The Legalities of Severance Pay: What Are Your Rights?
Encino Attorney Gives Legal Help on Severance Pay
Employees may often receive severance pay when they are let go by an employer. Although companies are not automatically required to provide severance pay by state and federal law in California, employers may decide to offer an employee severance pay pursuant to a severance agreement.
Because an employee may be waiving important rights if they sign a severance agreement, it is imperative that an employee speak with an employment lawyer before signing such an agreement.
What Is Severance Pay?
Severance pay is compensation provided to an employee upon termination of employment. It’s typically offered in situations such as layoffs, company restructuring, or mutual agreements to end employment. The primary purpose of severance pay is to provide financial support to the employee during their transition period while they search for new employment.
Severance packages may include various forms of compensation, such as lump-sum payments, continued salary for a specified period, benefits continuation, stock options, and outplacement services.
Contractual buy-outs occur when an employer opts to terminate an employment contract early, offering severance to fulfill contractual obligations. Voluntary resignations with incentives can also fall under this category in situations where an employee is encouraged to leave with a severance package as part of an amicable departure.
Legal Framework Governing Severance Pay in California
Both state and federal laws have provisions that may affect severance pay. The Fair Labor Standards Act (FLSA) does not mandate severance, leaving it largely to employer discretion or specific contractual obligations. However, federal law requires employers to provide advance notice of mass layoffs or plant closures through the Worker Adjustment and Retraining Notification (WARN) Act, which indirectly influences severance arrangements.
In California, the Employment At-Will Doctrine allows employers to terminate employees at any time, for any reason, except for illegal reasons such as discrimination or retaliation. As with the federal government, there are no California laws mandating severance pay.
California’s labor laws also require that all wages — including any earned but unused vacation time — be paid promptly upon termination. This can sometimes be confused with severance pay. The California WARN Act mandates 60 days’ notice for mass layoffs, which may involve severance discussions.
When Is Severance Pay Legally Required in California?
Severance pay becomes legally required when it’s been stipulated in a contractual agreement between the employer and the employee. Such agreements can take various forms, including individual employment contracts, collective bargaining agreements, or company policies. These documents may outline specific conditions under which severance pay must be provided, such as the length of service, reasons for termination, and the amount or type of severance benefits. Collective bargaining agreements (CBAs) are contracts negotiated between employers and labor unions that represent employees.
Company policies and past precedents may create a legal obligation for severance pay. Many organizations have established policies detailed in employee handbooks or internal documents that outline the conditions under which severance will be provided. If a company has a history of providing severance pay to employees in similar situations, this can set a precedent that may be legally enforceable. Consistent past practices may obligate the employer to continue offering severance under similar conditions to avoid claims of unfair treatment or discrimination.
Our Encino Employment Lawyer Can Help You
If you have any questions about the legality of a termination or the terms of a severance agreement you have been offered, contact Malatesta Law immediately. Andrew J. Malatesta is an experienced employment law attorney with a deep understanding of state and federal law. Attorney Malatesta has successfully recovered millions of dollars for California employees who have been wrongly terminated or harmed by illegal employer actions.
Schedule a FREE consultation today with our experienced employment law lawyer in Encino — call Malatesta Law to speak with Andrew at (424) 284-1384.