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California Employers: What You Need to Know about Severance Agreements

severance agreement.jpgWhether your California business is looking to terminate a specific employee, or is conducting a larger reduction in your workforce, your company needs to understand how to effectively use severance and separation agreements. Relatively minor mistakes can come back to cause you major headaches. If you have any questions about severance agreements, please contact an experienced Northern California employer attorney for immediate legal assistance.

A Terminated Employee Might Bring Legal Action

Companies have the right to control their own workforce. However, there are many reasons for which a California employee may not be terminated. Employers will want to avoid facing legal action from terminated employees. Obviously there is a risk of an adverse decision by a California judge when legal action is brought against a firm, but further, facing a legal claim will lead to undesirable expenditures of both time and money. Potential claims that terminated employee might assert include:

  • Breach of their employment contract;
  • Breach of the employer's good faith and fair dealing obligations;
  • Allegations that the termination constituted a violation of public policy;
  • The allegation that the termination was based on discrimination;
  • Unfair business practices; or
  • Violation of the WARN Act.

An Effective Severance Agreement Can Protect Your Business

Employees have an incentive to sign a severance agreement because they can receive additional benefits. These benefits can include compensation, positive references, or assistance in finding future employment. The agreement may also include terms such as a mutual non-disparagement clause, or the protection of the company's trade secrets. Additionally, the agreement will typically require that the employee will agree to waive their rights to make a claim against the company. In essence, the severance agreement can help both sides avoid a dispute. However, California employers must always make sure that their severance agreements are enforceable under state law. A sloppy agreement, such as one written using a standardized form, may be ruled unenforceable by courts. This can leave your company facing major issues. Some issues that have led to non-enforceability of employment severance agreements include:

  • Inadequate value being offered to the employee;
  • The lack of specificity regarding the waiver of claims;
  • A lack of clear language regarding the waiver of claims;
  • Overly restrictive provisions; or
  • The employee being given inadequate time to review the agreement.

An experienced San Jose employment law attorney should always comprehensively review your specific situation. Your attorney can draft a cost effective, and enforceable, severance agreement that meets all of the needs of your business.

Need Legal Help?

At Diemer, Whitman & Cardosi, LLP, our skilled San Jose employer defense attorneys will help you proactively protect your business. We have extensive experience drafting effective severance agreements, along with many other types of employment contracts. We serve employers in Mountain View, Sunnyvale, Cupertino and throughout the rest of Silicon Valley. Please contact our office today at 408-971-6270 to learn more.



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