A severance agreement pays you money or benefits after you leave a job, in exchange for giving up your right to sue your employer. Before you sign, it helps to know what you are trading away. A severance agreement lawyer can review the offer, spot terms California law does not allow, value the claims you would release, and negotiate better terms. We advise executives and employees at every level, and we help employers draft agreements that hold up.
Key Takeaways
- A severance agreement is a contract: you usually get pay or benefits in exchange for a general release of your legal claims.
- California’s Silenced No More Act (SB 331) bars terms that stop you from disclosing unlawful workplace acts and gives you at least five business days to consider the agreement.
- If you are 40 or older, the federal OWBPA gives you at least 21 days to consider a waiver (45 in a group program) and 7 days to revoke after signing.
- Almost everything is negotiable, including the amount, benefits, references, timing, and equity.
- Have a severance agreement lawyer review your offer at 877-780-4727. The consultation is free.
What a severance agreement really is
A severance agreement is a contract, not a gift. You receive something of value, usually severance pay or continued benefits, and in return you sign a general release. That release is the heart of the deal.
Here is why the release matters so much. The severance offer is only a good deal if it is worth more than the claims you are giving up. If your departure may involve an illegal reason, the claims you would release could be worth far more than the money on the table.
So the first question is not how many weeks of pay you are offered. It is what you would be signing away, and what that is worth.
What you give up: the general release
A general release usually means you agree not to sue your employer for claims that arose up to the date you sign. That can be a broad waiver covering many types of claims at once. Some rights cannot be waived, but the waiver is often wide.
Before signing, it is worth valuing the claims in play. Those may include wrongful termination, discrimination or harassment, retaliation, and unpaid wages. If any of those look strong, the release changes the math. A lawyer can help you weigh the offer against the claims you would release.
SB 331, the Silenced No More Act
California’s SB 331, the Silenced No More Act, took effect on January 1, 2022. It limits what an employer can put in a severance agreement.
An employer generally may not require non-disparagement or confidentiality terms that stop you from disclosing unlawful workplace acts, such as harassment or discrimination. If the agreement includes those kinds of terms, it must contain specific carve-out language that preserves your right to talk about unlawful conduct.
The law also gives you time and information. You must get at least five business days to consider the agreement, and the employer must tell you of your right to consult an attorney. You can sign sooner if you choose. Even so, an agreement can still include a general release, protect genuine trade secrets, and keep the severance amount confidential.
Extra protections if you are 40 or older (OWBPA)
If you are 40 or older, a federal law called the Older Workers Benefit Protection Act adds rules for waiving age discrimination claims. These rules exist to make sure the waiver is knowing and voluntary.
- You generally get at least 21 days to consider the agreement, or at least 45 days if it is part of a group program such as a layoff.
- You get at least 7 days to revoke after signing before the agreement takes effect.
If an employer skips these steps, the waiver of age claims may not hold up. The practical lesson is simple: use the time you are given rather than rushing to sign.
What to review and negotiate
Most severance terms are negotiable, and the offer is often a starting point. Here are the terms worth a close look.
| Term | What to check |
|---|---|
| Severance amount | How many weeks or months of pay, and whether it reflects the strength of the claims you would release. |
| Benefits | Whether health coverage continues and who pays. COBRA lets you keep group coverage for a time, usually at your own cost. |
| References | A neutral reference and an agreed description of how your departure is announced. |
| Restrictive terms | The scope of any non-solicitation, confidentiality, and non-disparagement language. |
| Timing | Your last day and when payments actually arrive. |
| Tax structure | Severance is generally taxable. How payments are characterized and reported can change the result. |
One point on restrictive terms: California strongly limits non-compete agreements against employees, so many are unenforceable here. Business and Professions Code section 16600 voids most of them, and sections 16600.1 and 16600.5 (in effect since January 1, 2024) make it unlawful to include or enforce a void non-compete. Non-solicitation and confidentiality terms raise separate questions, so read them closely.
Executive severance: equity, bonuses, and change of control
Senior and executive packages carry extra moving parts. The details depend on your plan and grant documents, and many terms are negotiable.
- Equity: what happens to your vested and unvested stock options or RSUs at separation, how long you have to exercise, and whether any vesting can accelerate.
- Bonuses: earned but unpaid bonuses, and whether a prorated bonus for the year is on the table.
- Change of control: some packages provide enhanced severance if you leave around a sale or merger, sometimes tied to a double trigger.
- Other items: continued vesting, a short consulting or transition period, and indemnification or coverage for actions taken while you served.
Because these terms vary widely, it is worth reviewing the actual documents rather than relying on a summary offer letter.
For employers: drafting agreements that hold up
A severance agreement only protects the company if it is enforceable. That takes care in the drafting, not a recycled template.
Where an agreement includes confidentiality or non-disparagement language, it needs the SB 331 carve-out. It should give the required time to consider, five business days generally and the 21 or 45 day periods plus a 7 day revocation window for employees 40 and older. The release must be supported by real consideration, and overbroad terms that a court could strike are worth avoiding. Group layoffs carry their own OWBPA requirements and call for consistency across the group.
How we help
We work both sides of severance. For employees and executives, we review the full agreement, explain what you are releasing, value the claims in play, flag terms California law does not allow, and negotiate the amount, benefits, references, and equity. Much of this is flat-fee or hourly advisory work, and where there is an underlying claim, contingency options may apply.
For employers, we draft compliant, enforceable severance and separation agreements, build in the required carve-outs and consideration periods, and handle group layoffs under the OWBPA, usually on an hourly basis. Severance is one part of a broader field, and our California employment lawyers can help across it.
If a severance agreement is on your desk, or you need one drafted the right way, we can help you understand every term before anyone signs. Call a California severance agreement lawyer at 877-780-4727. The consultation is free.
Frequently Asked Questions
Usually not. You have time to review it, and often room to negotiate. Under California's SB 331 you generally get at least five business days to consider, and if you are 40 or older, federal law gives at least 21 days. Use that time to understand what you are giving up before you sign.
Almost always a general release: you agree not to sue your employer for claims that arose up to the signing date. That can include wrongful termination, discrimination, harassment, retaliation, and unpaid wage claims. Some rights cannot be waived. Because the release is the heart of the deal, it helps to value those claims first.
No. California's Silenced No More Act (SB 331) bars non-disparagement or confidentiality terms that prevent you from disclosing unlawful workplace acts, such as harassment or discrimination. If the agreement includes those terms, it must contain specific carve-out language that preserves your right to speak about unlawful conduct.
There is no fixed formula, and the amount is often negotiable. Leverage usually comes from the strength of the claims you would release, your role, your tenure, and the circumstances of your departure. Beyond the dollar figure, you can negotiate benefits, references, timing, and equity treatment. A lawyer can help you push on the right terms.
The federal OWBPA sets rules for waiving age discrimination claims. You generally must get at least 21 days to consider the agreement, or 45 days if it is part of a group program like a layoff, plus at least 7 days to revoke after signing. If those steps are skipped, the age waiver may not be valid.
California strongly limits non-compete agreements against employees, so many are unenforceable here. Business and Professions Code section 16600 voids most of them, and sections 16600.1 and 16600.5 (in effect since January 1, 2024) make it unlawful to include or enforce a void non-compete. Even so, read any non-solicitation, confidentiality, and non-disparagement terms closely, since those raise separate issues. A lawyer can tell you which restrictions are likely to hold and which are not.
Generally, yes. Severance pay is usually treated as taxable income, and how different payments are characterized and reported can affect the tax result. This is one reason the structure of the agreement matters, not just the total. It is wise to review the tax side with your attorney and a tax advisor before signing.
Yes. We draft compliant, enforceable severance and separation agreements, including the carve-out language and consideration periods California and federal law require, and we handle group layoffs under the OWBPA. Representing both employees and employers gives us a clear view of what makes an agreement fair and likely to hold up.
