California Severance Package Lawyers

The Ultimate Guide for Executives to Understand the California Severance Process

A California severance package is a collection of pay and benefits offered to departing employees.

Unless a severance package is written into your employment contract, an employer is not obligated to supply one.

Severance pay is not required by law in any U.S. state. Federal law and all state laws leave severance pay as a matter of agreement between employers and employees. The Fair Labor Standards Act (FLSA) does not mandate severance pay either.

Severance packages are typically offered to executives and employees who are laid off due to downsizing or restructuring.

They are not usually offered to people who resign or who are fired for poor performance or other causes.

Our California employment attorneys offer a Severance Package Review & Consultation. We review your severance package and then meet with you over the phone to review it.

We point out any issues and suggest modifications.

In most cases, that is all you need. But if major changes are necessary we go further and negotiate the modifications but we charge our hourly rate for that work.

Please don’t hesitate to contact us online or call (800) 668-7984 today for more information.

We have offices in Los Angeles and San Francisco.

You may also fill in your information below with a request and we will get back to you quickly.

California Severance Package Basics

In California, state law does not mandate employers to provide severance pay upon termination of employment. However, many employers offer severance packages as part of their company policies or employment contracts. Therefore, if you have questions about severance pay, it’s important to refer to your specific employer’s policy regarding eligibility and terms.

Understanding Severance Agreements

When a company offers a severance agreement, they seek the employee’s cooperation to ensure a smooth departure without disrupting the business. Transitioning smoothly helps both parties maintain a positive relationship.

Determining Severance Pay Amounts

The amount paid through a California severance package typically depends on the length of the employee’s service with the company. Generally, the longer the term of service, the larger the severance package. Here are common formulas used in California:

• Service-Based Pay: Some companies use a formula such as one week’s pay for every year of service. More generous packages might offer a month’s pay for every year of service.
• Lump-Sum Payments: Other severance packages provide a lump-sum payment, which can vary based on negotiations and company policies.

Flexibility in Severance Packages

It’s important to note that severance payments are not regulated in California. This means the parties involved are free to use any formula or payout amount they agree upon. Employers and employees can negotiate the terms to fit their specific needs and circumstances.

Key Takeaways

• No Legal Requirement: California law does not require severance pay.
• Employer Policies: Check your employer’s specific policy on severance pay.
• Negotiable Terms: Severance packages can be negotiated and are often based on length of service or offered as lump sums.
• Unregulated Payments: There are no regulations dictating the amount or formula for severance pay in California.

If you are negotiating a severance package or have questions about your eligibility, consider consulting with a legal professional to ensure you understand your rights and options.

Are Employers Just Being Nice?

A severance package isn’t just a thank you for your service. Companies often require you to sign a release of any potential claims and agree not to bad-mouth the business in exchange for severance pay. Thus, severance packages primarily protect businesses. However, a fair severance package can benefit both parties.

Understanding Severance Packages

Severance packages help companies protect themselves while providing financial support to departing employees. This arrangement creates a win-win situation, ensuring a smooth transition for both sides.

Does Your California Severance Package Cover the Basics?

Every severance agreement is different, but it should at least include the following elements:

• Consolidated Omnibus Budget Reconciliation Act (COBRA) information: Details about continuing your health insurance coverage.
• Confidentiality Agreement: Terms to keep company information private.
• General Release of Claims and Covenant Not to Sue: An agreement not to pursue legal action against the company.
• Return of Property (if applicable): Instructions for returning company property.
• Severance Pay Terms: Details on how much you will receive and the payment method.
• Unemployment Information: Guidance on filing for unemployment benefits.
• Vacation Payment Terms: Information about any accrued vacation pay.

Focusing on Financial Aspects

Most people prioritize the financial details of their severance package. Typically, California severance pay is based on your length of service, but it can also include:

• Stock Option Statement with Exercise Schedule: Details on any stock options you have.
• Commissions, Deferred Compensation Payouts, and Bonuses: Any additional earnings you are entitled to.
• Loan Repayment Terms: Information on repaying any loans from the company.
• Restricted Stock and Acceleration: Terms related to any restricted stock you hold.
• Rights from a Pension, 401(k), or Profit Sharing: Details on retirement benefits.
• Unreimbursed Business Expenses: Ensure you know when to submit these forms for reimbursement.

Important Considerations

• Mitigation Offset: Watch for clauses requiring you to pay back your severance if you get a new job within the severance period. Ask to have these removed.
• Health Benefits: Health benefits can be as crucial as severance payments. Most employers offer continued medical/dental coverage under COBRA. This federal law ensures your employer must continue offering the same health insurance policy at the same rate for 18 months, though you will need to pay for it.
• Non-Compete Clause: In California, non-compete agreements are not enforceable. If your severance package includes one, you can ignore it or ask your employer to remove it.

What’s Next?

According to Salary.com, over 70 percent of companies in the U.S. provide outplacement services to help former employees find new jobs. These services often include resume writing/editing, interview preparation, and target company searches. Even if your employer offers such help, remember that networking is still your best bet. Salary.com reports that over 60 percent of people find new jobs through someone they already know.

If you have questions or need assistance with your severance package, consider consulting with a legal professional to ensure you understand all aspects and receive a fair deal.

Does it matter if I’m over 40?

There are many protected classes, including those over the age of 40. If you fall into this category, you are protected by the Age Discrimination Employment Act (ADEA). If your severance package includes an ADEA waiver (and most of them do), you have 21 days to look over the general release and a seven-day period to revoke the release. Also, if you were laid off as part of a reduction in force, the ADEA requires your employer to provide you with a disclosure showing the ages and job titles of those laid off. It’s one way to help ensure age wasn’t a factor in a layoff.

Negotiating a Severance Package

The severance package in front of you is just an offer—you don’t have to accept it as is. At Ottinger Employment Lawyers, our California employment attorneys negotiate severance packages daily. We often secure much better deals for our clients; sometimes, we achieve modest improvements, and occasionally, we see no change.

Why Consider Negotiating?

We recommend having an employment law firm assist you, but many people handle negotiations on their own. Even if you dislike confrontation and cringe at the idea of negotiating, doing so can significantly impact your transition. Negotiating a severance package can lead to better financial security and extended benefits during a crucial time.

Steps to Negotiate Your Severance Package

1. Assess Your Objectives:
   • Determine what you aim for—higher severance pay or extended benefits.
   • Use the offer as leverage to negotiate terms that suit your needs.
2. Read the Fine Print:
   • Always read the fine print before signing anything.
   • Take the information home and think about it. Most packages include a review period of a week to 21 days or more. Companies will usually agree to give you more time if needed.
3. Make Your Request:
   • Ask for more than you believe you’ll be awarded. Be polite and preferably direct your request to someone you know, avoiding human resource personnel.
   • Remember, the worst that can happen is they say no. You’re already laid off or set to retire, and they can’t lower or cancel a pending severance package without causing significant issues. In our experience, companies rarely revoke severance offers.

Why Use a Lawyer?

At Ottinger Employment Lawyers, we have the expertise to navigate these negotiations and can often secure better outcomes. Even if you decide to negotiate on your own, understanding your rights and options can make a big difference. Our team can provide valuable advice and support throughout the process.

Final Thoughts

Negotiating your severance package might feel daunting, but it’s crucial to ensure your financial security and peace of mind during your transition. Take your time, understand your goals, and don’t be afraid to ask for what you deserve.

Were You Wrongfully Terminated in California?

Understanding why you were let go is crucial. It might give you the leverage you need to negotiate a better severance package. If you belong to a protected class, ensure your termination wasn’t illegal.

Identifying Protected Classes

A protected class includes characteristics such as race, gender, age, sexual orientation, religion, national origin, or disability. It’s both unfair and illegal to treat someone differently because of these traits. Additionally, it’s illegal for a company to fire or demote you for:

• Complaining about sexual harassment
• Not receiving overtime payment
• Being pregnant
• Serving jury duty
• Having a serious illness
• Caring for sick family members
• Taking Family Medical Leave

Next Steps

If you suspect wrongful termination, contact an employment attorney immediately for a Severance Review & Consultation.

How We Can Help

Our employment lawyers will review your severance package and discuss it with you over the phone. We’ll identify potential problems and suggest ways to improve the terms. With our guidance, you can better understand your situation and negotiate a fairer deal.

Are You Ready to Negotiate?

When negotiating a severance package, it’s crucial to tackle the primary issues effectively. Here are the key areas to focus on:

Severance Pay

First, always ask for more severance pay. This is crucial if you were laid off due to a merger or acquisition. If you receive a continuation of salary instead of a lump sum, ensure it continues even in case of disability or death. Check for any offsets or mitigations if you’ll be paid in installments, and make sure that any unpaid bonuses are included.

Medical Benefits via COBRA

Next, remember you’re entitled to continuous medical/dental coverage for up to 18 months after job termination (or 29 months if you are disabled) under COBRA. You can save money by asking for a taxable lump sum payment made directly to you instead of having the employer pay the insurance policy. If agreed upon, you may switch to a more affordable plan.

Outplacement Assistance

Outplacement assistance is a common severance benefit and can be the easiest to negotiate. You can ask for a cash outlay to hire your own outplacement firm. According to Forbes, the typical price of outplacement assistance ranges from $10,000 to $25,000.

General Release of Liability

The general release of liability is the most important part for the employer, often full of legalese. This entire release is negotiable, and it’s best to have an employment attorney review it.

Non-Disparagement

Severance packages usually include a clause that prohibits you from making or writing any disparaging remarks about the employer. You can negotiate to make this clause mutual, protecting yourself from disparaging comments as well. Larger companies might resist, but it’s worth asking.

References

Consider how the employer will respond to reference requests. Negotiate for a standard agreement to state something positive or include a clause in the severance agreement guaranteeing recommendations.

Non-Compete Agreements

Non-compete agreements are illegal in California, but some companies still include them in severance packages. If you see one, ask for it to be removed.

Legal Fees

In some cases, you can negotiate for coverage of legal fees incurred while reviewing and negotiating the severance agreement.

Company Property

You can also negotiate to keep company property, such as a laptop, phone, or other devices. Employers usually require the device to be wiped clean first.

Confidentiality

Most California severance packages are confidential, but you can negotiate for exceptions. Common exceptions include family members, financial advisors, attorneys, tax authorities, and the government.

Transitional Arrangements

Sometimes, you and your employer might agree on a consulting relationship after termination. Negotiate terms such as compensation, confidentiality obligations, dispute resolution processes, hours, length of the arrangement, services provided, and solicitation restrictions.

Cooperation

Severance packages often include a cooperation clause for any future investigations or litigation. Negotiate to limit cooperation to your period of employment and work scope. Ensure cooperation doesn’t interfere with future employment and negotiate reimbursement for travel and reasonable out-of-pocket fees. You might also negotiate an hourly rate for time spent.

Remember, almost anything in a California severance package is negotiable.

Severance Package Policies

Review your company’s severance policies, especially if you work for one of California’s large companies. You’ll likely find this information in the employee handbook or from human resources. These policies typically outline:

• Conditions: What you need to do to qualify for and receive severance packages, including conditions that may not qualify, such as involuntary termination for cause.
• Documents: Many employers require workers to sign legal releases before paying severance.
• Employer’s Right to Modify: Employers often retain the right to terminate or amend a severance policy. If a company is merged or sold, severance might not be paid, especially if an employee is fired.
• Groups Covered: Not all employees may qualify for severance. Sometimes, severance packages are exclusive to certain classes of workers, like salaried employees.
• Payment Method: Whether you receive a lump sum or regular severance payments can impact your unemployment benefits.
• Purpose: An outline of the severance plan’s purpose, often highlighting help offered while you look for a new position.
• Severance Pay Calculation: Details on how severance pay is calculated, including payments based on weeks of employment, unused vacation time, etc.

Read and understand your work’s severance policies before you need them. This preparation can give you a significant advantage during negotiations.

Contact a California Employment Attorney Today

California Severance Package Review & Consultation

We offer a comprehensive review and consultation for your California severance package. Our process includes:

• Thorough Review: We carefully examine your severance package.
• Phone Consultation: We discuss the details with you over the phone.
• Identify Issues: We pinpoint potential problems.
• Suggest Improvements: We recommend ways to improve the agreement terms.

Our California employment attorneys can also advise you on the fairness of the offer.

Executives often hire us to negotiate their severance agreements after the Review & Consultation.

Call our firm at (800) 668-7984 or send us an online message to get started.