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Part 1: Are severance packages enforceable?

We are back again in a time of massive layoffs. Unfortunately, it does not appear that these “reductions in work force” will stop any time soon, and in fact, most news sources say that they will continue. And, some tech companies that already did massive layoffs may do even more. As a result, a hot topic has become severance packages and their enforceability, and this blog post will be the first on this topic because while Santa Monica, California, severance packages are generally enforceable, not all provisions are enforceable.

How layoffs occur

Currently, there does not appear to be a profit or loss reason for these layoffs. Instead, they appear to be preparation for future “market conditions.” The way they are selecting these employees to lay off has not been released publicly. Often, Los Angeles area employers will lay off those employees who are closer to retirement or who have been with the company the longest because both categories of people are often the highest paid people in the company.

Illegal reasons

Regardless of the reason for the layoff, there are several reasons that are illegal. These include layoffs based on age, race, sex, national origin, religion or disability. As those later in their careers are usually aged 40 or older, often, these layoffs may violate the Age Discrimination in Employment Act. Depending on the nature of the layoffs, they could violate many other state and federal laws, like those enforced by the Equal Employment Opportunity Commission, including Title VII, the Americans with Disabilities Act, the Equal Pay Act, Older Workers Benefit Protection Act, etc.

Severance agreements

As a result of the possibility of these claims, in addition to claims that may have already arisen during the course of employment, are severance packages in exchange for the signing of a severance agreement. These are contracts between the employee and the employer that dictates the terms of the employment termination. Regardless of what the agreement is called, if your employer asks you to sign something in exchange for your severance package, it is likely a severance agreement.

Nonetheless, keep in mind that these Southern California agreements must be supported by separate contractual consideration. This means value that you are not already entitled to, like a pension, earned vacation or sick leave, etc. It must be something of additional value, like a lump sump or periodic payments that represent some percentage of the employee’s salary. Of course, it can include more, but it must, at a minimum, have this separate consideration. In future blogs, we will explore acceptable and not acceptable provisions within severance agreements.