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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
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Experience:  Significant experience in all areas of employment law.
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Does is sound like were handling this correctly? Were

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Does is sound like we're handling this correctly?

We're a California at-will company. We fired an employee. Being generous, we offered him a settlement equal to two weeks severance. By "settlement," I only mean that that's the only document we really have for an exiting employee. There was nothing to settle, so-to-speak.

In the short document was an anti-derogatory paragraph, including "whether true or not" language (other than by order, of course).

He was the CEO's assistant, and knew with certainty that the company adheres to that clause -- always, and even to the extent of informing us if someone was saying something bad.

During the mandatory 21 days of waiting to sign the agreement, he said that which he shouldn't have. Being the CEO's assistant at a micro cap company, someone could jump to the conclusion that it was inside info (if it were correct), and buy or sell on that information.

We're taking the position that we do NOT need to pay him the money under that agreement, and the agreement has a clause allowing for that.
Hello and thank you for entrusting me to answer your question.

Under the federal WARN Act, an employer with at least 100 employees that lays off at least 50 during a 30-day period must either give 60 days notice of the lay off or pay 60 days wages. This is the only circumstance in which an employer is legally required to pay severance.

Since severance is typically not a legal requirement, the terms by which it is payed are governed purely by the laws of contract. Essentially, severance can be conditioned upon whatever contingencies or requirements that the parties agree to, generally speaking.

Accordingly, if an employer entered into a severance agreement that stated as a contingency that neither party make derogatory statements about the other and that clause was breached, that breach may invalidate the entire contract and alleviate the employer of the duty to pay severance.

More specifically, the contract would be invalidated if the breach of the non-derogatory clause constituted a substantial non-performance. Substantial non-performance means that there has been a willful departure from the terms of the contract, and an omission of one or more of its essential parts, and that the contractor has not in good faith performed all of its substantive terms. (Connell v. Higgins (1915) 170 Cal. 541, 556.)

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