Employment Contracts & Severance
Employment relationships are increasingly governed by written agreements — offer letters, employment contracts, equity agreements, non-compete provisions, arbitration clauses, and severance packages. Understanding what you are signing, and what leverage you have, can have significant financial consequences.
Severance Agreements
When employment ends, employers often present severance agreements requiring employees to release legal claims in exchange for a payment. Before signing, there are several things worth understanding.
What You Are Releasing
A standard severance agreement releases all employment claims — including discrimination, retaliation, harassment, and wrongful termination — in exchange for a specified amount. The value of what you are releasing depends entirely on the strength of your underlying claims. An attorney can help you assess whether the offer reflects that value.
Age Discrimination — Additional Protections
Employees 40 and over who are asked to release ADEA (Age Discrimination in Employment Act) claims are entitled to at least 21 days to consider the agreement and 7 days to revoke after signing. Group layoffs trigger longer consideration periods. (29 U.S.C. § 626(f).)
Non-Disparagement and Confidentiality
California law limits the enforceability of non-disparagement clauses in settlement agreements involving harassment, discrimination, or retaliation claims. (Gov. Code § 12964.5; Civ. Code § 1001.) An attorney can identify provisions that are unenforceable or that may be negotiated.
Employment Contract Review
Arbitration Clauses
Many employment agreements contain mandatory arbitration clauses requiring disputes to be resolved privately rather than in court. California courts have invalidated arbitration agreements that are both procedurally and substantively unconscionable. Additionally, the federal EFAA prohibits enforcement of pre-dispute arbitration agreements in sexual harassment and sexual assault cases.
Non-Compete Provisions
California Business and Professions Code section 16600 renders non-compete agreements void and unenforceable in California, with narrow exceptions. Employers who attempt to enforce unlawful non-competes, or who include them in agreements knowing they are unenforceable, may face liability.
Equity and Compensation Disputes
Disputes over unvested equity, commissions, bonuses, and deferred compensation are a significant source of employment litigation. The enforceability of clawback provisions, acceleration clauses, and forfeiture conditions depends on the specific contract language and the circumstances of separation.
Frequently Asked Questions
Should I sign a severance agreement without consulting an attorney?
Not without understanding what you are releasing. A severance agreement typically requires you to waive all employment claims — including discrimination, retaliation, and harassment — in exchange for a payment. The value of what you are releasing depends on the strength of your underlying claims. An attorney can assess whether the offer reflects that value before you sign away your rights.
Are non-compete agreements enforceable in California?
Generally no. California Business and Professions Code section 16600 renders non-compete agreements void and unenforceable, with very narrow exceptions. Employers who attempt to enforce unlawful non-competes, or include them in agreements knowing they are unenforceable, may face liability under recently enacted legislation.
Can my employer force me to arbitrate my employment claims?
Mandatory arbitration agreements are common, but their enforceability has significant limits. Courts have invalidated arbitration agreements that are unconscionable, and the federal EFAA prohibits enforcement of pre-dispute arbitration clauses in sexual harassment and sexual assault cases. Whether a specific agreement is enforceable depends on its terms and the nature of the claims at issue.
What are my rights if I am over 40 and asked to sign a severance agreement?
Employees 40 and over who are asked to release claims under the Age Discrimination in Employment Act (ADEA) are entitled to at least 21 days to consider the agreement and 7 days to revoke after signing. If you are part of a group layoff, the consideration period is extended to 45 days. (29 U.S.C. section 626(f).)
Request a Confidential Consultation
If you have been presented with a severance agreement or employment contract with significant terms, or if you have a dispute over compensation, equity, or separation terms, Teti Law offers confidential consultations to evaluate your situation.