Exploring the Basics of Employee Severance Terms
- Haulk & Herrera LLP
- Jan 17
- 4 min read
When an employment relationship comes to an end in California, severance agreements often play a critical role in shaping what happens next. While severance is not automatically required under California law, the terms offered can significantly impact an employee’s financial security, future employment opportunities, and legal rights.
California employment law is employee-protective and continues to evolve. As we move through 2026, understanding how severance agreements work—and what rights cannot be waived—is essential for both employees and employers.
This guide breaks down employee severance terms under California employment law, highlights recent legal developments, and explains when it’s wise to consult an experienced employment attorney.
What Are Employee Severance Terms in California?
Employee severance terms outline the compensation and conditions offered when an employee separates from a company. In California, severance is typically offered in exchange for the employee signing a release of claims, meaning they agree not to pursue legal action related to their employment or termination.
Severance agreements commonly arise in situations involving:
Layoffs or reductions in force
Terminations without cause
Position eliminations
Executive or long-tenured employee departures
Unlike some states, California places strict limits on what employers can require in a severance agreement—making careful review essential.
Common Components of a California Severance Agreement
While packages vary, most California severance agreements include:
Severance PayOften calculated based on length of service (e.g., one or two weeks of pay per year worked).
Continuation of BenefitsEmployers may subsidize COBRA premiums or extend health benefits for a set period.
Release of ClaimsEmployees waive potential legal claims, such as discrimination, retaliation, or wage violations.
Confidentiality ClausesLimited confidentiality regarding company information—not unlawful conduct.
Non-Disparagement ClausesIncreasingly regulated in California and subject to statutory limitations.
Payout of Accrued Wages and PTORequired under California law regardless of severance.
Key California-Specific Factors That Affect Severance Terms
1. Length of Employment
Longer tenure often leads to more favorable severance offers, especially for management or executives.
2. Reason for Separation
Layoffs and no-fault terminations are more likely to include severance than resignations or terminations for cause.
3. Employment Agreements or Policies
Offer letters, executive contracts, or company severance plans may control the terms.
4. Age of the Employee (40+)
Under the Older Workers Benefit Protection Act (OWBPA), employees age 40 and over must receive:
21 days to review a severance agreement (45 days in group layoffs)
7 days to revoke after signing
These timelines cannot be waived.
5. California Legal Restrictions (2026 Emphasis)
California law strictly limits what employers can include in severance agreements:
Non-compete clauses are unenforceable (and continue to face heightened enforcement in 2026)
Employees cannot waive the right to file claims with government agencies
Confidentiality clauses cannot prohibit disclosure of unlawful workplace conduct
Non-disparagement clauses must include required employee-protective language
What Is a Typical Severance Package in California?
Although there is no legal “standard,” many California severance packages include:
1–2 weeks of pay per year of service
Employer-paid COBRA premiums for 1–3 months
Payment of accrued vacation/PTO (required by law)
Outplacement or career transition services
Mutual release of claims
The value of a severance package often depends on the employee’s potential legal claims—something an experienced employment attorney can help evaluate.
How to Negotiate a Severance Agreement in California
Severance offers are often starting points, not final terms. Practical negotiation strategies include:
Requesting additional severance pay or extended benefits
Asking for neutral or positive references
Narrowing overly broad confidentiality or non-disparagement clauses
Clarifying tax treatment of payments
Ensuring compliance with California labor laws
Because signing a severance agreement may permanently waive valuable legal rights, consulting an attorney before signing is strongly recommended.
Common Mistakes Employees Make With Severance Agreements
Signing immediately due to pressure
Assuming non-compete clauses are enforceable
Overlooking restrictive non-disparagement language
Missing statutory review and revocation periods
Failing to assess potential discrimination, retaliation, or wage claims
Once signed, severance agreements are difficult—sometimes impossible—to undo.
Why Legal Review Matters: Haulk & Herrera LLP
California severance agreements often contain complex legal language that can significantly affect an employee’s future. Jose Herrera and Matthew Haulk, partners at Haulk & Herrera LLP, regularly advise California employees and employers on severance negotiations, compliance, and risk mitigation.
Their practice focuses on:
California employment law compliance
Severance agreement review and negotiation
Discrimination, retaliation, and wrongful termination claims
Executive and high-level employee separations
Having experienced counsel review a severance agreement can often lead to improved terms—or help an employee understand when not signing may be the better option.
Final Thoughts
Employee severance agreements in California are not just about compensation—they are legal documents with lasting consequences. With continued enforcement of employee-protective laws in 2026, understanding your rights before signing is more important than ever.
If you are offered a severance agreement or are considering one as an employer, consulting a knowledgeable California employment attorney can help ensure the agreement is fair, compliant, and aligned with your long-term interests.
