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Severance Agreement and Release of Claims

November 18, 2023 Legal Team

A severance agreement is a legal contract between an employer and an employee that outlines the terms and conditions under which the employment relationship will end. Often, these agreements include a release of claims, where the departing employee agrees not to sue the employer for any potential legal claims related to their employment. 

Severance Agreement and Release of Claims

Components of a Severance Agreement

A typical severance agreement includes various components such as the amount and timing of severance pay, continuation of benefits, confidentiality provisions, and the release of claims. Each component is carefully negotiated to meet the needs and concerns of both parties.

Severance Pay and Benefits

The amount of severance pay and the continuation of benefits are critical aspects of the agreement. Severance pay may be based on factors like length of service, position, or other negotiated terms. However, employers are generally not required to provide severance pay. California is an at-will employment state, which means that either the employer or the employee can terminate the employment relationship at any time, with or without cause, and with or without notice. 

However, there are some exceptions. For example, if you have an employment contract or are covered by a collective bargaining agreement that specifies severance pay terms, your employer may be obligated to provide severance according to those terms. Additionally, if your employer has established policies or agreements that provide for severance pay in certain circumstances, they must provide it regardless of whether you sign a release of claims. 

Release of Claims

While the exact language can vary, depending on the circumstances and negotiations, the release of claims may include:

Statutory Claims

Statutory claims that may be included encompass a broad spectrum of employment-related statutes. These may involve waiving claims related to discrimination under federal laws. However, employers cannot require you to waive your right to file a discrimination charge with the EEOC. Other potential inclusions are claims tied to family and medical leave rights, whistleblowing protections, and occupational safety and health violations. 

Common Law Claims

Your right to pursue a claim related to state common law, such as wrongful termination or defamation, can be waived. 

Disability Claims

A release can include claims against the employer related to a disability plan but does not mean it waives continuing disability benefits unless claims against the disability plan are also specified. 

Class Action Claims

Claims brought against the employer as a class, collective, or representative action. 

Unknown Claims

Agreeing not to bring any claims that may arise in the future based on events that occurred during the employment relationship.

Claims that cannot be released include those related to workers’ compensation, age discrimination, minimum wage and overtime, unemployment insurance, and USERRA. 

Speak to a Lawyer Before You Sign

Consulting an employment lawyer before signing a severance agreement and release of claims is crucial to protect your legal rights and ensure a fair and equitable resolution. An experienced Orange County Employment Attorney can comprehensively review the agreement, offer insights into potential legal implications and identify any clauses that may adversely affect you.