1. What Are You Giving Up in a California Severance Agreement?
A severance agreement is usually an exchange. The employer offers consideration beyond amounts already owed, while the employee agrees to release specified claims or accept other post-employment obligations.
Release of Employment Claims
A release may cover discrimination, retaliation, harassment, wrongful termination, contract, and other employment-related claims arising before the agreement is signed. The scope depends on the actual wording, not simply the use of terms such as “general release.”
California agreements also commonly address Civil Code §1542. That statute limits the effect of a general release on claims the releasing party does not know or suspect to exist. An agreement may ask the employee to waive that protection, potentially expanding the release to unknown claims.
A broad release does not necessarily waive every employment-related right. It cannot waive claims based on future conduct or prevent an employee from filing an EEOC charge or participating in an EEOC investigation, although a valid release may affect the employee's ability to obtain personal recovery on claims already released.
The circumstances surrounding the termination should therefore be reviewed with the release. A termination that closely follows a retaliation complaint, accommodation request, protected leave, wage complaint, or other protected activity may increase the significance of the claims being surrendered.
Severance Pay Vs. Final Wages and Existing Benefits
Severance pay is different from compensation the employer already owes.
California generally does not require severance solely because employment ends. A contract, policy, benefit plan, or other enforceable commitment may create a separate entitlement, but there is no statewide statutory severance formula for most employees.
Final wages are different. A discharged employee generally must receive wages due at termination, and earned, accrued, unused vacation is treated as wages. Earned commissions may also require separate analysis under the applicable commission agreement and wage rules.
Amounts already owed, including final wages and vested vacation, should be separated from additional severance consideration. Labor Code §206.5 restricts requiring an employee to release a claim for wages that remain due before those wages have been paid.
2. How Long Do You Have to Review a Severance Agreement in California?
California and federal law can create different review periods. The deadline written into the agreement should be compared with the employee's age, the type of termination, and the rights being waived.
California’S Five-Business-Day Review Period
For covered separation agreements, Government Code §12964.5 requires an employer to notify the employee of the right to consult an attorney and provide a reasonable review period of at least five business days.
This is not a five-day cancellation period.
An employee may voluntarily sign sooner if the decision to shorten the review period is knowing and voluntary. The employer may not induce early signing through fraud, misrepresentation, a threat to withdraw or alter the offer before the review period expires, or better terms offered only in exchange for signing early.
The five-business-day rule should not be generalized to every settlement involving the end of employment. Section 12964.5 contains an exception for certain negotiated settlements resolving claims that have already been raised through specified court, administrative, alternative dispute resolution, or internal complaint proceedings.
OWBPA Rules for Employees Age 40 or Older
Federal law adds separate requirements when an employee age 40 or older is asked to waive claims under the Age Discrimination in Employment Act.
For an individual termination, the Older Workers Benefit Protection Act generally requires at least 21 days to consider the ADEA waiver and seven days after signing to revoke it.
For an exit incentive or other qualifying group termination program, the consideration period is generally at least 45 days. Additional written disclosures concerning the decisional unit, eligibility criteria, time limits, job titles, and ages may also be required.
These periods serve a different purpose from California's five-business-day rule. The 21- or 45-day period concerns a knowing and voluntary ADEA waiver, while the seven-day period is a federal post-signing revocation right.
Negotiation can also affect timing. A material change to the employer's final offer may restart the applicable 21- or 45-day consideration period under federal regulations, subject to rules allowing the parties to agree that particular changes will not restart it. The seven-day revocation period cannot be shortened.
3. Which Severance Terms Need Special Review?
The value of a severance offer depends on more than the payment amount. Communications restrictions, benefits, equity, cooperation duties, references, and future-employment provisions can materially affect the agreement.
Confidentiality, Non-Disparagement, and Protected Disclosures
California limits separation-agreement provisions that restrict employees from disclosing information about unlawful acts in the workplace.
A covered nondisparagement or similar provision that restricts discussion of workplace conditions must preserve the employee's ability to discuss or disclose conduct the employee reasonably believes is unlawful. It must also include California's statutory carveout, or substantially similar language, preserving that right.
California law can still permit confidentiality concerning the amount paid under a severance agreement and protection of trade secrets, proprietary information, or confidential information unrelated to unlawful workplace conduct.
Pay, Benefits, References, Equity, and Cooperation Terms
Many severance terms may be negotiable depending on the employer, existing agreements, termination circumstances, and employee leverage.
Review points can include:
Severance amount and payment timing;
Bonuses or commissions;
Health coverage or COBRA contributions;
Equity and option deadlines;
Reference language and rehire eligibility;
Cooperation obligations;
Confidentiality and nondisparagement;
Return of company property and information.
Employees with incentive compensation, equity awards, or separate employment agreements may need those documents reviewed together with the severance offer. A favorable cash payment can lose value if the agreement also accelerates an option deadline, imposes burdensome cooperation duties, or releases a disputed bonus or commission claim.
4. When Should You Pause before Signing?
A severance offer deserves closer review when the termination circumstances suggest that the employee may be releasing a claim with meaningful value.
Potential Wrongful Termination, Discrimination, or Retaliation Claims
Closer review may be warranted when termination follows:
A discrimination or harassment complaint;
A wage or overtime complaint;
Whistleblowing or a compliance report;
Protected leave;
A disability accommodation request;
Pregnancy-related notice or leave;
Another form of legally protected activity.
A reduction in force may also require closer examination if selection patterns appear concentrated within a protected group or the employer's stated selection criteria do not match available records.
None of these circumstances automatically proves an unlawful termination. They identify facts that should be evaluated before a release eliminates potential claims.
Negotiating the Offer before Releasing Claims
Severance is not always negotiable, but an employee may have room to discuss more than the dollar amount.
Negotiation can address additional pay, benefit continuation, equity treatment, reference language, rehire status, cooperation duties, confidentiality, nondisparagement, and the scope of the release.
The potential value of released claims can also affect negotiation strategy. An offer that appears generous in isolation may look different if the employee has a substantial retaliation, discrimination, compensation, or contract issue that would be released by signing.
5. Frequently Asked Questions
Generally, no. California law does not require most employers to provide severance solely because an employee is terminated.
A contract, employer policy, benefit plan, or other enforceable promise may create an entitlement. Final wages, vested vacation, and other compensation already due are separate from additional severance consideration.
California has no legally required standard severance formula.
The amount and benefits offered can depend on the employment agreement, employer policy, tenure, position, compensation structure, termination circumstances, and the claims being released. A formula based on a certain number of weeks per year of service may be an employer practice, but it is not a California legal standard.
There is no universal California rule giving every employee a post-signing right to cancel a severance agreement.
If an employee age 40 or older validly waives ADEA claims, the OWBPA generally requires a seven-day revocation period after signing. An agreement may also provide an additional contractual revocation right.
6. Severance Agreement Review before Signing
An employee usually has the most negotiating leverage before the release is signed and while the employer's offer remains open.
A severance agreement attorney can compare the offer with the termination record, compensation documents, potential employment claims, and applicable California and federal waiver rules. Review can identify claims covered by the release, separate severance from wages or benefits already owed, examine §1542 and confidentiality provisions, evaluate OWBPA compliance, and identify terms that may warrant negotiation.
Review is particularly useful when termination follows protected activity, involves a reduction in force, includes disputed compensation, or requires the employee to release claims that have not yet been evaluated.
05 Oct, 2026
