Red Flags in Severance Agreements That California Lawyers Catch

When an employment attorney reviews a severance agreement, they're not just reading it. They're looking for traps. Provisions that seem standard but actually cost you money, rights, or leverage. Here are the red flags we see most often in severance agreements from Los Angeles employers.

1. Vacation Pay Bundled into Severance

Your accrued vacation pay is owed to you under California Labor Code Section 227.3 regardless of whether you sign the agreement. Some employers roll the vacation payout into the severance number to make the offer look bigger. If the agreement says you're receiving $15,000 in severance and that includes $4,000 of accrued vacation, you're really only getting $11,000 in actual severance. Always insist on separate line items.

2. Non-Compete Clauses

Still showing up in California severance agreements, even though they're void under Business and Professions Code Section 16600 and explicitly illegal to include under AB 1076. If it's there, it should be removed. An unenforceable clause can still scare future employers and create unnecessary complications.

3. Overly Broad Confidentiality

A confidentiality clause that covers "all information related to your employment" goes too far. It can prevent you from discussing your work experience, your compensation, or your skills with future employers. Confidentiality should be limited to trade secrets and the specific terms of the agreement, with carve-outs for your spouse, attorney, financial advisor, and tax preparer.

4. Missing SB 331 Language

Since 2022, California law requires severance agreements to include language confirming that confidentiality and non-disparagement provisions don't restrict disclosure of information about unlawful workplace conduct. If this language is missing, the agreement has a compliance problem.

5. Clawback Provisions

Some agreements say the company can take back the severance payment if you violate any term of the agreement. This is a sword hanging over your head. A casual comment that someone interprets as disparagement could theoretically trigger a demand to return everything. Push for specific, proportional remedies rather than a blanket clawback.

6. Cooperation Clauses Without Limits

A clause requiring you to cooperate with the company in future litigation or investigations sounds reasonable. But without limits, it could mean unpaid days of preparation, depositions, and testimony for months or years after you leave. Negotiate for: advance notice requirements, compensation for your time at a reasonable hourly rate, coverage of travel expenses, and the right to have your own attorney present at the company's expense.

7. "Voluntary Resignation" Language

If you were fired or laid off, the agreement should not describe your departure as a voluntary resignation. This language can be used to contest your unemployment claim and undermine wrongful termination claims. Insist on accurate language.

8. Waiver of Unknown Claims Without Adequate Compensation

The Section 1542 waiver gives up claims you don't know about yet. This is standard in severance agreements, but it should be matched with adequate severance. If you're giving up potentially valuable unknown claims for a token payment, the trade is disproportionate.

9. OWBPA Non-Compliance (If You're Over 40)

If you're 40 or older, the agreement must comply with OWBPA requirements: 21-day review period (45 for group layoffs), 7-day revocation period, written advice to consult an attorney, and specific disclosures for group layoffs. Non-compliance can make the age discrimination waiver unenforceable.

10. No Dispute Resolution Mechanism

What happens if the company breaches the agreement? Some agreements require mandatory arbitration in a location far from where you live, with the employee paying half the arbitration fees. Push for fair dispute resolution: arbitration in Los Angeles County (if arbitration is required), employer pays arbitration costs, and a neutral arbitrator selection process.

11. Representations About Prior Complaints

Some agreements ask you to represent that you have not filed any complaints or claims against the company. If you have filed a complaint (with HR, the CRD, or any other body), making this representation could void the agreement or expose you to fraud claims. Read these representations very carefully.

12. One-Sided Non-Disparagement

You can't say anything negative about the company, but the company can say whatever they want about you. This should be mutual. If they want your silence, they should give theirs too.

Don't Sign Until Someone Checks

These red flags aren't theoretical. We see them in real agreements from Los Angeles employers every week. The average employee doesn't know to look for clawback provisions or SB 331 compliance issues. That's exactly what your employer's lawyers are counting on.

Our employment attorneys review severance agreements for employees throughout Los Angeles and Southern California. Free consultation. We'll flag every issue and tell you which ones matter most for your situation.