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Release Section 1542 California

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  • Release Section 1542 California

    Does anyone know what the following means in a release agreement?:

    The parties hereby waive the provisions of section 1542 of the California Civil Code, which states:

    "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."

  • #2
    I am not a lawyer. I did a quick websearch and I am finding a lot of canned severance agreement forms which use that language. This is everything that I know on this subject.

    http://contracts.onecle.com/navisite...03.02.21.shtml
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    • #3
      annade: Does anyone know what the following means in a release agreement?: The parties hereby waive the provisions of section 1542 of the California Civil Code.

      In essence, it means that you agree to waive all claims, known and unknown. Best illustrated by an example....

      Let's say, you became aware that your last employer did not properly compensate you for overtime and meal breaks. Let's further assume your ex-employer wants to settle the matter with you. The last thing your ex-employer wants to do is have you bring up a claim for some currently unknown or unsuspected labor law violation in the future. To facilitate final closure on all claims (known and unknown), your company wants a complete release. Hence, the 1542 waiver.
      Barry S. Phillips, CPA
      www.BarryPhillips.com

      IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

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      • #4
        Barry:

        Dumb question. Can an employee legally waive a valid claim to paid overtime? I thought I remembered reading something on the federal DOL website that was illegal.
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)

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        • #5
          DAW: Barry, Can an employee legally waive a valid claim to paid overtime? I thought I remembered reading something that it was illegal.

          You are correct that CA Labor Code 1194 provides employees are entitled to overtime even if the enter into an agreement that provides they will work for a lesser wage http://law.onecle.com/california/labor/1194.html. In a well-drafted settlement agreement, however, an employee does not waive his right to overtime compnsation, he just agrees to settle the dispute for some monetary amount (usually at a discounted amount that takes into account the hazards of litigation). Suffice to say, there is a difference bewteen an employee waiving his/her right to overtime premium pay and and settling his/her claim overtime premium pay.
          Barry S. Phillips, CPA
          www.BarryPhillips.com

          IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

          Comment


          • #6
            We routinely get employees out of "mutual releases," as they relate to wage and hour issues. This is a very fact intensive issue, but the general rule is that you can not release overtime claims. Federal law is quite clear that private overtime settlements are invalid. California law does allow for some private settlements, but the terms of these are fairly strict and many settlements do not qualify. In order for your release to qualify, it must meet both California and Federal requirements (or one of them must be irrelevant, such as you are exempt from overtime under Federal law, but not California Law).

            Such a release (1542) is also not valid for workers comp claims.

            A release based only on 1542 is based on California law. As such, it will not and can not waive any protections or provisions of Federal Law. Federal Law has many more requirements, especially for age discrimination.

            This can be very complicated, and if you are an employee, you should not sign one expecting to get out of it later. If you are an employer, you should not think that it will shield you against claims. Determining your rights and/or obligations under a settlement agreement is a very complex issue and you should consult a local attorney to advise you of your rights.

            As the topic is complex and fact intensive, it is not very suitable to discussion on this forum. As such, I will not post any follow up to this discussion. You need to speak with an attorney.
            Michael Tracy
            Attorney
            http://www.laborlawradio.com

            Disclaimer: The above response is a general statement of the law and should not be relied upon as legal advice. It only assumes the facts that are stated in the message. The above response does not serve to form an attorney-client relationship.

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            • #7
              From the federal DOL website:

              http://www.dol.gov/esa/regs/compliance/whd/whdfs23.htm

              Overtime Pay May Not Be Waived: The overtime requirement may not be waived by agreement between the employer and employees. An agreement that only 8 hours a day or only 40 hours a week will be counted as working time also fails the test of FLSA compliance. An announcement by the employer that no overtime work will be permitted, or that overtime work will not be paid for unless authorized in advance, also will not impair the employee's right to compensation for compensable overtime hours that are worked.
              "Reality is that which, when you stop believing in it, doesn't go away".
              Philip K. **** (1928-1982)

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              • #8
                I read something like that on eBay's website so from what I can tell I doesn't just apply to employment as eBay has that in their user agreement and at the moment I don't fully understand it all.

                Because of that and because of an issue that I am having with Paypal relating to something similar I am re-reading the Paypal user agreement and at this point in time I am strongly thinking about talking to a California attorney regarding my issue.

                Comment


                • #9
                  rdonovan, this thread is over 2 1/2 years old. I'm sure the issue has been resolved by now. Please do not respond to ancient threads.
                  I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

                  Comment

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