Be careful when signing a severance agreement

On behalf of Girard Bengali, APC posted on Friday, May 10, 2019.

It has become almost customary for California companies to offer executives and other professionals in the Los Angeles area what is referred to as a severance agreement when they decide to let these types of employees go.

Severance agreements are possible even when an employee is getting fired for alleged poor performance or for some other specific reason, but they are commonplace in situations where an employer is laying an employee off for business reasons or simply because the employee is no longer the right fit for the company.

Particularly amidst the stress of losing one’s job and having to think quickly about how to provide for herself and her loved ones, an employee may be tempted to sign a severance agreement without giving much thought to it.

After all, the severance agreement usually promises additional pay and benefits beyond what the employee has already earned. This extra compensation can help a working Californian bridge the financial gap while she searches for another job. A severance agreement may even carry with it the promise of a favorable or at least a neutral recommendation to future employers.

However, there is inevitably a tradeoff. Usually, in exchange for additional compensation, an employee will waive important benefits and legal rights, including some of his rights to sue for things like discrimination and certain violations of wage and hour laws. A severance agreement may not be advantageous if an employee has a valid legal claim against his employer.

Moreover, employees need to review the terms of any severance agreement carefully, if only to make sure they understand fully what they are bargaining for.

An attorney experienced in employment law counseling can help an executive or other professional who is facing termination review his severance agreement and evaluate his legal options.

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