No. California law does not require an employer to pay severance when it lets you go. It does require your final wages, including vacation you have already earned, and the employer cannot make you sign anything to get them. A severance offer usually comes with a release of your claims, and you do not have to decide in the meeting where it is handed to you. California requires the employer to tell you that you may consult an attorney and to give you at least five business days to do it (Gov. Code § 12964.5(b)(4)). If you are 40 or older and the release covers age claims, federal law adds 21 days to consider the agreement (45 for a group program) and seven days after signing to change your mind (29 U.S.C. § 626(f)(1)).
A severance offer usually arrives in the same meeting as the termination notice: a document to sign and a short deadline. You have more time and more options than that meeting suggests. If you also believe the firing itself was unlawful, start with how to tell whether you have a wrongful termination case, because what you sign can end that case.
Already holding an agreement? Request a severance agreement review from Liberation Law Group.
What does California require an employer to pay when it fires or lays you off?
Severance is not on the list. Three other payments are, and they belong to you whether or not you sign anything.
Owed whether or not you sign
Final wages. Wages earned and unpaid at the time of discharge are due immediately (Lab. Code § 201(a)).
Vested vacation. Vacation you earned and did not take is paid as wages at your final rate, and a contract or policy cannot provide for its forfeiture when you are terminated (§ 227.3).
A penalty if the check is late. If the employer willfully fails to pay on time, your daily wage keeps running as a penalty for up to 30 days (§ 203(a)).
Not required by state law
Severance pay. The Labor Commissioner’s final pay information sheet states that no California law requires employers to pay severance and tells workers to look to the employer’s policy. Severance plans governed by the federal ERISA statute fall under federal law.
The two are kept apart on purpose. An employer cannot make your final pay depend on your signature. Lab. Code § 206.5(a) bars an employer from requiring a release of a claim over wages due unless those wages have been paid, and it makes a release obtained that way void. The Labor Commissioner’s guidance adds that even when some wages are in dispute, the employer must pay the undisputed part without requiring a release.
Check your last paycheck before you read the offer. Compare it with your pay stubs and your vacation balance. Unused vacation is part of your final wages. It is not part of the severance.
When does an employer have to pay severance?
Only when something other than state law creates the obligation. Four sources are worth checking:
- Your contract or offer letter, if it promises severance or a notice period.
- A written company policy or handbook, which the Labor Commissioner tells workers to consult.
- A severance plan covered by ERISA, which is governed by federal law.
- A missed Cal/WARN notice, the state’s mass-layoff notice law.
What is Cal/WARN, and does a layoff trigger it?
The California Worker Adjustment and Retraining Notification Act, called Cal/WARN, applies to a covered establishment: a workplace that employs, or in the past 12 months has employed, 75 or more people (Lab. Code § 1400.5(a)). When the employer orders a mass layoff of 50 or more employees within 30 days, a relocation of 100 miles or more, or a shutdown of the operation, it must give 60 days’ written notice to the affected employees, to the Employment Development Department, to the local workforce development board, and to the chief elected official of each city and county where the layoff occurs (§ 1401(a)). Since January 1, 2026, the notice must also say whether the employer will coordinate services, such as a rapid response orientation, through the local workforce board (§ 1401(c)).
The employees covered are those who worked for the employer at least six of the 12 months before notice was due, and employees hired for seasonal, temporary work are excluded (§ 1400.5(g)(2), (h)). If the employer skips the notice, it owes each affected employee back pay and the value of lost benefits for the days of the violation, up to 60 days or half the days the employee worked there, whichever is shorter. The amount is reduced by wages paid during that period and by voluntary, unconditional payments (§ 1402). A federal WARN Act also exists (29 U.S.C. § 2101 et seq.), and the California notice must include the federal content (§ 1401(b)).
Why this matters for a severance offer: a release can ask you to give up a notice claim. If your layoff was part of a group reduction, ask whether the agreement covers that claim and how the offer compares with what the missing notice would have been worth.
What does a severance agreement ask you to give up?
In exchange for the payment, the agreement usually asks you to release claims against the employer for things that have already happened: wrongful termination, discrimination, harassment, retaliation. California allows a general release in a separation agreement if it is otherwise lawful (Gov. Code § 12964.5(b)(3)), so a signed release can end claims you would otherwise have. Some limits protect you:
- Unlawful acts cannot be gagged. An employer cannot put in a separation agreement any provision that prohibits you from disclosing information about unlawful acts in the workplace, and a nondisparagement or confidentiality 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 provision that violates the rule is unenforceable (§ 12964.5(b)(1)–(2)).
- The amount can still be kept secret. A clause that keeps the amount paid in a severance agreement confidential is allowed (§ 12964.5(e)).
- Claims you do not know about. Under Civil Code § 1542, a general release does not extend to claims you do not know or suspect exist when you sign. Many agreements ask you to waive that protection. If yours does, claims you cannot see today can be released too.
29 U.S.C. § 626(f)(1) — age claims. If you are 40 or older, the federal Age Discrimination in Employment Act lets you waive age claims only if the waiver is knowing and voluntary, and the statute sets a minimum. The agreement must be written so the average person eligible to sign can understand it; refer to the Act by name; exclude claims that arise after you sign; give you something of value beyond what you are already owed; advise you in writing to consult an attorney; give you at least 21 days to consider it (45 days for an exit incentive or termination program offered to a group); and let you revoke within seven days after signing, with the agreement not taking effect until that period ends. For a group program, the employer must also give you in writing the eligibility factors, time limits, and the job titles and ages of the people selected and not selected. In a dispute, the employer must prove the waiver was knowing and voluntary (§ 626(f)(3)).
How long do you have to sign a severance agreement?
| Rule | Time | Source |
|---|---|---|
| Right to consult an attorney about a separation agreement | A reasonable time, not less than five business days | Gov. Code § 12964.5(b)(4) |
| Waiver of age discrimination claims | At least 21 days to consider (45 days for a group program), then seven days after signing to revoke | 29 U.S.C. § 626(f)(1)(F)–(G) |
| Final wages after a discharge | Immediately | Lab. Code § 201(a) |
| Discrimination complaint to the California Civil Rights Department | Three years from the unlawful act | Gov. Code § 12960(e)(5) |
| Lawsuit after the right-to-sue notice | One year from the date of the notice | Gov. Code § 12965(c)(1)(D) |
You may sign before the time runs out if you want to, as long as that decision is knowing and voluntary. The employer cannot induce it through fraud, misrepresentation, a threat to withdraw or change the offer, or better terms for people who sign early (Gov. Code § 12964.5(b)(4)). The deadlines to file a complaint and to sue do not pause while you decide. If you think the termination was discrimination or retaliation, the deadline to file a complaint keeps running; the guide to filing with the CRD and the EEOC explains the steps.
A date printed on the agreement is not the legal minimum. If the offer gives you until Monday and the law gives you longer, ask for the longer period in writing and keep a copy of the request.
Which clauses should you read twice?
- The release. Who is released (the company only, or also its owners and managers), which claims are covered, and whether it says “known and unknown” claims or mentions Civil Code § 1542.
- A noncompete. In California, every contract that restrains someone from engaging in a lawful profession, trade or business is void, with exceptions written into the same chapter (Bus. & Prof. Code § 16600(a)). The law is read broadly to void a noncompete in an employment context no matter how narrowly it is drawn (§ 16600(b)(1)), and it is unlawful to include one in an employment contract or require an employee to enter one (§ 16600.1(a)). A noncompete in your agreement is a sign to have the rest read closely. Protecting real trade secrets is a different matter, and the law leaves room for it (Gov. Code § 12964.5(f)).
- Nondisparagement and confidentiality. Check for the required sentence about unlawful acts, and for how broadly “confidential” is defined.
- Payment terms. A lump sum or installments, the date of the first payment, what happens if the employer says you broke the agreement, and whether you must repay anything. Ask a tax professional how the payment will be taxed.
- Benefits and paperwork. The date your health coverage ends and what it costs to continue it, how unused vacation is paid, what the employer will say when a new employer calls, and what you must return.
Have an agreement and a deadline? Arlo Uriarte and the attorneys at Liberation Law Group represent employees, never employers. Send the agreement for review before you sign.
Does severance affect unemployment benefits in California?
The Employment Development Department’s Benefit Determination Guide, TPU 460.35 states that severance pay is not wages for unemployment insurance purposes, and it bases that position on Powell and Byrd v. California Unemployment Insurance Appeals Board (1965) 63 Cal.2d 103. That is a general rule, not a promise about your claim. EDD decides how each payment is treated, and the way an employer describes and structures a payment can matter, so report what you received accurately when you apply.
What can you ask for before you sign?
- More time to review, in writing.
- A copy of the severance plan or policy the offer is based on, if there is one.
- A higher payment, or a different payment schedule.
- A narrower release, and the removal of a noncompete or an overbroad nondisparagement clause.
- A longer period of health coverage, or help with its cost.
- An agreed reference or an agreed explanation of why you left.
- Final wages and vacation paid now, separately from the severance.
Whether any of these is realistic depends on the facts, including whether you may have claims against the employer. Nothing guarantees a better offer, and an employer may refuse every request. An attorney can tell you which requests make sense for your situation.
What happens if you do not sign?
You still receive your final wages and your vested vacation (Lab. Code § 201(a); § 227.3). You do not receive the severance. You keep whatever claims you have, subject to the filing deadlines: three years for a Civil Rights Department complaint, then one year to sue after the right-to-sue notice. Whether you have a claim at all is a separate question, and a lawyer can help you answer it before the offer expires. Asking for more time is not the same as saying no.
A worked example: how to read a severance offer
Example. This is an illustration, not a case the firm handled. Dana, 52, works for a restaurant group in San Francisco. On a Friday, a manager tells her that her position is being eliminated and hands her a five-page agreement offering several weeks of pay if she signs by Monday. Her final check does not include the vacation she earned and did not take.
- The vacation pay is owed whether or not she signs (§ 227.3), and it cannot be held back until she signs (Lab. Code § 206.5(a)).
- The release covers “all claims, known and unknown,” and waives Civil Code § 1542. If she had a claim she does not yet know about, it would be gone.
- One clause bars her from working for a competitor for a year. That clause runs into Business and Professions Code § 16600.
- Monday is shorter than the five business days California requires (Gov. Code § 12964.5(b)(4)). Because she is over 40 and the release covers age claims, the agreement also needs a 21-day review period and a seven-day revocation period (29 U.S.C. § 626(f)(1)(F)–(G)).
Before deciding, Dana asks the employer in writing for the vacation pay now and for more time, and she has a lawyer read the release. She has not decided to sign or to refuse. She has made the decision on her own schedule, with the facts in front of her.
What should you bring to a severance agreement review?
- The agreement and every attachment, plus the email or letter that delivered it. The date you received it matters.
- Your offer letter or contract, and the handbook pages on severance, vacation and sick leave.
- Your last pay stubs and a record of your unused vacation.
- The termination letter and your notes from the meeting: who said what, the date and the time.
- Any complaint you made before you were let go, to a supervisor, to HR or to a government agency, and the replies.
- Records of any medical leave, pregnancy, injury or accommodation request in the months before the termination.
- For a group layoff, the notice letter and any list of positions or ages the employer gave you.
When is a review by an employment attorney most worth it?
- You believe the real reason for the termination was unlawful: a pregnancy, a medical leave, an injury, a complaint about pay or safety, your age, or your race, national origin or other protected status. The release would end those claims. See wrongful termination in San Francisco.
- You are 40 or older and the agreement covers age claims. See age discrimination in California.
- The layoff was part of a group reduction.
- The agreement has a noncompete, a broad confidentiality clause or a repayment clause.
- Your final check looks short. How to recover unpaid wages explains the options.
A review does not promise the offer will change. It tells you what you would be giving up and what you can still do.
Frequently Asked Questions About Severance Agreements
Can my employer make me keep the amount of my severance secret?
Yes. California allows a clause that keeps the amount paid in a severance agreement confidential (Gov. Code § 12964.5(e)). What an employer cannot do is bar you from disclosing information about unlawful acts in the workplace, such as harassment or discrimination. An employer may also protect real trade secrets and confidential business information, as long as the clause does not reach unlawful acts (§ 12964.5(f)).
Can I still contact a government agency after I sign?
For age claims, federal law says a waiver cannot be used to justify interfering with your right to file a charge with the Equal Employment Opportunity Commission or take part in its investigation (29 U.S.C. § 626(f)(4)). That is a narrow protection for the agency process. It does not tell you what you can still recover after signing a release, which is a question for the lawyer who reads your agreement.
What if I do not fully understand the agreement?
Do not sign something you do not understand. For age-claim waivers, federal law requires the agreement to be written in a manner calculated to be understood by you or by the average person eligible to sign it (29 U.S.C. § 626(f)(1)(A)), and it puts the burden on the employer to prove the waiver was knowing and voluntary (§ 626(f)(3)). For every agreement, the practical answer is the same: ask for the document in writing, ask for more time, and have a lawyer read it with you.
Does it matter whether I was laid off or fired?
For final pay, no. The wage rules apply whenever an employer discharges an employee (Lab. Code § 201(a)). It matters for notice: Cal/WARN applies only to a mass layoff, relocation or shutdown at a covered workplace. The reason you were let go still matters if it was unlawful. A layoff that happens right after a pregnancy announcement, a medical leave or a wage complaint is a different situation from a layoff for lack of work, and a release could end claims in both.
Can I ask for more time to decide?
Yes, and ask in writing. California requires the employer to give you a reasonable time of at least five business days to consult an attorney about a separation agreement (Gov. Code § 12964.5(b)(4)). You may choose to sign sooner, but the employer cannot induce that choice by fraud, by misrepresentation, by threatening to withdraw or change the offer, or by giving better terms to people who sign early. If the document gives you less time than the law allows, say so in your request.
If I sign, can I still claim unpaid overtime or vacation pay?
Not safely. California says an employer cannot require you to sign a release of a claim over wages due unless those wages have been paid, and a release required in violation of that rule is void (Lab. Code § 206.5(a)). What the agreement says about wage claims, and whether your final check was complete, are two things a lawyer should check before you rely on either side of that rule.
Before you sign anything, talk to a lawyer who represents employees. Arlo Uriarte and the attorneys at Liberation Law Group can review your severance agreement and explain what signing would give up.
Official sources
- Cal. Lab. Code § 201; § 203; § 206.5; § 227.3
- Cal/WARN: Lab. Code § 1400.5; § 1401; § 1402
- Cal. Gov. Code § 12964.5; § 12960; § 12965
- Cal. Civ. Code § 1542; Bus. & Prof. Code § 16600; § 16600.1
- 29 U.S.C. § 626(f) (Older Workers Benefit Protection Act waiver rules)
- California Labor Commissioner’s Office, final pay information sheet
- Employment Development Department, Benefit Determination Guide, TPU 460.35
This page gives general information about California and federal law as of November 2026. It is not legal advice for your situation, and contacting the firm does not by itself create an attorney-client relationship. Laws and agency positions change, so confirm the current rule before you act. Do not send confidential details through a contact form before you have spoken with the firm.
