Severance Pay California: What It Includes and How to Change the Terms

California severance pay is not legally required, but agreements often include pay, benefits, and legal waivers. Employees can negotiate terms, challenge clauses, and improve severance offers with legal or personal review.

By Douglas Wade, Attorney

Email | Call (800) 484-4610

Have a quick question? We answered nearly 2000 FAQs.

Table of Contents

1. Introduction

2. Basics of the California Severance Package

3. Do employers just want to be nice?

4. A Severance Package Negotiation

5. Did the company terminate you wrongfully?

6. Are you prepared to negotiate?

7. Policies for Severance Packages

Introduction

A bundle of compensation and perks provided to departing employees is known as a California severance package.

An employer is under no obligation to provide severance pay in California unless it is specified in your contract of employment.

In every state in the union, a severance payment is not mandated by law. All state legislation and federal law leave severance compensation up to the employer-employee agreement. Additionally, the FLSA (Fair Labor Standards Act) doesn’t mandate companies to pay severance pay in California.

When executives & staff are let go as a result of restructuring/downsizing, severance packages are usually provided.

Those who quit or are fired for subpar work or other reasons are typically not provided them.

A review and consultation of a severance package is provided by reputed California employment lawyers. They identify any problems and recommend fixes.

Basics of the California Severance Package

The state of California doesn’t mandate employers to provide severance pay upon the departure of an employee. Nonetheless, organizations tend to provide severance benefits on the basis of the employment contract or the company policy. It is therefore of great assistance that when at any time you have inquiries on the issue of severance compensation you should consider referring to the policy of the particular employer in issues of eligibility and conditions.

1. Comprehending Severance Contracts

Employee participation is sought when a corporation gives a severance agreement in order to facilitate a seamless leave without interfering with business operations. Maintaining a good relationship between both parties is facilitated by a seamless transition.

2. Calculating the Amount of Severance Pay in California

The length of an employee’s employment with the company usually determines how much is paid via a California severance package. In general, the severance package increases with the length of employment. The following formulas are frequently used in the state of California:

Service-Based Earnings: A formula that involves one week’s salary for each year of service is used by some companies. For each year of service, greater compensation packages may provide a month’s salary.
Lump-Sum Payments: Depending on the terms of the agreement and the company’s policies, other severance payments may offer a lump-sum payment.

3. Flexibility in Packages for Severance

An interesting fact is that California does not govern severance payments. This only means that the parties are free to agree on the amount or formula of compensation that they prefer. Both parties can discuss the terms and make them appropriate to their individual needs and circumstances.

Important Takeaways

No Statutory Requirement: Severance pay in California is not required by the law.
Employer Guidelines: Verify the precise severance pay policies of your employer.
Negotiable Terms and Conditions: Severance benefits, which are frequently paid as lump sums or based on the period of service, are negotiable.
Unregulated Payments: In California, there are no rules governing the amount or methodology of severance pay.

See a lawyer to make sure you are aware of your rights and alternatives if you are discussing severance pay in California or have concerns about being eligible.

Do employers just want to be nice?

Severance pay in California is more than just a token of appreciation for your work. In return for severance money, companies frequently ask you to execute a waiver of any prospective claims and promise not to speak poorly of the company. Thus, corporations are the main beneficiaries of severance payouts. A reasonable severance compensation, however, might be advantageous to both sides.

1. Comprehending Severance Packages

Severance benefits give departing employees financial support while also assisting businesses in protecting themselves. A win-win scenario is produced by this arrangement, guaranteeing a seamless transfer for all parties.

2. Are the fundamentals included in the California severance package?

Even though each severance agreement is unique, it should have the following components:

Information about the COBRA (Consolidated Omnibus Budget Reconciliation Act): How to keep the health insurance you have in place.
Agreement of confidentiality: Terms to protect the privacy of firm information are outlined in the confidentiality agreement.
Public Disclosure of Covenant and Claims to Not Sue: A commitment to refrain from bringing lawsuits against the business.
Return of Assets (if any): Guidelines for giving back business property.
Terms of Severance Pay in California: Information on the amount and mode of payment you will receive.
Details on unemployment: How to apply for unemployment insurance.
Terms of Vacation Payment: Details regarding any accumulated vacation time.

3. Paying Attention to Financial Aspects

The majority of people give their severance package’s financial specifics top priority. California severance package is usually determined by your duration of work, however, it may also consist of:

Statement of Stock Options and Exercise Schedule: Information about any stock rights you may own.
Bonuses, Commissions, and Deferred Compensation Payments: Any extra money you are eligible for.
Terms of Loan Repayment: Details about paying back any firm debt.
Acceleration and Restricted Stock: Conditions pertaining to any restricted assets you own.
The benefits obtained by an employee through a profit-sharing plan, 401(k), or pension: Retirement benefits information.
Company expenses not reimbursed: You should make sure that you know the time limits within which you should turn in these documents to have them reimbursed.

4. Crucial Points to Remember

Mitigation Offset: Keep an eye out for provisions that require you to repay your severance when you find another employment during that time. Request that these be taken out.
Health Benefits: In some cases, health benefits are just as important as severance compensation. Under COBRA, the majority of companies provide ongoing dental and medical care. Although you will be responsible for paying for it, this federal law guarantees that your company must continue to offer identical insurance coverage at the same price for a period of 18 months.
Non-Compete Clause: Non-compete clauses are unenforceable in California. You can choose to ignore it or request that your employer remove it if it is part of the severance package.

5. What comes next?

More than seventy percent of American companies offer outplacement services to assist former workers in finding new employment, as reported by Salary.com. These services frequently involve target company searches, interview preparation, and resume writing and editing. Remember that connecting is still your greatest option, even if your job provides such assistance.

Over sixty percent of individuals find new employment through someone they are acquainted with (Salary.com). In order to ensure that you know it all and receive a just deal, consider consulting the legal expert in case you are confused or need assistance with the severance package.

Does my age being over 40 matter?

One of the many protected classifications is the over-40 age group. The ADEA (Age Discrimination Employment Act) protects you if you fit into this category. In the event that your severance package contains an ADEA waiver, which the majority do, you have seven days to cancel the release and 21 days to review the general release. Additionally, the ADEA mandates that your employer disclose to you the ages & job titles of the employees laid off if you have been laid off as a result of the change in force. It’s a means of preventing age from being an issue in a layoff.

A Severance Package Negotiation

You are not required to accept the severance payment in its current form immediately; it is merely an offer. Every day employment lawyers in California negotiate severance benefits. They frequently get their clients substantially better deals; occasionally, they notice no difference; and occasionally, they make slight improvements.

1. Why think about negotiating?

Although we advise enlisting the help of an employment legal firm, many people manage negotiations themselves. Negotiation can have a big impact on your transition, even if you’re averse to conflict and shudder at the thought. Better financial protection and longer benefits during a critical period can result from negotiating a severance deal.

2. How to negotiate for your severance benefits

Evaluate your goals

Decide if you want longer benefits or more severance pay.

You may negotiate conditions that meet your demands by using the offer as leverage.

Go through the fine print

Before accepting anything, make sure you thoroughly review the fine print.

Bring the information to your house and give it some thought. A review time of one week to twenty-one days or longer is included in the majority of packages. Businesses will typically grant you additional time if necessary.

Make the request

Don’t settle for less than you think you’ll get. Be courteous and, if possible, address your request to a familiar person rather than human resources staff.

Keep in mind that refusing your demand is the worst possible outcome. They can’t reduce or cancel a prospective severance package without seriously disrupting your retirement or layoff plans. Companies hardly ever withdraw severance offers, in our observations.

3. Why hire a lawyer?

With their experience navigating these talks, employment lawyers are frequently able to get better results. Knowing what is available to you can be very important, even if you want to bargain alone. They can offer helpful guidance and assistance all along the way.

Though it might appear daunting to negotiate your severance payout, it is necessary to ensure that you have the required financial support and ease as you transition. There is no need to rush, you have to be straightforward about what you want and not be afraid to ask what you deserve.

Did the company terminate you wrongfully?

You should understand why you lost your job. The bargaining power may help you obtain a larger severance package. Make sure your firing isn’t unlawful if you are a member of a protected class.

1. Recognizing Protected Classes

Discrimination of an individual on the basis of protected qualities is wrong & illegal. Furthermore, a business cannot demote or terminate you citing the following reasons as it is unlawful:

Making a sexual harassment complaint
Not getting paid for overtime
Having a pregnancy
Participating in jury duty
Being seriously unwell
Taking care of ailing family members
Using Medical Leave for Family

2. Next Actions

Get in touch with an employment lawyer right away for a Severance Assessment and Consultation if you believe there was a wrongful termination.

Are you prepared to negotiate?

Addressing the main concerns in a severance package negotiation is essential. Here are the main things to concentrate on:

1. Severance Pay

Always request additional severance pay initially. If you were let go as a result of an acquisition or merger, this is very important. Make sure your salary continues even in the event of your handicap or death if you get a continuance of it rather than a lump amount. If your payment will be made in installments, look for any adjustments or reductions and confirm that any unpaid incentives are covered.

2. COBRA-provided medical benefits

Next, keep in mind that under COBRA, you are entitled to ongoing medical and dental coverage lasting a maximum of 18 months following the termination of your employment (or a maximum of 29 months when you are handicapped). Asking for a taxed lump sum payment to be made right away to you rather than having your employer cover the cost of the insurance policy can save you money. You can move to a less expensive plan if that is agreed upon.

3. Outplacement Assistance

One popular severance perk that is sometimes the simplest to negotiate is outplacement aid. To hire an independent outplacement company, you can request a monetary investment. Outplacement assistance often costs between $10,000 and $25,000, as reported by Forbes.

4. Liability Release in General

The most crucial section for the employer is the broader waiver of liability, which is frequently rife with legalese. The best course of action is to have a labor attorney evaluate this complete release, which is negotiable.

5. Non-disparagement

Typically, severance agreements have a provision that forbids you from writing or speaking negatively about your company. By negotiating this condition to be mutually beneficial, you may also shield yourself from derogatory remarks. Bigger businesses may object, but it’s worth a try.

6. References

Think about the employer’s response to requests for references. Either include a provision in the severance contract that guarantees recommendations or negotiate a standard contract to say something good.

7. Non-Competition Contracts

Even while non-compete clauses are prohibited in California, some businesses nevertheless incorporate them in their severance packages. Request that it be taken out if you notice one.

8. Legal Charges

Legal fees paid during the review and negotiation of the severance agreement may occasionally be covered by the agreement.

9. Property of the Company

Negotiating to keep business property, like a phone, laptop, or other gadgets, is another option. In most cases, companies demand that the gadget be wiped out beforehand.

10. Maintaining confidentiality

Although you can bargain for exceptions, the majority of California severance settlements are confidential. Members of the family, financial advisors, lawyers, tax authorities, & the government are examples of common exceptions.

11. Transitional Plans

After being fired, you and the company may occasionally decide to continue consulting together. Discuss parameters including payment, confidentiality commitments, dispute resolution procedures, working hours, duration of the contract, services rendered, and limitations on solicitations.

12. Cooperation

A collaboration clause for any upcoming investigations or legal actions is frequently included in severance packages. Negotiate to limit cooperation to the extent of your work and within the time of working. Ask to be compensated for a travel expense and reasonable out-of-pocket costs, and be certain that it does not interfere with any future work. An hourly fee for time spent could also be negotiated.

Keep in mind that practically every item of a California severance settlement is negotiable.

Policies for Severance Packages

Examine the severance rules of your employer, particularly if you are employed by a large California corporation. This information is probably available via human resources or the employee handbook. Usually, these policies specify:

Conditions: What you must accomplish in order to be eligible for and get severance benefits, including things like involuntary dismissal for cause that would not qualify.
Documents: Before providing severance, many firms demand that employees accept legal releases.
The right of the employer to change: Employers frequently have the authority to change or terminate a severance policy. Severance may not be paid in the event of a merger or sale, particularly if a staff member is let go.
Covered Groups: Not every worker might be eligible for severance pay. Severance benefits are occasionally only available to specific employee classifications, such as salaried staff.
Method of payment: The amount of your unemployment compensation may vary depending on whether you get a lump sum or ongoing severance payments.
Objective of the severance plan: A summary of the severance plan’s objectives, frequently emphasizing assistance provided as you search for replacement employment.
Calculation: Information on how the severance package is determined, including how much is paid depending on accumulated vacation time, days of employment, etc.

Before you require them, read and comprehend the severance rules of your place of employment. You may have a big advantage in negotiation if you are prepared.

Have a quick question? We answered nearly 2000 FAQs.

See all blogs: Business | Corporate | Employment

Most recent blogs:

Severance Pay California: What It Includes and How to Change the Terms

Employment Litigation: Key Issues in Job Termination, Discrimination, and Harassment Cases

Employees may sue for job termination, discrimination, or harassment when workplace actions violate federal or state employment rules. This article explains legal protections, common violations, and employee rights involved in workplace-related lawsuits.

Company Morale: 20 Practical Ways to Improve Workplace Culture and Engagement

Improve company morale with 20 practical tactics that strengthen workplace culture, boost motivation, and support everyday team interaction. Encourage positivity, increase retention, and support employee satisfaction through real-world practices designed for today's professional environment.

California Mileage Reimbursement 2025: Rate Details, Methods, and Employer Duties

California employers must reimburse staff for business-related vehicle use based on mileage rates or alternative approved methods. The 2025 policy outlines IRS rates, covered expenses, and mandatory employer responsibilities under California labor law.

Temporary Disability California: Workers’ Compensation Coverage, Benefit Limits, and Qualifying Conditions

Temporary disability in California pays part of your wages after a workplace injury confirmed by an approved medical provider. Eligibility, time limits, and payment amounts depend on work status, legal codes, employer options, and medical updates.

Legal Age to Work in 2025: Employment Limits for Minors

State and federal laws set age, hour, and job restrictions for minors working in 2025 to protect their safety. Review employment limits for children across all fifty states, including agricultural rules, certificates, and non-hazardous job requirements.

Abusive Conduct Under California Law: Definition, Workplace Examples, and Employer Obligations

Abusive conduct in California workplaces includes bullying, hostile language, and exclusion that disrupts an employee's job performance. Employers must provide harassment prevention training and meet legal obligations under FEHA and Senate Bill No. 778.

Minimum Wage in San Diego 2025: Updated City and County Pay Rates for Employers

Minimum wage in San Diego City is $17.25 per hour in 2025, while the county rate remains $16.50. Employers must comply with state, city, and county wage laws or face penalties for underpayment and related violations.

California Labor Law: 2025 Employer & Employee Guide to Wages, Breaks, Leave, and Rights

California’s 2025 labor laws address wages, breaks, overtime, workplace safety, discrimination, sick leave, and employee protections. This guide outlines rules on scheduling, payroll, final paychecks, paid sick time, and employment standards for minors.

California Final Paycheck Law: Payment Timelines, Legal Rules, and Employer Responsibilities

California employers must follow exact final paycheck rules when employees quit or are fired, or risk paying penalty wages. The article covers payment timing, employer duties, and industry-specific exceptions including film, oil drilling, and agriculture.

Can You Work at 14 in California? Laws, Restrictions, and Permits for 14- and 15-Year-Olds

Minors aged 14 can work in California, but strict federal and state labor laws limit hours, industries, and duties. Work permits are mandatory for 14- and 15-year-olds, and employment is subject to revocation if conditions are violated.

How Many Hours Is a 9-5 Job? Daily, Weekly, Monthly, and Yearly Breakdown

A 9–5 job typically means eight hours daily, totaling 40 hours weekly across five standard workdays. Monthly and yearly hours vary depending on vacations, with most averaging 160 monthly and 2,000 annually.

Exempt Employee California: 2025 Rules, Salary Thresholds & Classification Tests Explained

California's 2025 exempt employee rules include new salary thresholds for fast food and healthcare workers under state wage laws. Detailed tests determine exemption status based on duties, salary structure, and consistent application of independent judgment.

Fair Chance Employers: A 2025 Guide to Compliant and Inclusive Hiring Practices

Fair chance hiring promotes compliance with evolving state and federal laws that support inclusive recruitment for applicants with records. Employers must assess convictions individually, follow proper procedures, and align background checks with job relevance and legal standards.

PAGA Claims in California: How Workers Can File and What Penalties Employers Face

Employees in California can file PAGA claims for labor violations and recover civil penalties on behalf of the state. Penalties vary by infraction, and employers may reduce liability if violations are corrected within the allowed timeframe.

How Many Hours Can a 16 Year Old Work? A Complete Guide to U.S. Child Labor Laws

Federal law sets no limit on work hours for 16-year-olds, but many states impose restrictions and nighttime limits. This guide breaks down FLSA rules, state variations, job types, and penalties for violating child labor laws.

New Hire Forms Checklist: Required Documents & Onboarding Essentials for Employers

Manage new hire onboarding smoothly using this checklist of required federal, state, and internal employment documents. Meet compliance needs and simplify hiring by collecting tax forms, offer letters, benefits paperwork, and signed policy acknowledgments.

Comp Day Explained: Eligibility, Benefits, and How to Calculate It Correctly

Comp day lets eligible employees take time off instead of receiving overtime pay, offering flexibility in work schedules. This article explains how comp time is calculated, who qualifies, and the differences between comp time and overtime rules.

Work Permit California: Requirements, Age Limits, and Job Restrictions for Minors

Minors in California need a work permit to get jobs, with specific restrictions based on age, role, and school status. This article outlines age requirements, job limitations, working hours, and exceptions to the state’s work permit rules for minors.

Split Shift Meaning Explained: How It Works, Benefits, Laws, and Real-World Examples

Split shifts divide a workday into separate periods with a long unpaid break, boosting flexibility and reducing staffing costs. This schedule helps businesses meet demand during peak hours while supporting employee well-being and complying with labor laws.

Is California an At-Will State? 4 Key Exceptions You Need to Know

California permits at-will employment, but specific exceptions restrict when employers may legally terminate an employee without explanation. Contracts, public policy, fraud, and fairness-based exceptions can provide legal grounds for challenging terminations.

California Pay Data Reporting: 2025 Deadline, New MENA Category, and Updated Filing Requirements

The 2025 deadline for California pay data reporting brings updated requirements, including MENA classification and new employer obligations. Covered employers must submit demographic wage data by job role, gender, race, and pay band or face financial penalties.

Family Leave California: Paid Family Leave Benefits, Eligibility, and Updates for 2025

California’s Paid Family Leave program provides up to eight weeks of partial wage coverage for caregiving and bonding with children. Eligibility criteria and compensation limits have changed for 2025, administered through the State Disability Insurance (SDI) system.

California Child Labor Laws: Key Rules About Work Permits, Hours, and Restrictions for Minors

California sets strict rules on work permits, hours, and job types allowed for minors under its child labor laws. State and federal rules also limit dangerous tasks and require school attendance for working minors.

California Minimum Wage Increase 2025: New Rates for State, Fast Food, Healthcare, and Localities

California’s 2025 minimum wage increase sets new statewide, fast food, healthcare, and local rates employers must comply with. Exempt and industry-specific employees face new salary thresholds, impacting wage standards across sectors and jurisdictions.

Background Check California: Laws, What Shows Up, and How to Clear Your Record

California background checks show criminal history, credit data, education records, and other public details under strict screening laws. Options such as expungement, pardons, and record sealing may remove damaging entries from your personal background file.

How Many Hours Can a Minor Work in California? A Complete Guide to Labor Laws and Restrictions

Minors working in California must follow strict hour limits based on age, school attendance, and job category. Employers who violate labor rules risk significant fines and possible criminal consequences.

California Overtime Law: Rules, Exemptions, Pay Rates, and Worker Rights Explained

California overtime law requires non-exempt workers to receive extra pay for working beyond daily and weekly hour limits. Certain employees, including independent contractors and exempt workers, do not qualify for overtime based on legal standards.

How to Calculate Overtime in California: Daily, Weekly, and Double Time Pay Explained

California overtime laws require daily and weekly overtime pay for nonexempt workers, including salaried, commissioned, and piece-rate employees. This guide outlines calculating overtime, daily double time, regular pay rates, and employer responsibilities without addressing alternative workweek schedules.

What is Comp Time for PTO? A Complete Guide for Employers and Employees

Employers and employees can use comp time for PTO if it is applied legally with clear policies in place. Comp time rules differ between public and private sectors, affecting when it can substitute for overtime pay.

See all blogs: Business | Corporate | Employment

Severance Pay California: What It Includes and How to Change the Terms

Introduction

Basics of the California Severance Package

Do employers just want to be nice?

A Severance Package Negotiation

Did the company terminate you wrongfully?

Are you prepared to negotiate?

Policies for Severance Packages

Free Consultation