Should I sign a severance agreement in California?

A severance offer often arrives on the same day as the termination, with a short deadline and a payment that looks generous when a paycheck has just stopped. The decision deserves more care than that. This page walks through the California rules for separation agreements, the federal rules that add time for workers 40 and over, and the questions to answer before you sign. For an overview of the claims these agreements usually ask you to give up, see our employment law page.

How does a severance offer work in California, step by step?

1. The offer. The employer hands over or emails a separation agreement, often at the termination meeting. It usually promises a payment, and sometimes continued benefits or a neutral reference, in exchange for a release of your legal claims.
2. The notice and review period. Because the agreement relates to your separation, Government Code section 12964.5(b)(4) requires the employer to tell you that you have the right to consult an attorney and to give you a reasonable period of not less than five business days to do so.
3. Your final pay, separately. Earned wages are not part of the bargain. If you were fired, they are due immediately under Labor Code section 201, signed agreement or not. Our page on final paycheck rules in California covers the deadlines when you quit instead.
4. The review. You, ideally with a lawyer, compare the release with the claims you may have, check any confidentiality or non-disparagement clause against section 12964.5, and look for terms the law does not allow.
5. Questions or a counter-proposal. You can ask in writing for more time, a different amount, or changes to specific clauses. The employer is not required to agree.
6. Signing, and a revocation window for some workers. If you are 40 or older and the release covers federal age discrimination claims, federal law gives you at least seven days after signing to revoke, and the agreement does not take effect until that period ends (29 U.S.C. 626(f)(1)(G)).
7. Payment. The severance is paid on the schedule the agreement sets. Keep a signed copy of everything.

Which deadlines and limits apply to a severance agreement?

The table puts the time limits and the hard rules in one place. The federal rows apply only when the release waives claims under the federal Age Discrimination in Employment Act.

What changes the answer?

The same agreement can be fair for one person and a poor trade for another. These are the facts that most often change the advice.

Your age

If you are 40 or older, federal law sets minimum conditions before a waiver of federal age discrimination claims counts as knowing and voluntary. Under 29 U.S.C. 626(f)(1), the agreement must be written so you can understand it, must refer specifically to rights under the Age Discrimination in Employment Act, cannot waive claims that arise after you sign, must give you something beyond what you are already entitled to, and must advise you in writing to consult an attorney. You also get the 21 or 45 days to consider it and the seven days to revoke. California's own age protections apply too; our page on age discrimination in a layoff explains them.

Whether it was a group layoff

When the offer is part of an exit program for a group, the federal rules require the employer to tell workers 40 and over, in writing, which group the program covers, the eligibility factors and time limits, and the job titles and ages of the people selected and not selected (29 U.S.C. 626(f)(1)(H)). Those lists can show whether age played a part. Separately, California's WARN rules require 60 days' written notice to affected employees and to the Employment Development Department before a mass layoff, relocation or termination at a covered establishment, which Labor Code section 1400.5 defines as a site that employs, or employed in the past 12 months, 75 or more people.

Whether you have already filed a claim

Section 12964.5's disclosure and review rules do not apply to a negotiated settlement of a claim you have already filed in court, with an agency, in arbitration, or through the employer's internal complaint process (section 12964.5(d)). A different statute steps in: for claims of sexual harassment, workplace harassment or discrimination, and related retaliation that have been filed, Code of Civil Procedure section 1001 bars provisions that keep the factual information about the claim secret, while still allowing the amount to stay confidential and letting you ask for a provision that protects your identity. If your complaint was internal, our guide to what happens after you report harassment at work explains the employer's duties.

Whether any wages are still unpaid

Labor Code section 206.5 makes a release of a wage claim void unless the wages due have been paid. An agreement cannot turn unpaid overtime, missed break premiums or final pay into a bargaining chip. If you think wages are missing, our overview of wage violation penalties in California shows what may be owed on top of the wages themselves.

Whether it hides a noncompete

Business and Professions Code section 16600 voids contracts that restrain anyone from a lawful profession, trade or business, and section 16600.5 makes such a clause unenforceable no matter where it was signed. Our page on whether a noncompete is enforceable in California explains why an employer may not even ask you to sign one.

Whether there are claims you do not know about yet

Civil Code section 1542 says a general release does not cover claims you do not know or suspect exist when you sign, if knowing about them would have materially affected the settlement. Most agreements ask you to waive that protection. Before you do, think about what you might not know yet, such as how your pay compared with coworkers or why you were chosen for the layoff.

A worked example

For example, imagine a hypothetical 54-year-old office manager in Glendale who is laid off on a Tuesday along with eleven coworkers in a reorganization. That afternoon she receives a separation agreement offering eight weeks of pay in exchange for a general release, and a note asking her to sign by Friday.

Several rules apply at once. Friday is fewer than five business days away, so the deadline falls short of what section 12964.5(b)(4) requires, and the agreement does not mention her right to consult an attorney. Because she is over 40, the release covers federal age claims, and the layoff was a group program, federal law gives her at least 45 days to consider it, seven days to revoke after signing, and a written list of the job titles and ages of the people selected and kept. Her final wages and accrued vacation were due on Tuesday whatever she decides. The non-disparagement clause lacks the required sentence about unlawful acts, so that clause is unenforceable as written.

Looking at the list, she notices that most of the people kept are much younger. She asks in writing for her personnel file and payroll records and for the full review period. None of this tells her what a claim would be worth or whether she should sign; it tells her that she has time, and that the decision should wait until she knows what she would be giving up.

Common mistakes people make with severance agreements

• Signing in the termination meeting. The law gives at least five business days for a reason, and an early signature induced by pressure does not count as voluntary under section 12964.5(b)(4).
• Treating final pay as part of the deal. Wages already earned are owed regardless, and a release of them is void unless they are paid.
• Skimming past the section 1542 waiver. That paragraph is what reaches claims you have not discovered yet.
• Assuming a confidentiality clause silences you about harassment. California law does not allow a separation agreement to bar disclosure of unlawful acts in the workplace.
• Letting other deadlines run while negotiating. Talks over severance do not pause the time limits on your claims; our table of employment claim deadlines in California lists them.
• Missing a hidden restriction. Look for noncompete language, broad repayment conditions, or a promise not to apply for rehire that you did not expect.

What to do this week

1. Write down the date and time you received the agreement, and count the five business days. If you are 40 or older, count 21 days, or 45 in a group layoff.
2. Check that your final paycheck and accrued vacation have been paid on time. Our checklist for the first week after being fired covers what else is due.
3. Ask in writing for your personnel file and payroll records; our page on getting your personnel file and payroll records has the deadlines the employer must meet.
4. Make a dated list of events before the termination: complaints you made, leave or accommodation requests, comments about age or other protected traits, and who made the decision.
5. Read the release, confidentiality, non-disparagement and any restriction clauses, and mark every sentence you do not understand.
6. If you need more time, ask for it in writing and keep the reply.
7. Have a lawyer review the agreement before you sign or return anything.

Frequently asked questions

Do I have to sign the agreement to get my final paycheck?

No. Final wages are owed whether or not you sign, and Labor Code section 206.5 voids a release of wages due unless they are paid. Severance is usually an extra payment offered for the release.

Can the employer pressure me to sign before five business days?

You may sign early if you choose to, but section 12964.5(b)(4) says an early signature is not knowing and voluntary if the employer induced it through fraud, a misrepresentation, a threat to withdraw or change the offer before the period ends, or better terms for people who sign early.

I already signed. Is it too late?

Not always. If you are 40 or older and the release covered federal age claims, you have at least seven days to revoke. Separately, any clause that violates section 12964.5 is unenforceable, and a release of unpaid wages is void, so bring the signed copy to a lawyer.

Can the severance amount be kept secret?

Yes. Section 12964.5(e) and Code of Civil Procedure section 1001(e) both allow an agreement to keep the amount paid confidential. What cannot be hidden is information about unlawful acts in the workplace.

Does the five-day rule apply if I already filed a complaint?

No. Section 12964.5(d) excludes a negotiated settlement of a claim already filed in court, with an agency, in arbitration, or through an internal complaint. If you filed with the Civil Rights Department, our guide to the Civil Rights Department complaint process explains where that claim stands.

Does a group layoff change what I should receive?

For workers 40 and over, yes: 45 days to consider the agreement and written information about who was selected, with job titles and ages. A large layoff may also require 60 days' notice under California's WARN rules.

Who pays for a lawyer to review the agreement?

That depends on the claims involved and the agreement you make with the lawyer. Our page on who pays the lawyer in a California employment case explains the fee rules that apply to employment claims.

How can Glendale Law help?

It is wise to have an attorney review any severance or release agreement before you sign. We can explain what the agreement asks you to waive, whether its terms comply with California and federal law, and how it compares with the claims you may have. Workers in Glendale and nearby cities can read about local agencies and courts on our Glendale employment lawyer page. Call (818) 244-9000 or request a consultation.