Severance and Settlement Agreement Review

Michael Trust founded Michael Trust Law, APC after more than 35 years in HR leadership across entertainment, healthcare, higher education, finance, banking, solar energy, and other industries, including managing approximately 35,000 disability and leave-of-absence cases. He holds the SPHR, PHRca, and SHRM-SCP credentials. The PHRca is a California-specific HR credential focused on California employment law and HR practice. The SPHR, PHRca, and SHRM-SCP are HR credentials, not State Bar certifications. Michael Trust does not hold a State Bar certified specialization, and currently the State Bar of California does not offer a specialization in employment law. According to HRCI’s published pass-rate statistics at https://www.hrci.org/pass-rates, the PHRca has the lowest pass rate of all HRCI credentials (47% as of December 31, 2025, compared with 71% to 84% for HRCI’s other certifications), and only 293 candidates worldwide tested for it in 2025. That HR-systems background helps identify HR process issues early, which can shape legal analysis on both sides. On a severance agreement, that background means reading the offer alongside the termination paperwork, final pay rules, and benefit notices that surround it.

Employee Severance and Settlement Agreements

A severance agreement, sometimes called a separation agreement or a settlement agreement, is a contract. The employer offers pay, benefits, or both, and the employee gives up legal claims against the employer. Once an employee signs, the release usually ends those claims, so the review happens before the signature.

In many cases the employer is buying peace. The payment often reflects a desire to end the risk of a claim, and that desire is frequently the real reason for the offer. A review looks at what the employer is buying, what the employee is giving up, and whether the price fits the claims.

California Severance and Settlement Agreement Review - Employee Rights

California and federal law set rules for what a release can cover, how long an employee has to decide, and which promises an employer may require. A severance or settlement agreement review checks the offer against those rules and against the facts of the separation.

What a Severance Agreement Review Looks At

The release. A general release ends the claims it lists. It can also end claims the employee does not know about, if it waives Cal. Civ. Code § 1542. An employer may not require a release of wages it concedes are due, but a release can cover wages that are genuinely in dispute. Cal. Lab. Code §§ 206, 206.5; Chindarah v. Pick Up Stix, Inc., 171 Cal. App. 4th 796, 803 (2009).

Claims that cannot be waived. Some rights survive a signed agreement, including unemployment insurance benefits, reimbursement of necessary business expenses, and the right to file a charge with the Equal Employment Opportunity Commission. Cal. Unemp. Ins. Code § 1342; Cal. Lab. Code §§ 2802, 2804; 29 U.S.C. § 626(f)(4). An employee cannot release a claim for workers’ compensation benefits without the approval of the Workers’ Compensation Appeals Board. Cal. Lab. Code § 5001. A claim that an employer discriminated against an injured worker, which Cal. Lab. Code § 132a prohibits, needs a separate release. A workers’ compensation settlement that does not specifically refer to a § 132a claim may not release it. Morehouse v. Workers’ Comp. Appeals Bd., 154 Cal. App. 3d 323, 329-31 (1984).

Age and the review period. An employee age 40 or over who releases age claims falls under the Older Workers Benefit Protection Act. The Act requires at least 21 days to consider the agreement, seven days to revoke after signing, a written advisory to consult with an attorney, and consideration beyond what the employee is already owed. 29 U.S.C. § 626(f)(1). Federal law does not require the employee to consult with an attorney, but a release of age claims is the kind of document an attorney should review before signature. A settlement of an age claim already filed with the Equal Employment Opportunity Commission or in court follows a different rule: the employee must have a reasonable time to consider it, and the 21-day and seven-day periods do not apply. 29 U.S.C. § 626(f)(2).

Layoffs and group programs. A group exit or termination program that asks employees to release age claims requires a consideration period of at least 45 days. At the start of that period, the employer must give each employee a written disclosure. The disclosure covers the class, unit, or group; the eligibility factors; the time limits; the job titles and ages of everyone eligible or selected; and the ages of everyone in the same job classification or organizational unit who is not eligible or selected. 29 U.S.C. § 626(f)(1)(F), (H).

Time to consult with an attorney. California requires an employer that offers a separation agreement to notify the employee of the right to consult with an attorney and to allow at least five business days to do so, at any age. Cal. Gov’t Code § 12964.5(b)(4).

Limits on speaking. California limits confidentiality and nondisparagement terms. A separation agreement may not prohibit disclosure of information about unlawful acts in the workplace, and a nondisparagement term must say so in substantially the statutory words. Cal. Gov’t Code § 12964.5(b). The amount of the severance may stay confidential. Cal. Gov’t Code § 12964.5(e). The statute does not apply to a negotiated settlement of a claim already filed under the Fair Employment and Housing Act. Cal. Gov’t Code § 12964.5(d).

Rehire and competition. An agreement settling a filed employment claim generally cannot bar the employee from working for that employer again, and a noncompete is void in California except under narrow statutory exceptions. Cal. Civ. Proc. Code § 1002.5; Cal. Bus. & Prof. Code § 16600. Our page on non-compete agreements explains the rule.

Notice periods. Whether an employer owes a notice period depends on its source: a contract, offer letter, or policy that promises notice; a mass layoff, relocation, or termination covered by California’s Cal-WARN law; or a plant closing or mass layoff covered by the federal WARN Act. Each of the two statutes requires 60 days of written notice. An employer that fails to give required California notice owes back pay and the cost of benefits for the violation period, up to 60 days or half the days the employee worked for the employer, whichever is less. Cal. Lab. Code §§ 1401, 1402, 2922; 29 U.S.C. § 2102.

Pay, health insurance, and unemployment insurance. Final wages, including vested vacation, are due immediately when an employer discharges an employee. When an employee resigns, they are due at the time of quitting, or within 72 hours if the employee gave less than 72 hours’ notice. Cal. Lab. Code §§ 201, 202, 227.3. Health insurance, such as employer-paid continuation coverage for a period, is often part of the negotiation, and our page on keeping health insurance after a job ends explains the basics. The Employment Development Department decides eligibility for unemployment insurance benefits, and the answer can depend on how the agreement describes each payment and on who ended the employment. Cal. Unemp. Ins. Code § 1256; Cal. Code Regs. tit. 22, § 1256-1. We do not provide tax advice, and an employee should consult with a tax professional about how severance is taxed.

Other terms. A review also reads the remaining terms, including any statement that the employer admits no liability, any duty to cooperate, the use of the employee’s name, photograph, and likeness (including a digital replica), and the clause that makes the written agreement the parties’ entire agreement.

When to Contact Us

A severance or settlement agreement usually comes with a deadline. If your employer has given you a severance or separation agreement, contact Michael Trust Law, APC for a 30-minute conversation before signing. Michael Trust Law, APC does more than review the agreement. It negotiates severance and settlement packages for employees, including the amount, the benefits, and the terms of the release.

No attorney-client relationship exists until a fee agreement is fully executed by all parties. See Disclaimers.

29 U.S.C. §§ 626(f), 2102; Cal. Civ. Code § 1542; Cal. Gov’t Code § 12964.5; Cal. Bus. & Prof. Code §§ 16600, 16600.5; Cal. Civ. Proc. Code §§ 1001, 1002.5; Cal. Lab. Code §§ 132a, 201, 202, 206, 206.5, 227.3, 1401, 1402, 2802, 2804, 2922, 5001; Cal. Unemp. Ins. Code §§ 1256, 1342; Chindarah v. Pick Up Stix, Inc., 171 Cal. App. 4th 796, 803 (2009); 29 C.F.R. § 1625.22; Cal. Code Regs. tit. 22, § 1256-1.

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Frequently Asked Questions

How long do I have to decide whether to sign a severance agreement in California, and should an attorney review it?

It depends on your age and on whether your employer is laying off a group. If you are age 40 or over and release age claims, the Older Workers Benefit Protection Act requires at least 21 days to consider the agreement (45 days in a group program). It also requires seven days to revoke after you sign and a written advisory to consult with an attorney. 29 U.S.C. § 626(f)(1). California also requires an employer that offers a separation agreement to notify you of your right to consult with an attorney and to allow at least five business days to do so, at any age. Cal. Gov’t Code § 12964.5(b)(4). Different timing rules apply when you settle a claim that is already filed. No law requires you to hire an attorney, but an attorney should review the agreement before you sign it, particularly a release of age claims.

Can I sign early, and does a change to the offer restart the clock?

You may sign early if your decision is knowing and voluntary and your employer did not induce it through fraud, misrepresentation, a threat to withdraw or alter the offer, or different terms for early signers. Under the federal rule, a material change to the final offer restarts the 21- or 45-day period, but the parties may agree that changes, material or not, do not restart it. The parties cannot shorten the seven-day revocation period. 29 C.F.R. § 1625.22; Cal. Gov’t Code § 12964.5(b)(4).

Can I negotiate a severance agreement, and why did my employer offer one?

Often, yes, though an employer typically offers a group program on standard terms. The employer wants to end the risk of a claim, and the release is what it is paying for. If you have viable claims, you often have more room to negotiate, and a review identifies the terms worth raising before you respond. Michael Trust Law, APC reviews severance agreements and negotiates severance and settlement packages for employees.

What claims do I give up when I sign, and which claims can I keep?

You give up the claims the release covers. A release that waives Cal. Civ. Code § 1542 can include claims you do not know about. A release can cover wages that are genuinely in dispute, but the employer must first pay wages it concedes are due. Cal. Lab. Code §§ 206, 206.5. Some rights cannot be waived, including unemployment insurance benefits, reimbursement of necessary business expenses, and, without approval of the Workers’ Compensation Appeals Board, a claim for workers’ compensation benefits. Cal. Unemp. Ins. Code § 1342; Cal. Lab. Code §§ 2802, 2804, 5001. A claim that an employer discriminated against you for pursuing workers’ compensation, which Cal. Lab. Code § 132a prohibits, needs a separate release. A workers’ compensation settlement that does not specifically refer to a § 132a claim may not release it. Morehouse v. Workers’ Comp. Appeals Bd., 154 Cal. App. 3d 323, 329-31 (1984). A waiver of age claims cannot cover claims that arise after you sign. 29 U.S.C. § 626(f)(1). If you have already signed, see our answer on whether you can undo a signed severance agreement.

Can my employer require me to keep my severance agreement confidential?

In part. An employer may not prohibit you from disclosing information about unlawful acts in the workplace, and a nondisparagement or similar term must include statutory language preserving that right. Cal. Gov’t Code § 12964.5(b). The amount of the severance may stay confidential. Cal. Gov’t Code § 12964.5(e). That statute does not apply to a negotiated settlement of a claim already filed under the Fair Employment and Housing Act. Cal. Gov’t Code § 12964.5(d). If the agreement settles a filed claim of sexual assault, harassment, discrimination, or retaliation for reporting or opposing harassment or discrimination, a separate statute limits terms that restrict factual information about the claim, though the amount of the settlement may stay confidential. Cal. Civ. Proc. Code § 1001.

Can a severance agreement stop me from working for a competitor or for my former employer?

A noncompete in a severance agreement is generally void in California, and an employer may not include a void provision in a contract with an employee. Cal. Bus. & Prof. Code §§ 16600, 16600.5. An agreement settling a filed employment claim also cannot prohibit you from future employment with that employer or its affiliates, subject to limited exceptions. Cal. Civ. Proc. Code § 1002.5.

Will severance affect my unemployment insurance benefits?

It can. The Employment Development Department makes the final determination on unemployment insurance benefits, subject to its appeal process, and an agreement cannot dictate how it will treat a payment. The answer can depend on how the agreement describes each payment and on who ended the employment. Cal. Unemp. Ins. Code § 1256; Cal. Code Regs. tit. 22, § 1256-1. Ask how the agreement describes the separation and each payment before you sign. We do not provide tax advice, and you should consult with a tax professional about how any payment is taxed.

Can my employer pay for my health insurance after I leave?

Often, and employees commonly negotiate this term. An agreement may provide that the employer pays part or all of the premium for continuation coverage for a period. Our page on keeping health insurance after a job ends explains how continuation coverage works.

I gave two weeks of notice and my employer let me go that day. Can I collect unemployment insurance?

It can. If your employer ended your employment early and did not pay you for the notice period, the employer is the party that ended the employment, and the Employment Development Department treats the separation as a discharge. If your employer paid you through the end of the notice period, the separation generally remains a resignation. The Employment Development Department makes the final determination, subject to its appeal process, so describe the facts accurately when you apply. Cal. Code Regs. tit. 22, § 1256-1. Whether an employer owed you a notice period in the first place depends on a contract, offer letter, or policy, or on state and federal notice laws for certain mass layoffs.

I am age 40 or over and part of a layoff. What should I expect?

For a group exit or termination program that asks you to release age claims, federal law requires at least 45 days to consider the agreement. It also requires a written disclosure of the class, unit, or group covered; the eligibility factors; the time limits; the job titles and ages of everyone eligible or selected; and the ages of everyone in the same job classification or organizational unit who is not eligible or selected. 29 U.S.C. § 626(f)(1)(F), (H). The disclosure exists so that you can make an informed choice, and an attorney can review it against the agreement. Our age discrimination page explains age claims in more detail.