California Employment Law: Severance Agreements...Sign or Don't Sign?

The emotional state of an employee who has recently been laid off or fired is typically unstable to say the least.  One of many concerns of the recently fired or laid off employee is, "where will I find a substitute source of income?"  Employers are aware of this.  I will not opine as to the motivation of the employer during this tense period after a termination or lay-off.  However, employers that offer severance pay to recently fired employees within days (or sometimes hours) after a termination or lay-off are asking for something in exchange for the severance pay.  In a nutshell, they are demanding the employee promise to never sue the employer...under any circumstances.

Severance agreements can be a mutually beneficial arrangement for both employer and employee.  However, it is important for employees to consider the effect of signing such an agreement and not let the severance pay offer cloud their judgment.  I would strongly suggest an employee review the severance agreement with their attorney.

Be assured that the severance agreement was drafted by the employer's attorney and was drafted in a fashion to heavily favor the employer's interests.  Take one of many examples: the employee is asked to agree to never bring a claim against the employer, however the employer is never asked to agree to forego any claims against the employee.  Whether or not this term can be negotiated, an employee needs to be aware of the possibility that their employer may choose to pursue a claim against the employee at a later date for, as an example, alleged misuse of or confiscated company materials.  Employees tend to mistakenly understand a severance agreement as an "end all, be all" type of agreement.  In some ways (for the employee and his/her rights), it usually is.

I frequently am contacted by individuals who have signed severance agreements, but unfortunately realize weeks or months later that they were not compensated fully for overtime hours worked while employed, or they were never paid a commission earned during their last few weeks of employment, or certain out of pocket expenses were never reimbursed by the employer...and on and on.  The first question I ask is whether they understood the effects of signing the severance agreement.  Almost unanimously, the individual states they didn't really read the agreement, needed the severance pay and never thought that their employer would really use the agreement to defend itself in a later-discovered situation such as theirs.  Invalidating a severance agreement is not easy nor likely.

If you need assistance reviewing a severance agreement that has been presented to you or would like to fully understand the effect of already signing one, please contact Richardson "Red" Griswold of Griswold Law at (858) 481-1300 or

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