If you were recently laid off and offered a severance package, your employer may be asking you to sign away valuable legal rights. While receiving additional pay might seem beneficial during your transition period, it's crucial to understand what you may be giving up in exchange.

Understanding What's in Your Severance Agreement

Most severance packages include a "release of claims" provision—legal language requiring you to waive your right to sue your former employer for nearly any claim you might have. This means potentially valuable legal claims could be signed away for a fraction of their worth.

Common Claims You Might Be Releasing

Here are some examples of claims that you could potentially be releasing. 

Misclassified as Exempt from Over Time

Many professional workers are classified as "exempt" employees who don't receive overtime pay. However, to legally qualify for certain exemptions in California, employees must meet specific criteria. For example, Computer Professionals should be making at least $56.97 per hour, $9,888.13 monthly, or $118,657.43 annually to be exempt from overtime in California. (Learn More)

Many other employees, who are not computer professionals, need to make at least twice the minimum wage for 40 hours of work per week, or $1,320 per week, to be exempt from overtime requirements.

Unreimbursed Business Expenses

An employer must reimburse employees for necessary business expenses, which could include: 

• Using your personal internet connections for work
• Driving your personal vehicle for work purposes
• Purchasing equipment or software for remote work

Signing a release could prevent you from being able to ever recover any of the expenses from your employer. 

Workplace Retaliation

Were you separated from employment shortly after:

• Reporting potential illegal activity?
• Requesting accommodations for a medical condition?
• Taking protected family or medical leave?
• Raising concerns about workplace conditions?

These situations could indicate unlawful retaliation, which might entitle you to compensation beyond your severance package.

Before You Sign

Consider taking these steps before signing a severance agreement:

1. Review the full agreement carefully. Understand exactly what claims you're waiving.
2. Calculate potential claims. For example, if you regularly worked overtime hours but were misclassified as exempt, your unpaid wages could be substantial.
3. Consider consulting with an employment attorney. While they may be limited in the advice they can give you in an initial consultations, they may be able to help evaluate your specific situation. They may also be able to assist you pursue your claims or negotiate a better severance package. 
4. Negotiate. If you have potential claims, you may be able to negotiate a better severance package.

While severance payments provide immediate financial support, they often require you to give up potentially valuable legal claims. Taking time to understand the value of what you're signing away ensures you can make the best decision for your long-term financial wellbeing.