Understanding Severance Agreements and Legal Options for Employees in California

A severance agreement is a contract between an employer and an employee that outlines the terms of an employee’s departure from the company. In California, employers often use these agreements to offer financial compensation in exchange for a release of legal claims against them. Before you sign, there are several important things you should understand.

What Is a Severance Agreement?

When an employer asks you to sign a severance agreement, they are asking you to give up your right to sue them in exchange for a payout. That is a significant trade-off, and it deserves careful consideration.

These agreements are common across industries including tech, healthcare, finance, and manufacturing. They may arrive alongside a wrongful termination, a mass layoff, or a forced resignation — sometimes called constructive discharge. They often come with a tight deadline and language that feels final. The good news is that like any contract, a severance agreement is negotiable.

It is also worth knowing that a severance offer does not mean your employer acted lawfully. In many cases, employees who receive severance packages have valid underlying claims for discrimination, retaliation, or wrongful termination that they are unaware of before signing.

Your Rights as an Employee in California

California law gives employees meaningful protections when it comes to severance agreements. Here is what you need to know before you respond to your employer.

You Have the Right to Review the Agreement

You are not required to sign immediately. You have the right to take time to review the terms and consult with a California employment attorney before making any decisions.

Employees Over 40 Have Additional Protections

If you are 40 years of age or older, federal law under the Older Workers Benefit Protection Act (OWBPA) gives you additional rights. You are legally entitled to at least 21 days to consider the agreement and 7 days after signing to revoke your signature. Your employer cannot pressure you to waive these protections.

This protection matters especially in industries where age discrimination is common. If you work in tech and are over 40, you may want to read our post on age discrimination in tech before signing anything.

Certain Rights Cannot Be Waived

A severance agreement cannot strip you of certain legal rights. Specifically, the agreement should not contain any provisions that would prevent you from filing a complaint with:

• The Federal Equal Employment Opportunity Commission (EEOC)
• California’s Civil Rights Department (CRD), formerly known as the Department of Fair Employment and Housing (DFEH)

If your agreement contains language that attempts to block those rights, that is a red flag worth discussing with an attorney. California offers some of the broadest employee protections in the country through the FEHA protected classes framework, and those rights cannot be negotiated away through a severance contract.

What to Look for in a Severance Agreement

Not all severance agreements are created equal. Here are the key terms to review carefully before signing.

The Compensation Amount

Ask yourself whether the severance pay offered will realistically support you through your job search. One to two weeks of pay per year of service is a common starting point, but that is not a legal requirement in California. The amount is negotiable, and an attorney can help you assess whether the offer is fair given your role, tenure, and circumstances.

If you believe your termination may have been unlawful, the potential value of a wrongful termination claim in California could be significant. Signing a severance without that analysis could mean leaving money on the table.

Non-Monetary Terms

Financial compensation is not the only thing worth negotiating. A strong severance agreement may also include:

• Extended health insurance coverage beyond your termination date
• Neutral reference language so future employers receive a professional response
• Equity or bonus vesting provisions if applicable to your role
• Non-disparagement clauses that apply to both parties

If your role involved a non-disclosure agreement, it is also worth reviewing our post on what happens if you break an NDA to understand how those obligations interact with your severance terms.

The Scope of the Release

Read the release of claims section carefully. This is the part where you agree not to sue your employer. You want to understand exactly what claims you are giving up and whether any of those claims have value before you sign away the right to pursue them.

Should You Negotiate Your Severance Agreement?

Yes, in most cases it is worth at least exploring your options. Employers expect some negotiation, and the initial offer is rarely their final position. An experienced severance negotiation attorney can help you evaluate the agreement, identify any concerning terms, and negotiate on your behalf.

This is especially important if any of the following apply to your situation:

• You believe your termination may have been discriminatory or retaliatory
• You were let go while on medical leave or FMLA
• You had unvested equity, a pending bonus, or a commission due at the time of termination
• You are being asked to sign quickly under pressure
• You were part of a mass layoff and did not receive proper notice under California law

Frequently Asked Questions

Do I have to sign a severance agreement in California?

No. Signing is voluntary. Your employer cannot legally force you to sign, and declining to sign does not automatically forfeit any wages or benefits you have already earned.

How long do I have to review a severance agreement in California?

There is no single universal deadline, but if you are 40 or older, federal law gives you at least 21 days to consider the agreement. Regardless of age, you have the right to take reasonable time and consult with an attorney before signing.

Can I negotiate a severance agreement after I have already been let go?

Yes. Being separated from your employer does not mean the negotiation window has closed. In many cases, employees have successfully negotiated better terms after their termination date. An attorney can advise you on timing and strategy.

What happens if I sign a severance agreement and later discover my employer broke the law?

It depends on the specific claims involved and the language of your release. Some claims may be waived by signing. Others, such as the right to file with the EEOC or CRD, cannot be waived. This is one of the most important reasons to have an attorney review the agreement before you sign.

Can a severance agreement include health insurance?

Yes, and it should be a point of negotiation. Extended health coverage, sometimes through COBRA continuation, can be a valuable addition to any agreement, especially if you are between jobs.

Talk to a California Severance Agreement Attorney

Because you are agreeing to release your employer from legal liability, it is critical that you fully understand what you are signing and what rights you may be giving up. The potential value of your claims, the fairness of the compensation offered, and the specific language in the agreement all deserve a careful review.

At TONG LAW, Vincent Tong has extensive experience negotiating severance agreements on behalf of employees throughout California. His clients include professionals in tech, healthcare, finance, manufacturing, and more. Whether you are facing a tight signing deadline or simply want to understand your options before you respond, TONG LAW is here to help.

Call (855) 866-4529 or visit tong-law.com to book a consultation today.

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