How to Negotiate an Executive Severance Package

Losing an executive position is rarely straightforward. Whether you were laid off as part of a corporate restructuring, terminated without cause, or pushed out through constructive dismissal, the severance package you accept or fail to negotiate, can have long-lasting consequences for your financial security and future career. In California, executives often have more leverage than they realize, and the stakes are too high to leave money and protections on the table.

At Brereton, Mohamed, & Korte LLP, our employment attorneys help executives in Santa Cruz and throughout California understand the full scope of their rights and negotiate severance agreements that reflect the true value of their contributions. This guide walks you through the key steps and considerations every departing executive should know.

1. Understand What You Are Entitled To- Before You Sign Anything

The first and most important step is to resist the pressure to sign quickly. Employers often present severance agreements with tight deadlines, but California law provides employees, including executives, with specific rights regarding review periods. Under the Older Workers Benefit Protection Act (OWBPA), for example, if you are 40 or older and are being asked to waive age discrimination claims, you must be given at least 21 days to consider the agreement and 7 days to revoke it after signing.

Before you evaluate the package, gather and review the following documents: your employment contract, any equity or stock agreements, bonus plans, deferred compensation arrangements, non-compete or non-solicitation clauses, and your company's written severance policy. These documents form the baseline for any negotiation.

2. Know the Components of a Comprehensive Executive Severance Package

A well-negotiated executive severance package typically addresses several areas beyond just base salary continuation. Key components to evaluate and negotiate include:

• Severance Pay: Industry norms for executives often range from one to four weeks per year of service, but senior roles may command significantly more. The amount should reflect your tenure, your level of responsibility, and the circumstances of your departure.

• Equity and Stock Options: Determine what happens to unvested stock, RSUs, or options. Negotiate for accelerated vesting or an extended exercise window where possible.

• Bonus and Incentive Pay: If you were terminated before a bonus payout date, you may still be entitled to a prorated bonus. California wage laws are protective in this area.

• Benefits Continuation: Negotiate for continued health insurance coverage beyond your termination date. COBRA allows you to continue coverage, but the cost is high. Having the employer pay COBRA premiums for a defined period is a valuable concession.

• Outplacement Services: Many executives negotiate for professional career transition support, which can ease re-entry into the job market.

• Reference and Departure Statement: Negotiate the language of any internal communications about your departure and secure a written commitment for a favorable reference.

3. Evaluate the Release of Claims You Are Being Asked to Sign

Severance agreements almost always require you to release legal claims against your employer. This release can be extensive, covering claims for wrongful termination, discrimination, harassment, retaliation, wage and hour violations, and more. Once signed, these rights are typically gone.

California is an employee-friendly state with robust protections under the California Fair Employment and Housing Act (FEHA), the California Labor Code, and other statutes. Before waiving these rights, have an experienced employment attorney review the agreement to assess whether any of your potential claims have significant monetary value. In some cases, the threat of litigation gives you substantial additional leverage at the negotiating table.

4. Negotiate Non-Disparagement and Confidentiality Provisions

Most severance agreements include non-disparagement clauses prohibiting you from speaking negatively about the company, but many executives fail to ensure these provisions are mutual. A one-sided clause benefits only the employer. Push for a mutual non-disparagement agreement that equally restricts what the company can say about you.

Similarly, review any confidentiality provisions carefully. Overly broad clauses could restrict your ability to discuss your work history with future employers or in legal proceedings. In California, agreements that prevent an employee from disclosing information about unlawful workplace conduct, such as harassment or discrimination, are unenforceable under state law.

5. Address Non-Compete and Non-Solicitation Clauses

California is one of the strongest states in the country when it comes to protecting employee mobility. Under California Business and Professions Code Section 16600, non-compete agreements are generally void and unenforceable in California. If your severance agreement contains such provisions, they cannot lawfully restrict your ability to work for a competitor or start your own business.

Non-solicitation clauses, particularly those preventing you from recruiting former colleagues or contacting former clients, occupy a more complex legal space and have been the subject of significant recent litigation in California. An experienced employment attorney can advise you on the enforceability of these provisions and negotiate to narrow or eliminate them.

6. Do Not Negotiate Alone

Executive severance negotiations are not routine HR conversations; they are legal transactions with lasting financial implications. Having an employment attorney review and negotiate on your behalf accomplishes several things: it signals to the employer that you are informed and serious, it brings knowledge of applicable California law and industry standards to the table, and it allows you to maintain a professional relationship with the company while your attorney handles the adversarial aspects of negotiation.

The attorneys at Brereton, Mohamed, & Korte LLP have extensive experience representing executives throughout California in severance negotiations and employment disputes. We take the time to understand the full picture of your situation, including your employment history, potential claims, and future goals, to ensure any agreement you sign truly serves your interests.

Conclusion

An executive severance negotiation is your last and often best opportunity to secure fair compensation and protect your professional reputation after a difficult transition. California law provides meaningful protections, but they must be actively asserted. By taking the time to understand your rights, engaging experienced legal counsel, and approaching the process strategically, you can achieve a significantly better outcome than the employer's initial offer.

If you are facing a separation from employment and have questions about your severance package, contact Brereton, Mohamed, & Korte LLP at (831) 429-6391 or visit breretonlawoffice.com. Our team is here to protect your rights and your future.

Frequently Asked Questions

1. Can my employer force me to sign a severance agreement immediately?

No. Employers cannot legally require you to sign immediately without adequate time to review. If you are 40 years of age or older, federal law under the OWBPA mandates a minimum 21-day review period when age-related claims are being waived. Even for younger employees, signing under duress or without a reasonable time can be grounds to challenge the agreement. Take the time to consult an attorney before signing anything.

2. What if I believe I was wrongfully terminated? Should I still negotiate a severance package?

Yes, and your potential claims can become powerful negotiating leverage. If you have viable claims for wrongful termination, discrimination, retaliation, or wage violations under California law, the value of those claims may far exceed the employer's initial severance offer. An employment attorney can evaluate your situation and help you decide whether to negotiate an enhanced package or pursue formal legal action.

3. Are non-compete agreements enforceable against me in California?

Generally, no. California Business and Professions Code Section 16600 broadly voids non-compete agreements, making California one of the most protective states for employee mobility in the country. If a severance agreement attempts to restrict your ability to work in your industry or start a competing business, those provisions are likely unenforceable. You should still have an attorney review any such clause before signing.

4. What happens to my unvested stock options or RSUs when I leave?

The answer depends on your equity plan documents and the terms of your employment agreement. In many cases, unvested shares are forfeited upon termination. However, you may be able to negotiate for accelerated vesting of some or all unvested equity as part of your severance package, particularly if your departure was involuntary. This is a significant area of value that executives frequently overlook.

5. Can I collect unemployment benefits if I accept a severance package in California?

Receiving severance pay does not automatically disqualify you from unemployment insurance benefits in California, but the timing and structure of the payment can affect your eligibility. Lump-sum payments are treated differently from salary continuation payments. We recommend consulting with an employment attorney and reviewing guidance from the California Employment Development Department (EDD) to understand how your specific severance arrangement may impact your unemployment claim.

6. What is a mutual non-disparagement agreement, and why does it matter?

A non-disparagement clause prohibits one or both parties from making negative statements about the other. Many employer-drafted severance agreements include this restriction only as to the employee, leaving the employer free to speak unfavorably about you to future employers or colleagues. Negotiating a mutual non-disparagement clause ensures that both parties are equally bound, protecting your professional reputation as you transition to your next opportunity.

7. Is it common for employers to negotiate severance terms with executives?

Yes. Employers, especially larger companies, expect a degree of negotiation from senior employees. Executives are often in a stronger position than rank-and-file employees because they have more leverage: knowledge of company operations, potential discrimination or whistleblower claims, and the ability to retain experienced legal counsel. A well-prepared counteroffer, delivered professionally and backed by legal counsel, is standard practice in executive separations.

8. How can Brereton, Mohamed, & Korte LLP help me with my severance negotiation?

Our employment attorneys provide comprehensive support through every stage of the severance process, from reviewing your initial agreement and assessing the value of any potential claims to drafting counterproposals and negotiating directly with your employer or their counsel. We represent executives throughout California and are committed to achieving outcomes that reflect the full value of your service and your rights under California law.