Since January 1, 2022, most California severance agreements must meet Government Code section 12964.5, which voids any clause that keeps a departing employee from disclosing unlawful acts in the workplace and requires specific language in a non-disparagement clause that limits what the employee can say about workplace conditions. A well-drafted release still buys real protection. But a release copied from an older template, or one that trades a paycheck the company already owed, can leave the employer paying severance without getting the release it paid for.
What does a California severance agreement have to include?
Three things, under section 12964.5(b), once the agreement relates to an employee’s separation from employment. First, no provision “that prohibits the disclosure of information about unlawful acts in the workplace.” Second, under the same subdivision, any non-disparagement or similar clause that limits what the employee can say about workplace conditions “shall include, in substantial form,” this sentence:
“Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”
Third, the statute says the employer “shall notify the employee that the employee has a right to consult an attorney regarding the agreement and shall provide the employee with a reasonable time period of not less than five business days in which to do so.” The employee can sign sooner if the choice is “knowing and voluntary” and wasn’t induced by fraud, misrepresentation, a threat to withdraw or alter the offer, or different terms for employees who sign early.
A provision that violates the disclosure rule “is against public policy and shall be unenforceable,” and including a clause that bars disclosure of unlawful acts is itself an unlawful employment practice under the statute. The statute speaks to the offending provision, so the practical risk is that the confidentiality promise the company bargained for is gone.
The statute leaves employers real room. Section 12964.5(b)(3) allows “a general release or waiver of all claims” that is otherwise lawful. Section 12964.5(e) allows a provision “that precludes the disclosure of the amount paid in a severance agreement.” Section 12964.5(f) still lets the employer protect trade secrets and confidential information “that does not involve unlawful acts in the workplace.” And section 12964.5(d) carves out a “negotiated settlement agreement” of a claim under the Fair Employment and Housing Act (FEHA, California’s main anti-discrimination law) that the employee has already filed in court, with an agency, in arbitration, or through the employer’s internal complaint process.
Why does a California release need a Civil Code section 1542 waiver?
Because without one, a “general” release may not reach claims the employee didn’t know or suspect, if knowing about them would have materially affected the deal. Civil Code section 1542 provides: “A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.”
California releases handle this by quoting section 1542 and having the employee expressly waive it. The wording matters. The Legislature amended section 1542 in 2018 (Stats. 2018, ch. 157), effective January 1, 2019, and the current text refers to “the creditor or releasing party.” If the company’s template quotes the pre-2019 wording, I’d fix it. A release that misquotes the statute it’s waiving invites an argument, however weak, that the waiver wasn’t knowing.
A 1542 waiver doesn’t make every claim releasable. Earned wages can’t be released at all without payment, and age discrimination claims can be released only by following a federal checklist.
Which wage claims can’t be released in a severance agreement?
Wages the employer concedes are owed. Labor Code section 206.5(a) says an employer “shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made.” A release obtained in violation “shall be null and void as between the employer and the employee,” and the violation is a misdemeanor. Section 206(a) adds that in a wage dispute the employer must pay “without condition” all wages “conceded by him to be due.”
The practical rule is simple. The final paycheck, accrued vacation the company owes, and any other undisputed wages get paid on time whether or not the employee signs anything. Severance is the separate payment that buys the release.
Disputed wages are different. In Chindarah v. Pick Up Stix, Inc. (2009) 171 Cal.App.4th 796, a published opinion, a restaurant company facing a proposed misclassification class action settled individually with more than 200 managers and cooks, each of whom signed a general release of overtime claims. Eight of them joined the lawsuit anyway and argued that section 206.5 voided their releases. The trial court found the company had produced evidence of a good faith dispute over whether the jobs were exempt, and the Court of Appeal affirmed, explaining that “there is no statute providing that an employee cannot release his claim to past overtime wages as part of a settlement of a bona fide dispute over those wages.” The court stressed that the releases didn’t “purport to exonerate it from future violations” and didn’t condition payment of wages the employer conceded.
So, under Chindarah’s reasoning, a severance agreement can resolve a bona fide dispute over past overtime if the conceded amounts were paid first. The opinion addressed overtime, and I’d expect the same reasoning to be argued for other disputed wage claims. In my view, the recitals should describe the dispute. A release that names the disputed claims is easier to defend than one that pretends nothing was ever in question.
What extra rules apply to employees 40 and older?
The federal Older Workers Benefit Protection Act (OWBPA) adds a checklist, and missing any item means the release doesn’t cover a federal age discrimination claim. Under 29 U.S.C. § 626(f)(1), a waiver of claims under the Age Discrimination in Employment Act (ADEA) is not “knowing and voluntary” unless, at a minimum, it’s written in understandable language, “specifically refers to rights or claims arising under” the ADEA, waives no future claims, gives consideration beyond what the employee is already owed, and advises the employee in writing to consult an attorney.
The timing rules are where agreements usually fail. Under section 626(f)(1)(F) and (G), the employee must get “a period of at least 21 days within which to consider the agreement,” or at least 45 days when the waiver is part of a program offered to a group of employees. The agreement must then give the employee “a period of at least 7 days following the execution of such agreement” to revoke it, and it doesn’t become effective until that period ends. Group programs also require written disclosure of who is covered, the eligibility factors and time limits, the job titles and ages of everyone eligible or selected, and the ages of those in the same job classification or unit who weren’t.
The EEOC’s regulation fills in details. Under 29 C.F.R. § 1625.22(e), the 21-day or 45-day period “runs from the date of the employer’s final offer,” and “Material changes to the final offer restart the running” of that period, though the parties may agree that changes won’t restart it. The regulation also says “The 7 day revocation period cannot be shortened by the parties, by agreement or otherwise.” An employee may choose to sign before the 21 days are up, as long as the employer didn’t push the early signature.
The burden is on the employer. Section 626(f)(3) says the party asserting the waiver’s validity “shall have the burden of proving” it was knowing and voluntary. And no waiver can stop an employee from filing an EEOC charge or taking part in an EEOC investigation, under section 626(f)(4).
How do the California and federal requirements line up?
| Requirement | Source | Who it covers | What happens if it’s missed |
|---|---|---|---|
| No clause barring disclosure of unlawful acts, and the required non-disparagement sentence | Gov. Code § 12964.5(b)(1) | All separating employees, except negotiated settlements of filed claims | The provision is unenforceable, and a clause barring disclosure is also an unlawful employment practice |
| Notice of the right to consult a lawyer and at least five business days | Gov. Code § 12964.5(b)(4) | All separating employees covered by the section | The agreement doesn’t comply with the statute, which invites a challenge to it |
| Express waiver of Civil Code § 1542 | Civ. Code § 1542 | Any general release | Unknown claims aren’t released |
| Conceded wages paid first, unconditionally | Lab. Code §§ 206, 206.5 | All employees | A release of those wages is void, and the violation is a misdemeanor |
| ADEA reference, 21 or 45 days to consider, 7 days to revoke, attorney advice in writing, group disclosures | 29 U.S.C. § 626(f) | Employees 40 and older | The release doesn’t waive a federal age discrimination claim |
For an employee who is 40 or older, the federal consideration period (21 days, or 45 in a group program) is longer than California’s five business days. Giving the full federal period, with the attorney notice written to satisfy both statutes, covers both.
What should an employer do before offering severance?
Treat the agreement as the first document in a possible lawsuit, because that’s often what it becomes. These steps come first:
- Preserve the personnel file, the documents behind the separation decision, timekeeping and payroll data, and any complaints the employee made, and keep them under a litigation hold if the employee has raised a claim.
- Pay the final wages, accrued vacation, and any other undisputed amounts on time and without conditions, and calendar the consideration period from the date of the final offer and the revocation period from the date the employee signs.
- Identify the decision-makers and confirm whether the employee is 40 or older and whether the separation is part of a group reduction, which changes the timing and disclosure rules.
- Pull the current severance template and check it against the current text of Civil Code section 1542, Government Code section 12964.5, and the OWBPA, and check for an arbitration agreement or an employment practices liability (EPLI) policy that requires notice.
- Talk to a lawyer before presenting the agreement, before negotiating with the employee or the employee’s lawyer, and before changing terms after the offer is made.
Separation disputes and the claims that follow them are part of the firm’s work defending employment lawsuits in California.
California severance questions from employers
Can we require a release before paying severance?
Yes, for the severance itself. Severance is typically money the employee isn’t otherwise entitled to, so it can be conditioned on a signed release that complies with the rules above. What can’t be conditioned is pay the employee has already earned. Under Labor Code section 206.5, a release required in exchange for wages due is void.
Can the agreement keep the severance amount confidential?
Yes. Government Code section 12964.5(e) expressly allows a provision “that precludes the disclosure of the amount paid in a severance agreement.” What the agreement can’t do is stop the employee from disclosing information about unlawful acts in the workplace. My practice suggestion is to keep the amount-confidentiality clause separate from the non-disparagement clause, so a challenge to one is less likely to reach the other.
Does the release cover a claim the employee files with a government agency?
Not fully. The federal statute says no ADEA waiver may interfere with the employee’s right “to file a charge or participate in an investigation or proceeding” conducted by the EEOC, under 29 U.S.C. § 626(f)(4). Draft the covenant not to sue so it doesn’t read as a ban on contacting an agency.
What if the employee already has a lawyer and a claim on file?
If the filed claim is under FEHA, the agreement may be a negotiated settlement under section 12964.5(d), which the section’s restrictions don’t cover. A filed wage claim alone doesn’t qualify. The statute defines a negotiated agreement as one that is voluntary, deliberate and informed, provides consideration of value, and with notice and an opportunity to retain a lawyer or actual representation.
If a departing employee’s lawyer is pushing back on your severance terms
If a separation is turning into a dispute, or an employee has signed a release and sued anyway, the agreement’s wording and the timeline around it usually decide whether the release holds. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving severance agreements and releases. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The California statutes are Government Code section 12964.5, Civil Code section 1542, and Labor Code sections 206 and 206.5. The federal rules are 29 U.S.C. § 626(f) and 29 C.F.R. § 1625.22. The decision is Chindarah v. Pick Up Stix, Inc. (2009) 171 Cal.App.4th 796, certified for publication. The Supreme Court of California denied review.
This post is general information about California and federal employment law as of November 5, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.