No, but we will offer some anyway. Again, an employer has no obligations to provide severance payments. Employers rarely offer severance pay to hourly workers. NOTE WORTHY CASE: The Arizona Court of Appeals recently decided Swanson v. The Image Bank, Inc. a case that illustrates the importance of getting the details right when dealing with employment documents. Mary Swanson worked at The Image Bank (“TIB”) under a written contract that promised her one year’s compensation if her employment was terminated for anything other than cause. The same contract said that if Swanson’s employment was terminated without cause, then full payment to her of all amounts she was due, “shall be in full release and discharge of any claim or action she may have against the Company...” In July 1999, TIB discharged Swanson without cause. On the day she was terminated, TIB presented Swanson with a release and informed her that if she would sign the release, it would pay her the one year’s salary promised in her employment agreement Swanson refused to sign the release and TIB then refused to pay the one year compensation. Swanson filed suit for breach of contract and sought treble damages under Arizona’s wage statutes. The trial court found that TIB had breached its employment agreement by refusing to pay Swanson one year’s salary as required by the agreement and, on the parties’ cross motions for summary judgment, awarded Swanson treble damages, totaling $450,000 and attorneys’ fees in the amount of $50,000. TIB appealed on several grounds which were all rejected by the appeals court based upon the language of Swanson’s employment contract. TIB also argued that its decision to withhold severance pay from Swanson until she executed a release was a good faith dispute and that the court, therefore, should not award treble damages. The appealing court disagreed, holding that TIB’s request that Swanson executed a release at the time of termination could not be characterized as reasonable, good faith conduct because TIB’s obligations to make the severance payments under paragraph was unreasonable as a matter of law and that treble damages were therefore appropriate. The court also upheld the attorneys’ fee award and awarded Swanson the fees she incurred defending the appeal.
Consult legal counsel to evaluate any claims that you may have. Find out what your claims are worth if you were to win, the chances that you have of winning and the attorneys’ fees and court costs that you will pay in an effort to win. You should then compare this (plus the aggravation and uncertainty of litigation) to the benefits offered by your employer.
Technically, once you ask for a better package you have “rejected” the employment offer by making a “counteroffer” which the employer can accept or reject. Therefore, you run the risk of losing the guaranteed offer by making a counteroffer. However, in practice most employers will not rescind their offer if you make a counteroffer, but will leave their original offer on the table if they do not want to negotiate it. To be clear, though, you must be prepared to lose the offer if you make a counteroffer.
Yes. So long as the employer writes the plan to condition a release of rights (i.e., a promise not to sue) on payment of any severance benefits, you must agree not to sue your employment in order to receive them.
No. An employer has no obligation to provide severance pay. The only benefit that employers must by law provide is unemployment compensation.

The Law Office of

Joseph A. Velez

480.710.5079

Phoenix, Arizona Employment & Labor Law Attorney

Employment Severance Agreements

Employment separation agreements usually accompany layoffs and other types of employment termination in the U.S.  Your employer might call yours a Termination Agreement, Severance Agreement, or Separation Agreement and General Release.  Whatever your employer calls it, at first glance, it may look like an innocent letter on company stationary, buried around the mounds of paperwork that officiate termination.  But it’s typically a “gotcha” that specifies the terms of your termination, to your employer’s advantage.  It will likely ask you in so many words to just sit back and take it.


To encourage you to sign it, your employer might offer severance pay, extra severance pay or a better overall severance package.  That’s typical for layoffs.  Some terminated employees just take the money and run, without fully understanding exactly what it is they’ve signed and why their employers paid them to do so. But the fact of the matter is, an employment separation agreement is a contract in which you relinquish your legal rights, while the severance is effectively a bribe to influence you to sign it.


Joseph A. Velez has experience reviewing severance agreements and goes beyond traditional analysis of specific provisions of an agreement and perform a thorough review of all the facts and circumstances related to your involuntary termination.  This comprehensive process helps us see the bigger picture that often times is more complicated than merely language written in the Agreement.  We will ask questions and request your help in providing facts and any materials related to your employment and termination.  We can offer our best recommendations only when equipped with knowledge of the facts surrounding your case.


The signage of a severance agreement releases or prevents you from suing your employer for any claims against them that you have, so it is essential to first determine whether legitimate claims exist.  Upon the signing of a Release, you will not be able to assert claims against the company at any point in the future.


We frequently learn, during the initial consultation, that circumstances surrounding the person’s termination could involve discrimination of some sort, such as racial discrimination or unfair treatment based on religious beliefs of the employee being terminated or those of this person’s supervisor.


Attorney Velez carefully evaluates the circumstances surrounding a severance agreement through active listening, precise inquiry, and investigative research and review.  At this point, meaningful and knowledgeable guidance can be offered, but not before these crucial steps are taken.  It is with that knowledge that we proceed to review and analyze your severance agreement, on its own.


The severance agreement conditions provide for benefits and impose specific obligations that could prove to be significant and should be examined by an attorney who has experience with such agreements.  We possess that experience since we have been reviewing  and successfully negotiating Severance Agreements for years.  As an experienced employment attorney, Joseph Velez protects clients’ interests by identifying and making changes to the employment severance when possible.  We do our best to work into the agreements as many modifications as possible to further the interests of our clients.  We will also highlight provisions in your agreement that must be weighed carefully by you before signing the agreements.


Many times agreements will suggest that you seek the advice of a lawyer and we wholeheartedly agree.  Do not go at it alone.  Frequently, part or all of an agreement is subject to a deadline by which point the agreement must be signed, so do not put off discussions with a lawyer about your severance agreement. 


Important Warnings

If your employment separation agreement includes a non-compete clause , you might think twice about signing that too, as it limits the work you may seek at a time when you need work most.  That’s a big gotcha. It’s enforceable in many states, unless it’s to restrictive in whole or part.  Still, your employer might try to get you to sign the unenforceable anyway, as an intimidation tactic.  It happens.


The same goes if your employment separation agreement includes a confidentiality or no-disclosure clause, asking you to agree that you still not disclose or profit from company trade secrets, customer lists, and so on.  It’s pretty much a no-brainer that you shouldn’t disclose pr profit from company trade secrets, stolen customer lists, etc.  But a non-disclosure clause might limit you in many other ways, too.  To be enforceable, a non-disclosure clause must legitimately protect the company’s business interests.  But again,your employer might try to get you to sign the unenforceable anyway.  It’s not unheard of for a company to try to protect that which it has no right to protect, such as common industry knowledge.


Q. Is there a law that  requires employers to provide severance pay?

Q. My employer offered a severance agreement to me, but I have to agree not to sue my employer in order to receive any severance benefits. Can they do that?

Q. What happens to the waiting period if i ask my employer for a better package?

Q. I am inclined to accept the severance package, but I do not know what, if anything, my rights are worth that I will be giving up. What should I do?

Q. Are there any “rules of thumb” for how much severance an employer will pay?

Please contact The Law Office of Joseph A. Velez with any severance agreement questions.

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Our law office represents clients throughout the Phoenix, Arizona area including the cities of Scottsdale, Maricopa, Mesa, Surprise, Paradise Valley, Avondale, Gilbert, Chandler, Glendale, Florence, New River, Fountain Hills, Peoria, Surprise, Queen Creek, Tempe, Sun City, Apache Junction, and Casa Grande. We serve the counties of Maricopa, Yavapai, Gila, Pinal, La Paz, Yuma, and Pima County.

The Law Office of Joseph Velez

Employment & Unemployment Law Attorney

Scottsdale Financial Center

7272 E. Indian School Rd., Suite 111

Scottsdale, Arizona 85251

480.710.5079