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Rand L. Stephens & Richard Koss

Can an Employer Deny Severance?

Severance Pay concept with agreement document on wooden board

Ideally, when you leave a job, you are doing so on your terms. You have a plan to move on to another job, higher education, another career, or pursue some other objective. Unfortunately, things are often less than ideal. You might lose your job because of layoffs, downsizing, “redundancies,” or termination for alleged cause. Your employer might cushion the blow with a severance package, but are they required to do so? Read on to learn about how severance works in California and when you are entitled to severance upon leaving your job. Call an experienced California labor & employment attorney with any questions or for help with an employment-related matter.

What Is Severance?

Severance pay is a sum of money paid to an employee upon termination. Often, severance is included as part of a severance agreement. In such a situation, severance pay is typically offered in exchange for the employee giving up certain rights. The employee may be required to sign an agreement waiving their right to, for example:

  • Sue the employer for wrongful termination
  • Sue the employer for discrimination based on race, gender, or other protected characteristics
  • Discuss your severance with other people
  • Reveal corporate secrets or other insider information
  • Defame the employer or make negative comments in public

The specifics of your severance agreement will depend upon your circumstances, including your position, your relationship with your employer, and other factors.

Is Severance Guaranteed?

Severance is based on a contractual agreement between you and your employer. Severance may be guaranteed as a matter of company policy or union contract; it may be guaranteed in your employment contract; it may be offered as a part of a settlement agreement; and it may even be offered as a separate severance agreement as part of a round of layoffs to avoid liability. If your employer has agreed to pay you severance as part of a severance agreement or any other contract (including an employment policy), they must pay. If not, however, nothing in California law requires your employer to pay you severance.

If your employer has never agreed to do so by way of company policy or contract, then they have no obligation to pay you severance. You are not entitled to any separation benefits under California law beyond the wages and other benefits you’ve already earned.

Employers Must Pay Wages Earned

It’s important to distinguish severance pay from other benefits of employment. Severance is additional compensation beyond that which you’ve already earned at your job. While severance is not required, your employer is required to pay you what they already owe you. Upon termination, you are entitled to wages and benefits already earned, including back pay, holiday pay, unused vacation days, etc.

Additionally, there are limits on what restrictions a severance package can impose. For example, a severance agreement cannot force you to sign away your right to minimum wage, overtime, or other wages guaranteed by California law. You cannot sign away your right to workers’ comp or unemployment insurance. You also cannot sign away your right to report illegal activity, the right to work for a competitor (in California), or the right not to perjure yourself. If you are concerned about the terms of your severance agreement, consult with a California labor law and workers’ rights attorney.

If you are a San Francisco employee or employer in need of advice or representation concerning severance agreements, wage & hour violations, non-compete agreements, retaliation, whistleblower protections, workplace discrimination, or other California labor law issues, contact the Bay Area employment law attorneys Richard Koss and Rand L. Stephens at 650-722-7046 on the San Francisco Peninsula, or 925-757-1700 in the East Bay.

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