Severance for Executives in Los Angeles: What's Different About C-Suite Departures

Executive severance operates on a different level than a standard employee package. The numbers are larger, the provisions are more complex, and the stakes are higher. If you're a VP, SVP, C-suite officer, or other senior leader in Los Angeles, here's what makes your situation unique.

The Compensation Is More Complex

Executive compensation typically includes multiple components that all need to be addressed in the severance agreement:

Base salary severance. For executives, the standard benchmark is higher than for rank-and-file employees. Three to twelve months of base salary is common, with some packages reaching 18 to 24 months for C-suite officers.

Bonus considerations. Is your annual bonus guaranteed or discretionary? Will the severance include a pro-rated bonus for the current year? What about performance-based bonuses that haven't been calculated yet? The agreement should address each one specifically.

Equity. Stock options, RSUs, performance shares, and phantom equity. This is often the most valuable component of executive compensation. What happens to unvested equity? Is accelerated vesting on the table? What about the exercise window for vested options? For executives at Los Angeles tech companies and startups, equity can dwarf the cash severance.

Deferred compensation. If you participated in a nonqualified deferred compensation plan, the severance needs to address when and how those funds are paid out. Section 409A of the Internal Revenue Code creates strict rules about timing, and getting this wrong has serious tax consequences.

Retirement benefits. Supplemental executive retirement plans (SERPs), excess benefit plans, and contributions to defined benefit plans. These are often separate from the company's standard 401(k) and require specific treatment in the agreement.

D&O Insurance and Indemnification

This is something rank-and-file employees never think about, but for executives it's critical. As a corporate officer or director, you may face personal liability for decisions you made on behalf of the company. Your severance agreement should address:

Continued D&O coverage. The company should maintain Directors and Officers liability insurance that covers you for the period of your service, even after you leave. A tail policy that extends coverage for claims made after your departure is standard.

Indemnification. The agreement should confirm the company's obligation to indemnify you for any legal claims related to your actions as an officer or director. This is already required under California Corporations Code Section 317 in many cases, but having it in the severance agreement provides additional certainty.

Non-Compete and Non-Solicitation

While non-competes are unenforceable in California under Business and Professions Code Section 16600, executive agreements often contain more nuanced restrictions. Garden leave provisions (where you stay on payroll but don't work), customer non-solicitation clauses, and employee non-solicitation provisions are all common in executive packages.

Even in California, these need careful attention. The enforceability of each type of restriction varies, and the practical impact on your next career move can be significant even if the legal enforceability is questionable.

The Departure Narrative

For executives, how the departure is communicated publicly matters enormously. A press release, a board announcement, an SEC filing (for public companies), internal communications to staff. Each of these tells a story about why you left.

Negotiate the exact language of every public communication. The difference between "departed to pursue other opportunities" and "was terminated" can define how the market perceives you for years. Negotiate mutual sign-off on all public statements.

Enhanced Release Considerations

Executive releases are broader because executive roles create broader liability. The release may cover decisions you made as an officer, fiduciary claims related to employee benefit plans, securities law compliance issues, and regulatory matters. Make sure you understand every category of claim being released and evaluate whether the severance adequately compensates for each.

Cooperation Clauses

Executive severance agreements almost always include cooperation provisions requiring you to assist with ongoing litigation, investigations, or regulatory matters. This is reasonable in principle, but the terms need boundaries:

Define how much time you're expected to commit. Require reasonable advance notice for any cooperation requests. Ensure the company pays for your travel and time (at a specified rate). Confirm that the company provides legal counsel at its expense if your cooperation involves any risk of personal liability.

The Negotiation Dynamic

Executive severance negotiations are different in tone and scale. Your employer knows you have more leverage, more sophistication, and likely access to legal counsel. The negotiation tends to be attorney-to-attorney and more detailed than a standard employee severance discussion.

Common negotiation wins for executives include increased cash severance, accelerated equity vesting, extended option exercise windows, full-year bonus payout, 12-18 months of employer-paid COBRA, enhanced outplacement services, positive press release language, and tail D&O coverage.

Get Experienced Counsel

Executive severance involves tax law, securities law, corporate governance, and employment law simultaneously. You need an attorney who handles executive departures regularly and understands how all these pieces interact.

Contact our team for a confidential consultation. We represent executives and senior leaders throughout Los Angeles and Southern California.