California separation agreements cover employee rights, severance pay, and post-termination limits, clarifying lawful waivers, negotiation paths, and invalid non-compete restrictions. Seek legal counsel to negotiate terms, secure wages and benefits, preserve unemployment eligibility, and avoid clauses that overreach California law.
By Brad Nakase, Attorney
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A separation contract is an official agreement between a company and an employee who is about to face separation from employment under California employment law. Generally speaking, the agreement mandates the employee to give up any legal rights they could have against the business. The employee is compensated with severance compensation in return.
A lot of separation agreements also limit the employee’s post-termination options in California. Signing a severance contract is not always a good idea. Additionally, even if you consent to it, there are some rights that can’t be legally surrendered.
You can achieve the maximum financial rewards upon separation from employment by waiving only the bare minimum of rights with the assistance of a reputable attorney with a long history of writing advantageous separation agreements. Additionally, they manage the entire bargaining process, saving you from ever having to haggle with your company personally.
A separation agreement is a legally enforceable contract in California when tied to separation from employment. It is created between a company and a worker who is going to be released. A severance package is provided by the employer. However, the employee must forfeit some rights against the company in order to obtain it.
1. Contractual Conditions
For a separation agreement to be enforceable in California, there must be:
Your company is making the proposal by creating and sending the separation agreement. You accept the offer by signing it. There is consideration since both you and the employer are forfeiting something in the transaction:
Every agreement tied to a separation from employment, nevertheless, must have a legitimate reason. A contract is null and void if it goes against the law.
2. Separation Agreements’ Invalidity
Separation agreements that require you to part with rights that you are not legally allowed to give up may be null and void. It would be illegal for the arrangement to try to force you to give up these rights even at separation from employment.
The remainder of the agreement might still be valid even if a clause that is illegal in the separation contract is declared null and void.
3. Separation Agreements’ Commonality
Not every termination includes a separation agreement since some employers might not be worried about a possible lawsuit.
However, businesses may still provide severance so as to preserve their reputation even if they are not worried about a lawsuit. This tends to happen when an employee is let go or when restructuring was the reason for separation from employment.
Separation agreements can occasionally even serve as contracts for the resolution of conflicts.
Not every separation agreement is created equal in California. Employers often modify the agreement’s provisions in response to their requirements and worries.
According to my observations, workers frequently have to give up the following rights in order to get the severance package:
Claims Waiver
The waiver of claims clause in the severance agreement outlines the particular privileges that the employee is giving up. Another name for this part might be “release of claims.”
You won’t be able to use these rights later if you accept a contract of separation that waives them. Your suit will be rejected if you attempt to introduce an assertion that you gave up in the agreement. The costs of fighting against your claim and the company’s legal bills may also be borne by you.
Some of those waivers, meanwhile, might not cover everything. For instance, you are legally able to forego bringing a Title VII lawsuit alleging employment discrimination, but not the EEOC (Equal Employment Opportunity Commission) discrimination allegation.
In addition, you may forfeit your federal anti-discrimination rights, but comparable claims within California law may still be upheld. Your right to participate in a class-action suit against the former employer, for instance, may be waived. Your ability to file a class action lawsuit against your former employer pursuant to the Private Attorney General Act (PAGA) will remain intact, nevertheless.
A separation agreement cannot surrender many of your rights at work in California. Among these rights are:
1. Claims of Age Discrimination
Pursuant to the Age Discrimination in Employment Act, you can waive your right to sue on the basis of age discrimination. You can only do so consciously and voluntarily. To meet the requirements under the Older Workers Benefit Protection Act, a waiver should meet the following requirements to be deemed knowledgeable and voluntary:
2. Provisions for Severability
The courts in California will not uphold any part of a separation agreement that you entered into that commits you to giving up one of these lawfully unassailable rights. The court will disregard the waiver if you later assert these rights after having waived them.
Nonetheless, a severability clause is typically included in separation agreements. According to this clause, the agreement is severed from the remainder if any part of it is determined to be unenforceable. The rest of the contract is still enforceable.
California job separation agreements typically contain additional post-termination activity restrictions in addition to a clause waiving your right to bring a lawsuit against your former employer. A few of the most prevalent restrictive covenants are:
Details on the employer’s remedies in the event that you breach any of the post-termination restrictions will also be included in the separation agreement.
Non-Compete Provisions
A limiting clause is not always enforceable just because it is included in the severance agreement. Non-compete clauses are unenforceable in California.
However, I frequently witness employers including them in their contract of employment in an effort to exert control over their former workers.
Numerous forms of compensation may be incorporated in the severance package’s perks. I frequently make sure that companies include the following:
Any severance package is taxable income, so keep that in mind.
1. The ability to negotiate
California has no laws dictating what must be included in a severance payout. Employees who are fired frequently have the option to bargain for their severance.
I strongly suggest hiring legal counsel to bargain for better conditions, particularly if you have power against your employer and are experiencing severe financial difficulties as a result of losing your employment. Having a lawyer is essential to protecting your rights during the stressful process of separation from employment.
2. Unemployment benefits
Being eligible for unemployment insurance in California is unaffected by the severance payment because it is given as a condition for your accepting the separation agreement.
You have the legal capacity to sue the company for any wrongdoing that occurred while you were employed by them in California. Lawsuits for the following may be included:
When an employee leaves the company after a tense period, these worries frequently force companies to adopt separation agreements.
Employers are not required by California law to provide severance when they fire workers. However, a lot of businesses decide to give severance pay in return for the former worker’s promise not to challenge them.
Severance agreements are common for workers in managerial or supervisory positions in many businesses. Incentives for fresh faces to join the organization include the offer of monetary compensation upon exit.
Employers must still pay fired workers all of their salary, including accumulated paid vacation time off and additional benefits, even in the absence of a severance agreement.
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