Severance agreements in California: the rules both sides must follow

No duty to pay severance

No California law requires severance in an ordinary termination. Severance is a deal: money or benefits in exchange for a release of claims. Wages already earned are not part of the deal. They are owed on the last day whether or not the worker signs anything.

Five business days and the right to a lawyer

Government Code section 12964.5 says that an employer offering an agreement related to separation must tell the worker they have the right to consult a lawyer about it, and must give a reasonable time of at least five business days to do so. The worker may sign sooner if the choice is knowing and voluntary and not induced by fraud or threats.

Nondisparagement and confidentiality

A separation agreement may not stop a worker from disclosing information about unlawful acts in the workplace. If it has a nondisparagement clause or another clause that limits talking about workplace conditions, it must include, in substance, this sentence: "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 agreement may still keep the amount of severance confidential, and it may still protect trade secrets and other confidential information that does not involve unlawful acts.

Workers 40 and older

A release of federal age discrimination claims must meet the Older Workers Benefit Protection Act. The worker must get at least 21 days to consider it, or 45 days if the offer is part of a group layoff or exit program. The worker then has 7 days after signing to revoke. The agreement must be written so the worker can understand it, must advise the worker in writing to consult a lawyer, and, in a group program, must list the job titles and ages of those selected and not selected.

Releasing claims

Most California releases include a waiver of Civil Code section 1542, which otherwise keeps a general release from covering claims the worker does not know about. A release cannot be used to settle wages that are admittedly owed unless they are paid. Labor Code section 206.5 makes that kind of release void.