Nora recently advised a client who needed a severance agreement reviewed. She had been laid off from a local high tech firm that is in the cloud storage business. There seemed to be no dispute that her employment was “at will,” which meant that she could be fired at any time, for any reason or no reason at all. There also appeared to be no suspicious impermissible motivation for the termination like gender, age or race discrimination. In short, it was a garden-variety lay off, although of course it did not feel that way to the client.
The employer also was very anxious to ensure that the termination was super “legal.” To that end, it provided a 12-page “severance agreement.” Kind of in the vein of using a cannon to kill a mouse. The agreement had all sorts of provisos, ostensible quid pro quos and hyper legalese. The client had to state that she read and understood the document and that she understood that she needed to have it reviewed by an attorney. This, sadly, had the potential to use up the 4 weeks’ severance pay the employer had magnanimously offered.
Because Nora is a tender heart, she agreed to limit the fees for the review. Her review revealed that the employer was demanding a unilateral (read: one-sided) “non-disparagement” clause. In other words, the employee would not be permitted to say “anything bad” about the employer (whatever that means) but the employer would not be so bound. Second, the employer had paid the employee her final wages but sent the check via Fed Ex. Both of these were problems.
Labor Code Sections 201 and 208 state that when employers terminate an employee they must “immediately” pay employees their final wages “at the place of employment.” This simple rule means: give the person their check at work on the last day of the job. Here, the employers fancy lawyer insisted that it was “OK” to send the client her check via Fed Ex, because it was “actually doing her a favor.” Wrong! Moreover, the error entitled the employee to “waiting time” penalties of close to $1,000.
As for the “non-disparagement” clause: it wasn’t “illegal” but it was unnecessary and complicated. Not to mention unfair, because it was one-sided. Nora recommended deleting it, or, if absolutely necessary, making it mutual. After a lot of back and forth, including a total walk away by client (who valued free speech above all), the employer took out the offending clause and paid the client the penalties.
What is the lesson here? Many companies assume that they will be better off if they use one law firm to do all their work. Kind of a “one stop shop” approach. From our point of view, this is often not the case. When you hire a huge firm to do all of your work, will you know each lawyer who is billing you? No. Will you have experience with the quality of their work? Probably not. Will you always be able to ask a specific person your question? Maybe. More important: are you guaranteed good advice? No. Most important: Are you spending your money wisely? There is such a thing as “overkill,” and the above case was a good example. Not to mention the fact that the company probably paid a lot of money for some bad advice, such as “sure, go ahead and Fed Ex the final paycheck.” That was really a waste of money, because the law is so clear on this point. See Nora’s next blog post for another real life example of why “bigger” is not always “better.”
