My friend Eve sent me an email yesterday asking me about severance. She was specifically referring to an article, in which a 64 year old employee who worked in the shop for 12 years was terminated with his co-workers when a Wilkes-Bashford store in Mill Valley, CA shut its doors unexpectedly. None of the store employees received any severance pay for their service.
That lead me to to think about severance pay. What is it and why do companies give it? It’s not required, neither federally nor statutorily. Yet many employers have severance guidelines, if not full-blown policies.
Well, I think I know. Severance pay seems to really be “Here’s some money so you don’t sue us.” Yet, the naif in me really wants to believe that severance is an effort of good faith to recognize an employee’s service to the company, and to assist a person financially while they seek other employment. But all of us know that you never, ever let an employee walk away with that check unless they’ve signed an official “Release of Claims” that basically tells the employee that they give up their rights to sue the company.
Typically, the employer will seek to have the employee release all non-waiveable state and federal claims the employee has, or may have, whether known or unknown, against the employer (including but not limited to claims of discrimination, harassment, wrongful termination, breach of contract, privacy violations, defamation, and intentional infliction of emotional distress). An employee’s waiver of a federal claim of age discrimination, however, is NOT valid, unless: 1) the release specifically mentions the Age Discrimination in Employment Act, 2) the release is written in clear understandable language; 3) the employee is advised to see an attorney before signing the agreement, 4) the employee is given a full 21 days to consider the release (45 days in some cases), and 5) the employee is given a 7 day “cooling off” period during which the employee can change his or her mind after signing the release.
An employee may also be forced to waive “unknown” claims against the employer, which will be valid as long as the employer has properly inserted the language required under California Civil Code 1542 into the release.
In other words, everything. Except cases regarding overtime, Workers Comp, and, unless specifically cited in the Release, Age Discrimination. It seems like an awful lot to give up for a payment that’s usually 1 week per 1 year served (or some close facsimile thereof). Yet in the case of the 64 year old worker who was let go with nary a cent, I’m sure that 12 weeks of compensation in exchange for a lousy release would probably be a no-brainer.
Stuff like this breaks my heart. How difficult would have been to offer something to recognize loyalty, good work and many years of service (along with a Release of Claims)? I realize that there are financial implications here, but even a token gesture of some sort would have been better. There’s the right thing to do and then there’s the RIGHT thing to do.
It sounds like Wilkes Bashford did neither in this case.
UPDATE: When it looks like Karma is circular. Wilkes-Bashford filed for Chapter 11 Bankruptcy today.