Things to Consider Before Signing a Severance Package

An employer may offer a severance package after an employee is laid off or terminated. A severance package is generally a set of compensation and benefits that an employer offers to an employee as a way of acknowledging the employee’s contributions and helping mitigate the financial impact of involuntary job loss. There are different types of severance packages, including lump sum payments, salary continuation, and benefits continuation. Before you sign a severance contract, there are certain things you need to consider. Below are five things to consider when presented with a severance agreement.

1. What is in the Package?

The first crucial thing to consider before signing a severance contract is what is included in your package. The exact components of your package may depend on your employer, the industry, and how you lost your job. A severance package can include, among others, severance pay, which is based on your salary and years of service, retirement benefits, health insurance, and job-finding assistance. Ensure you understand precisely what benefits and compensation you will receive and their timings. Consider whether the compensation and benefits are fair based on your tenure, position, and the circumstances of your job loss.

2. What are Your Rights?

Before signing a severance agreement, take time to understand your legal rights. California law gives employees several rights as it pertains to severance agreements. The following are some of these rights;

• Right to consult an attorney regarding the agreement: California GOV Statute 12964.5 grants employees the right to consult an attorney regarding a severance agreement. The law mandates not less than five business days to do this.  
• Right to fair and reasonable terms: Your employer must offer you a fair and reasonable severance agreement. For example, according to Business and Professions Code Section 16600, a California severance agreement cannot contain a non-compete clause.
• Right to be free from pressure: The law requires you to accept the severance agreement voluntarily. An employer or another party cannot pressure you into accepting a severance agreement.
• Right to negotiate your severance package: If the proposed compensation and benefits don’t seem fair, you have the right to negotiate for a better package. An attorney can help you negotiate and secure a better severance package.

3. Consider What You are Willing to Give Up

When you sign a severance agreement, you give up something in exchange. For example, you might have to give up your right to sue the employer for employment discrimination or wrongful termination. An employment lawyer can help explain the rights you waive by signing the severance agreement. Are you willing to give up these rights? Or perhaps you want to explore a claim for wrongful termination or discrimination.

4. Understand Your Deadline for Signing the Agreement

Understanding the deadline for signing the severe agreement allows you to take time to review your agreement thoroughly. You want to ensure you consult an attorney early to help you review the agreement. Avoid rushing at the last minute.

5. Understand the Confidentiality Clause

Some severance agreements contain confidentiality clauses that prevent employees from discussing the terms of their severance package with others. It may be a red flag if a severance agreement contains an overly broad confidentiality clause.

Contact a California Employment Lawyer

Contact a California employment lawyer near you if you need help reviewing a severance agreement.