Being handed a severance agreement on your way out can feel like a lot at once. This article explains, in general terms, what these agreements often contain and what California and federal law say about them. It is general information, not advice about your situation or about whether to sign.

The short answer

A severance agreement is usually a trade. The employer offers money or benefits, and the worker agrees to give up certain legal claims in return. The federal Equal Employment Opportunity Commission (EEOC) describes these agreements this way (EEOC: Waivers in severance agreements).

Before you decide anything, it can help to know three things. First, what your employer generally must pay you no matter what. Second, how much time the law gives you to review. Third, which terms the law generally does not allow.

Final pay is separate from severance

There is no legal requirement under California law that employers provide severance pay (DIR: Final pay and severance pay). Final wages are different. They are wages the law generally requires an employer to pay, whether or not you sign anything.

  • If you are let go: your employer generally must pay all wages you earned, including accrued vacation, right away at the time of termination (DIR: Paydays and final wages FAQ).
  • If you quit: with at least 72 hours of notice, final pay is generally due on your last day. Without notice, it is generally due within 72 hours (same DIR FAQ).
  • No release for undisputed wages: even when some wages are in dispute, the employer generally must pay the wages that are not in dispute without requiring a release (same DIR FAQ).
  • Sick leave: California does not require payout of unused sick leave at termination (DIR: Final pay and severance pay).

If an employer willfully fails to pay final wages on time, a waiting time penalty may apply. It is generally the worker's daily wage for each day late, up to 30 days, and weekends count (DIR: Waiting time penalty FAQ). Our unpaid wages guide covers final pay in more detail.

How much time you get to review

For an agreement about leaving a job, a California employer must tell you that you have the right to talk with a lawyer. It must also give you at least five business days to do so, and it cannot require you to sign the same day (CRD: Separation and settlement agreements FAQ).

Federal law adds more time for workers age 40 and older. Federal age discrimination protections cover people 40 and over (EEOC: Age Discrimination in Employment Act). If the agreement asks a worker in that group to give up age discrimination claims, the waiver must advise them in writing to consult a lawyer. It also cannot give up claims that arise after signing (EEOC: Waivers in severance agreements).

Federal review timeline for workers 40 and older

  1. Day 0

    You receive the agreement

    In a group exit or layoff program, the employer must also give written information about who is covered.

  2. At least 21 days

    Time to consider

    At least 45 days if it is part of a group exit or layoff program.

  3. Any time in the review window

    You sign, if you choose to

  4. 7 days after signing

    Time to change your mind

    This period cannot be changed or waived.

  5. After the 7 days end

    Agreement takes effect

Sources: EEOC: Waivers in severance agreements, EEOC: Older Workers Benefit Protection Act

In a group program, the written information generally includes who is covered, the eligibility factors, the time limits, and the job titles and ages of people who were and were not chosen (same EEOC page). Our age discrimination guide explains these protections further.

Common terms and what the law generally limits

Most severance agreements include a release of claims. That is where the worker agrees to give up past legal claims against the employer. Many also include confidentiality and non-disparagement terms. A non-disparagement term is a promise not to say negative things about the employer.

California puts limits on these terms. A non-disparagement clause generally must include specific language protecting your right to talk about unlawful acts at work. A clause without it is unlawful and unenforceable (CRD: Separation and settlement agreements FAQ).

What a California separation agreement generally can and cannot do

Generally allowed

  • Releasing past claims in exchange for severance
  • Keeping the amount of the severance payment confidential
  • Protecting trade secrets that are not about unlawful acts

Generally not allowed

  • Stopping you from discussing unlawful acts at work, like harassment or discrimination
  • A non-disparagement clause without the required language
  • Limiting your right to file an EEOC charge or take part in an EEOC investigation

No-rehire clauses come up too. In a settlement of a claim, a clause that bars the person from working for the employer again is usually unlawful and unenforceable. There are exceptions, such as when the employer found in good faith that the person engaged in sexual harassment or sexual assault (same CRD FAQ).

Your right to go to the EEOC

No agreement can limit your right to file a charge with the EEOC. It also cannot limit your right to testify, assist, or take part in an EEOC investigation. A term that tries to do this is invalid and unenforceable (EEOC: Waivers in severance agreements).

Questions you may want to ask yourself

  • Have I received my final wages and accrued vacation, separate from this offer?
  • How many days was I given to review, and was I told I can talk with a lawyer?
  • Am I 40 or older, and does the agreement mention age claims?
  • Does any non-disparagement clause include the required language?
  • Do I understand which claims I would be giving up?

Our severance review guide walks through how to read an agreement step by step. If you are thinking about whether your firing itself was lawful, our wrongful termination guide covers the basics.