What are California's Severance Pay Laws For Workers over 40?

If you’re over 40 and facing termination in California, you may be offered a severance package from your employer. Severance agreements often include additional compensation and benefits, but you’ll likely need to waive certain rights in exchange. As an older worker, you have protections under state and federal law when reviewing and accepting severance offers.

How Severance Agreements Work

Severance packages are commonly offered to employees laid off or terminated without cause. The employer provides additional pay and benefits; the employee agrees not to sue the company.

California employers use severance agreements for various reasons:

To avoid potential litigation over the termination
To protect trade secrets and confidential information
To gain certainty and closure after employment ends

Severance agreements often require the employee to waive claims related to:

Wrongful termination
Discrimination and harassment
Whistleblower retaliation
Wage and hour violations
Breach of contract

Employees also typically agree to confidentiality and non-compete clauses restricting their behavior after leaving the company.

Special Rules for Older Workers

For employees over 40, there are critical legal requirements surrounding severance agreements under the federal Age Discrimination in Employment Act (ADEA) and California law.

Time to Review

In California, employers must provide employees over 40 at least 21 days to review a severance agreement before signing. This gives workers time to fully understand the terms, check with a lawyer, and decide whether to accept the offer.

The 21-day review period is required under California Labor Code section 206.5 and the federal Older Workers Benefit Protection Act. The severance agreement must clearly state this 21-day review period.

Right to Revoke

In addition to 21 days to review severance, employees over 40 have seven days to revoke the agreement after signing. This allows older workers to cancel the deal if they change their minds or have second thoughts.

To revoke, the employee must provide written notice to the employer within seven days of signing. This revocation period must also be clearly stated in the severance agreement itself.

Encouragement to Consult Counsel

Under federal law, employers must “encourage” employees over 40 to consult with an attorney before signing a severance agreement. This acknowledgment should be included in the agreement’s text.

Consulting experienced employment counsel helps ensure workers understand what rights they are waiving in exchange for severance compensation.

No Pressure or Coercion

Employers are prohibited from pressuring or coercing employees over 40 into signing severance agreements. They cannot threaten or falsely state that the offer is only available for a limited time.

Federal law requires severance agreements to be entirely voluntary for older workers. If an employer rushes an employee to sign without allowing time for review, the contract could be deemed unenforceable.

What Severance Agreements Include

While severance agreements differ across companies, there are typical provisions to expect. This includes:

Release of Claims – The employee agrees not to sue the employer for employment-related claims, like discrimination, harassment, or wrongful termination. Often, this release is broad and applies to any claims before the date of signing.
Non-Compete Clause – The employee agrees not to work for a competitor until after employment ends. In California, non-competes are unenforceable except in limited circumstances.
Non-Solicitation – The employee agrees not to solicit the company’s customers or employees after leaving. This can be limited for a reasonable period.
Confidentiality – The employee agrees not to share the employer’s proprietary information and trade secrets. This usually continues indefinitely after employment.
Return of Company Property – The employee agrees to return all company property upon termination, including documents, electronics, keys, and more.
No Disparagement – Both parties agree not to make negative or disparaging remarks about the other. This includes written, oral, or electronic statements.
General Release – The employee agrees to waive any claims against the company, often broadly defined. This is usually the primary purpose of a severance agreement.

Should You Sign the Severance Agreement?

If you’re over 40 and offered a severance package, there are important considerations before signing it:

Review the agreement – Take the full 21 days to review and understand the terms. Have an employment lawyer review it as well.
Assess if the severance is fair – Look at your length of service, compensation, and circumstances of termination. Is the severance sufficient and appropriate?
Understand what you’re waiving – Know exactly which claims and rights you give up. Are you comfortable with this?
Consider alternatives – You can negotiate a better package or explore other options besides signing.
Get advice – Consult an employment attorney to understand your rights and whether accepting the severance is advisable.

While severance packages provide valuable compensation, you shouldn’t feel pressured to accept an inadequate offer or waive claims you wish to pursue. As an employee over 40, exercise your rights under state and federal law.

Negotiating Better Severance Terms

In many cases, the initial severance offered by an employer can be negotiated to be more beneficial for the employee. Some areas you may be able to negotiate include:

Increased severance pay – Often calculated as weeks or months of salary.
Extended health insurance coverage – This is especially important for older workers.
Eliminate overly broad release – Limit the claims or period you must waive.
Remove restrictive clauses – Like non-competes or non-solicitation, if not needed.
Outplacement services – Help finding a new job.
Letter of recommendation – For applying to future positions.
Extended stock option exercise period – If you have unvested options.

An experienced employment lawyer can assist with these negotiations to maximize your severance package. The terms are not necessarily set in stone.

Alternatives to Accepting Severance

While severance agreements provide fast resolution, there may be alternatives worth exploring:

Negotiate different exit packages– wages, PTO payout, or a neutral job reference.
File a discrimination claim – If you believe your termination was discriminatory or retaliatory.
Pursue wrongful termination lawsuit – If you have evidence that you were fired improperly.
Report wage and hour violations – To recover unpaid compensation that may be owed.
Claim unemployment benefits – If you weren’t terminated for misconduct.

An employment attorney can advise on which option may be best given the circumstances of your termination.

Consult an Employment Lawyer Today

Being over 40 and faced with a severance agreement can be stressful. Make sure you understand your rights and explore any options before signing away claims.

The attorneys at TONG LAW represent employees statewide, navigating severance negotiations and terminations. They provide experienced legal counsel to protect your rights.

Contact their team or reach out online to schedule a consultation.