What to Know Before Signing a Severance Agreement in California
June 19, 2025
What to Know Before Signing a Severance Agreement in California
If you're leaving a job in California—whether voluntarily or through termination—you may be presented with a severance agreement. While it might be tempting to sign and move on quickly, severance agreements can include important legal terms that affect your rights long after your employment ends. At the Law Offices of David R. Denis, P.C., we help individuals in Los Angeles understand what they're signing and protect their interests.
What Is a Severance Agreement?
A severance agreement is a contract between an employer and a departing employee. In exchange for a severance package—typically a lump-sum payment or continued benefits—the employee agrees to certain terms laid out by the employer. These agreements are legal in California, but they must meet specific standards to be enforceable.
Key Things to Consider Before Signing
1. Waiver of Legal Claims
Most severance agreements include a clause where you waive your right to sue your employer. This can include claims related to wrongful termination, discrimination, harassment, or unpaid wages. It's crucial to know whether you are giving up any valid legal claims.
2. Review Time and Revocation Period
If you are 40 or older, federal law (the Older Workers Benefit Protection Act) gives you 21 days to review the agreement and 7 days to revoke it after signing. This is especially important in cases involving group layoffs.
3. Confidentiality and Non-Disparagement Clauses
Many agreements prohibit you from discussing the terms of your severance or saying anything negative about your employer. These clauses can impact your ability to speak freely about your experience and can even affect future job prospects.
4. Non-Compete and Non-Solicitation Provisions
While non-compete clauses are generally unenforceable in California, some employers still include them. Make sure any such clause doesn’t restrict your right to work in your field.
5. Tax Implications
Severance pay is usually taxable income. It’s important to understand how receiving a lump sum or structured payments may impact your taxes for the year.
6. Legal Review Is Your Right
You are not required to sign a severance agreement on the spot. You have the right to have an attorney review the terms and negotiate on your behalf if needed.
Why Legal Guidance Matters
Employers typically draft severance agreements to protect themselves. A careful legal review ensures the terms are fair and that you are not giving up more than you’re getting in return. At Law Offices of David R. Denis, P.C., we can examine the agreement for legality, fairness, and hidden clauses that may affect your future.
Final Thoughts
Before signing any severance agreement, understand what rights you're waiving and whether the compensation you're receiving is worth it. With knowledgeable legal support, you can make informed decisions that serve your best interests.
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