California Severance Agreements: Before You Sign

Separate the money you already earned from the release price

A severance agreement should let you identify what the employer is buying and what it is paying. Start by separating earned wages, accrued vacation, existing benefit promises, and any disputed compensation from the additional payment offered for a release. Labor Code sections 201, 206, and 227.3 govern important parts of that distinction.¹

For an age discrimination waiver, 29 U.S.C. section 626(f)(1)(D) expressly requires consideration beyond something you are already entitled to receive. A final paycheck does not become new consideration merely because the employer includes it in the same envelope as the agreement.²

Write a payment inventory before discussing whether the offer is fair. Identify the gross severance amount, payment dates, benefit subsidy, and any conditions attached to later installments. List earned compensation separately. If the agreement describes an amount without explaining whether it includes vacation or previously promised compensation, request that breakdown.

Search your employer in the California WARN layoff database. A notice may help you identify the wider event and compare dates. It does not tell you the value of your release, and a severance agreement may address claims far beyond notice rights.

What a general release can cover

A separation agreement may contain an otherwise lawful general release of employment-related claims under Government Code section 12964.5(b). Read the list of released parties as closely as the list of claims. The document may cover the employer, related companies, benefit plans, managers, and other people or entities.³

Check the time period. A release of existing claims differs from a promise about future conduct. For ADEA claims, 29 U.S.C. section 626(f)(1)(C) prohibits waiver of rights or claims arising after execution. An agreement can still contain future obligations, such as cooperation or property return, whose practical burden deserves separate review.²

Do not stop reading after the paragraph titled “Release.” Look for a covenant not to sue, repayment language, representations that you have received all compensation, and statements that you have not suffered an injury or reported misconduct. A factual statement can create a dispute even when it appears outside the formal release paragraph.

Make a separate list of anything you cannot truthfully confirm. Examples include an unresolved commission calculation, an expense reimbursement request, or a complaint the agreement says you never made. Ask for accurate wording rather than relying on an oral assurance that a printed statement does not matter.

Why a Civil Code section 1542 waiver matters

Civil Code section 1542 generally keeps a general release from reaching claims you do not know or suspect exist when you sign, if knowing about them would have materially affected the settlement. Agreements often include an express waiver of that protection. The statutory language appears in an official California court settlement form.⁴

An express Civil Code section 1542 waiver can therefore expand the release beyond the problems you have already identified. For example, you might later receive information about the layoff selection process that changes your understanding of why you were selected. Review the waiver together with the scope and date of the released claims.⁴

The practical question is whether the information you need to evaluate the offer is available before signing. Ask for missing pay calculations, the applicable severance policy, and any required group disclosure. Keep the employer’s responses with the agreement so the decision is based on the actual offer and available records.

Review time for employees covered by the OWBPA

For employees age 40 or older, an ordinary severance waiver of ADEA claims must satisfy the Older Workers Benefit Protection Act requirements in 29 U.S.C. section 626(f). The employer cannot make the statutory requirements disappear by calling the agreement a voluntary resignation, transition payment, or standard company form.^{2, 5}

Under 29 U.S.C. section 626(f)(1)(F), the usual minimum consideration period is 21 days for an individual agreement and 45 days when the waiver is connected with an exit incentive or other employment termination program offered to a group or class. These periods come from the statute, not from how long you worked for the employer.²

Under 29 U.S.C. section 626(f)(1)(G), the agreement must also provide at least 7 days after execution to revoke the ADEA waiver, and it cannot become effective or enforceable before that period expires. Read the revocation instructions before signing, including the recipient, delivery method, and deadline.²

The waiver must identify ADEA rights, use understandable language, and advise you in writing to consult an attorney under 29 U.S.C. section 626(f)(1)(A), (B), and (E). A sentence saying you had an opportunity to seek advice is not necessarily the same as the required written advice to do so.^{2, 5}

The rules differ for settlement of an already filed EEOC charge or court action under 29 U.S.C. section 626(f)(2). That provision uses a reasonable consideration period rather than simply importing every ordinary severance timing requirement. Identify which setting you are in before assuming the familiar review periods apply unchanged.²

What a group layoff disclosure should reveal

When the group program requirements apply, 29 U.S.C. section 626(f)(1)(H) requires written information about the covered class, unit, or group; eligibility factors; applicable time limits; job titles and ages of eligible or selected employees; and ages of relevant employees who were not eligible or selected.²

The relevant group is often called the decisional unit. Under 29 C.F.R. section 1625.22(f), it concerns the portion of the organization used to make the selection decision. It may be a department, location, job category, or another defined unit. It is not automatically the entire company.⁶

Check whether the group description matches the explanation you received. If your manager said everyone in your role was compared, but the disclosure lists only your immediate team, identify the mismatch. Ask whether employees performing the same work elsewhere were considered and whether the selection pool changed during planning.

The disclosure is not a finding that discrimination occurred. Its value is that it lets you examine the selection process with more than your own employment history. Preserve the original document and any corrected version so differences remain visible.

California review time and limits on secrecy

Government Code section 12964.5(b) requires an employer offering a separation agreement to notify you of your right to consult an attorney and provide a reasonable period of at least 5 business days to do so. This California protection is separate from any longer OWBPA period that applies to an ADEA waiver.³

SB 331 expanded California restrictions on provisions that silence workers about unlawful workplace conduct. Under Government Code section 12964.5, a covered separation agreement cannot prohibit disclosure of information about unlawful acts in the workplace, including conduct you reasonably believe is unlawful.³

A covered non-disparagement provision must include the statutory clarification, or substantially similar language, preserving discussion of unlawful workplace acts under Government Code section 12964.5(b). A broad promise never to embarrass the company should be reviewed together with that protection.³

Confidentiality of the severance amount remains permissible under Government Code section 12964.5. Protection for trade secrets or proprietary information unrelated to unlawful workplace acts can also remain enforceable. The statute distinguishes those subjects from suppressing information about unlawful conduct.³

Code of Civil Procedure section 1001 separately restricts confidentiality of factual information relating to specified claims filed in court or an administrative proceeding, including workplace discrimination, harassment, and related retaliation. It permits confidentiality of the settlement amount. The existence and type of filed claim matter when applying that section.³

Review the practical consequences of every confidentiality paragraph. Determine who may receive the agreement, whether you can discuss payment terms with a financial adviser, and how the document treats required disclosures. Request clear exceptions in the written agreement instead of relying on informal explanations.

Severance and California unemployment benefits

EDD generally does not treat qualifying severance or dismissal pay as wages that reduce unemployment benefits. Its Benefit Determination Guide explains this treatment through Unemployment Insurance Code section 1265 and the California Supreme Court’s 1965 Powell decision. The actual character of the payment matters.⁷

That does not mean you should leave severance off an EDD response that requests it. EDD’s reporting guidance includes severance among payments workers should disclose so the agency can classify them. Unemployment Insurance Code sections 1252 and 1279 govern unemployment and earnings calculations.⁸

Ask the employer to distinguish severance from wages paid while employment continues, vacation, bonuses, and other payments. Keep the agreement and payment schedule available for EDD. A clause promising that you will qualify for benefits cannot substitute for the agency’s determination under the Unemployment Insurance Code.^{7, 8}

What the release is actually worth

There is no reliable case value hidden in a formula based only on tenure. Evaluate what you would receive without signing, what the agreement adds, what claims it releases, and what future obligations it creates. An offer can look larger when earned compensation and optional severance appear as a single total.

Consider this comparison. An employer describes a package as $18,000, but $4,000 represents earned compensation already payable and $2,000 represents a benefit already promised under an applicable arrangement. Only $12,000 is newly offered in exchange for the release. This illustrates the additional-consideration distinction in 29 U.S.C. section 626(f)(1)(D), not a valuation of any claim.²

Next, examine payment certainty. A lump sum due on a stated date differs from installments that can stop under a broad cooperation clause. Identify who decides whether you complied, whether the agreement provides notice of an alleged breach, and whether a dispute affects all remaining payments.

Noncash terms can matter to your next job. Consider a written reference, an accurate separation description, an agreed response to employment verification requests, and the scope of any no-rehire language. Put the terms you care about in the document rather than leaving them as an understanding with a departing manager.

Keep the negotiation focused. A request for a corrected wage statement is different from a request for additional severance. A request for more review time is different from an acceptance. Save the final version and all attachments together so you can identify exactly what you signed.

Connect the offer to the underlying employment issues

Review the wrongful termination page for concerns about the stated separation reason, the age discrimination page for selection patterns, and the discrimination page for other protected characteristics. Use the retaliation page for a layoff following a report and the wage and hour page for unpaid compensation.

Before signing, finish the factual inventory: the final agreement, benefit documents, pay calculation, separation date, required disclosures, and written answers to unresolved questions. That packet makes it possible to evaluate the actual bargain instead of judging the offer from its headline amount.

More layoff guides

• California WARN Act Guide: Layoff Notice and Pay: who is covered, what the notice must say, back pay and the daily penalty.
• California Furlough and Temporary Layoff Rights: when a furlough becomes a layoff, final wages, COBRA, partial unemployment.
• Final Paycheck After a California Layoff: when final wages and vacation are due, waiting time penalties with worked examples, the wage claim.
• California Layoffs and Age Discrimination: reading the selection list, selection rates, the OWBPA disclosure, CRD and EEOC deadlines.
• Was Your California Layoff Retaliation?: protected activity, timing, changing explanations, the Lawson burden shift, leave protections.
• Layoff notice tracker: every California WARN notice, searchable by employer, county, city and year.
• Wage and hour guides: overtime, the 2026 minimum wage by city, meal and rest breaks, filing a wage claim and the deadlines.
• Wage theft tracker: U.S. Department of Labor back wage cases against California employers.
• Wrongful termination, age discrimination, workplace retaliation and wage and hour: the practice pages for a claim.

Questions about severance agreements

Sources

1. California Department of Industrial Relations, Final Pay (accessed October 2026): Final wages, vacation, undisputed wages, and severance overview.
2. U.S. Government Publishing Office, United States Code, Title 29, Section 626 (2024 edition): OWBPA requirements, review periods, disclosures, revocation, and agency participation.
3. California Civil Rights Department, Employment, Separation, and Settlement Agreements: Limitations on Confidentiality and Non-Disparagement Clauses (2022): Government Code section 12964.5 and Code of Civil Procedure section 1001.
4. Ventura County Superior Court, Mandatory Settlement Conference Settlement Form (accessed October 2026): Official reproduction of Civil Code section 1542 and express waiver language.
5. U.S. Equal Employment Opportunity Commission, Understanding Waivers of Discrimination Claims in Employee Severance Agreements (2009): Waiver requirements and practical distinctions.
6. U.S. Equal Employment Opportunity Commission, Waivers and Claims Under the ADEA, 29 C.F.R. Section 1625.22 (1998, accessed October 2026): Decisional units and group programs.
7. California Employment Development Department, Benefit Determination Guide, Total and Partial Unemployment TPU 460.35 (accessed October 2026): Severance classification.
8. California Employment Development Department, Reporting Work and Wages FAQs (accessed October 2026): Payment reporting and earnings treatment.

Statutes are cited by section so you can read them on the Legislature’s site. Worked examples use made-up numbers to show the method; they are not case results or predictions.