CA Severance Pay

What is California Severance Pay?

severance pay

Severance pay, or Termination/ Separation Pay, is compensation paid to you by an employer in the event you are fired or laid off from your job. Generally speaking, California is an at will state which means that unless you have a contract that states otherwise, you are not entitled to any severance or termination benefits. Though as usual, there are always exceptions.

What is Typically Contained in a California Severance Pay Agreement?

For the agreement to be binding, among other things, there must an offer, acceptance and consideration (i.e. compensation). It is common for the employee to release all claims known and unknown against the employer, have no loans outstanding with the employer, keep the California severance pay agreement confidential or agree to a variety of other things.

On the other hand, the employer may agree as part of its severance practices to allow the employee to work up to a certain date, and pay out a lump sum of compensation and benefits through a certain date in exchange for conditions fulfilled by the employee. Many severance and employment issues between an employee and employer can be resolved in one all encompassing California severance agreement.

IMPORTANT: The separation agreement will not be enforceable should the employer not provide the employee with a benefit that the employee would not otherwise receive upon separation of employment.

Can I Still Get Unemployment If I Get A Severance Package? A common concern of California employees facing a potential layoff is the disqualification of unemployment insurance benefits if they accept a lump sum severance package from their employer. Under California law, severance pay is actually not grounds for disqualification from unemployment insurance benefits.

Dismissal and severance pay received by employees from an employer upon termination of employment was deemed to not be “wages” for unemployment compensation purposes and unemployment benefits should not be denied because of receipt of payments under such plans (Powell v. California Dept. of Employment (1965) 45 Cal Rptr 136). A potential exception exists to this ruling. The granting of California unemployment insurance or a California unemployment insurance claim can be impacted by a California severance pay agreement if there is an admission of willful misconduct. Although most agreements will not contain such admissions, it is important for the employee to be wary of this type of language which could impact the awarding of unemployment insurance benefits.

California Release Agreements Cannot Release Certain Claims: Employers cannot require you to waive claims relating to: (1) payment of minimum wage; (2) overtime pay; (3) unemployment insurance benefits; or (4) Workers’ Compensation claims or benefits. Any agreement containing a general release containing these items is likely unenforceable. It is very important to contact a California labor law attorney to review any California severance pay agreement or California release agreement. These agreements can be complicated and as such getting legal advice from a California employment attorney is essential to protect your interests.

California Termination Pay

In California, termination pay including all wages, vacation pay and PTO (paid time off) must be remitted to the employee immediately upon separation of employment, unless the employee resigned and failed to give at least 72 hours notice. In this case, the employer has 72 hours from the time you leave your job.

One exception: If you are being temporarily laid off, and have a firm return to work date, termination pay is not required and your boss may pay you on the regularly scheduled pay day.

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* In California you are entitled to overtime when you work more than 8 hours a day, the FLSA under Federal law mandates OT pay over 40 hrs worked in a week.


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