Severance Agreements in California: What to Review Before You Sign

What you are actually being paid for

Severance is not owed by default in California. Unless a written policy, employment agreement, or company practice promises it, an employer offers severance because it wants something: a general release of all claims, including claims you may not have thought about yet.

That means the value of the offer should be measured against the value of the claims you are releasing. An employee with a clean, uneventful separation and an employee who was terminated two weeks after reporting unpaid overtime are being asked to sign the same paperwork — but they are not giving up the same thing.

Terms that deserve a close read

• Scope of the release — whether it covers only employment claims or every claim of any kind, and whether it reaches affiliates, officers, and successors.
• Section 1542 waiver — the California-specific language by which you give up unknown claims. It is standard, but it is also the clause that makes the release final.
• Revocation and consideration periods — federal age-discrimination law (the OWBPA) gives workers 40 and over at least 21 days to consider and 7 days to revoke; group layoffs get 45 days plus disclosure schedules.
• Non-disparagement and confidentiality — California's Silenced No More Act limits provisions that prevent you from discussing unlawful acts in the workplace, and agreements must include the statutory carve-out language.
• Non-competes — unenforceable in California, and since 2024 it is itself unlawful for an employer to include or attempt to enforce one against a California employee.
• Return of property, cooperation, and reference clauses — often overlooked, but they govern how the next year of your life actually goes.
• Tax treatment and timing — how the payment is characterized (wages vs. non-wage damages) changes withholding and can change the net materially.

What is not waivable, no matter what the draft says

A severance agreement cannot stop you from filing a charge with the EEOC, the California Civil Rights Department, the NLRB, or the Labor Commissioner, and it cannot prevent you from cooperating with a government investigation. It cannot waive unpaid wages already earned, workers' compensation rights, or unemployment insurance eligibility. It also cannot require you to lie.

When a draft appears to waive those things, that is usually a sign the template is old — and an old template is often a sign that the rest of the numbers have not been thought about carefully either.

Where the negotiating room usually is

• The severance multiple itself — weeks of pay is the headline number and the most commonly moved one.
• Continued health coverage — employer-paid COBRA for a defined period is frequently easier for a company to approve than more cash.
• Equity treatment — accelerated vesting, an extended exercise window, or the removal of a forfeiture trigger.
• The separation date — a later date can preserve a vesting cliff, a bonus eligibility date, or a benefits milestone.
• A neutral reference and an agreed departure statement.
• Mutual, rather than one-way, non-disparagement and release obligations.

When to bring in counsel

If the separation followed a complaint, a leave, a disability accommodation request, a whistleblower report, or a protected characteristic issue, the release is worth more than the offer typically reflects. The same is true where equity, commissions, or a bonus are in play, or where the agreement contains restrictive covenants.

A review is usually a fixed, short engagement: read the document, identify the leverage, and either advise you to sign or send a counter. Rainey Law P.C. handles severance reviews for employees across California from its San Diego office.