California Severance Agreement Review
By Aidin Ghavimi, Managing Attorney ·
Before you sign a California severance agreement: the five-business-day right to consult a lawyer, what you cannot waive, and extra rules at age 40 or older.
Employment Law
6 min read
Short answer: California employers do not have to offer severance unless a contract, policy, or another law requires it. When they do, the payment is usually exchanged for a release, and Government Code 12964.5 gives you at least five business days to consult a lawyer. Workers age 40 and older also get a federal consideration period and seven days after signing to revoke an age-claim waiver.
What to do before you sign
- Do not sign at the meeting where the agreement is handed to you. Ask for the full agreement and every attachment.
- Mark the date you received it. Five business days under Government Code 12964.5, and 21 or 45 days under federal age law, run from receipt, not from a manager’s preferred date.
- List the claims you would be releasing: wages, discrimination, harassment, leave, and retaliation. Compare that list with the dollar amount.
- Have a lawyer read the release, the non-disparagement clause, and any cooperation or confidentiality section.
- If you are 40 or older, confirm the seven-day revocation period is in the agreement and that nobody asked you to waive it.
Our severance pay page answers whether an employer must pay severance at all. This page is about the paper you are asked to sign. They are different questions.
Under 40 and age 40 or older
| Term | Separation agreement under Government Code 12964.5 | Federal age waiver for workers 40 and older |
|---|---|---|
| Source | California Government Code 12964.5 | Older Workers Benefit Protection Act, 29 U.S.C. 626(f) |
| Time to consult a lawyer | At least five business days. You may sign sooner only if the choice is knowing and voluntary and is not induced by fraud, misrepresentation, a threat to change the offer, or better terms for people who sign early. | The agreement must advise you in writing to consult a lawyer. |
| Time to consider | The five business days are the statutory minimum to consult counsel. | At least 21 days for an individual agreement. At least 45 days if the waiver is part of a group exit incentive or termination program. |
| Revocation | California’s five-day consult period is not a revocation period. | At least seven days after you sign. The waiver is not effective until those seven days end. You cannot waive the seven days. |
| What it covers | A general release in a separation agreement can be lawful. It still cannot waive unpaid wages or gag disclosure of unlawful workplace acts. | Only a knowing and voluntary waiver of federal age-discrimination claims. It does not, by itself, validate every other waiver. |
Those 21-day and 45-day periods, and the seven-day revocation, come from 29 U.S.C. 626(f)(1). For a group exit incentive or other termination program, the employer must also describe in writing the class covered, the eligibility factors, the time limits, the job titles and ages of the people selected, and the ages of people in the same job classification or unit who were not selected. A settlement of an age claim already filed with the EEOC or in court is different: 29 U.S.C. 626(f)(2) requires a reasonable time to consider the agreement, and it does not use the 21-day, 45-day, or seven-day periods.
What the California statute requires
An employer cannot demand a release of a FEHA claim, or a non-disparagement clause that blocks disclosure of unlawful acts, in exchange for a raise or bonus or as a condition of keeping the job. A separation agreement is different. It may include a general release if the release is otherwise lawful. The employer must tell you that you may consult a lawyer and must give you at least five business days to do so.
Any clause that restricts what you can say about workplace conditions must include, in substantial form, 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.” A clause that prohibits disclosure of unlawful acts is void. The employer may still keep the dollar amount of the severance confidential, and it may protect trade secrets that are not about unlawful acts.
Wages, taxes, and the “normal” package
Labor Code 206.5 makes a release of wages that are due, and have not been paid, void. Final pay, unpaid overtime, and earned vacation are checked separately from the severance offer. Use the final paycheck calculator if the last check is late, and the overtime calculator if the hours look short.
California does not set a standard number of weeks of severance per year of service. There is no legal “normal” package for seven years or any other tenure. The offer depends on the employer, any contract or policy, and the claims you would release. Do not treat a round number of weeks as the measure of whether the release is fair.
Severance is generally taxable as wages. The withholding on the check is not a 40 percent tax, and it is not your final tax bill. A tax professional should look at your return. This page does not quote a withholding percentage.
Checklist before you sign
- The date you received the offer and the date any revocation period would end.
- A list of unpaid wages, expenses, and vacation, separate from the severance amount.
- Whether you are 40 or older and whether other people were laid off at the same time.
- The required sentence about disclosing unlawful acts, if the agreement limits what you can say.
- Any pending complaint with the Civil Rights Department or the Labor Commissioner. Signing can affect it.
- The deadline on the deadline checker if you might refuse the offer and pursue a claim instead.
Questions people ask
Is severance pay required in California?
No. An employer does not have to offer severance unless a contract, policy, or a specific statute requires it. The payment is usually exchanged for a release. Read what you are giving up before you sign.
How long do I have to review a severance agreement?
For a separation agreement covered by Government Code 12964.5, the employer must give you at least five business days to consult a lawyer. You may sign sooner only if that choice is knowing and voluntary and the employer did not pressure you.
What extra rules apply if I am 40 or older?
An individual age waiver needs at least 21 days to consider, or 45 days for a group termination program, plus 7 days to revoke. Those 7 days cannot be waived. A settlement of a charge or lawsuit already filed uses a reasonable period instead.
Is severance taxed at 40 percent?
No flat 40 percent tax applies. Severance is generally taxable wages, and the amount withheld from the check is not your final tax. Withholding and what you owe at filing can differ. Ask a tax professional about your return.
What can I not waive?
You generally cannot waive unpaid wages that are already due. Labor Code 206.5 makes that kind of release void. You also keep the right to disclose unlawful workplace conduct. A clause that blocks that disclosure is unenforceable.
Talk with Starpoint Law. Call 310-424-9971 or contact us online for a free consultation. Offices in Century City and Sherman Oaks. We represent people in California only. The case is handled on contingency. If we do not win, you owe Starpoint Law nothing: no attorney fee and no case costs. This page is general information, not legal advice.
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