Severance Agreements

Many California workers are offered a severance package at the time of a layoff. An employee can be offered a severance package because it is required by their employment agreement, because they are part of a union, because the employee is being terminated or because their employer is negotiating for a voluntary resignation. Severance agreements contain many provisions. It is important for employees to understand all the terms and conditions of a severance agreement. While the total cash payment might seem like the most important term, there are many other important things to consider. Our experienced California employment attorneys can ensure that your legal rights are protected throughout severance negotiations. While pay is important, a fair severance package can provide for other employment benefits, as well.

Pay

Most employees consider severance pay to be the most important part of a severance package. It is important to understand that there is no general legal requirement for employers to offer severance pay under California law. If your employer does offer severance pay, it could be a contractual requirement under your employment agreement or union contract. It could also be a voluntary policy that your company has enacted to be a competitive employer in the labor market. The amount of pay you are entitled to will be determined by the contract or policy that gives you the right to severance pay.

These agreements typically measure severance pay in weekly installments. For example, severance pay could entitle an employee to one or two weeks’ worth of severance pay for every year they have been employed with the company. Employees who are paid commissions and bonuses can also negotiate for this income as part of their severance pay. In some cases, it is possible to negotiate for more pay or a cash payment in lieu of other employment benefits.

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Continuing Health Insurance Coverage

Though most employees focus on the cash payment, this is not the only thing to consider in a severance agreement. Many severance agreements will allow the employee to stay on the employer’s health care plan for a specified period. This coverage is an important gap – especially for employees whose health insurance extends to their partners or children.

It could take some time to find a new job and to become eligible for the new employer’s health insurance plan. Even then, chronic health conditions might not be covered under policy exclusions for pre-existing conditions. Carefully consider how long you will need to remain on your current employer’s health insurance. If your family has a lot of medical bills, it might be worth it to extend this health insurance coverage, even if you must trade off other benefits (such as pay) in order to do so.

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Retirement Benefits

Retirement accounts can be affected dramatically by the end of employment. If you have not been at the company long enough for your benefits to “vest,” you could lose out on some of the funds that the company has already contributed. If your company stops sponsoring the plan, you might incur costs to roll your funds into another plan or even tax liability if the funds must be withdrawn before you reach retirement age. All of these costs can be negotiated as part of a severance package. Your employment lawyer can help you explore all possible options for your retirement benefits to find the solution that is best for you.

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Other Conditions

Though less common, there are other random benefits that can be negotiated as part of a severance package. Some employers might offer job placement services. Others might agree to pay for relocation expenses and related costs. You might need childcare or eldercare while you search and interview for a new job. If these services – or any other conditions – are important to you, be sure to ask your employment attorney about your options. It might be possible to negotiate for these costs and services as part of your overall severance package.

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Orange County Employment Representation Throughout the Severance Agreement Process

Though employers try to make employees feel like a severance package is a “take it or leave it” offer, this is usually not the case. You have the right to have a severance agreement reviewed by your own employment attorney, and you also have the right to negotiate for better terms. These agreements typically measure severance pay in weekly installments. For example, severance pay could entitle an employee to one or two weeks’ worth of severance pay for every year they have been employed with the company.

Employees who are paid commissions and bonuses can also negotiate for this income as part of their severance pay. In some cases, it is possible to negotiate for more pay or a cash payment in lieu of other employment benefits.

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