A severance agreement is a contract between you and your employer that outlines the terms of your exit from the company. It usually includes compensation and benefits, in exchange for your agreement to certain conditions after leaving the company or workplace.
While California law does not legally require severance agreements, there are still restrictions on what these agreements can include. Some provisions, if included, could make parts or even all of the agreement void.
Confidentiality clauses on workplace misconduct
Under California law, you have the right to talk about sexual misconduct and discrimination at work. This means “gag orders” on these experiences are illegal, especially if they relate to claims of:
- Sexual assault and harassment
- Discrimination
- Retaliation
You should be able to freely discuss these experiences, even after signing an agreement.
Non-disclosure of wages
The California Equal Pay Act protects employees’ right to discuss their wages. This means that your employer cannot include conditions in your severance agreement that prevent you from sharing information about your pay.
Waiver of Fair Employment and Housing Act (FEHA) claims
California’s Fair Employment and Housing Act (FEHA) protects you from workplace discrimination and harassment, especially in relation to:
- Race
- Gender
- Age
- Disability
- sexual orientation
The law does not allow clauses that stop you from filing complaints with the Department of Fair Employment and Housing. Courts may consider a severance agreement invalid if it prevents you from exercising your FEHA rights.
Non-compete clauses
The California Business and Professions Code prohibits contracts that prevent former employees from working in their chosen field. This means that you can generally work for a competitor or start a similar business after leaving your job. Courts may void any broad non-compete clauses in severance agreements, with very few exceptions in cases of business sales or partnership dissolutions.
Release of wage claims
Employers must pay all wages due before asking for any release of claims in a severance agreement. Courts will invalidate any agreement that tries to exchange already-earned wages for a release of claims.
Your signature carries significant weight
Signing a severance agreement is a big decision with long-term consequences. Make sure you understand the true value of what you’re agreeing to. Seek legal counsel today.