Company A has a low-performing employee, Worker 1, who is also rude and threatening and resists correction.  Should Company A: (1) allow Worker 1 to continue to cause chaos to avoid a lawsuit if it terminates Worker 1; (2) try to get Worker 1 under control; or (3) terminate Worker 1 with an offer of severance in exchange for a release?

Option 1 is disruptive to company morale and performance and unacceptable.  If Company A has tried Option 2 with well-documented efforts at correction to no avail, then Option 3 can be a good method of regaining peace and productivity while eliminating potential suits for discrimination, retaliation, wrongful termination, disputed wage claims and the like.  Company A would offer a severance amount — above all earned wages and accrued vacation pay — commensurate with time of service and contributions.  To receive that additional benefit, Worker 1 will agree in a binding contract never to file or pursue such claims, real or imagined, known or unknown, against Company A.

If an employer approaches this task with care, including a well-planned exit interview, most departing workers will agree to the package, ending uncertainty for both parties.

To ensure the waiver applies to age discrimination claims, if Company A has 20 or more employees and Worker 1 was 40 or over, Company A must allow the worker (1) up to 21 days to consider and sign the waiver and the opportunity to have it reviewed by an attorney; and (2) seven more days after accepting to change his/her mind and rescind the agreement. Although that employer must wait the 21 days to withdraw the offer, the worker can agree and sign on the spot or at any time before the three weeks is up.

Some employers pay the severance amount as soon as the ink dries. Others wait for the seven-day recission period to expire.  While rescission is rare, paying on signing carries some risk, since it may be impossible to recover that severance money from the rescinding former employee.

If a business has fewer than 20 on payroll and/or the departing worker is under age 40, the 21-day waiting and seven-day rescission periods are not required.  However, California law does require a five-day waiting period for such workers.

The Bowles Law employment forms package includes an overview memo on severance offers, short and long form sample severance agreements, and a sample termination letter.  We can help with forms for specific terminations.  Ensuring proper written workplace policies, procedures and template forms are implemented can go a long way to preventing dubious suits from former employees intent on retribution.

Take-Away:

While it may be unpopular with managers to offer a troublesome employee severance upon termination, paying that extra amount under a well-worded agreement is an employer’s “insurance policy” against a possible suit nearly guaranteed to cost more in company time, disruption, and attorney fees.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.
See also:

• Retaliation Wake-Up Call: Employer Discipline, Termination May Be Presumed Illegal (December 1, 2023)
• Resignations and Terminations Policy  (July 13, 2023)
• Bidding Farewell Not Unfondly: Using Severance Agreements in Touchy Terminations (September 24, 2021)

Helena Kobrin
May 30, 2025