A severance offer can arrive with the emotional weight of a termination still fresh, a stack of pages, a deadline to sign, and a sense that this is the best you are going to get. The truth is different: severance offers are starting points, not final offers, and what you sign in the first week can quietly waive claims worth far more than the check.
TL;DR
A severance agreement is a contract that releases your legal claims in exchange for payment. Before signing, you need to know what you are giving up, whether the payment matches the value of your claims, and what the deadlines and restrictions actually mean. Negotiating is routine, and California law limits many of the clauses employers include.
What a severance agreement actually does
A severance agreement has one central feature: in exchange for a payment (and sometimes benefits or other consideration), you agree to release your legal claims against the employer. That release typically covers every claim you could bring, discrimination, harassment, retaliation, wrongful termination, wage claims, and more, whether you know about them or not.
The payment on the table is, in effect, the employer’s estimate of what it would cost to defend a claim. Your job is to figure out whether that estimate is fair, and in our experience, it often is not.
The clauses that deserve special attention
Severance agreements are dense, and employers count on you not reading closely. These are the clauses we examine first:
- The release itself: does it cover claims you may not yet know you have? Does it waive PAGA standing or FEHA claims?
- The payment: does it match the value of what you are giving up? Severance of two weeks per year of service is common but often below what a strong claim is worth.
- Deadlines and revocation: how long do you have to decide? Under federal law for certain releases, 21 days to consider and 7 days to revoke.
- Non-compete clauses: largely unenforceable in California, and unenforceable language does not vanish just because you signed it.
- Non-disparagement and confidentiality: what are you prohibited from saying, and to whom? Does it block truthful reports to government agencies?
- Benefits continuation: COBRA coverage, accrued vacation, commissions, bonuses, and stock, the agreement may shortchange these.
- Return of property and cooperation: obligations that can be used against you later.
Why California is different
California law is unusually protective when it comes to severance and release agreements. Among the most important rules:
- Non-competes are largely unenforceable. California Business and Professions Code section 16600 voids non-compete clauses. An agreement that claims to restrict you from working for a competitor is, in most cases, unenforceable paper.
- You cannot waive the right to report to government agencies. Clauses that purport to bar cooperation with the CRD, the Labor Commissioner, or other agencies are against public policy.
- Releases must be knowing and voluntary. Pressure, misrepresentation, or inadequate time to consider can render a release unenforceable.
- You may not be able to waive PAGA claims. Private Attorneys General Act penalties are brought on behalf of the state, and courts have limited the ability to waive them.
The most expensive mistake in severance negotiation is signing before understanding the release. The deadline in the agreement is a negotiation pressure point, not a court order.
Can you negotiate a severance agreement?
Yes, and employers expect it. Severance packages are routinely improved through a single round of negotiation. Common improvements our clients achieve include:
- Higher severance payment or additional months of salary
- Extended benefits or COBRA paid by the employer
- Better reference terms and neutral job descriptions
- Removal of the non-compete or overbroad non-disparagement language
- Accrued vacation, commissions, or bonuses added to the package
- Time to consider, extending the acceptance deadline
Because the employer has already budgeted for the severance, asking is low-risk. The answer to a professional counteroffer is usually a better offer, not a withdrawn one.
When the severance offer understates your claims
The most important question in any severance review is whether the offer reflects the value of what you are giving up. If your termination followed a discrimination complaint, a harassment report, or a leave request, your claims may be worth many times the severance check. In that situation, the wisest move is often to decline the offer and pursue the claim, or to negotiate a settlement that reflects the claim’s real value.
If the termination looks clean and the claims are weak, the severance may be a fair deal worth taking. Knowing which situation you are in, before you sign, is exactly what a review is for.
Frequently asked questions about severance
How long do I have to sign?
Whatever the agreement says, but federal law gives you at least 21 days to consider and 7 days to revoke for certain age-related releases. You can also ask for more time; the request is routine.
Can my employer take back the offer if I negotiate?
Theoretically, but it is rare. Employers expect a counter. A professional, one-round negotiation rarely results in a withdrawn offer.
Can I still file a claim after signing?
Only if the release is unenforceable, for example, if it was coerced, misrepresented, or contrary to public policy. That is why the review matters before signing, not after.
Is the severance taxable?
Generally, severance pay is taxable income. Some settlement portions (like emotional distress) may be treated differently. Your tax advisor and our office can map the structure.
How severance review fits with other claims
Severance review connects to everything else in employment law. If the termination underlying the offer was discriminatory, the wrongful termination claim is worth more than the offer. If you complained before the termination, the retaliation claim may dwarf it. See all our practice areas.
What to do next if you received a severance offer
- Do not sign on the spot. A deadline in the offer is not a legal requirement to decide instantly.
- Read the release carefully, especially the claims it covers and the restrictions it adds.
- Compare the payment against what your claims may be worth.
- Have the agreement reviewed before you respond; most reviews are fast and flat-fee.
- Negotiate in writing, the paper trail strengthens your position.
What a severance review looks like
A severance review is fast, focused, and low-pressure:
- Read the agreement. We go through the release, the payment, the restrictions, and the deadlines.
- Value the claims. We assess what you would realistically recover if you did not sign.
- Identify the leverage. We find the clauses that are unenforceable, overbroad, or negotiable.
- Counter or accept. We advise whether to sign, negotiate, or decline, and if you choose to negotiate, we draft the counter.
Most reviews happen within days, and the consultation is free.
Common mistakes when reviewing severance
- Signing on the spot under the employer’s deadline pressure
- Not reading the release, the payment gets the attention, the release gets the rights
- Accepting the first number when negotiation is routine
- Ignoring benefits, COBRA, vacation, commissions, and stock are part of the package
- Believing the non-compete that California law would void anyway
Related claims and services
If the termination behind the offer was discriminatory or retaliatory, the wrongful termination claim may dwarf the severance. View all of our practice areas.
Tax and payment structure considerations
Severance payments are generally taxable as wages, but the structure of the agreement affects both the payment and the tax treatment. A lump-sum payment for the release of claims is treated differently from continued salary payments, and allocation between wage replacement and emotional distress components can change the tax picture. Whether the payment is reported on a W-2 or a 1099 matters as well. Before signing, it is worth understanding how the structure affects what you actually keep.
Other financial terms deserve attention: whether accrued vacation and commissions are paid separately, whether the severance is conditioned on signing (which can be a violation in California), whether COBRA premiums are subsidized, and what happens to equity, bonuses, or deferred compensation. These terms are often the most valuable parts of the package, and they are the most frequently overlooked.
How to negotiate without burning the bridge
Negotiating a severance does not have to damage the relationship or the reference. A professional counteroffer, reasonable in amount, clear in structure, and respectful in tone, is normal and expected. The employer has already committed to a severance budget; the question is whether you capture more of it. Effective negotiation focuses on the items that matter to you: the payment, the benefits continuation, the release scope, and the reference terms.
Having an attorney negotiate on your behalf changes the dynamics in your favor. Employers take a represented employee’s counteroffer more seriously, and counsel can press on points, like the unenforceable non-compete or the overbroad release, that the employee might not raise. The cost of representation in a severance negotiation is usually modest relative to the value it captures.
Common clauses employers hope you will not read
Several clauses appear in severance agreements with striking frequency and are designed to slip past an unrepresented employee:
- The 10-day release, a waiver of the opportunity to consult an attorney, which California courts view with suspicion
- The confidentiality clause, framed to bar even truthful reports to government agencies, which is unenforceable
- The non-disparagement clause, drafted so broadly it covers truthful statements about unlawful conduct
- The cooperation clause, demanding help with investigations in ways that could waive your own interests
- The return-of-property clause, used to withhold final wages if you do not return equipment, which California law prohibits
- The rehire waiver, agreeing not to apply for reemployment, which may be enforceable but is negotiable
An attorney will identify these clauses, explain which are enforceable and which are not, and negotiate the ones that matter.
If you have a severance offer on the table, a free consultation with a senior attorney will tell you what the agreement is worth, what it waives, and whether you should sign or counter. We represent employees across California.