Should I sign a severance agreement?

This page is general information, not legal advice. A severance agreement is a legal contract. If you can, have a lawyer or free clinic read yours before you sign.

What is a severance agreement?

It is a contract between you and your employer when your job ends. Usually:

• You get money, extra weeks of pay, paid health coverage, or a good reference.
• You give a release, which is a promise not to sue or file claims about your job.

Your employer offers severance because it wants that release. That is why the decision matters. Once you sign a valid release, it can be very hard to bring a claim later, even a strong one.

How much time do I get to decide?

In California, an agreement related to ending your job must tell you that you have the right to talk to a lawyer about it. It must also give you a reasonable time to think about it, at least five business days (Government Code 12964.5).

You can sign sooner if you choose, but only if it is your own informed choice. Your employer may not push you to sign early with a threat to take the offer away, or by offering better terms to people who sign fast.

If you are 40 or older, federal age law adds more time. To give up age discrimination claims, the agreement must (29 USC 626(f)):

• Be written so you can understand it, and name the federal age law
• Give you at least 21 days to decide, or 45 days if you are part of a group layoff or exit program
• Let you cancel within 7 days after you sign. It does not take effect until those days pass.
• Tell you in writing to talk to a lawyer first
• Give you something extra, beyond what you are already owed
• In a group layoff, list the job titles and ages of people chosen and not chosen in your unit

What cannot be taken from me?

Some rights stay with you no matter what you sign.

• Wages you already earned. Your employer may not make you sign a release to get pay that is already owed. A release like that is void (Labor Code 206.5). Your final pay, including unused vacation, is due right away when you are fired or laid off (Labor Commissioner FAQ).
• Talking about illegal acts at work. An agreement may not stop you from sharing information about unlawful acts at work, like harassment or discrimination. If it has a "do not criticize" or secrecy clause, it must include wording close to this: "Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace" (Government Code 12964.5).
• Talking about your pay and working conditions. California bars waivers that stop workers from sharing wages or working conditions (Labor Code 232 and 232.5).
• Future age claims. An age release cannot give up claims that arise after you sign (29 USC 626(f)).

Your employer can ask you to keep the severance amount private, and can protect real trade secrets (Government Code 12964.5).

What should I look for in the papers?

Read slowly. Mark anything you do not understand. Check:

1. The money. How much, when it is paid, and whether it comes in one payment or over time.
2. What you give up. Most releases cover "all claims." Ask yourself if you had a problem at work you may want to raise: unpaid wages, discrimination, retaliation, an injury.
3. Health coverage. Does the employer pay for coverage after you leave, and for how long?
4. Secrecy and "do not criticize" clauses. Look for the required sentence about unlawful acts.
5. A "no rehire" clause. If you had already filed a claim against the employer, a clause that bars you from working there again is usually void (Code of Civil Procedure 1002.5). The employer still does not have to rehire you.
6. Paying money back. Some agreements say you must return the severance if you break a term.
7. Return of property, like keys, laptops or uniforms, and by when.
8. References. Will they confirm your dates and job title? Ask for that in writing.
9. The deadline to sign and, if you are 40 or older, the 7 day cancel window.

Can I ask for more?

Yes. The first offer is often not the last. You can ask politely in writing. Common requests:

• More weeks of pay
• Paid health coverage for longer
• A neutral or positive reference
• Changing the reason in your file to "laid off" or "resigned"
• Payment of unused sick days or a bonus you were expecting
• More time to decide

If you have a possible claim, like unpaid overtime or discrimination, a lawyer may be able to use it to ask for more. Do not threaten. State what you want and why.

Will severance affect my unemployment?

Usually not. EDD's own guide says severance paid under a company plan or policy, to a group of workers, when jobs end, is generally not counted as wages and should not reduce unemployment benefits (EDD benefit determination guide). Payments that are really a bonus or retirement pay can count. Report everything honestly on your claim and let EDD decide. See Unemployment after being fired or quitting.

What about health insurance?

If you had health insurance through work, ask how long it lasts. You may be able to keep the same plan by paying for it yourself. Federal COBRA covers employers with 20 or more workers; Cal-COBRA covers employers with 2 to 19. You have 60 days after you get notice to sign up (California Department of Managed Health Care). Ask if your severance will pay those premiums.

What if I do not sign?

Then you usually do not get the severance, but you keep your right to bring claims. You still get your final pay and any benefits the law gives you. Not signing is a real choice, not a mistake.

What mistakes should I avoid?

• Signing in the meeting because you feel rushed. You have time.
• Signing to get your last check. Earned wages are owed anyway.
• Not reading the release section because it is long.
• Missing the deadline while you wait for advice. Ask for more time in writing if you need it.
• Losing your copy. Ask for a copy of everything you sign (Labor Code 432).

Who can help?

These are free public offices and nonprofit clinics. Contact them to confirm hours, languages and openings. Being listed here is not a referral or a promise of service.

• Legal Aid at Work, Workers' Rights Clinic: free and confidential for people within its income limits or age 60 and over. East Palo Alto line: (415) 404-9093. Clinic details
• Labor Commissioner: if earned wages or final pay were not paid, with phone interpreters at 833-526-4636. How to file a wage claim
• Department of Managed Health Care Help Center: questions about keeping your health plan, 1-888-466-2219. COBRA and Cal-COBRA
• Private lawyers: see How to find a trusted lawyer and Free help with a work problem in the Bay Area.

You are allowed to slow down. Take the papers home, ask your questions, and decide with clear eyes.

Questions people ask

My employer says I must sign today or lose the offer. Is that legal? In California, you must get at least five business days for an agreement tied to ending your job. Your employer may not use a threat to pull the offer to make you sign early.

I am not a citizen. Does that change anything? California says its worker protections apply whatever your immigration status (Labor Code 1171.5). If the agreement asks for immigration information or a Social Security number, ask a clinic why before you give it.

I signed already. Can I take it back? If you are 40 or older and the agreement covers age claims, you have at least 7 days to cancel. Otherwise, talk to a lawyer quickly.

Can I still file for unpaid wages after signing? A release of wages that were owed but not paid is void under Labor Code 206.5. A clinic can check your case.

Is there a checklist I can print?