When not to sign a severance agreement?

Do not sign a severance agreement if you do not understand it. By agreeing to a severance agreement, you give up your right to sue your employer. Remember, it is possible to negotiate the terms of your severance package. You are not required to sign a severance agreement.

By Brad Nakase, Attorney

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Severance Pay

When your company extends a severance agreement to you, it is critical that you thoroughly read, comprehend, and decide whether or not to accept the contract. Severance pay is often granted to employees upon termination of employment. It is usually based on length of employment for which an employee is eligible upon termination. There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay, according to the US Department of Labor.

Accepting the deal as is won’t always be in your ideal interests.

It could be beneficial to get legal counsel from an attorney (employment) if you feel that the severance package is not acceptable or if you are convinced that you can negotiate a better deal. As a worker, keep in mind that it is not mandatory to sign a severance agreement.

California law binds severance agreements. As a result, before signing/accepting the severance agreement, you should contact an employment attorney.

When is it not a good idea to sign a severance agreement?

An employee can be reluctant to sign a severance agreement for the following primary reasons:

  1. If you haven’t spoken with an employment attorney.
  2. You are thinking about filing a case against your company
  3. You feel that the severance package isn’t enough
  4. You are getting pressurized to sign without reviewing it
  5. You are afraid of the severance agreement’s implications for your career
  6.  If you are unsure of its terms, you shouldn’t sign a severance agreement.

  1. You haven’t spoken with an employment lawyer.

It is advisable that you obtain legal counsel before signing a severance agreement. Under California’s law, severance agreements are legally binding and may contain intricate wording. To make sure you fully comprehend the paperwork, you should speak with a lawyer who is knowledgeable about the labor regulations in your state.

An employment lawyer can support you in:

  • Recognize the terms and meaning of the agreement.
  • Increase your severance pay or settlement by negotiating.
  • Verify the respect for your rights
  • Safeguard yourself against any future or unexpected liabilities that may arise from signing the contract.

You can make sure you are getting the best possible severance package and are treated appropriately by having an employment attorney by your side.

  1. You are thinking about filing a case against your company

When you sign a severance agreement, you will probably be prevented from filing a lawsuit against your employer in the future, if you were thinking about doing that.

If your company offers you a severance package, it could mean they think you have lawful claims against them and are prepared to pay to keep you from suing them. You will give up any claims you could have against your company if you sign the offer. Consult a lawyer before accepting if you plan to take legal action.

One of the most important clauses in the severance agreement would be the “waiver of claims”. The kinds of claims that you will have to give up in order to get the severance package are described in this clause. On February 1, 2023, the Labor Relations Board reverted to a well-established precedent, determining that employers cannot present a present a severance agreement to employees that forces a broad waiver of employee’s rights as outlined in the National Labor Relations Act. This ruling was based on the examination of severance agreements given to employees on furlough, which included clauses forbidding the employees from disparaging the employer or revealing the details of the severance agreement.

Your employer’s concerns are typically reflected in the categories of legal claims mentioned in this section, which may include claims concerning:

  • Wrongful termination
  • Defamation
  • Disability
  • Discrimination
  • ERISA retirement benefits
  • FMLA family leave rights
  • COBRA healthcare coverage
  • Any further claims that weren’t known at the time the severance agreement was signed

You also won’t be eligible to represent yourself in any class action legal case brought against your previous company.

In case the claims are included in the release of claims clause, signing the severance agreement and taking the given package means that you are giving up the ability to file a lawsuit against your company.

However, some legal rights—such as those to employees’ compensation payments, unpaid salaries, unemployment benefits, and the right to file a Title VII discrimination complaint with the EEOC—cannot be given up under the separation agreement.

Moreover, few separation agreements merely eliminate some of your rights. For instance, in California, it is possible to waive your right to bring a class action lawsuit against your employer through a severance agreement, but you cannot waive your right to bring a case under the PAGA (Private Attorney General Act).

Employers are still allowed to include a clause in the severance agreement listing rights that cannot be waived notwithstanding this intricacy, but it’s not legally binding. See an employment attorney to learn more about your rights.

IMPORTANT: Consult an employment attorney before signing the severance agreement if you want to take legal action against your company for labor violations. Your rights can be better protected and a better severance package can be negotiated at your behest by an experienced attorney.

  1. You feel that the severance package isn’t enough

The severance payout your company first gave probably won’t be enough for you. Negotiating for a better claim is an option if you feel the package is insufficient.

You can make more informed requests during negotiations if you are aware of what constitutes an appropriate severance payout for your situation. In order to determine what is reasonable in your circumstances, you need to consult an employment lawyer.

You can negotiate, even if your company tells you otherwise. By asking for additional money, or augmentations of current benefits, you can make your severance package worth more.

Make sure you carefully analyze the advantages and disadvantages of accepting a severance agreement before committing to give up your ability to take legal action against your company.

Accepting the severance package can save you the money, time, and stress of going to court, but it also guarantees you a total amount of severance pay—which is usually less than what you deserve. It could take many rounds of negotiations to get a decent severance package, but it’s crucial to wait before accepting the agreement when the payout is insufficient and not worth giving up your legal rights.

  1. You are getting pressurized to sign without reviewing it

Should your employer have set a deadline to sign the severance agreement, you could be reluctant to see a lawyer out of concern that you won’t have time. These deadlines, however, usually have no bearing on anything and are just a ploy to get you to choose a less desirable offer.

Give yourself the time you need to speak with a lawyer (employment) before accepting or signing anything, if your company is forcing you to sign your severance agreement.

If an extension is requested, employers typically agree to it. Make an informed choice, don’t let the employer’s arbitrary deadline stop you.

Although moving swiftly is crucial for some legal claims, when it is about severance agreements, it is preferable to take your time speaking with an attorney and negotiating a better payout than what was first offered.

Furthermore, if you are under duress to sign a severance agreement, your employer might be pressuring you to do so for a specific reason.

Severance agreements are used by employers, particularly in cases when they violate employee rights, to avoid legal issues and close loose ends.

  1. You are afraid of the severance agreement’s implications for your career

Severance agreements typically include stringent conditions, such as a non-compete clause which can prevent you from joining a rival company or launching a venture of a comparable nature. Your career may suffer if these restrictions keep you from being active in your field for a while.

As such, it’s imperative to weigh the monetary compensation against any potential career disadvantages and carefully evaluate whether the terms of the severance agreement are reasonable.

You may be barred by a non-compete agreement from:

  • Collaborating with an adversary
  • Launching a comparable company
  • Using private data that was acquired throughout the course of employment
  • Reaching out to former coworkers to inquire about possible consulting or employment opportunities

Certain non-compete agreements are legitimate and essential, but others are unduly wide and restrictive.

Make sure to thoroughly review the details of your severance agreement as an overly harsh non-compete clause can severely restrict your career prospects and make finding a job more difficult.

Consult an employment lawyer to make sure a non-compete clause is reasonable and fair if one is present in the contract.

  1. You are unsure of its terms, you shouldn’t sign a severance agreement

Any severance agreement that you do not understand should not be signed. Complex clauses, including confidentiality and non-compete provisions, are commonly included in severance agreements.

Before you sign anything, spend some time having an employment attorney explain the severance agreement’s terms if it’s difficult to understand or confusing. Do not sign an agreement without fully understanding it, even if the company wants an answer right now.

Before signing this form, it is recommended that you make sure you understand it and its entire ramifications. An employment attorney can assist you in analyzing the provisions of the contract, outlining any advantages or disadvantages, and offering advice on how to bargain for a better deal.

For fired workers, receiving a severance package following the execution of a separation agreement might not be the final thing. If they don’t completely understand the terms and conditions of the agreement, they can unintentionally break them and then face legal action from their previous company. Their career may suffer severe consequences as a consequence of this.

According to California law, severance agreements are legally binding contracts

You give up all lawful rights against your company when you sign a severance agreement. After the agreement is signed, it is final and enforceable in California.

You consent to refrain from taking legal action against the company if you give up your legal rights. This implies that you cannot file a lawsuit against them, even if you have substantial proof that they caused you harm.

Because there’s no going back on a choice once it is made, use prudence before you sign a severance agreement. Prior to signing anything, confirm that you completely comprehend the terms and available options. For this reason, in this case, legal counsel about employment is essential.

Why it’s advisable to get legal counsel to safeguard your interests in California severance agreements

Hiring an attorney with severance agreement negotiation experience is crucial if you want to safeguard your rights and increase the amount of money you get paid.

Having an experienced lawyer by your side can improve your chances of obtaining a better deal because handling layoffs and possible unfair termination on their own can be difficult for employees.

You can understand your severance package and learn about your rights with the assistance of the California employment lawyers. Avoid the error of signing your contract before having it properly reviewed by a qualified employment attorney.

Have a quick question? We answered nearly 2000 FAQs.

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