Employment terminations are difficult for both managers and employees. Because of the sensitivities involved and the desire to avoid litigation, managers should take special care in drafting the severance agreement and release and in conducting the termination meeting.
For California employers, one of the most important contract provisions is to require that the employee waive all rights under Section 1542 of the California Civil Code. This Section, which is well-known to attorneys but not necessarily to business managers, states: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”
After executing a release in exchange for severance benefits, the terminated employee may discover facts suggesting that the severance benefits were inadequate. Without the Section 1542 waiver, the employer is at risk that the employee may render the release ineffective and demand additional compensation.
Once the severance agreement and release are prepared, here are some tips on conducting the termination meeting:
- Have two management representatives present so there will be a witness.
- Present the reasons for termination in a straightforward manner.
- Pay the employee for time worked and for accrued but unused personal time off.
- Explain that although the company is not obligated to do so, it will pay certain severance benefits, but only if the parties sign the severance agreement and release.
- Present the severance agreement and release, and recommend that the employee seek legal counsel.
- Document the meeting immediately after it occurs.
The foregoing is illustrative rather than complete coverage of a complex topic that is governed by many state and federal laws, including those prohibiting discrimination against certain protected classes of employees. Be careful!
For insights about steps that should be taken to put an employee on notice about performance problems to lay the groundwork for termination, check out Alice Doesn’t Work Here Any More.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.