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Severance Agreements in California (Release of Claims, Non-Compete and Non-Solicitation…..)

March 15th, 2013
In California, if a termination is not a covered event
under the WARN Act, there is no requirement to pay Severance to an
Employee-at-Will.  Employees with Specific ‘Contracts of Employment’ and
Notice Periods must be treated in accordance with the terms contained therein.
Union Employees are covered under the terms of the Collective Bargaining
Agreement (CBA).

A  Severance Payment, if offered,  is  offered in exchange for a General Release of all
Claims and an Agreement Not to Litigate. In some cases there are  added
element including; Non Solicitation of Clients &  Employees and
perhaps a Non-Competition Clause. Confidentiality  and Severability
Clauses are also common.

For a Severance Agreement  to be binding, the basic rules of Contract Law
apply…see prior articles on ‘ Law of Contract’ on this Blog (Consensus,
Consideration, Capacity, Formality, Legality….).
For a Severance agreement to be binding the  Employer and the Employee  provide each other with a
Benefit or something of value that is not ordinarily due under another  Contract, under State or Federal Laws (Consideration) or under a

A Severance Agreement in California which requires the employee
to release claims under some Federal and State Laws will only be enforceable in
California if the following AND other conditions are met (see your HRO
HR Consultant for further details);
  1. Specific
    Employment Acts for which the Employer seeks protection are mentioned by the
    correct Title;
  2. The Employee signing the Release is advised to consult Counsel (please consult your
    HRO Representative to review the required period of review time and whether
    there is Revocation Clause).
In general, including California,  claims relating to the following cannot
be released; Workers Comp, Minimum & Overtime Pay and Unemployment
The language used in a Severance Agreement needs to be simple
and comprehensive.  Failing to use the correct wording can cause the
agreement to be invalid.  NOTE that an Unenforceable Agreement  does
not entitle the Company to the return of the funds paid out
(consideration).  In addition, Contracts are generally interpreted in
favor of the individual (Adhesion) as the Contract is almost always written by
the Company.