California Severance Agreement Lawyer
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What California Law Prohibits in Your Severance Agreement, and What You Must Know Before Signing
California law imposes specific, non-negotiable rules on what employers can and cannot include in a severance agreement. Under Government Code § 12964.5 (effective January 1, 2022), any nondisparagement or confidentiality clause in a separation agreement must contain a mandatory carve-out preserving your right to report unlawful workplace acts. Without that language, the clause is unlawful under FEHA. If you are 40 or older, federal law separately gives you at least 21 days to review the agreement and 7 days to revoke after signing. And if you were part of a group layoff, Cal-WARN may entitle you to additional pay that is entirely independent of whatever your employer is offering in the severance package.
What a Severance Agreement Actually Does, and What California Law Will Not Let It Do
A severance agreement (sometimes called a separation agreement) is a contract in which an employer offers money or other benefits in exchange for the employee’s release of legal claims against the company. Signing one is almost always a permanent act: you give up the right to sue over the conduct covered by the release. California law, since January 1, 2022, sharply limits what employers may demand as part of that exchange.
Government Code § 12964.5, enacted through Senate Bill 331, makes it an unlawful employment practice for an employer to include in any separation agreement any provision that prohibits an employee from disclosing information about unlawful acts in the workplace. That prohibition covers harassment, discrimination, and any other conduct the employee has reason to believe is unlawful. An employer that includes such a clause without the required carve-out is violating FEHA, not merely drafting a poorly worded contract.
The Required Language Every California Nondisparagement Clause Must Include
Under Government Code § 12964.5(b)(1)(B), any nondisparagement clause or other contractual provision in a separation agreement that restricts what you can say about your workplace must include, in substantial form, the following language:
“Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”
The statute requires this language in “substantial form,” meaning a superficially similar but narrower restatement does not satisfy the requirement. If your agreement contains any clause limiting what you can say about your employer and that clause omits this carve-out, the clause is unlawful. A severance agreement review in California by an employment attorney can identify these defects before you sign.
What Employers Are Still Allowed to Keep Confidential
Government Code § 12964.5(e) expressly permits one confidentiality restriction: the dollar amount of the severance payment itself may still be kept confidential. So an employer can lawfully require you to keep the payment figure private. What the employer cannot do is use a confidentiality clause to prevent you from reporting unlawful conduct to a government agency, an attorney, or others. These are distinct categories, and conflating them is a common source of confusion when reading a severance agreement.
One additional boundary worth knowing: the requirements of § 12964.5 do not apply to a negotiated settlement agreement that resolves an existing claim you have already filed in court, before an administrative agency, in arbitration, or through an employer’s internal complaint process. If you are in active litigation and your employer is offering a settlement, different rules may govern that agreement.
How Long Do You Have to Review a California Severance Agreement?
The review-period question is the most time-sensitive concern for anyone holding a document with a deadline. Two distinct legal frameworks apply simultaneously, and they are frequently confused.
The California Rule: Five Business Days Under § 12964.5
Under Government Code § 12964.5(b)(4), an employer offering a separation agreement must notify you of your right to consult an attorney and must give you a reasonable time period of not less than five business days to do so. This applies to FEHA-related separation agreements regardless of your age.
You may sign before the five-business-day period expires, but only if your decision is knowing and voluntary and was not produced by the employer’s fraud, misrepresentation, or threat to withdraw or alter the offer before the period runs. If an employer tells you the offer disappears tomorrow when the law gives you five business days, that threat itself may render your signature involuntary.
If You Are 40 or Older: Federal OWBPA Adds More Protection
The Older Workers Benefit Protection Act (OWBPA), a 1990 amendment to the Age Discrimination in Employment Act (29 U.S.C. § 626), imposes seven independent requirements on any severance agreement that asks an employee age 40 or older to waive ADEA age-discrimination claims:
- The agreement must be written in plain, understandable language.
- It must specifically reference the ADEA rights being waived.
- It must not waive claims arising after the date of signing.
- It must provide consideration beyond what the employee is already entitled to receive.
- It must advise the employee in writing to consult an attorney.
- It must provide at least 21 days to consider the agreement if you are being terminated individually, or 45 days if the waiver is part of a group layoff, exit incentive program, or other termination program affecting two or more employees.
- It must include a 7-day revocation period after signing, during which the agreement does not yet take effect.
These two frameworks, California’s five-business-day rule and the OWBPA’s 21-day or 45-day period, can apply at the same time. When they do, the longer period governs. An employer cannot satisfy the OWBPA by pointing to California’s shorter window. Understanding how to use that time to your advantage is part of how to negotiate a severance agreement in California effectively.
Your Situation | Applicable Review Period | Revocation Right | Authority
|
|---|---|---|---|
Any employee, FEHA-related separation agreement | 5 business days minimum | None established under California state law separately | |
Employee age 40+, individual termination, ADEA waiver | 21 days minimum | 7 days after signing (agreement not effective until this period expires) | OWBPA, 29 U.S.C. § 626(f)(1)(F) |
Employee age 40+, group layoff or RIF affecting 2+ employees, ADEA waiver | 45 days minimum | 7 days after signing (agreement not effective until this period expires) | OWBPA, 29 U.S.C. § 626(f)(1)(F) |
Were You Laid Off in a Group? Cal-WARN May Entitle You to Additional Pay
Many employees receiving severance after a mass layoff have a separate, independent legal entitlement they do not know about. The Cal-WARN Act (Labor Code §§ 1400-1408) is not a substitute for severance. It is a distinct statutory right that may add to what you can recover.
Which Employers and Layoffs Trigger Cal-WARN
Cal-WARN applies to employers with 75 or more employees, counting full-time, part-time, and hourly workers. A qualifying event is any of the following:
- A mass layoff affecting 50 or more employees within any 30-day period.
- A plant closing or termination of operations.
- A relocation of operations to a site 100 miles or more away.
When any of these events occurs, the employer must give at least 60 days’ advance written notice before the layoff, closing, or relocation takes effect.
What You Can Recover If Your Employer Skipped the 60-Day Notice
Under Labor Code § 1402, an employer that fails to provide the required 60-day notice is liable to each affected employee for back pay and the value of lost benefits for up to 60 days, or one-half the number of days the employee was employed, whichever is smaller. The critical practical point: severance payments the employer has already made may be credited against this liability. This is exactly why reviewing your severance offer before signing matters if you believe Cal-WARN applies. Signing a release first may not eliminate the Cal-WARN claim, but it can complicate your ability to pursue it.
A narrow “actively seeking capital” exception exists under Labor Code § 1402.5, but it applies only to plant closings and relocations, not mass layoffs, and it requires the employer to demonstrate to the California Department of Industrial Relations that a WARN notice would have precluded obtaining necessary capital or business.
Who Must Receive Cal-WARN Notice
Under the California Employment Development Department’s WARN requirements, notice must be delivered to four parties: affected employees directly, the California EDD Workforce Services Division, the Local Workforce Development Board, and the chief elected official of each city and county where the layoff, closing, or relocation occurs. If you were laid off as part of a group and received no written notice, that absence is a signal worth discussing with a severance agreement lawyer.
Common Mistakes California Employees Make Before Signing a Severance Agreement
The following mistakes consistently result in employees waiving rights or leaving money on the table. Each is grounded in the legal frameworks described above.
Employee Mistakes Checklist: What Not to Do Before You Sign
- Signing before the review period expires. Even if an employer implies the offer is about to disappear, Gov. Code § 12964.5(b)(4) requires five business days minimum. Employees age 40 or older have 21 or 45 days under the OWBPA. Signing earlier is only valid if the decision is genuinely knowing and voluntary, not the product of pressure or a threat to withdraw the offer.
- Failing to check whether the nondisparagement clause contains the required carve-out. Under Gov. Code § 12964.5(b)(1)(B), any clause restricting what you say must include the verbatim statutory language protecting your right to disclose unlawful workplace acts. A missing or watered-down carve-out makes the clause unlawful, but you lose the ability to object once you have signed and moved on.
- Assuming the dollar amount is confidential but so is everything else. Gov. Code § 12964.5(e) permits confidentiality of the payment amount only. The rest of the confidentiality clause is subject to the carve-out requirements. Many employees misread broad NDA language as enforceable when it is not.
- Not investigating Cal-WARN before releasing claims. If your layoff was part of a group event at a 75-or-more-employee company, Labor Code § 1402 may entitle you to back pay and lost benefits for up to 60 days on top of what your employer is offering. Signing a broad release of “all claims” without knowing whether a Cal-WARN violation occurred may leave that money behind.
- Not exercising the 7-day OWBPA revocation right when needed. If you are 40 or older and sign an agreement that waives ADEA claims, the agreement does not become effective for 7 days. Employees sometimes feel locked in immediately after signing. They are not. That revocation window is a statutory right and cannot be waived.
- Treating the employer’s offer as the final and only number. Severance agreements are negotiable. The initial offer is rarely the ceiling, particularly if the employer has potential liability for wage and hour violations, discrimination, or a Cal-WARN failure. For specific strategies, see our guide on how to negotiate a severance package in California.
- Not preserving documentation before signing. Once you sign and are off the company’s systems, recovering evidence of wage violations, discriminatory treatment, or missed WARN notice becomes far harder. Before signing, save copies of your pay stubs, offer letter, any written warnings or performance reviews, and any communications about the layoff.
- Confusing a settlement agreement with a separation agreement. If you have already filed a claim in court, before an administrative agency, or in arbitration, your settlement agreement is not governed by Gov. Code § 12964.5. The rules are different. Do not assume the same protections apply automatically.
What to Bring When You Consult a Severance Agreement Lawyer in California
An employment attorney can evaluate your agreement most efficiently when you arrive with the right materials. Before your consultation, gather:
- The complete severance or separation agreement, including all exhibits and addenda.
- Any written communication from your employer about the offer, including emails stating a deadline.
- Your offer letter and any employment contract, if you have one.
- Recent pay stubs and your W-2 from the prior year.
- Any written notice about the layoff, including whether it mentioned Cal-WARN or was addressed to a group of employees.
- Documentation of any workplace complaints you made, formal or informal, before the termination.
- A note of your age and your last day of employment, so the attorney can identify which review period applies.
If your employment involved unpaid wages, missed meal periods, or off-the-clock work, those potential claims are part of what a release of “all claims” may extinguish. Our unpaid wages attorneys in Los Angeles work alongside our severance review practice to ensure nothing is overlooked before you sign. For a complete framework of what to consider during this process, our severance package negotiation guide for California walks through the full picture.
What This Means If You Are Holding a Severance Agreement Right Now
Do not treat the employer’s deadline as the only clock that matters. Under California and federal law, you have mandatory minimum review periods, and threatening to withdraw an offer to pressure you into signing early may itself be unlawful. Read every clause that limits what you can say or whom you can contact: if it lacks the statutory carve-out required by Gov. Code § 12964.5(b)(1)(B), the clause is defective. If your layoff was part of a group termination at a company with 75 or more employees, ask specifically whether 60-day Cal-WARN notice was given, because a violation creates liability for back pay that exists independent of the severance offer on the table.
If you are 40 or older, remember that you have 7 days to revoke even after signing, and the agreement does not take effect during that window. The most costly mistake in this situation is signing quickly to make the anxiety go away before understanding what you are giving up.
Frequently Asked Questions
Does California require employers to offer severance?
No. California law does not impose a general obligation on employers to pay severance upon termination. Severance is typically a contractual benefit or, in specific circumstances, a remedy triggered by a legal violation such as a Cal-WARN failure. The absence of a severance offer is not, by itself, a legal violation.
Can my employer require me to sign a severance agreement that says I can never say anything negative about the company?
Not in a California separation agreement governed by Gov. Code § 12964.5. Any nondisparagement clause must include the statutory carve-out preserving your right to disclose information about unlawful workplace acts. A blanket prohibition on negative statements, without that carve-out, is unlawful under FEHA.
What happens if I sign the agreement and later realize the nondisparagement clause was missing the required language?
This is a fact-specific question that depends on when you discovered the defect and the circumstances of signing. A California severance agreement lawyer can assess whether the defect renders the clause voidable or unenforceable and what options remain available to you.
I am 42 years old and was laid off with 30 other coworkers. How long do I have to review the agreement?
Under the OWBPA, because the waiver is part of a group termination program affecting two or more employees and you are age 40 or older, you have at least 45 days to review the agreement and 7 days to revoke after signing. California’s five-business-day minimum under Gov. Code § 12964.5(b)(4) also applies, but the longer federal period governs.
My employer says it never gave Cal-WARN notice because it was “actively seeking capital.” Does that excuse apply?
The “actively seeking capital” exception under Labor Code § 1402.5 is narrow. It applies only to plant closings and relocations, not to mass layoffs. It also requires the employer to establish, with documentation submitted to the California Department of Industrial Relations, that the WARN notice would have actually precluded obtaining the necessary capital or business. It is not a self-executing excuse an employer can simply claim.
Contact Setareh Law Group:If you have been handed a severance agreement and want to understand your rights before the deadline, contact Setareh Law Group. Our California employment attorneys review severance agreements, identify unlawful provisions, and help employees understand whether they may have claims that a release would otherwise extinguish. We do not guarantee any particular outcome, but we can make sure you are making an informed decision.
Contact us today:
📞 Phone: 310-888-7771
✉️ Email: help@setarehlaw.com
🌐 Address: 420 N Camden Dr, Beverly Hills CA, 90210
Disclaimer: This information is provided for educational purposes and does not constitute legal advice. Each case is unique, and outcomes depend on specific facts and circumstances. Consult with a qualified California employment attorney to discuss your individual situation.
Sources and Additional Resources
Authoritative sources cited
- Government Code § 12964.5
- Older Workers Benefit Protection Act (OWBPA)
- Cal-WARN Act (Labor Code §§ 1400-1408)
- Labor Code § 1402
- Labor Code § 1402.5
- California Employment Development Department’s WARN requirements
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