The short version: No California law requires most employers to pay severance. You may be entitled to it if it was promised in a contract, offer letter, written severance plan or policy, or union agreement. Mass layoffs can trigger 60 days' notice or pay under the federal and California WARN Acts. Whether or not you get severance, your employer must pay all earned wages and accrued vacation in your final paycheck.
Most people assume severance is either a legal requirement or a gift. It's neither. It's a deal.
When severance is required
California doesn't have a law that requires severance pay for most terminations. You may have a right to it if:
- Your employment contract or offer letter promises it. Read it again. Severance terms are often buried near the end.
- Your employer has a written severance plan or policy. Many larger companies do, and some are governed by federal benefits law (ERISA), which comes with its own claim process.
- You're covered by a union contract that provides for it.
- You were part of a mass layoff without proper notice. The federal WARN Act and California's version (Lab. Code § 1400 and following) generally require covered employers to give 60 days' notice of a mass layoff, plant closing, or relocation. An employer that doesn't can owe back pay and benefits for the notice period.
What you're owed no matter what
Severance is extra. Some money is yours regardless of whether you sign anything:
- All earned wages, due immediately if you're fired (Lab. Code § 201)
- Accrued, unused vacation or PTO (Lab. Code § 227.3)
- Earned commissions and bonuses, depending on the terms of your plan
- Waiting time penalties if your final pay is late: up to 30 days of wages (Lab. Code § 203)
Your employer can't make any of this contingent on signing a release (Lab. Code § 206.5).
Why employers offer severance anyway
If it's not required, why offer it? Because the employer is buying something: your promise not to sue. A severance agreement almost always includes a release of every claim you might have against the company.
That's why the amount is negotiable. The more risk the company would face if you sued (because you complained before you were fired, took protected leave, got hurt, asked for an accommodation, or were replaced by someone younger), the more your release is worth.
Severance and unemployment
Severance pay generally doesn't disqualify you from unemployment benefits in California, though some payments, like wages paid in place of notice, can reduce your benefit. The EDD decides. One thing worth asking for in any negotiation: the employer's written agreement not to contest your claim.
The bottom line
Your employer probably didn't have to offer you severance. But they did, which tells you they want something from you. Find out what it's worth before you sign.
Have a severance offer on the table?
Talk to us before you sign. Tell us what happened, and we'll help you figure out whether there's room to negotiate.
Get help nowThis article is general information about California and federal law as of its date, not legal advice for your situation. Laws change, and the right move depends on your facts.