What Is a Separation and Release Agreement?

A separation and release agreement is a legal contract between an employer and an employee. Typically, the employer offers some form of consideration—like severance pay, extended benefits, or a positive reference—in return for the employee’s agreement to waive certain rights, including the right to sue the employer for specific claims.

These agreements can cover:

  • General release of claims, including known and unknown claims.
  • Non-disclosure agreements (NDAs).
  • Non-disparagement clauses.
  • Confidentiality terms.

Should I Sign a Separation and Release Agreement in California?

Signing a separation and release agreement in California is a significant decision that can have long-lasting implications for your legal rights and financial future. These agreements, often presented by employers during layoffs, resignations, or terminations, generally include a waiver of your right to sue in exchange for severance pay or other benefits. This article explores the critical aspects of separation and release agreements in California, helping you make an informed decision.

Key Legal Considerations

Understanding the legal framework surrounding separation agreements in California is crucial. Below are some laws and cases to consider:

  1. General Release and Waiver of Claims

    2. California courts generally uphold separation agreements if the release is knowing and voluntary. For example, in Castelo v. Xceed Financial Credit Union (2023), the court enforced a release that included claims of wrongful termination and discrimination under the California Fair Employment and Housing Act (FEHA), as long as the employee received consideration and understood the terms.

  2. California Civil Code Section 1542

    3. California’s Civil Code Section 1542 protects employees by invalidating general releases for claims they were unaware of at the time of signing. However, many agreements include a waiver of Section 1542 protections. If you agree to this waiver, you may be relinquishing the right to pursue claims you didn’t know existed.

  3. California Civil Code Section 1668

    4. This statute prohibits contracts that exempt employers from responsibility for fraud or illegal acts. Even if you sign a release, it may not cover claims involving willful misconduct or violations of public policy.

  4. California Government Code Section 12964.5

    5. Employers cannot require you to sign a release as a condition of employment or continued employment. However, they can offer a release as part of a negotiated separation agreement.

Case Examples:

  • Skrbina v. Fleming Companies (1996): Upheld a release signed for severance benefits.
  • Jefferson v. California Dept. of Youth Authority (2002): Enforced a broad release in a workers’ compensation settlement.
  • Perez v. Uline, Inc. (2007): Found a release enforceable when the employee signed willingly and received adequate consideration.

Pros and Cons of Signing

Pros:

  1. Financial Compensation: Many agreements offer severance pay or extended benefits.
  2. Legal Certainty: Resolving disputes upfront avoids costly litigation.
  3. Professional References: Agreements often include provisions for positive references.

Cons:

  1. Waiving Legal Rights: You may give up the right to sue for valid claims.
  2. Broad Language: Some agreements include overly broad waivers that can extend to unforeseen claims.
  3. Emotional Pressure: Employers often present these agreements during stressful times.

Questions to Ask Before Signing

  1. What am I giving up?
    • Review the scope of the claims you are waiving, including known and unknown claims.
  2. What am I gaining?
    • Ensure the severance or other benefits justify the rights you’re relinquishing.
  3. Is the agreement enforceable?
    • Check for compliance with California laws, such as Government Code Section 12964.5.
  4. Can I negotiate?
    • Many employers are willing to modify terms if you negotiate.
  5. Have I consulted an attorney?
    • Legal advice is invaluable in understanding the agreement’s implications.

Steps to Take Before Signing

  1. Request Time:
    • Under California law, employers must give employees at least five business days to review the agreement.
  2. Consult an Attorney:
    • A lawyer can help identify red flags and negotiate better terms.
  3. Understand the Terms:
    • Read every clause carefully, including waivers of Civil Code Section 1542.
  4. Consider Alternatives:
    • Explore whether litigation or other forms of resolution might be more beneficial.

FAQs

  1. Can I revoke a separation agreement after signing?

    2. In some cases, such as agreements involving the Age Discrimination in Employment Act (ADEA), you may have seven days to revoke after signing.

  2. What happens if I don’t sign?

    3. If you decline to sign, you forfeit the benefits offered in the agreement. However, you retain your right to pursue legal claims.

  3. Can I negotiate a better deal?

    4. Yes, especially if you have valid claims or leverage. Consult an attorney for guidance.

  4. Does a release cover future claims?

    5. Most releases apply only to claims existing at the time of signing, not future claims.

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Conclusion

Whether to sign a separation and release agreement in California is a nuanced decision. Carefully weigh the benefits against the rights you are waiving. Consult an experienced attorney to review the agreement and negotiate terms that align with your best interests.

For a free and confidential consultation, contact Setyan Law, APC, your trusted advocate for employment law matters in California.

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What is The Legal Definition of Wrongful Termination?Protect Your Job: What to Say in a Surprise HR Meetingemployment arbitration casesWhat You Should Know About Employment Arbitration Agreements Before You Sign
Categories: Employment Law, Wrongful Termination