How to Negotiate a Severance Package in California

Overview

When an employer offers a severance package, the offer is often not the employer's final position. Severance packages can frequently be negotiated to provide better terms for the employee. This guide walks you through the process of evaluating and negotiating a severance offer in California.

When You Receive a Severance Offer

Take Time to Review

Do not sign a severance agreement immediately. Request time to review the agreement, typically at least 21 days (or 45 days if you are age 40 or older and there are group terminations). Use this time to have an employment attorney review the agreement.

Request Documentation

Ask the employer to provide:

• A copy of the severance agreement
• Information about the severance calculation
• Information about benefits continuation (health insurance, etc.)
• Information about final paycheck and unused paid time off

Understanding the Severance Offer

What Is Severance?

Severance is extra pay (beyond final wages) that an employer provides when terminating an employee. Severance is voluntary unless required by law, an employment contract, or a collective bargaining agreement. In most cases, severance is negotiable.

Typical Components

Severance packages typically include:

• Severance pay (lump sum or payments over time)
• Continued health insurance (COBRA)
• Continuation of benefits
• Outplacement services
• Release of claims and confidentiality agreements

Identifying Your Use

Assess Your Potential Claims

Consider whether you might have legal claims against the employer, such as:

• Wage and hour violations
• Discrimination or harassment
• Retaliation for protected activity
• Breach of contract
• Violation of company policies

Even if claims are uncertain, the existence of potential claims gives you negotiating use. Employers often prefer to settle uncertain claims rather than litigate.

Length of Service

Long-term employees typically have more negotiating power than short-term employees. Loyalty and institutional knowledge are valuable.

Position and Responsibilities

Higher-level positions and positions with sensitive responsibilities may have more negotiating power. The cost of hiring and training a replacement is higher.

Common Severance Negotiation Points

Severance Amount

The amount of severance is often negotiable. Factors that affect severance include length of service, position, age, and the reason for termination.

Bonus and Commissions

Negotiate for unpaid bonuses and commissions earned but not yet paid. These may not be subject to any negotiation restriction and should be paid immediately.

Unused Paid Time Off

Negotiate for payment of all accrued, unused paid time off (vacation, sick leave, personal days). In California, accrued vacation must be paid upon separation.

Health Insurance

If the employer offers COBRA continuation, consider whether additional health insurance costs would be paid by the employer during the severance period or notice period.

Non-Disparagement Clause

Be cautious of non-disparagement clauses that prevent you from speaking negatively about the employer. These clauses may be unenforceable or overly broad.

References and Letters of Recommendation

Negotiate for neutral or positive references from the employer. A negative reference can significantly impact job search prospects.

OWBPA and Protections for Older Workers

Older Workers Benefit Protection Act (OWBPA)

If you are 40 or older and the employer is requesting you to release age discrimination claims, the Older Workers Benefit Protection Act (OWBPA) provides additional protections:

• The severance agreement must be written in plain language
• You must have at least 21 days to consider the agreement (45 days if in a group termination)
• You must have at least 7 days to revoke your acceptance after signing
• The severance offer must include specific information about the rights being waived

Implicit Quid Pro Quo

OWBPA requires that any release of age discrimination claims involve a bargain where you receive something in exchange for the release. This is called an implicit quid pro quo and is necessary for the release to be enforceable.

Negotiating Release Agreements

What You Are Agreeing To

A release agreement is where you agree not to sue the employer for various claims. Before signing, understand exactly what claims you are releasing.

Potential Carve-Outs

Negotiate for carve-outs (exceptions) from the release, such as:

• Claims for vested benefits
• Claims for unemployment benefits
• Claims for workers' compensation
• Claims arising after the severance agreement is signed

Enforceability Concerns

Some release agreements are overly broad or unenforceable under California law. Have an attorney review the release to understand what claims you are actually waiving.

Negotiation Strategy and Process

Get an Attorney

Hiring an employment attorney to review a severance agreement is one of the best investments you can make. An attorney can identify issues, advise on the strength of potential claims, and negotiate on your behalf.

Start Negotiations Early

Begin negotiations promptly after receiving the offer. Delays may signal a lack of serious interest in negotiating.

Put Requests in Writing

Send written requests for modifications to the severance offer. This creates a record and shows seriousness.

Be Professional and Respectful

Keep negotiations professional and focused on specific issues. Threats or aggressive language can backfire.

Know Your Bottom Line

Before starting negotiations, determine what terms are acceptable to you. Know when to walk away if the employer is not willing to negotiate on important points.

Conclusion

Severance negotiations can result in significantly better outcomes for employees who approach the process strategically. Take time to understand the offer, identify your use, and negotiate key terms. An employment attorney can help ensure that you fully understand the agreement and negotiate favorable terms.

This guide is provided for general informational and educational purposes only. It does not constitute legal advice. Consult a qualified attorney for advice regarding your particular circumstances.