Severance Negotiations
Severance agreements are contracts offered by employers when an employee is terminated or laid off, typically in exchange for a release of legal claims.
While California law does not require employers to provide severance pay, it allows for negotiation over the terms of separation, especially when the employer wants to minimize legal risk.
What Is a Severance Agreement?
A severance agreement outlines the financial and legal terms of an employee’s exit from the company. Common terms include:
- Lump-sum or ongoing severance pay
- Payment for unused vacation or PTO
- Extension of health benefits (e.g., COBRA premiums)
- A general release of claims against the employer
- Confidentiality, non-disparagement, and non-solicitation clauses
- References or employment verification terms
Employees are often asked to waive claims under California and federal laws, including FEHA, Title VII, the FMLA, and the ADA.
Case Results
When Severance May Be Offered
or downsizing
dispute or avoid litigation
contract or company policy
Severance is more likely when the employer believes the termination could lead to legal claims, or when attempting to ease the transition for a long-term or high-level employee.
Key Legal Considerations
- Release of Claims: A severance agreement is often conditioned on the employee releasing the employer from any future claims. This release must be knowing and voluntary to be enforceable.
- Age Discrimination Waivers: Employees aged 40 or older must be given at least 21 days to consider the agreement (or 45 days in group layoffs) and 7 days to revoke it under the Older Workers Benefit Protection Act (OWBPA).
- Protected Rights: Agreements cannot waive certain rights, such as the right to report criminal conduct or cooperate with government investigations.
- Consideration: The employee must receive something of value—such as severance pay or benefits—that they are not already entitled to.
Negotiating Tips for Employees
If an employer violates the WARN Act, affected employees may be entitled to:
Remedies for Unlawful Terms or Coercion
If a severance agreement was signed under duress or includes unlawful terms, it may be unenforceable. Courts may invalidate provisions that are overly broad, coercive, or violate public policy.