All Wages Must Be Paid
California law requires that an employee must be paid all compensation earned, including unused vacation pay: (1) immediately and at the time of termination if the employee is fired, or if the employee has provided at least 72 hours notice before quitting; and (2) within 72 hours of the termination if the employee quits without notice. Payment must be made at the place of the termination, or by mail, if requested by the employee. Failure to pay all compensation due as required by law subjects the employer to substantial statutory penalties. If some part of the employee's compensation cannot be measured until a later time, because calculated as a commission on sales that are not yet concluded, then the employee must be paid those commissions after termination and as soon as the sales are concluded and the calculation can reasonably be done.
Severance Pay
There is no entitlement to severance pay. No state or federal law requires an employer to provide anything to the employee other than or in addition to the employee's already earned compensation. An employer may, however, have a contract to do so. The contract can be either express or implied-i.e., manifested by conduct. If there is a contract to provide severance pay, and if the employer fails to provide it, then the employee may sue to obtain it. Several federal case authorities characterize severance pay as a job benefit, and have held that severance pay claims must be brought in federal court, and pursuant to the enforcement provisions of the federal Employee Retirement Income Security Act (ERISA).
Employment Termination Settlement and Release Agreements
When an employer terminates an employee-either at the time of termination or shortly thereafter-the employer frequently presents to the employee some manner of settlement and release agreement. These can range from one page, to 50 or more pages, plus exhibits.
Settlement and release agreements usually contain an offer of some amount of severance pay, sometimes coupled with a limited continuation of health insurance and/or other benefits, and provide a release of all claims, forever, by the employee as against the employer-i.e., an offer of money and/or benefits in exchange for the employee's promise not to sue or otherwise initiate proceedings against the employer. Many such agreements contain a list of the federal and California employment law claims being released by the employee. Many also contain agreements by the employee not to compete with the employer, and not to use or disclose any of the employer's confidential information or trade secrets. The list of things the employee agrees not to do may include using or disclosing the employer's customer lists, contacting or doing business with the employer's customers, and soliciting or encouraging any of the employer's other employees to leave their employment.
Legal Advice is Necessary
Any employee presented with a settlement and release agreement should immediately seek the assistance of an employment law attorney. The sufficiency of the severance pay being offered cannot properly be evaluated by the employee without competent legal advice as to the potential value of the claims being released. The legality and enforceability of the promises not to compete and not to use or disclose confidential information should be explained to the employee, and revisions to the agreements should be negotiated accordingly. Certain of the employee's rights and potential claims against the employer should be excepted from any general release of all claims, and are required by law to be so excepted. Any release of all claims by the employee as against the employer should be reciprocal, or mutual, and the employee should be released from and protected against any and all claims that might otherwise be brought by the employer against the employee in the future. Any liquidated damages provisions should be reviewed and revised, if appropriate.
A settlement and release agreement, once signed, is an important legal document which will bind the employee forever. It should not be signed unless and until the employee has had the benefit of a professional review of the circumstances of the employment and its termination; and has a thorough understanding of the force and effect of each of the employer-drafted provisions.
If you have been terminated from your employment, or if you are an employer contemplating the termination of an employee, contact the California Employment Law offices of Virginia H. Gaburo & Associates to be informed about your legal rights and duties in the termination of an employment relationship.
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