Understanding Severance Pay in California

Q: I worked for Company A for several years. Recently, I was notified of my termination and was pressured to sign a Severance Agreement. In exchange for my signature, the employer offered me a lump sum as severance pay. Am I required to sign this agreement?

Unlike employment practices in some other countries, California employers are generally not legally required to provide severance pay.
However, if a severance clause was included in your employment contract at the time you were hired, the employer may be legally obligated to honor it upon termination.

One critical point to understand is that signing a Severance Agreement often means waiving your legal claims against your employer.
For instance, if the severance amount offered is $5,000 but your potential labor law claim is worth significantly more, signing the agreement may bar you from pursuing that claim—even if it is strong and well-supported.

Employers sometimes offer relatively small severance amounts—sometimes only a few thousand dollars or even a few hundred dollars—in order to shield themselves from potentially much larger labor lawsuits in the future.

Q: Should I consult an attorney before signing a Severance Agreement?
Yes. If your employer offers you a Severance Agreement and severance compensation at the time of termination, it is strongly advised that you consult with an experienced California labor law attorney before signing any documents.
A thorough review of the agreement and your legal rights can help you determine whether the severance offered is fair and whether signing is in your best interest.

This column is intended to provide a general understanding of key labor law principles and does not constitute legal advice. If you believe your rights have been violated in the workplace, we highly recommend consulting with a qualified labor attorney to evaluate your situation and pursue appropriate remedies.