It can be stressful when you are dismissed from a job through no fault of your own. You may be coming from a status of financial stability and relative ease, only to be told that your next paycheck will be the last you will depend on. Sometimes, a company may offer a severance package to ease some of that financial burden. These can be a great resource if you need guaranteed payment, but they usually do not come without contingencies and strings. It may be wise to consult with a San Francisco wrongful termination lawyer with The Armstrong Law Firm before signing anything about a severance package. This can help protect your rights if you are a victim of wrongful termination.
What is Severance Pay?
A severance package or severance pay is generally offered by a company when employment is terminated for reasons unrelated to the employee’s performance. According to the California Department of Industrial Relations, the state does not require any kind of severance pay beyond your final pay due for time already worked. However, some companies may elect to provide this buffer if their termination is not the employee’s fault. Severance pay agreements may be based on position, salary, or tenure. These packages are legally binding agreements between the employee and employer and may include benefits like continued health insurance or continued salary payment for a determined amount of time. A company may offer a severance package to reduce its liability by requiring the employee to waive the right to sue in exchange for the payment or continued benefits.
Severance Agreement Conditions
Severance can allow you to catch your breath and ease immediate financial concerns while you search for new employment. However, it does not come without costs and frequently requires you to agree to certain terms such as:
- Waiving the right to sue in civil court
- Sign a non-disparagement clause
- Waive your unemployment entitlement
- Require you to state that you resigned
- Confidentiality agreement regarding the conditions of your termination or severance agreement. This will commonly include speaking publicly, like posting on social media
Considerations of Severance Pay
Some employers will offer a choice of receiving your severance pay in a lump sum amount or distributed over multiple payments. Severance pay is taxable income, so depending on your circumstances, the way your severance is paid out may affect how it is taxed and should be considered prior to signing any agreement. In many cases, there may be room for negotiation regarding your package, and that can work to your advantage. Because California does not mandate severance pay, most companies offer it as a precaution to reduce liability. Whether the employer has acted in bad faith or not, accusations of discrimination or retaliation can be costly to refute, particularly with new legislation that makes retaliation claims easier for employees. However, suppose you feel that you have been inappropriately or illegally terminated. In that case, it may be advised to refrain from accepting a severance agreement before you speak with a San Francisco employment lawyer about the details of your situation.