California Separation Agreement Lawyers

Every year, thousands of Californian employees encounter a document they hope never to see: the separation agreement. The unexpected job loss can be overwhelming, leading many to sign these agreements without fully understanding their terms. This guide provides essential information for California employees facing separation agreements.

Who Signs Separation Agreements?

Professionals and executives in various industries, such as biotech, entertainment, and finance, often sign these agreements in California. Despite their experience and expertise, they may not fully understand the potential risks and rewards involved.

This Guide Covers:

• How California law handles separation agreements
• Key terms to consider
• How an employment lawyer can help negotiate with your employer

If you have questions or need to speak with a California separation agreement lawyer, please contact us online today.

What Is an Employment Separation Agreement in California?

A separation agreement, also known as a severance agreement, is a legal contract between an employer and an employee who has been (or will be) terminated. The purpose of a separation agreement is to facilitate a smooth exit for the employee from the company.

Purpose and Benefits

Employers typically extend separation agreements by offering an employee payment and other benefits in exchange for their agreement to cooperate with the transition. For instance, an employee may receive severance pay, continued health insurance coverage, and cash payouts from unused benefits. In return, they agree not to sue their employer, publicly spread negative information about the company, or share trade secrets.

Common Recipients

Companies most often present these agreements to higher-level employees, such as business executives or managers. However, they may also offer them to individuals laid off for reasons beyond their control, such as downsizing or layoffs. It is far less common for employees who voluntarily resign or are fired “for cause” (e.g., poor performance, inappropriate behavior) to receive separation agreements.

Legal Requirements

There’s no law in California or at the national level requiring employers to offer terminated employees the benefits included in a separation agreement. Someone could be legally entitled to a separation package only if another contract requires it. This includes a collective bargaining agreement or an employment contract stipulation.

Terms Included in Separation Agreements in California

California doesn’t have any specific legal requirements for what kinds of benefits employee separation agreements should offer. This means that the contents of a severance package are largely up to your employer. Here are the typical benefits and obligations you may encounter:

Benefits

• Severance Pay: This will typically appear as a portion of your salary paid out over a period of time, usually calculated in weeks or months of pay. For instance, an agreement could offer an IT executive in Palo Alto their monthly salary for up to three months after they leave the company. This payment is paid in installments or as a lump sum. Your employer may also have their own formula for calculating the monetary portion of your severance package. This can take into account your position in the company or your years of service.
• Health Benefits: Federal law requires your employer to offer you health insurance at the corporate rate for 18 months after your departure. These are called COBRA benefits, after the 1985 Consolidated Omnibus Budget Reconciliation Act. Be aware: COBRA ensures that you still have access to health benefits, but they don’t guarantee that you’ll still pay the same rate that you did as an employee. Instead, former employees are offered the “corporate” rate, i.e. the amount that your company paid for your health insurance. So, if you previously received health benefits for $800 a month, but your company was paying $2,000 a month to the insurer, continuing your health coverage will cost you $2,000 a month for the next 18 months.
• Money Owed Independently of Severance Pay: This includes previously promised compensation. This could be unpaid commissions, bonuses, reimbursed business expenses, unused vacation days, or personal/sick time.
• Other Financial Benefits: These could include pensions, profit sharing, 401(k), loan repayments, and stock options, among others. Departing employees usually have 90 days to exercise their vested stock options before they expire.
• Outplacement Services: Employees could receive funds to connect with programs or agencies that provide assistance in job searches. These services can include guidance in resume writing or editing, interview preparation, or targeted company searches.

Employee Obligations

• Confidentiality or Non-Disclosure Agreements: If you accessed client lists, trade secrets, or intellectual property, the agreement may prohibit you from sharing certain information after leaving your former company.These are more common in industries like tech or pharmaceuticals, where employees are often privy to proprietary research and/or development.
• Non-Disparagement Clauses: These clauses prevent you from making any public statements that negatively reflect on your former employer.
• Return of Property: If your company provided any tools or technology as part of your role (laptop, phone, other technology), they may ask for their return upon termination.
• Non-Solicitation Clauses: This could prevent you from doing business with your former employer’s clients, customers, or other employees in your future professional pursuits. For instance, a finance consultant who starts a new position with a different firm in San Diego could be prohibited from taking on clients she’d worked with at her previous company.
• Non-Compete Agreement: These clauses restrict when and where an individual can find future employment to prevent employees from working with a company’s competitors. Fortunately, non-compete agreements are often legally unenforceable under California state law. This means that even if your employer includes this clause in a separation agreement, they typically can’t enforce its restrictions on you in court.

General Release of Claims

Most separation agreements will also include a clause outlining “general release of claims and covenant not to sue.” This part of the agreement requires an employee to waive their right to sue their employer in state or federal court in the future over certain issues. Your employer must list any claims to be waived in the separation agreement. These could include the right to sue for breach of contract, privacy violations, defamation, or a violation of the Family and Medical Leave Act (FMLA). They could also require you to waive your right to sue for claims specific to California law. These claims include wrongful termination in violation of public policy or discrimination and harassment under California’s Fair Employment and Housing Act.

CA Civil Code Section 1542

In California, an employer might request that employees waive CA Civil Code section 1542. This code normally prevents individuals from relinquishing their right to claims they’re not aware of at the time. Under CA Civil Code section 1542, even if an individual agrees to a general release of claims against another party, they still retain the possibility of bringing a future suit. This applies to issues that were “unknown” at the time of the agreement.

For instance, if a software sales executive discovers months after agreeing to her company’s severance agreement that her termination was illegal and discriminatory, Civil Code section 1542 allows her to sue her employer for wrongful termination. However, if she agrees to an explicit waiver of Civil Code section 1542 as part of that severance agreement—willingly giving up her right to future claims “known and unknown”—then the court will dismiss her case.

Are There Limits to the Rights That California Employees Can Waive in Separation Agreements?

Yes. California and federal law protect employees from waiving certain workplace rights in separation agreements. These include the rights to:

• Unemployment Benefits
• Workers’ Compensation or Fair Labor Standards Act Claims
• Payment of Wages or Compensation They’ve Already Earned
• File Administrative Claims with the Federal Equal Employment Opportunity Commission (or Cooperate with Their Investigations)

Age Discrimination Claims

For employees over 40, there are limits to the circumstances under which they can waive their right to an age discrimination claim. These protections ensure fair treatment under the Age Discrimination in Employment Act (ADEA). An employer must meet certain requirements before legitimately accepting an employee’s waiver of their right to an age discrimination suit, including:

• Providing them with a waiver that uses clear, unambiguous language and specifically references the employee’s rights under the ADEA
• Ensuring the waiver does not affect claims that can arise after the agreement is signed
• Offering the employee something of value that they were not already entitled to in exchange for their waiver
• Advising the employee in writing to consult with legal counsel before signing the separation agreement
• Giving the employee at least 21 days to consider whether to waive their ADEA rights (or 45 days if it is a part of a mass layoff)
• Allowing the employee at least 7 days to revoke their waiver once it was given

In all these cases, regardless of age, it’s wise to have an employment lawyer evaluate the terms of your employer’s separation agreement. Ensure you understand any waivers involved.

Do I Have to Sign My Employer’s Separation Agreement?

No. California employees are not obligated to sign a separation agreement as it is written. These agreements are legally binding contracts, and both parties must fulfill certain terms.

Remember:

• A severance package is not a gift.
• A separation agreement is a legally binding contract.
• Both parties promise to fulfill certain terms.

To receive the financial and other benefits listed in the agreement, you have to fulfill certain obligations. Companies offer these agreements not out of generosity but with their liability and business interests in mind. That’s why it’s important to carefully consider the separation agreement before you sign it. Take time to read it through entirely to ensure you understand all the terms and obligations involved. These contracts can often be complex, dense, or filled with technical legal language. It is a good idea to have an employment attorney review them before signing.

Can I Negotiate the Terms of My Separation Agreement in California?

As a legal contract, a separation agreement is technically open to potential negotiation and revision between the parties before signing. Here are five areas where California employees are most successful in improving their separation agreement benefits:

Areas for Negotiation

1. Severance Pay:
   • Request more pay, especially if laid off due to a merger or acquisition.
   • Ask for a continuation of salary in case of disability or death.
   • Ensure there are no offsets or mitigations when paid in installments.
   • Remove mitigation offset clauses requiring payback of severance if a new job is found during the severance period.
2. Severance Pay Schedule:
   • Request a payout in 10 or 15 days instead of 30 or 45 days.
   • Ask for a lump sum payout instead of an incremental pay schedule.
3. Medical Benefits via COBRA:
   • Ask for a taxable lump sum payment instead of the employer paying the insurance policy.
   • Switch to a more affordable plan if agreed upon.
4. Outplacement Assistance:
   • Request the cash equivalent if services are not needed.
5. References:
   • Ensure neutral to positive recommendations for future job searches.
   • Have the employer agree to provide a letter of recommendation attached to the agreement.

Leverage in Negotiations

• Positive Work History: Meaningful relationships inside the organization and documented strong performance reviews.
• Employer Misconduct: Evidence of employer misconduct or potential wrongful termination.

Under California law, it’s illegal for a company to fire someone for:

• Complaining of sexual harassment
• Not receiving overtime payment
• Being pregnant
• Serving jury duty
• Having a serious illness
• Caring for sick family members
• Taking Family Medical Leave
• Reporting discrimination or harassment at work
• Being a member of a protected class under California law

Contact an employment lawyer immediately if you suspect you were fired for illegal or discriminatory reasons. An employment attorney specializing in California employment law can assess your situation and determine if you have grounds for a wrongful termination lawsuit. If that is the case, an experienced advocate can also advise you on the best course of action and advocate for you if the issue goes to court.

When Should I Not Sign a Separation Agreement in California?

Evaluating an employer’s separation agreement can be overwhelming and confusing for employees who are already facing the uncertainty of a recent job loss. You should never feel pressured into signing a document that you don’t fully understand. Fortunately, California employees don’t have to deal alone with the stress of evaluating and negotiating employer separation agreements.

Seek Legal Assistance

Ottinger Employment Lawyers offers review and consultation for employees facing separation agreements. Our team of attorneys will review your separation agreement and meet with you over the phone or in one of our offices in Los Angeles or San Francisco to discuss the package. Our experts in federal, California state, and local employment law can identify potential problems in the agreement, suggest ways to improve the separation terms, and even conduct negotiations with your employer on your behalf.

How Can I Reach a California Employment Lawyer Who Can Review My Employer’s Separation Agreement?

If you work in California and are concerned about how to handle your employee separation agreement, contact our office today to set up a review and consultation.

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