Severance agreements that hold up.

What severance agreements actually do

A severance agreement does two things: provides the departing employee a defined separation package (pay, benefits continuation, sometimes references), and obtains a release of claims against the employer. The trade is the consideration.

A poorly drafted severance agreement does the first part without effectively achieving the second. The employer pays severance, the employee signs, and then files a charge with the EEOC or DFEH anyway — and the release doesn't bar the claim. That's a common pattern when severance agreements are downloaded from a template service or copied from another company.

What a properly drafted severance agreement covers

Severance pay and benefits

Defined amount, payment schedule, treatment of accrued PTO, COBRA / Cal-COBRA continuation (often with employer subsidy for a defined period), outplacement services if offered.

General release of claims

Release of all claims arising out of or relating to the employment, with specific identification of the major statutes (FEHA, ADEA, FLSA, Cal Lab Code, federal civil-rights statutes, common-law claims). General-release language alone often isn't enough; specific statutory carve-ins matter.

OWBPA compliance for employees 40+

The Older Workers Benefit Protection Act (federal) imposes specific requirements on releases of age-discrimination claims for employees 40+: 21-day consideration period (45 days for group terminations), 7-day revocation period, written advice to consult an attorney, voluntariness language. Non-OWBPA-compliant releases of ADEA claims are unenforceable.

California STAND Act compliance

California's STAND Act and SB 331 prohibit certain non-disparagement and confidentiality clauses in severance agreements involving harassment or discrimination claims. Specifically: cannot prevent the employee from disclosing factual information about workplace harassment, discrimination, or retaliation. Required "carveout language" must be present in California severance agreements involving these claims.

Carveouts for non-waivable claims

Certain claims can't be waived in California: workers' comp claims, unemployment claims, vested benefits, claims under whistleblower-protection statutes, certain wage claims. The release has to acknowledge these carveouts explicitly.

Confidentiality and non-disparagement

Mutual non-disparagement (with the STAND Act carveout for protected disclosures), confidentiality of severance terms (often), reference policy.

Cooperation

Cooperation in pending or future legal matters where the employee has knowledge. Often includes a flat fee for time spent post-termination on legal cooperation.

Return of property and IP

Return of all company property, deletion of company information from personal devices, reaffirmation of confidentiality and IP-assignment obligations from the employment contract.

OWBPA — the most-missed compliance issue

OWBPA applies to employees 40 or older. If the severance includes release of age-discrimination claims (and most general releases purport to), OWBPA imposes:

21-day consideration period. The employee must have at least 21 days to consider the agreement before signing. For group terminations (2+ employees), 45 days. The period can't be shortened by the employer's preference.

7-day revocation period. After signing, the employee has 7 days to revoke. The agreement isn't enforceable until the revocation period expires.

Written advice to consult an attorney. Specific written notice that the employee should consult counsel before signing.

Voluntariness. The release must be "knowing and voluntary" — clear language, no excessive pressure, no time-of-the-essence demands inside the consideration period.

Non-compliance voids the release of age-discrimination claims. The employee can keep the severance and still sue.

Severance amounts and structure

Common patterns by employee level:

Line-level employees. 1-2 weeks of pay per year of service. Cap often at 12-16 weeks.

Managers. 4-12 weeks of pay, often plus accelerated vesting on equity.

Senior managers and directors. 3-6 months of pay, plus equity acceleration, plus COBRA subsidy for the severance period.

Executives. 6-12 months of pay (often defined in the employment agreement), full equity acceleration, COBRA-period subsidy, sometimes outplacement.

Amounts vary significantly with the strength of the employee's potential claims, length of service, the company's standard practice, and negotiation.