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California laws to be aware of when negotiating your severance package


If you are a company executive, you were likely asked to sign a contract before assuming your new employment role. The legal agreement you entered into typically spells out the responsibilities of your position, your salary, any fringe benefits you are eligible for, and ways in which you and your employer would terminate your work together if the need arose.

In some contracts, eligibility for a severance package is also outlined if you and your company part ways. This agreement might leave this severance package up for negotiation if shareholders decide to ask you to vacate your role.  

Unless you have experienced the execution of a severance package before, you may not know what to expect during the negotiation process, including your legal rights, according to lawful mandates in the state of California.

Non-disparaging agreements and severance pay

Employers often include non-disparagement agreements in the documents they require employees to sign when taking on a new job. If they don’t at the time of hiring, they may try to have you sign one as part of your termination process.

California Civil Code Section 47(c) outlines the conditions under which your current employer and future ones may exchange job performance-related information about you. However, California Labor Code Section 432.3 restricts employers from discussing pay or fringe benefits.

It’s not uncommon for companies to ask employees to sign non-disparagement agreements. In these situations, the employees agree to abstain from negative comments regarding the company. Your employer may decide to withhold your severance package until this document is signed. However, if you suspect an employer has slandered you to other prospective employers, causing you to decline to sign the non-disparagement agreement, pursuing litigation may be warranted.

The Silenced No More Act and severance packages

Senate Bill (SB) 331 (also known as the “Silenced No More Act”) went into effect in California in October 2021. It limits employers from including non-disclosure clauses regarding sexual assault, harassment, and discrimination in private settlement agreements with employees. This passing of the Silenced No More Act made it unlawful for employers to withhold compensation because workers were unwilling to sign non-disclosure settlement agreements.

While many companies exercise their relationships with their employees in good faith, others attempt to find ways to minimize financial responsibility and loss of reputation, even if this means trying to silence you by having you sign a non-disparagement or non-disclosure agreement. Thanks to the Silenced No More Act, California law limits how far employers can push these boundaries.