Things to consider before signing a severance or release agreement

A separation package or a severance agreement is a contract between an employer and an employee who is about to leave the employer’s employment. In a typical severance agreement, the employer agrees to provide the employee with additional compensation (severance pay) in exchange for the outgoing employee agreeing not to sue the employer for employment-related claims, such as wrongful termination or early retirement.

Employers are does not legally obliged to provide any severance pay to their employees, regardless of whether the employment relationship is due to a resignation, a dismissal or a dismissal. Even if an employee has worked for the same employer for several years, the employer is still not obliged to provide severance pay if the employer decides to dismiss such a long-term employee. Most employers do not sponsor formal severance plans.

However, some employers offer formal severance schemes that provide eligibility conditions. An employer can e.g. Provide severance pay to long-term employees in the event of dismissal. This means that severance pay is a matter of agreement between the employer and the employee.

A severance pay is usually calculated according to a specific formula, often based on the employee’s length of service. For example, an employee may be entitled to two weeks’ salary for each year up to 12 years. The severance pay is also affected by factors such as the reason for the termination of the employment relationship (eg the company’s “cut”, employee misconduct or dismissal) or the employer’s financial condition (eg merger with a larger company).

An employee may try to negotiate more severance pay than is offered, especially if the employee has been in the business for many years, has an excellent service record, or has added value to the employer’s business. An employee can also negotiate how to receive the severance pay, e.g. As a lump sum, as a salary for a certain period or as periodic payments. Each method has an advantage and a pitfall.

Most importantly, before signing or negotiating a severance agreement, an employee must keep the following in mind:

  • Has the employer paid all working hours, including overtime?
  • Has the employer paid the employee for meals or rest breaks that were not given to the employee?
  • If the employee is entitled to vacation, has the unused vacation been paid?
  • If the employee is fired, what is the reason for the dismissal? If an employer fired an employee for discriminatory or retaliatory reasons, the employee may be entitled to compensation.
  • Does the severance agreement protect the employee against any claims of misconduct or harassment that the employer may make?

So you need to sign a severance package? It depends on. If you had been paid correctly for all working hours, if you received all your meal and rest periods, and if you do not have problems with your termination, a severance package is a generous and welcome benefit. However, if you did not get paid all your working hours, including overtime, and you did not get meal and rest periods, or the dismissal was unfair – then a severance package can be a way for your employer to stop you from claiming your rights and seeking redress. in court. If this is the case, you would be better able to consult a knowledgeable hiring lawyer before signing anything.

Finally, employers must immediately pay all compensation to the employee at the time of termination. It is illegal for employers to threaten not to pay dismissed employees for work already performed, unless the employees sign a form of “release”. A release signed by the employee in these circumstances may not be enforced.

The attorneys from C. Joe Sayas, Jr. welcomes inquiries on this subject. All inquiries are confidential and free of charge. You can contact the office at (818) 291-0088 or visit [For more than 25 years, C. Joe Sayas, Jr., Esq. successfully recovered wages and other monetary damages for thousands of employees and consumers. He was named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is a past Presidential Awardee for Outstanding Filipino Overseas.]

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