Contract termination agreement and release of claims (2023)

1. What is check-in?

An employment contract is a contract that an employer may ask an employee to sign upon termination of employment. Severance pay is often offered in exchange for releasing the employee from claims against the employer. Severance pay, which includes a release of any claim against the employer in exchange for severance pay or other benefits, is legal, enforceable, and binding.

However, an employer cannot require an employee to waive claims in exchange for compensation for hours worked or benefits already owed to the employee. If you suspect that your employer has not paid you in full, your employer may send you a letter informing you of this fact. You can find a template for this type of letterHere.

2. Is my employer required to pay me severance pay?

NO. Unless a union contract, company policy manual, or employment contract specifically requires the payment of a fixed amount of severance pay to employees who leave or are laid off, the employer is not required to pay severance pay. for dismissal. Severance agreements are at the discretion of the company, which typically demands severance pay in exchange for severance pay.

If your employer has rules that require them to pay a fixed amount of severance pay, your employer must pay the severance amount regardless of whether or not you sign a waiver of claims against it. Previously agreed severance pay is considered salary and must be paid in full immediately upon termination of employment, on the last day if you give notice of resignation within 72 hours, or within 72 hours of the last day if you have not given prior notice.

3. How much money must my employer include in my severance pay?

A fixed amount of severance pay is not required unless severance pay is required by a union agreement, company policy manual, or other employment contract. Severance pay is often based on seniority. For example, a severance agreement may include a severance pay date, giving the employer one week's pay for each year of service.

Although not required, some employers may also offer other termination benefits, such as career counseling or COBRA coverage, as part of an overall termination "package."

If you believe you have serious employment law claims against your employer and the amount of your severance payment depends on the dismissal of these claims, you may be able to negotiate a higher severance payment to compensate you for alleged damages from these claims.

4. What can I do if my employer has not paid me severance/benefits in accordance with the severance agreement?

If the indemnity plan is governed by the Employee Retirement Income Security Act (ERISA), the plan participant must exhaust administrative remedies by filing a timely appeal of the claim denial within 60 days and then filing a lawsuit if the appeal is denied. ERISA administers private sector pension plans and, to some extent, employer-provided health (for example, health insurance) and social (for example, gym membership) plans. Government employee plans and church plans are generally not regulated by ERISA.

If the indemnity plan is not regulated by ERISA, claims for benefits ("wage claim") may be made toCA Division of Labor Standards Compliance(also known as the Labor Commissioner) or in court (including small claims court if the claim is for less than $10,000). Follow the step-by-step instructions for filing a claim in small claims courtHere.

5. Can I still claim unemployment benefits if my employer has paid me severance pay?

It depends. To determine if you qualify for unemployment benefits, the Employment Development Department (EDD) first checks to see if there has been a reduction in payment due to your fault. Severance pay is generally not considered a continuation of "earnings" for unemployment insurance purposes, so even if you receive severance pay, you are generally still entitled to unemployment benefits.

In all cases, the severance pay will not compute for the purposes of unemployment benefits when:

1. You have been paid in accordance with company policy,
2. The plan or policy stipulates that the payment is made for a specific reason (for example, job termination or recognition of previous work),
3. The plan is available to at least one class of workers and
4. The purpose of the payment is to supplement unemployment insurance benefits.

The method of payment, ie, lump sum or periodic, does not determine whether severance pay counts as remuneration.

It is important to note that if your employer terminates your contract and continues to pay you full salary, these payments may be considered "continuation pay" or "termination pay," which means you will not be entitled to unemployment benefits during the period in receive these payments. . Things like your employer keeping you on the payroll after your contract ends, receiving paychecks from your employer on payday, and continuing to accrue service credits (vacation or sick time) can all be examples of pay continuous salary that counts as payment for the unemployment subsidy .unemployed person.Use: If this salary does not compensate you at your levelfullnormal rate of pay, you may qualify for 'partial unemployment.'

Unemployment insurance claims cannot be waived under the general release in the severance agreement. (See also question 7).

More information about unemployment benefits and severance payments can be found on the EDD websiteHere.

What claims can be released under a waiver?

legal claims

Most legal claims, including discrimination claims (eg, Title VII, ADA, FEHA, WARN Act, etc.) filed in court, can be dismissed by the employee, even if the claim is not established. expressly in dismissal. Therefore, a waiver stating that the employee waives "claims under federal law" would be valid with respect to the employee's Title VII claim of discrimination. On the other hand, an employer cannot require an employee to give up their right to file a discrimination claim with the EEOC (rather than sue).

Other legal claims that can be released include claims under ERISA and COBRA. Voluntary waivers for claims under the Family and Medical Leave Act (FMLA) can be enforced without court or Department of Labor approval. For more information on discrimination claims and related laws, see the Frequently Asked Questions on Discrimination and Harassment.Here.

Common law claims

Claims made pursuant to state law (eg, wrongful termination, defamation, etc.) can be effectively released under a Claims Release.

disability claims

A disability pension plan (such as a long-term disability insurance plan provided by an insurance company designated by the employer) is a separate entity from the employer that offers it. A general waiver that covers claims only against the employer would not waive continued disability benefits unless the waiver specifically covered claims against the plan itself. As such, any claim under a private annuity plan can be waived under the claim waiver.

Use: This does not apply to California State Disability Insurance (SDI), which is administered by the state. California SDI claims cannot be waived.

Class Action Claims

An employee may waive the right to participate in any dispute brought in a class, collective, or representative lawsuit, provided that the claim or claims under which the action is brought are waivable claims in the indemnification agreement.

Use: The Class Action Waiver is inapplicable with respect to a representative action brought under the Private Attorney General Act (PAGA). This means that if you and other class members have sued your employer on behalf of the government, these claims cannot be released.

unknown claims

Employees can effectively waive both "known" and "unknown" potential claims against employers, as long as the wording of the permit makes it clear that the waiver of claims covers unknown claims.

If an employee has successfully waived unknown claims and later discovers that their employer has illegally terminated them, there is no legal basis for bringing such claims against the employer. If they do so anyway, they may be responsible for attorneys' fees and costs if the lawsuit is dismissed at the pleadings or summary judgment stage.

7. What claims cannot be withdrawn?

Workers' Compensation Claims

In general, a workers' compensation claim cannot be waived under the general release contained in a compensation agreement. Employers also cannot credit or offset amounts paid under a severance settlement against temporary disability benefits.

Employment Law Age Discrimination Claims

Claims under the Age Discrimination in Employment Act (ADEA), which prohibits employers from discriminating against workers over the age of 40 because of their age, generally cannot be waived unless certain certain conditions are met. requirements. ADEA resignations in severance agreements are only enforceable if the employer, in addition to other requirements, gives the employee at least 21 days to consider the resignation (and at least 7 days to revoke it) and advises the employee to consult a lawyer.

Minimum Wage and Overtime Claims

An employer may not place any conditions on the payment of undisputed wages owed to an employee under California wage and hour laws, including minimum wage and overtime pay. If the employee signs such a waiver, the waiver is void. On the other hand, an employee may be released from a wage claim that was the subject of a good faith dispute between the parties as to whether such wages were owed.

Waivers of wage and hour claims made under the Federal Labor Standards Act (FLSA) are also generally not enforceable unless the waiver is approved by the court or placed under the supervision of the Department of Labor.

Unemployment Insurance Claims

Unemployment insurance claims cannot be waived under the general release in the severance agreement.

USERRA claims

Courts failed to enforce waivers of wrongful termination and breach of oral employment contract claims under the Uniformed Services Employment and Reemployment Act of 1994.

8. What other things can my employer include in the settlement agreement?

There are several common clauses that employers often include in severance contracts. Below are some examples of important clauses that employers can include in a severance agreement, but keep in mind that there may be other enforceable provisions in addition to those listed here:

• Confidentiality agreements.Employers often require you to keep the terms of your exemption confidential. To get the "teeth" in the contract, some employers tie the confidentiality clause to the contractual penalty clauses. Confidentiality clauses are usually included with communications and can be enforced. However, contractual penalty clauses only apply when 1) the damages are difficult to assess; 2) the amount of compensation is a reasonable estimate of the damage at the time of the conclusion of the contract; and 3) they are not a sanction.
• Confirmation by the employee that there are no claims.It is routine for a release to identify any claims made so that the release applies specifically to all pending claims.
• The employer's failure to plead guilty.The disclaimer is almost always included in the termination and severance agreement.
• Non-participation of workers in accidents.Employers often try to prevent their employees from voluntarily participating in lawsuits brought by others against the employer. However, such clauses cannot prevent a person from providing evidence required by law, for example, in the context of a subpoena or court order.
• Negative statements from an employee.To prevent a former employee from discrediting their former employer, the employer may introduce language that prevents the former employee from speaking negatively about the employer. If you find a 'no disparagement clause' in your severance agreement, you can request a reciprocal clause that your employer will not disparage you.
• Recommendation letters.Employees are often concerned about the type of testimonials their former employer will give potential future employers about their work. Therefore, many severance agreements include a "neutral" reference letter as evidence in the contract, which can be used by either the employer or the employee whenever a reference letter is required for the employee. You can find a sample letter.Here.
• Job resignation.If the employee has not filed any claims prior to the conclusion of the contract, the employer can legally prohibit the former employee from working or even applying for a job for that employer in the future. If the employer is a large corporate employer with many subsidiaries and affiliates, it is worth asking whether the no rehire clause also covers these other companies.
• Merger clauses make the contract the final agreement between the parties and prevent employees from demonstrating any prior promises, oral or written, made to them by the employer.
• government lawIn order to control the forum whose law will apply to an extradition agreement, agreements often contain language that specifies which state or jurisdictional law will control the agreement.
• Abolition of inapplicable provisions.If a provision of the contract is considered unenforceable, many contracts include a clause that allows the unenforceable condition to be separated from the rest of the contract. This means that the rest of the contract will remain legally binding.

Arbitration. The arbitration provision states that you agree to submit any claim to arbitration and waive your right to sue in court. Arbitration is essentially a private court system where you bring your claim before an independent third-party arbitrator. The arbitrator's decision is final and enforceable in court and is generally not subject to appeal. Arbitration can indirectly benefit the employer more than the employee for several reasons; one factor is that the employer pays the arbitrators. Class action waivers in arbitration agreements are also enforceable.

9. Are there any restrictions on what my employer can include in a severance settlement?

Resignation from employment if the worker made the request before the conclusion of the contract

If an employee has filed a claim prior to entering into a contract, California law prohibits an employer from including a "no rehire" clause in a contract to resolve a claim filed with a court, with an administrative agency, through a alternative dispute resolution process. , or through the company's internal complaint process. An employer also cannot prevent its parent company, subsidiary, division, affiliate, or contractor from rehiring an employee in the future. The only exception under which an employer can include a no-rehire clause in a settlement agreement is when the employer "has determined in good faith that the person is committing sexual harassment or assault."

Confidentiality for Whistleblower Violations

Employers cannot prevent people from reporting possible violations to the Securities and Exchange Commission (SEC) or the Occupational Safety and Health Administration (OSHA), even if the employee has signed a confidentiality agreement.

Non-compete clauses

In California, it is generally illegal for an employer to require an employee to sign a non-compete agreement. A non-compete agreement, also known as a non-compete agreement, is an agreement that prohibits an employee from going to work for a competitor of their current employer.

10. What should I do if my employer asks me to sign a claim release?

Before signing a waiver, it is important to understand what potential claims you may have against your employer. Once you know the strength of your potential claims, you'll be better able to decide whether to withdraw them by signing a waiver or by negotiating a "better deal" in your severance agreement. Whether an employee can negotiate a better deal generally depends on the leverage he may have (ie, the value of the claims the employer wants him to give up).

However, it's also important to understand that any counter-offer you may make to your employer is generally considered a rejection of your employer's offer. If your employer decides not to respond to a counterproposal, you may be left with nothing.

11. How long do I have to consider the termination of my employment contract?

There is generally no time limit within which an employee must have the opportunity to consider or reject an offer of claim relief. You can ask for more time, but your employer is not required to give you more time. The only exception is ADEA claims, where employees age 40 and older have 21 days to consider any agreement waiving ADEA claims.

12. My employer tricked me into signing a resignation statement that I didn't want to sign. What I can do?

Fraud, misrepresentation, coercion, or lack of scruples are common defenses you can use if you want to void an already signed breakup agreement. While this defense is rarely successful, it can be successful if the termination was achieved through fraud or malice on the part of your employer. For example, if you do not speak English and were unable to read the statement when you signed it, this may justify termination of the contract.

If you believe your employer has breached the terms of your severance pay, you should consult an employment lawyer. Lawyers can be found on the California Employment Lawyers Association websiteHere. See Question 4 for what to do if your employer has not paid you severance pay/benefits as agreed.