Reading the agreement

Practice now: Want to try finding these clauses in an actual mock document? The interactive Spot the issue exercise buries eight quiet traps in a fictional California separation agreement. Tap each one to see what it really does.

How to read it

Print it. Use a pen. You are looking for four things: dates, dollars, duties and documents.

Read it twice. The first pass is for shape, not comprehension. The second pass is slow, with a pen, marking every number and every sentence you do not understand. Questions you can articulate are worth far more in a consultation than a general feeling of unease.

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1. The recitals and the separation date

The opening paragraphs identify the parties and state your separation date. This date is not decoration. It controls vesting, benefits end dates, your equity exercise window and sometimes your severance tier. See The date that moves.

Check: Is the separation date the same as your last day of work? If it is earlier, ask why.

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2. What you receive

The consideration section. Severance amount, payment schedule, COBRA contribution if any, outplacement, and the treatment of accrued vacation or PTO.

Check these specifically:

• Is severance a lump sum or salary continuation? Salary continuation can affect the timing of unemployment benefits and spreads the tax across periods differently.
• Does payment cross a calendar year boundary? That is a tax question worth asking before signing.
• Is accrued, unused vacation or PTO listed separately? Under Labor Code 227.3 vested vacation is wages and is paid out at your final rate. It is not severance and it should not be bundled into the severance figure as though it were a gift.
• Is there a condition attached, like signing a second release? See The second signature.

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3. The release of claims

The heart of the document. Usually a long sentence releasing “any and all claims,” followed by an alphabetical list.

Read the list to the end. The broad items sit near the bottom, past the point where most people stop concentrating. Look for releases of retaliation claims and anything touching whistleblower protections, and read The unwaivable waiver.

What a release does: closes your ability to recover money for claims that existed when you signed.

What it generally does not do: stop you from filing a charge with or cooperating with a government agency, and it cannot waive rights that statutes make non-waivable.

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4. Civil Code 1542

A separate paragraph, usually in capitals, quoting California Civil Code section 1542:

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

By signing, you waive that protection. In plain terms: you are agreeing that the release covers claims you do not currently know about.

This is standard and nearly universal in California settlements. It is not a red flag by itself. It is a reason to think about whether anything might surface later, and to notice if the agreement asks you to waive 1542 twice, in two separate documents.

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5. Age claims, if you are 40 or over

Federal law requires specific protections for a release of age discrimination claims under 29 U.S.C. 626(f):

• A written recommendation that you consult an attorney
• 21 days to consider it, or 45 days if the offer is part of a group termination program
• 7 days to revoke after signing, which cannot be shortened or waived
• In a group program, a written disclosure listing the job titles and ages of everyone selected and everyone not selected in the decisional unit

That last one is genuinely useful information and most people never read it. It tells you the shape of the layoff.

If any of these are missing or the periods are shorter than required, that is a significant finding. Note it and raise it.

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6. Non-disparagement and confidentiality

California regulates these. Under Government Code 12964.5, a separation agreement that restricts disclosure of information about conditions in the workplace must include a carve-out stating, in substance:

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.

The employer may keep the amount of the settlement confidential. It may not buy your silence about unlawful conduct.

Check: Is that carve-out present? If there is a non-disparagement clause covering workplace conduct and no carve-out, ask for one in writing.

Also check whether the clause is mutual. Yours binds you; theirs, if it exists, binds them. Asking for mutuality is a reasonable, low-cost request.

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7. No pending claims

A short recital asking you to confirm you have filed no claims. If that is not accurate for you, this matters a great deal. See The attestation clause.

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8. Cooperation, return of property, no rehire

Cooperation clauses ask you to assist with future litigation or investigations. Ask whether your time will be paid and whether expenses are covered. Unpaid, open-ended cooperation obligations are worth narrowing.

Return of property is routine. Make sure it does not sweep in your own property or require you to surrender personal devices.

No-rehire clauses bar you from working for the company or its affiliates again. In California, Code of Civil Procedure 1002.5 restricts these in settlements of filed claims. If the clause covers a large corporate family, ask to narrow it to the specific entity. “Affiliates” can mean dozens of companies you might want to work for someday.

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Behind the curtain: Why do agreements read so one-sided? They are drafted by the company’s professionals to protect the company, which is their job. A campaign working paper found that 79% of senior ethics and compliance leaders at 58 large US companies are lawyers. Nobody on that side is assigned to protect you, which is why reading slowly and asking in writing matter.

9. The last two pages

This is where people stop reading and where the most consequential clauses live.

• Arbitration and class waiver. Determines where every future dispute goes.
• Choice of law and forum. If it names another state, look at Labor Code 925, which generally lets a California employee void such a provision where they were not represented by their own counsel in negotiating it.
• Incorporation by reference. Every document named here is part of what you are signing. See The documents you never saw.
• Entire agreement clause. Means verbal promises are not binding. If something important was said out loud, get it into the document.
• Severability. Means striking one invalid clause leaves the rest standing.
• Counterparts and electronic signature. Means an e-signature counts. Which is exactly why you need a copy you can open.

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The three questions to answer before you sign

1. What am I giving up? Name it specifically, not vaguely.
2. What am I getting, and when, and how is it taxed?
3. What will I still be bound by in two years? Confidentiality, cooperation, no-rehire, invention assignment and arbitration all outlive the payment.

If you cannot answer all three, you are not ready to sign, and you probably still have time. Check your deadline and read The clock that never restarts.