Answer: No. Neither California nor Federal law require an employer to pay severance to an employee upon termination of employment. This is true regardless of the reason for the termination. Nonetheless, some employers choose to pay severance under some circumstances, or have a handbook or other policy that promises severance. If such a practice or policy creates a contractual obligation to provide severance, then the employer will have to do so.
Question: When might it make sense to pay severance?
Answer: If an employer provides an employee anything more than is legally required (generally just the final paycheck and any accrued vacation), the employer should consider requiring the employee to sign a release in exchange. If the employee does not sign a written release, the severance or other benefit given by the employer becomes a mere gift. The employee may take that gift and still sue the employer later for wrongful discharge, discrimination, etc.
Even when the employee is given severance or another benefit, a release will not be appropriate in every case. For example, the use of releases may be counterproductive where the discharge is for misconduct. Such conduct should not be rewarded, and doing so may send the wrong message to remaining employees. However, when faced with such issues as reductions in force or awkward terminations where the situation may not have been handled as well as it might have been, it may be wise to seek a release.
Question: What is a release?
Answer: A release is a document, signed by an employee, in which the employee releases all claims against the employer and promises not to sue the employer. In order for a release to be valid, there must be "consideration." This means that the release is valid only if the employee receives something more than that to which he or she is already entitled, such as an extra week's pay.
Releases are not standard form documents. A release must be carefully tailored to the particular employee and the individual circumstances in which it will be used. For example, if the worker is 40 years old or older, the release will have to comply with the Older Workers Benefit Protection Act (OWBPA), which provides that an employee may not waive any right or claim under the Age Discrimination and Employment Act of 1967 (ADEA) unless the waiver is "knowing and voluntary," and the employee is provided certain specific periods of time to think about the release before signing it, and even to revoke it after signing it.
For these releases, employment law counsel should be consulted to assist in the preparation of any release.
