California Severance Pay Laws (2026): Is Severance Required?

California law does not require an employer to pay severance when it lets you go. The state Labor Commissioner puts it plainly: "There is no legal requirement under California law that employers provide severance pay to an employee upon termination of employment." The one situation where California law makes an employer pay on a layoff is the California WARN Act (Cal/WARN). Under Labor Code § 1402, an employer that skips the required 60-day notice of a mass layoff, relocation or termination is liable for up to 60 days of back pay and benefits.

Everything else about severance in California turns on what your employer promised and what the agreement says. California regulates those agreements more closely than most states, and this guide covers each rule. For how every state compares, see our severance pay laws by state hub.

Information last verified on 2026-10-07. This article has not been reviewed by a licensed lawyer.

Jurisdiction scope: This article covers California law on severance pay, Cal/WARN layoff notice and back pay (Cal. Lab. Code §§ 1400-1413), promised severance claims, unemployment insurance treatment, and limits on separation agreements (Gov. Code § 12964.5, Lab. Code § 206.5), with short notes on the federal rules that overlap them (WARN Act, OWBPA, ERISA, NLRA, federal tax), which our 50-state hub covers in full. It does not cover the deadline for your final paycheck, which separate rules set; see California final paycheck laws. For benefit amounts and how to apply, see California unemployment benefits.

Is severance pay required in California?

No. The Labor Commissioner's Final Pay fact sheet says there is no legal requirement under California law to provide severance pay, and that "Employees should refer to their employer's policy with respect to severance pay." The same fact sheet adds: "In certain limited situations, California laws may apply."

Federal law does not fill the gap: the U.S. Department of Labor says "There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay."

That leaves three ways severance pay actually arises for a California worker:

• A covered layoff without proper notice. Cal/WARN and the federal WARN Act make an employer that skips the required notice pay for the missed notice period. That is liability for a violation, not a severance formula.
• A promise in a written policy, handbook, offer letter, employment contract or union agreement.
• A severance agreement offered at separation, usually in exchange for a release of claims.

California employment is at-will by default, so an employer can generally end the job without owing anything beyond what you already earned. Our California at-will employment guide explains the doctrine and its exceptions.

Cal/WARN: when a California layoff triggers pay

Cal/WARN, Labor Code §§ 1400-1413, is a notice law. It provides that "An employer may not order a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order." When an employer breaks that rule, it owes the affected workers money. That liability is the only layoff pay California law imposes.

Who and what Cal/WARN covers

Section 1400.5(g) excludes seasonal hires and certain project-limited work under Industrial Welfare Commission Wage Orders 11, 12 and 16. AB 1601 (Stats. 2022, ch. 752) moved these definitions into § 1400.5 effective January 1, 2023.

Who must receive the notice

The 60-day written notice goes to the affected employees. It also goes to the Employment Development Department (EDD), the local workforce development board, and the chief elected official of each city and county where the layoff happens (Lab. Code § 1401(a)). The notice must include the elements the federal WARN Act requires (§ 1401(b)).

Since January 1, 2026, SB 617 (Chapter 229, Statutes of 2025) has required more. The notice must say whether the employer will coordinate services such as rapid response through the local workforce board, through another entity, or not at all. It must give the board's working email and phone number, a prescribed description of rapid-response services, a description of CalFresh with its helpline and link, and the employer's own working email and phone (§ 1401(c)-(e)). If the employer coordinates services, they must be arranged within 30 days of the notice.

Exceptions

Notice is not required when a physical calamity or act of war causes the layoff (§ 1401(f)). A separate exception for an employer actively seeking capital is decided by EDD, and it is not available for mass layoffs (§ 1402.5).

Call-center relocations abroad

A covered call-center employer must give the same 60-day Cal/WARN notice before moving a call center, or units handling at least 30 percent of its call volume, to a foreign country, and a violation carries the same § 1402 back pay and benefits (Lab. Code §§ 1409-1410.5).

What an employer owes if it does not give notice

Under Labor Code § 1402, an employer that fails to notify employees is liable to each employee who lost employment for:

• Back pay at the higher of the employee's average regular rate over the last 3 years or the final regular rate.
• The value of benefits, including medical expenses that would have been covered under the employer's benefit plan.

The violation period is capped at 60 days or one-half the number of days the employee was employed, whichever is smaller (§ 1402(b)). The amount is reduced by wages the employer paid during the violation period, by voluntary and unconditional payments, and by benefit payments made to third parties for the employee (§ 1402(c)).

Separately, an employer that fails to notify the government recipients faces a civil penalty of up to $500 for each day of the violation. The penalty is waived if the employer pays the employees what it owes them within 3 weeks of the order (§ 1403). A court may award reasonable attorney's fees to a prevailing plaintiff (§ 1404), and may reduce the penalty if the employer shows it acted in good faith after a reasonable investigation (§ 1405).

How Cal/WARN is enforced

Employees can bring a civil action under § 1404. The Labor Commissioner can also examine an employer's books and enforce the notice requirements by citation (§ 1406). We did not find a limitations period for a Cal/WARN lawsuit in the chapter itself, so confirm that deadline with the Labor Commissioner or a lawyer rather than assume you have time.

How Cal/WARN compares with the federal WARN Act

The federal WARN Act also requires 60 days' notice, but only from employers with 100 or more employees, not counting part-time employees, or 100 or more employees, counting part-time employees, who together work at least 4,000 hours a week, not counting overtime (29 U.S.C. §§ 2101(a)(1), 2102(a)), and its back pay is likewise capped at 60 days and never more than half the days employed (§ 2104(a)). Federal rights add to state rights, and the two notice periods run concurrently (§ 2105). Because Cal/WARN starts at 75 people and counts any 50 layoffs in 30 days at a covered establishment, a California layoff can fall under the state law even when federal WARN does not apply. The federal definitions and exceptions are on our severance pay laws by state guide.

Promised severance: can you claim it?

When your employer promised severance in a policy, handbook or contract and then refuses to pay, California gives you an administrative route. Labor Code § 96(h) lets the Labor Commissioner take "Claims for vacation pay, severance pay, or other compensation supplemental to a wage agreement."

There is an important limit. The Labor Commissioner's Enforcement Manual says the agency may accept severance claims, but federal ERISA preempts its enforcement where the severance arrangement is an ERISA plan. The manual draws the line between an arrangement that needs an ongoing administrative scheme, which can be an ERISA plan, and a one-time contractual payment. The agency takes the claim so it can decide its own jurisdiction.

ERISA covers plans that provide benefits in the event of unemployment and supersedes state laws that relate to them (29 U.S.C. §§ 1002(1), 1144(a)), so if your employer runs a formal severance plan, the plan's claims process and federal law may govern instead of a state wage claim. The U.S. Department of Labor's Employee Benefits Security Administration may assist an employee who did not receive severance benefits under an employer-sponsored plan.

Is promised severance treated as wages for late-pay penalties?

Labor Code § 200(a) defines wages to include all amounts for labor performed by employees. We did not find a California appellate decision holding that promised severance counts as wages for the waiting-time penalties tied to late final pay, so this page does not say that it does.

Deadlines to file

The Labor Commissioner's wage-claim page lists the general filing windows: within four years for a claim based on a written contract, and within two years for an oral promise to pay more than minimum wage. A written severance promise is easier to prove and carries the longer window.

When promised severance must be paid

We found no California rule that fixes a payment date for promised severance. The Labor Commissioner points employees to the employer's own policy, so the timing in your policy or agreement is what to check. The separate deadlines for final wages are in our California final paycheck guide.

Does severance affect unemployment in California?

Usually not. EDD's Benefit Determination Guide states: "Severance pay is not wages for unemployment insurance purposes." EDD notes that no Unemployment Insurance Code section says so in those words; it rests the rule on Unemployment Insurance Code § 1265 and California Supreme Court precedent. Section 1265 says payments under an employer plan or system for employees generally, or for a class of employees, made to supplement unemployment benefits are not wages, and benefits may not be denied or reduced because of them.

The exception is wage continuation pay. EDD's guide says "Wage continuation pay is considered wages." EDD looks at substance, not labels or payment method: "Whether a payment is made in a lump sum or periodically is immaterial in deciding whether the payment is wages." Severance paid under an employer plan or policy available to a group of employees is not wages, even if the employer calls it "salary continuation." Payments count as wages when they are individual pay continued outside any plan or group-wide policy, for example where the employer simply keeps one person on the payroll, or when you keep accruing all service credits (vacation, sick leave, seniority) for the period the payments cover, even if they arrive as a lump sum.

Cal/WARN back pay gets the same protection. Labor Code § 1407 says those payments are not wages for unemployment insurance purposes and that benefits may not be denied or reduced because you received them.

EDD decides eligibility claim by claim. For how to apply and what benefits pay, see California unemployment benefits.

What a California severance agreement cannot make you give up

Most severance agreements trade money for a release of legal claims. California allows a general release, but it limits several common terms.

No gag on unlawful acts at work (Gov. Code § 12964.5)

It is an unlawful employment practice for an employer or former employer to include in a separation agreement any provision that prohibits disclosure of information about unlawful acts in the workplace (§ 12964.5(b)(1)). Any nondisparagement clause or similar term that restricts disclosure of workplace conditions must include, in substantial form, this language:

"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."

A provision that violates the section is unenforceable.

Notice of the right to a lawyer and five business days

An employer offering a separation agreement must tell you that you have the right to consult an attorney, and must give you a reasonable period of not less than five business days to do so (§ 12964.5(b)(4)). You may sign sooner, but only if your decision is knowing and voluntary and was not induced by fraud, misrepresentation, a threat to withdraw the offer, or an offer of different terms for signing early.

What the employer may still include

Section 12964.5 still permits a general release of all claims if it is otherwise lawful, a clause keeping the amount paid under a severance agreement confidential, and protection of trade secrets and confidential information that does not involve unlawful acts (§ 12964.5(b)(3), (e), (f)). Civil Code § 1542 says a general release does not extend to claims you do not know or suspect exist when you sign, if knowing of them would have materially affected your settlement. If an agreement quotes § 1542 and asks you to waive it, read that paragraph carefully, because it is aimed at claims you do not yet know about. Section 12964.5 does not apply to a negotiated settlement that resolves a FEHA claim you already filed in court, with an agency, in alternative dispute resolution, or through an internal complaint process (§ 12964.5(d)).

A related rule, § 12964.5(a), bars employers from requiring a release of FEHA claims, or a nondisparagement term that denies the right to disclose unlawful acts, in exchange for a raise or bonus or as a condition of employment or continued employment.

Settlements of filed claims (Code Civ. Proc. § 1001)

If you have filed a civil action or administrative complaint, Code of Civil Procedure § 1001 voids settlement terms that restrict disclosure of factual information about claims of sexual assault, sexual harassment, workplace harassment, discrimination or retaliation. The rule covers agreements entered on or after January 1, 2019, and SB 331 extended the workplace categories to agreements entered on or after January 1, 2022. The claimant may ask that their identity be shielded, and the settlement amount may be kept confidential (§ 1001(e)). This rule applies to settlements of filed claims, not to every severance agreement.

Separately, if you had filed a claim against the employer in good faith, including through its internal complaint process, Code of Civil Procedure § 1002.5 voids a term in an agreement settling that dispute that bars you from working for the employer again (agreements entered on or after January 1, 2020), with limited exceptions.

Unpaid wages cannot be released (Lab. Code § 206.5)

An employer may not require a release of a claim or right on account of wages due, or to become due, unless those wages have been paid. "A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee," and a violation is a misdemeanor (§ 206.5(a)). In practice, a severance release does not wipe out wages that are due and unpaid. We did not find a court decision applying § 206.5 to a severance release specifically.

Labor Code § 432.5 adds that an employer may not require an employee to agree in writing to any term the employer knows is prohibited by law.

Unemployment benefit rights cannot be waived (Unemp. Ins. Code § 1342)

A release in a severance agreement cannot take away your right to unemployment benefits. Unemployment Insurance Code § 1342 provides that "Any waiver by any person of any benefit or right under this code is invalid," apart from a few narrow exceptions listed in the section.

No non-compete (Bus. & Prof. Code § 16600)

A non-compete clause in a severance agreement is generally void in California "no matter how narrowly tailored," unless a statutory exception applies, and including one is unlawful (Bus. & Prof. Code §§ 16600, 16600.1). Under § 16600.5, an employer may not try to enforce such a clause even if it was signed outside California, and a prevailing employee who sues over one recovers reasonable attorney's fees and costs.

Federal limits that apply alongside California's

If you are 40 or older, a release of federal age-discrimination claims must also give you at least 21 days to consider it (45 in a group program) and 7 days to revoke after signing (29 U.S.C. § 626(f)). California's five-business-day rule and the federal periods run side by side, and for a worker 40 or older the longer federal period governs the age-claim waiver.

Under the NLRB's decision in McLaren Macomb, 372 NLRB No. 58 (2023), offering a severance agreement that requires employees to broadly waive their Section 7 rights, including through broad confidentiality and nondisparagement terms, violates the National Labor Relations Act. The NLRB General Counsel is arguing to overrule it in Valley Radiology, P.A. (10-CA-324512) (memo GC 26-04, August 26, 2026), but it remains Board law until the Board itself overrules it. The federal Speak Out Act (Pub. L. 117-224) separately makes a pre-dispute nondisclosure or nondisparagement clause unenforceable in a sexual assault or sexual harassment dispute. The full federal rules are on our severance pay laws by state guide.

Is severance pay taxed in California?

Yes. The IRS says "Severance payments are wages subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax," and treats severance as a supplemental wage (IRS Publication 15, 2026).

EDD's 2026 California Employer's Guide (DE 44, Rev. 52 (4-26)) also lists severance among supplemental wages. When it is paid separately from regular wages, an employer may withhold California personal income tax at a flat 6.6 percent or use the aggregate method. Withholding is a prepayment, not your final tax bill.

Reading a California severance offer

Nothing requires an employer to improve an offer. Before signing, use the five business days Gov. Code § 12964.5 gives you, check any nondisparagement or confidentiality clause for the unlawful-acts language quoted above, and make sure final pay is not traded for the release, since § 206.5 voids a release of wages that are due. Note whether you keep accruing vacation, sick leave or seniority during the payment period and whether the money is paid under a plan or policy covering a group of employees, because EDD uses those facts, not the label or whether it is a lump sum, to decide whether it counts as wages. General points on negotiating, including health coverage, are on our severance pay laws by state guide.

If you believe you were let go for reporting wrongdoing, read California whistleblower laws before signing a release.

Recent and pending changes

• SB 617 (Chapter 229, Statutes of 2025): approved by the Governor on October 1, 2025, and in effect since January 1, 2026. It added the rapid-response, CalFresh and contact requirements to Cal/WARN notices described above.
• SB 951 (Chapter 860, Statutes of 2026): approved by the Governor on September 30, 2026. It amends Cal/WARN so that a notice for a mass layoff, relocation or termination caused in whole or substantial part by artificial intelligence or other automated technology must list the number, classification and location of displaced positions, the automated job functions and the category of system, under the heading "This notice is for a technology displacement." It also directs EDD to publish notice summaries and a quarterly statewide summary. As a non-urgency statute enacted at a regular session, it takes effect January 1, 2027 (Cal. Const. art. IV, § 8(c)(1)), and it renumbers several subdivisions of §§ 1400.5 and 1401 cited above.
• AB 2530 (2026): would have extended Cal/WARN to public agencies and added new plant-closing and mass-layoff rules. Its last action was "In committee: Held under submission" in the Assembly Appropriations Committee on May 14, 2026. It is not law.
• McLaren Macomb: the NLRB General Counsel is asking the Board to overrule it in Valley Radiology, P.A., where reply briefs were filed on May 19, 2026 and the case remained open.

Common misconceptions

• "California requires severance." The Labor Commissioner says the opposite in terms.
• "The law gives one or two weeks per year of service." No California statute sets a severance formula. Cal/WARN pay is liability for missed notice, capped at 60 days.
• "Cal/WARN applies to any layoff." It applies to establishments with 75 or more people and layoffs of 50 or more in 30 days, or to a covered relocation or termination.
• "Severance always reduces unemployment." EDD says severance pay is not wages for unemployment insurance, though wage continuation outside any plan, or pay while you keep accruing all service credits, can be.

Related

• Severance pay laws by state
• California final paycheck laws
• California unemployment benefits
• California at-will employment laws
• California whistleblower laws

Disclaimer: This article provides general legal information about California severance pay law, including the Cal/WARN Act (Cal. Lab. Code §§ 1400-1413) and Gov. Code § 12964.5, and related federal law. It is not legal advice and does not create an attorney-client relationship. The information was verified on 2026-10-07. For advice about your own situation, contact the California Labor Commissioner, the Employment Development Department, a legal aid office, or a lawyer licensed in California.

Last updated: 2026-10-07.

Frequently Asked Questions

Is severance pay required by law in California?

No. The California Labor Commissioner says there is no legal requirement under California law to provide severance pay. The only layoff pay California imposes is Cal/WARN back pay under Lab. Code § 1402 when a covered employer skips the 60-day notice.

Does severance pay affect unemployment benefits in California?

Generally no. EDD's Benefit Determination Guide (TPU 460.35) says severance pay is not wages for unemployment insurance purposes, but individual wage continuation outside any plan, or pay for a period in which you keep accruing all service credits, is treated as wages (TPU 460.39). Whether it is paid as a lump sum or in installments does not decide it.

How long do I have to sign a severance agreement in California?

Gov. Code § 12964.5(b)(4) requires at least five business days and notice of your right to consult a lawyer. If you are 40 or older, federal law (29 U.S.C. § 626(f)) adds at least 21 days to consider, or 45 in a group program, and 7 days to revoke.

Can a California severance agreement stop me from talking about harassment?

No. Gov. Code § 12964.5(b)(1) makes it unlawful for a separation agreement to bar disclosure of information about unlawful acts in the workplace, and such a provision is unenforceable. The employer may still keep the severance amount confidential.

What do I get if my employer violated Cal/WARN?

Under Lab. Code § 1402, back pay at the higher of your 3-year average or final regular rate plus the value of benefits, for up to 60 days or half the days you were employed, whichever is smaller, reduced by certain payments the employer made.

Can I file a Labor Commissioner claim for promised severance in California?

Yes. Lab. Code § 96(h) lets the Labor Commissioner take severance pay claims, but its Enforcement Manual says ERISA preempts state enforcement when the severance arrangement is an ERISA plan.

Can a severance release waive wages I am still owed in California?

No. Lab. Code § 206.5 bars an employer from requiring a release of wages due unless those wages have been paid, and a release made in violation is null and void.

Is severance taxed in California?

Yes. The IRS treats severance as wages subject to Social Security, Medicare and federal income tax withholding (IRS Publication 15), and EDD's 2026 Employer's Guide (DE 44) lists severance as supplemental wages for California withholding.