February 11, 2025 Table of Contents
A severance agreement in California is a contract, not a parting gift. When an employer offers money as your job ends, it usually asks you to give up legal rights in return. Below, we explain what these agreements typically contain, which terms California law limits, and what to look at before you sign.
Should I sign a severance agreement in California?
Not before you understand what you are giving up. Most severance agreements include a release of legal claims in exchange for the payment. California law limits some terms. For example, under Government Code section 12964.5, a separation agreement cannot stop you from disclosing information about unlawful acts in the workplace, and the employer must give you at least five business days to consult an attorney.
This article is for you if:
Generally, no. Severance usually comes from an employment contract, a company policy, or the employer’s own decision, and the U.S. Department of Labor states that “there is no requirement in the Fair Labor Standards Act (FLSA) for severance pay” (U.S. Department of Labor). Because California employment is generally at-will (Labor Code § 2922), an employer that offers severance is usually asking for something in return, most often a release of claims.
Severance is also different from the wages you have already earned. Final pay, including earned and unused vacation, is owed whether or not you sign anything. Our article on what to do if your employer is delaying your final paycheck covers those rules.
In a larger layoff, other rules may apply. California’s WARN Act generally requires an employer to give 60 days’ written notice before ordering a mass layoff, relocation, or termination at a covered establishment. An employer that fails to do so may owe affected employees back pay and benefits for up to 60 days, or half the number of days the employee was employed, whichever is smaller (California Department of Industrial Relations).
| Common term | What it generally means | California limit |
|---|---|---|
| Release of claims | You agree not to sue over the employment or its end, in exchange for the payment. | Cannot release a claim for wages due unless they are paid (Lab. Code § 206.5). |
| Civil Code section 1542 waiver | You give up the default rule that a general release does not cover claims you did not know about. | The default rule is in Civil Code § 1542; waiving it widens the release. |
| Confidentiality and non-disparagement | You agree not to discuss the agreement or criticize the employer. | Cannot stop you from disclosing information about unlawful acts in the workplace (Gov. Code § 12964.5). |
| Non-compete | You agree not to work for a competitor. | Generally void and unenforceable in California (Bus. & Prof. Code § 16600.5). |
The release is usually the most important term. By signing, an employee may give up claims for wrongful termination, discrimination, harassment, or retaliation. Many agreements also waive the protection of Civil Code section 1542, which otherwise provides that a general release “does not extend to claims that the creditor or releasing party does not know or suspect to exist” when signing. A waiver of section 1542 can mean the release covers claims you have not yet identified.
An employee who may have a legal claim should compare the severance amount with what the claim may be worth. Our article on the average settlement for a retaliation lawsuit in California explains the factors that can affect value. An employment attorney can evaluate the specific facts.
California limits how far these clauses can reach. Under Government Code section 12964.5, it is an unlawful employment practice for an employer to include in a separation agreement any provision that prohibits the disclosure of information about unlawful acts in the workplace. A non-disparagement or confidentiality clause in that kind of agreement must include language stating: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”
Federal rules point the same way. According to the EEOC, no agreement between an employee and employer can limit the employee’s right to testify, assist, or participate in an EEOC investigation, hearing, or proceeding.
Some severance agreements include language that restricts future work. In California, a contract that is void under the state’s restraint-of-trade law “is unenforceable regardless of where and when the contract was signed,” and an employer may not attempt to enforce it (Bus. & Prof. Code § 16600.5). Our article on California non-compete agreements explains the narrow exceptions.
At least five business days in most California separation agreements. Government Code section 12964.5 requires the employer to notify the employee of the right to consult an attorney regarding the agreement and to provide a reasonable time period of not less than five business days to do so.
Employees who are 40 or older may have more time. When an agreement waives federal age discrimination claims, the EEOC explains that the waiver generally must advise the employee in writing to consult an attorney, give at least 21 days to consider the offer (45 days in a group layoff), and allow seven days to revoke after signing. If you believe age played a role in the decision, our article on how to spot age discrimination in California workplaces may help.
These review periods are separate from the deadlines for bringing a legal claim, which depend on the claim. An employment attorney can evaluate which deadlines apply to your situation.
If the termination followed a complaint, a leave request, an injury, or a protected characteristic such as age, race, or pregnancy, or if the agreement asks you to give up rights you do not fully understand, consider speaking with a California employment lawyer. An attorney can review the agreement, evaluate whether you may have claims, and explain your options before any deadline passes. If you work in Los Angeles County, our Los Angeles wrongful termination lawyers handle these matters.
At Abramson Labor Group, we represent California employees reviewing severance agreements. Our case reviews are free and confidential, and we work on contingency. Request your free case evaluation or call us at (213) 493-6300.
Often, yes. A severance agreement is a contract, and its terms, including the amount, benefits, and scope of the release, can be discussed before signing. Whether negotiation makes sense depends on the facts, including whether the employee may have legal claims.
Generally, no. Under Government Code section 12964.5, a separation agreement cannot prohibit the disclosure of information about unlawful acts in the workplace, such as harassment or discrimination.
According to the EEOC, no agreement can limit an employee’s right to testify, assist, or participate in an EEOC investigation, hearing, or proceeding. A release may still affect whether the employee can recover money personally, so an employment attorney should review the specific agreement.
It should not. Under Labor Code section 206.5, an employer cannot require a release of a claim for wages due unless those wages have been paid.
This article is general information about California law, not legal advice. Every situation is different. For advice about your specific case, talk to a licensed California employment attorney.
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