California Severance Agreements: When Not to Sign & How to Protect Your Rights

March 28, 2025
A man signing a severance agreement

What Do California Employees Need to Know Before Signing a Severance Agreement?

A severance agreement can provide valuable financial support after a job termination, but it often comes with legal conditions that can significantly affect your rights. While California law does not require employers to offer severance packages, many companies provide them in exchange for employees agreeing to waive potential legal claims, such as wrongful termination, discrimination, or wage disputes.


Before signing any agreement, it’s critical to understand the terms and implications. Some severance packages may include clauses that limit your ability to pursue future claims, require non-disclosure of company information, or restrict your employment options through non-compete or non-solicitation agreements. Accepting a package without fully understanding these conditions could unintentionally impact your rights and opportunities.


Consulting a California employment attorney before signing is the best way to evaluate whether a severance offer is fair, negotiate better terms, and ensure you do not forfeit important legal protections. Understanding your options allows you to make an informed decision and secure the benefits you deserve while protecting your future employment rights.

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When Not to Sign a Severance Agreement 

Before accepting a severance package, consider the following situations where signing may be a mistake: 

 

  • You plan to sue your employer – If you have claims for wrongful termination , discrimination , or unpaid wages , signing a severance agreement could waive your right to legal action. 
  • The severance package is insufficient – Employers may offer you a small monetary amount as part of your severance. A California employment attorney can help determine if the offer is fair. 
  • You do not have legal representation – A severance agreement may contain complex language that may significanty limit your rights. An employment lawyer can review the terms. 
  • You do not fully understand the agreement – If the contract is unclear, you could be signing away important protections unknowingly. 

 


Red Flags in a Severance Agreement 

Not all severance agreements are fair. Be cautious if you see: 

 

  • Non-Compete Clauses – California law ( Cal. Bus. & Prof. Code § 16600 , Senate Bill 699 and Assembly Bill 1076) prohibits non-compete agreements in almost all cases. If your severance agreement contains one, it may be unenforceable. 
  • Unclear or Ambiguous Language – If the terms are vague, they could be misinterpreted. Seek legal advice before signing. 
  • Unreasonable Confidentiality Provisions – Some agreements attempt to unfairly silence employees. 
  • Broad Release of Claims – A severance package that requires you to waive all claims may prevent you from pursuing legal action for workplace violations. 
  • Pressure to Sign Quickly – Employers may push you to sign immediately. However, the Older Workers Benefit Protection Act (OWBPA) grants employees 40 years of age or older at least 21 days to review an agreement. 

 

A severance agreement should never be signed without fully understanding its implications. If you’re unsure about your rights, contact Lawyers for Employee and Consumer Rights today. Our experienced California employment attorneys can review your severance package and help ensure your legal rights are protected. Call now for a free consultation. 




Frequently Asked Questions 

1. Do I have to accept a severance package if my employer offers one?

No. In California, employers are generally not required to offer severance. You can negotiate, reject, or request legal review before signing. Accepting without understanding the terms could limit your rights.


2. Can signing a severance agreement in California prevent me from suing my employer?

Yes. Many severance agreements include a waiver of claims, which can bar you from pursuing lawsuits for wrongful termination, discrimination, or unpaid wages. Always consult an employment attorney before signing.


3. Are non-compete clauses enforceable in California severance agreements?

Almost never. California law generally prohibits non-compete agreements, so if your severance package contains one, it is likely unenforceable—but it’s still important to have an attorney review it.


4. How do I know if my severance package is fair?

A fair package depends on your circumstances, including length of employment, role, and potential claims. An experienced California employment lawyer can evaluate the offer and help negotiate better terms if necessary.


5. Can a California employer pressure me to sign quickly?

Employers may try, but California law and federal protections like the Older Workers Benefit Protection Act (OWBPA) give employees, especially those over 40, at least 21 days to review the agreement. Don’t sign under pressure.


6. What should I watch out for in a severance agreement?

Red flags include vague language, overly broad confidentiality clauses, or releases of claims that cover all possible disputes. These could limit your future rights or be unfairly restrictive.


7. Do I need a California employment lawyer to review my severance agreement?

It’s highly recommended. Severance agreements can include complex legal language that impacts your rights. A California employment attorney ensures you understand the terms, protects your claims, and helps you make an informed decision.

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