Red Flags in a California Severance Agreement

A severance agreement is a contract your employer's lawyers wrote to protect your employer. Most of the language is standard. Some of it isn't, and those are the parts that cost you. Here's what to look for.

1. A deadline shorter than the law allows

Employers love a short fuse. "Sign by Friday or the offer goes away" is designed to keep you from getting advice.

California law requires an employer offering a separation agreement to give you at least five business days to consult a lawyer about it (Gov. Code § 12964.5(b)(4)). You can choose to sign sooner, but your employer can't pressure you into it with threats to withdraw or change the offer.

If you're 40 or older and the agreement waives age discrimination claims, federal law requires at least 21 days to consider it, or 45 days if you were part of a group layoff, plus 7 days to revoke after you sign (29 U.S.C. § 626(f)). More on that in our guide for workers over 40.

2. No mention of your right to talk to a lawyer

Under the same California law, the employer must tell you that you have the right to consult an attorney about a separation agreement. If your agreement or cover letter is silent on that, it's a sign of a sloppy or aggressive employer, and that can be useful leverage.

3. Your final paycheck is tied to signing

Your final paycheck is not severance. If you were fired, California requires your employer to pay all wages you've earned immediately at termination (Lab. Code § 201), including accrued, unused vacation or PTO (Lab. Code § 227.3).

An employer also can't require you to release a claim for wages that are already due as a condition of paying them (Lab. Code § 206.5). If your agreement makes earned wages, commissions, or vacation pay contingent on signing, that's a red flag. Severance should be extra money, on top of what you're owed.

4. A gag clause with no carve-out

Confidentiality clauses are common, and keeping the amount of your settlement private is generally allowed. But in California, a separation agreement can't stop you from disclosing information about unlawful acts in the workplace, like harassment or discrimination. If it has a non-disparagement or confidentiality clause, it's supposed to include language making clear you can still talk about conduct you reasonably believe is unlawful (Gov. Code § 12964.5).

If your agreement says you can never say anything about the company, period, it's overreaching.

5. Non-disparagement that only binds you

A one-way non-disparagement clause means you can't criticize the company, but your former manager can bad-mouth you to anyone who calls. If you're agreeing to keep quiet, ask for a mutual clause and a commitment about what the company will say to reference checks.

6. A non-compete

Non-compete agreements are generally void in California, with narrow exceptions like the sale of a business (Bus. & Prof. Code § 16600). It's also unlawful for an employer to make you sign one (Bus. & Prof. Code § 16600.5). If one shows up in your severance agreement, it's unenforceable, and it tells you the employer either didn't check California law or hoped you wouldn't.

7. A no-rehire clause after you complained

If your agreement resolves a complaint you made in good faith, whether in court, with a government agency, in arbitration, or through your employer's internal complaint process, California generally prohibits a clause that bans you from working for the employer again (Code Civ. Proc. § 1002.5). There are narrow exceptions, such as when the employer documented a good-faith finding, before you filed your complaint, that you engaged in sexual harassment, sexual assault, or criminal conduct.

8. A release that reaches too far

Almost every severance agreement includes a general release and a waiver of Civil Code section 1542, which means you're giving up claims you don't know about yet. That's standard. What isn't standard:

• Releasing claims that arise after you sign
• Releasing rights that can't legally be waived, like the right to file a charge with a government agency
• Broad "cooperation" clauses requiring unpaid help with future lawsuits
• Repayment or clawback provisions triggered by vague violations

The biggest red flag isn't in the agreement

It's the amount. A release is only a good deal if what you're paid matches what you're giving up. If you were let go after complaining, taking leave, getting hurt, asking for an accommodation, or turning 40 in a "reorganization," your release may be worth far more than the company's formula says.

That's the part we figure out for you.

This 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.