How to Negotiate Executive Severance Agreement Terms

One of the most common situations I encounter is the often abrupt departure of a senior executive, someone who’s spent years driving growth, leading teams, and delivering results. When that executive is handed a severance agreement, the message is clear: the decision’s been made. The real question is how to negotiate executive severance agreement terms that reflect your contributions, protect your interests, and preserve your future.

Too many executives assume the agreement is boilerplate. It’s not. These contracts are full of landmines: poorly defined stock provisions, overly broad releases, indefinite availability requirements, and restrictions that follow you long after you’ve left the building. If you don’t take control of the language now, you could be stuck with obligations you never agreed to, or give up rights you didn’t need to waive.

I’m Matt Ruggles, and I’ve practiced employment law in California for over 30 years. I’ve helped thousands of executives across industries negotiate clean, enforceable exits. I don’t write fantasy contracts, I help you sharpen the one you’ve been given so it reflects the real-world complexity of your role and the leverage you still hold.

This blog is for executives who accept that they’re leaving and aren’t looking to sue, but who still want to walk away with a fair, balanced agreement. Not a lopsided, HR-drafted document loaded with vague obligations, forfeited equity, one-sided confidentiality, or murky cooperation clauses. The focus here isn’t how to extract more money through legal leverage. It’s how to make sure the terms of the severance reflect your value and protect your future.

Step #1: Start With the Big Picture: What Do You Actually Want?

The goal isn’t to punish your employer. It’s to secure a clean, fair, and financially smart exit. That means knowing what matters most: money, benefits, reputation, references, timing, stock options, non-compete limitations, and post-termination obligations. You’re not just negotiating a check, you’re negotiating the terms of your exit from a leadership position. Treat it accordingly.

If you’re not just negotiating terms but are also considering using legal leverage to increase the severance amount, read my blog: Boost Your Executive Severance Pay: Demand Letter Tactics. It covers how to use a strategic demand letter to push for a larger payout.

Step #2: Understand the Key Terms in the Executive Severance Agreement

Severance agreements always come with strings attached. And for executives and C-suite officers, the stakes are often higher, especially when equity, reputation, and future earnings are on the line. Here’s a deeper breakdown of the most common and consequential terms you’ll see:

Release of Claims:

This is the core of the entire severance agreement. The company is offering you money to make sure you never sue them, and they want that protection to be airtight. What that means in practice: by signing, you are giving up your right to pursue any legal claim that arose during your employment. That includes claims under California’s Fair Employment and Housing Act (FEHA), such as discrimination, harassment, and retaliation. It’s important to understand that while unpaid wages, bonuses, and commissions cannot legally be waived in a severance agreement under California law, your right to bring a lawsuit for violations of FEHA can be forfeited. And once you sign, it’s gone.

Executives often underestimate the scope of this clause because it’s written in dense, legal boilerplate. But the waiver is broad by design. In most agreements, it’s written to release the company from all known and unknown claims, whether you’ve asserted them or not. That’s where California Civil Code section 1542 comes in. You’ll usually see it quoted verbatim. It says you’re even releasing claims you didn’t know you had, and that you’re knowingly giving up those rights in exchange for the severance.

Now, here’s where executives need to pay attention:

If you’re going to trade away your ability to ever sue your former employer, you need to make sure the price reflects the value of what you’re giving up. You may have potential legal claims worth hundreds of thousands of dollars or more, especially if your termination followed a whistleblower complaint, internal dispute, or power struggle. You don’t need to file a lawsuit to have leverage. But you do need to understand whether you have any viable claims, particularly under FEHA, before you agree to waive them.

Before you sign anything:

1. Do your homework. Talk to legal counsel and get an objective evaluation of any potential claims: discrimination, retaliation, bonus clawbacks, contract breaches, etc.
2. Don’t let the company bundle unpaid wages, bonuses, or commissions into the severance payment. Those are yours by law and should be paid regardless of whether you sign.
3. Consider negotiating for carve-outs or clarifying language. For example, you can request that the waiver explicitly excludes vested equity rights, indemnification for board service, or claims that arise after the agreement is signed.

One more thing: don’t fixate on trying to get the company to “admit wrongdoing” in exchange for a bigger payout. They won’t. Ever. The agreement will include a standard “non-admission” clause, which is legal-speak for: “We’re paying you, but we’re not saying we did anything wrong.” Ignore it. Focus on maximizing the payout and protecting your long-term interests.

Confidentiality and Non-Disparagement:

These clauses are standard in executive severance agreements and often more aggressive than they appear at first glance. Most executives expect some degree of confidentiality. What they don’t expect is being gagged so completely they can’t even acknowledge the existence of a severance agreement, let alone respond to questions from colleagues, recruiters, or future employers.

Start by reading the language closely. Many agreements prohibit you from disclosing the terms of the deal, the amount paid, or the circumstances of your departure. That can create problems if a potential employer asks why you left or what kind of transition you negotiated. In some agreements, you’ll even find a clause that prohibits you from saying you have a severance agreement at all, which can leave you in a legal gray area when asked to explain your exit.

Then there’s the non-disparagement clause. This is where the company tries to buy your silence and sometimes your opinion. Watch for broad language that prohibits any negative statement about the company, its leadership, or its employees. That includes private conversations, social media, even what you say to other prospective employers. These clauses often include liquidated damages provisions, which impose a set penalty (typically $500 to $5,000 per violation) for every alleged breach. That’s not just overkill, it’s a built-in threat the company can hold over your head long after you’ve moved on.

Here’s how to handle it:

• Make it mutual. If they want you to keep quiet about them, they should agree not to disparage you either. Ask for mutual confidentiality and mutual non-disparagement—especially from the board or senior leadership.
• Carve out your legal rights. Under California law, no agreement can prevent you from cooperating with government agencies, filing administrative complaints, or testifying under subpoena. Make sure the clause explicitly allows for this.
• Clarify what you can say. You should be able to tell future employers your dates of employment, title, and that you left under a severance agreement. If the agreement prohibits even that, negotiate for an exception or a joint script you can use.
• Watch for overreach. Vague, overbroad language that prohibits anything “disparaging” can be interpreted to include even honest, fact-based statements. Push for precise definitions. If they refuse, consider narrowing the scope to senior executives only, not every employee of the company.

Stock and Equity:

Don’t assume your severance means full vesting because it usually doesn’t. RSUs, stock options, performance shares, and other equity vehicles are governed by their own separate plan documents, and those documents rarely favor you once you’re out the door. In most cases, unvested equity vanishes the moment your employment ends unless you’ve negotiated otherwise.

Executives often overlook this because the severance agreement is silent (or vague) on equity. That’s a mistake. If you’ve got meaningful equity on the table, demand clear, written answers to a few key questions:

1. What happens to your vested equity? Can you still exercise stock options? For how long?
2. What happens to unvested RSUs or performance shares? Is there any flexibility for accelerated vesting due to the circumstances of your termination?
3. Is your termination being classified in a way (e.g., “without cause”) that triggers change-in-control or double-trigger protections in your grant documents?

If the company won’t offer full vesting, consider negotiating for partial acceleration, especially if you were near a vesting cliff or if your termination was abrupt. You can also push for continued service credit for a defined period, common for high-level execs exiting under negotiated terms.

And here’s the point: get it all in writing. The severance agreement should explicitly reference what’s happening to your equity. If it’s silent, you’re exposed. Don’t rely on vague HR reassurances or side conversations with Finance because they won’t hold up when you try to exercise your options post-exit and the portal tells you your shares are gone.

COBRA and Health Coverage:

Don’t overlook this section. Health coverage is one of the most immediate and practical concerns following a termination, especially for executives with families or ongoing medical needs. In California, once your employment ends, so does your employer-sponsored health insurance. That’s where COBRA comes in.

Under federal law, you generally have the right to continue your health insurance for up to 18 months (sometimes longer depending on the circumstances), but you’re responsible for the full cost of the premium, plus a 2% administrative fee. For most executives, that means sticker shock. Premiums that cost a few hundred dollars a month while employed can suddenly jump to $2,000 or more when you’re footing the entire bill.

Some companies offer to subsidize COBRA as part of the severance package. If they do, pin down the specifics:

• How long will they cover the premiums?
• Are they covering 100% or just the employee portion?
• When does the subsidy start and stop?
• Will you be reimbursed monthly or are they prepaying the insurer directly?

Vague promises like “we’ll assist with COBRA” are meaningless unless defined in writing. Get the duration, percentage covered, and payment method in clear terms in the agreement.

If the company isn’t offering any COBRA subsidy, consider asking for it, especially if your exit was involuntary or abrupt. Many employers will agree to cover at least a few months of premiums to ensure continuity of care and to avoid reputational fallout. If your departure is part of a reduction in force or a negotiated exit, you have even more leverage to press for this.

Also, check whether other health benefits (dental, vision, HSA contributions, etc.) are included in the COBRA continuation or addressed separately. Some plans require separate elections, and missing deadlines can leave you with unexpected gaps in coverage.

Bonus and Commission Payouts:

This is where a lot of executives get shortchanged, sometimes without even realizing it. If your bonus period has ended or your commission targets were hit before your termination date, those payouts likely count as earned wages under California law. That matters because earned wages are protected by statute. The company can’t legally withhold them to pressure you into signing a release.

But many do exactly that, folding your bonus or commission into the severance package like it’s discretionary. It’s not. If you already earned it, they’re required to pay it, whether you sign the agreement or not. So don’t let them blur the line between what you’re owed and what they’re offering.

You also need to look closely at the wording of your compensation plan. Some plans tie payout to “active employment” on a specific date or reserve discretion to the board or CEO. That’s where things get tricky and where negotiation matters. If the company is trying to dodge payment based on technicalities, call it out and push back. You’ve likely got leverage, especially if the bonus was tied to performance metrics that you delivered.

Here’s the rule: if the work was done and the performance met, the bonus or commission is yours. It’s not a bargaining chip. Don’t let it get lumped into the severance check or dressed up like a goodwill gesture.

If necessary, carve it out of the severance agreement entirely. State that any earned wages, bonuses, or commissions will be paid regardless of whether the agreement is signed. That language protects you from the company trying to backdoor a wage release, which is illegal in California but still happens more often than it should.

Employment Status and Reason for Termination:

Don’t overlook how the severance agreement describes your departure. It’s often buried in a sentence or two, but the wording matters. If the agreement inaccurately frames your exit, for example, by calling it a resignation when it was clearly a layoff, it can create unnecessary problems down the line.

First, it could impact your eligibility for unemployment benefits. In California, employees who are laid off are generally entitled to unemployment. But if your agreement makes it sound like you left voluntarily, the Employment Development Department (EDD) could deny your claim or delay benefits while they investigate. That’s not a fight you want to have.

Second, the way your exit is characterized affects your professional narrative. When future employers or board members ask why you left, your explanation should match what the agreement says. If there’s a mismatch between your story and the paperwork, it raises questions you shouldn’t have to answer. It also affects how your departure is communicated internally and externally, whether you’re allowed to say it was a strategic reduction in force, a leadership restructure, or simply a business decision unrelated to performance.

If the company wants to use vague or coded language, that’s fine, just make sure it doesn’t work against you. Ideally, the agreement should clearly state that your separation was involuntary and not for cause. If it was part of a broader layoff or organizational change, that should be noted as well. You want language that protects your ability to explain the transition accurately and professionally.

Post-Termination Cooperation:

This clause is often buried in the middle of the agreement, dressed up in neutral language: “the employee agrees to reasonably cooperate with the company following termination.” Sounds harmless. It’s not.

What it actually means is that your former employer wants the right to pull you back in after you’ve left to answer questions, join calls, give testimony, transition accounts, explain decisions, and generally be on call for anything they think you might know. Sometimes it’s litigation prep. Sometimes it’s a government inquiry. Sometimes it’s a partner or client relationship you helped build. And without limits, that vague “cooperation” language can turn into an open-ended consulting obligation you didn’t agree to and aren’t being paid for.

You are not required to offer free labor post-termination. If the company wants your help after your exit, that help needs to be clearly defined and fairly compensated.

Here’s how to structure it:

• Limit the scope: Cooperation should be limited to matters you were directly involved in during your employment, not general availability for anything they can dream up.
• Set a time frame: One year post-termination is typical. Anything beyond that should be negotiated separately.
• Define your availability: Set reasonable limits on the number of hours per month or require advance notice and scheduling that respects your other commitments.
• Require compensation: You’re no longer on salary. Your time is valuable. Matt’s rule of thumb? Take your prior hourly rate (base salary divided by 2,080 hours) and add at least 20%. You’re now a consultant, not an employee.
• Require reimbursement: Under California Labor Code § 2802, they’re on the hook for any out-of-pocket costs you incur while cooperating including travel, parking, legal fees, prep time, etc. Make sure that’s spelled out in the agreement.

And one more thing: if the company expects you to assist in ongoing litigation or investigations, make sure you’re indemnified for anything that arises from your involvement. If you’re going to be a witness or help them navigate a dispute, you shouldn’t be exposed to legal risk in the process.

Return of Company Property:

Pretty straightforward. You’ll need to hand back laptops, phones, documents, or anything else that belongs to the company. Don’t give them an excuse to delay your payment.

Attorney’s Fees:

Watch out for any clause that says the “prevailing party” in a legal dispute over the severance agreement is entitled to recover attorney’s fees. It may seem like boilerplate, but it is included for a reason. The company wants to make you think twice before challenging any part of the agreement later.

Even though most disputes never make it to court, this clause increases the risk on your side. If you later sue to enforce your rights under the agreement, or dispute how it was applied, you could be on the hook for the company’s legal fees if you lose. That possibility can deter even a strong claim, especially if the language is one-sided.

If this clause is in the agreement, try to negotiate it out. If they insist on keeping it, at least push for it to be mutual and limited to claims brought in bad faith. You should not be penalized for raising a legitimate issue in good faith. A fair agreement protects both sides, not just the company.

Neutral Reference Clause:

If reputation matters to you, and it should, look carefully at what the agreement says about references. Most severance agreements include a neutral reference clause. That means the company agrees to provide only the basics: your job title, your dates of employment, and sometimes your final salary. No commentary, no editorializing, just the facts.

This clause protects both sides. It prevents a rogue manager or HR rep from making damaging comments, and it gives you a clear, consistent story for background checks and recruiter calls. If it is not in the agreement, ask for it. There is no downside to locking in a neutral reference policy, and a lot of upside if someone inside the company has an axe to grind.

That said, don’t waste your time chasing a glowing letter of recommendation. Savvy hiring managers rarely trust them. They know those letters are sanitized, and in some cases, legally reviewed. What you want instead is a real person who will take a call and speak positively about your work. That kind of reference carries weight. The neutral clause just makes sure the company as an institution stays out of your way.

Bottom line: make sure the agreement sets a floor, not a ceiling. Lock in neutral references from HR, and secure real recommendations from individuals you trust before the dust settles.

Choice of Law:

If your employer tries to apply the law of some state other than California, object. California has the most employee-friendly labor laws in the country. Don’t let them swap those protections for a less favorable jurisdiction.

Integration Clause:

This boilerplate clause means the agreement is the entire agreement. Verbal promises? Prior emails? Irrelevant. If it’s not in the agreement, it doesn’t count.

Counterparts:

Just a formality. It means multiple copies of the agreement can be signed and treated as originals.

ADEA/OWBPA Waiver (if you’re 40+):

If you’re 40 or older, your severance agreement will almost always include a waiver of age discrimination claims under the federal Age Discrimination in Employment Act (ADEA). That waiver is governed by the Older Workers Benefit Protection Act, known as the OWBPA. And it comes with specific legal requirements that the company must follow.

First, you are entitled to at least 21 days to review the agreement before signing. That is not a suggestion, it is a legal requirement. If the company tells you the offer expires in three days or pressures you to sign in 72 hours, they are either bluffing or violating federal law. Either way, that kind of pressure is a red flag.

Second, once you sign the agreement, you have 7 days to revoke your signature. That revocation right must be stated clearly in the document, and it gives you a final window to walk away if you have second thoughts. If the company tries to enforce the agreement during that period or claims it’s effective immediately, they are jumping the gun.

Also, if the severance offer is part of a group layoff or reduction in force, the company is required to give you additional disclosures. That includes a list of job titles and ages of employees who were laid off or retained, so you can evaluate whether age played a role in the decision. Make sure those disclosures are included and that they align with what you’ve been told.

Outplacement and Job Search Support:

Some severance agreements include executive outplacement services i.e. resume writing, coaching, recruiter referrals, maybe even office space. Don’t dismiss this as fluff. Executive job searches take longer, and access to the right network matters. If they’re offering it, use it. If they’re not, ask. Also watch for offers to let you retain your company title, email address, or LinkedIn affiliation for a set period post-termination. That quiet runway can be a valuable tool for job hunting. It signals stability and preserves optics while you line up your next move. Get the timeline and conditions in writing.

No Waiver of Compelled Testimony:

You still have the legal right (and obligation) to testify truthfully in legal or government proceedings. This clause ensures your severance agreement can’t silence you in court.

Step #3: Get Serious About References (But Skip the Letters)

Let me be blunt: letters of recommendation are worthless. They’re vague, full of generic HR-approved language, and often backfire. What you actually want is a real, live person who will pick up the phone and say something positive when your next employer calls. A personal reference, someone who’s willing to say you’re smart, strategic, and trustworthy, is gold. Lock those in now while the relationship is still fresh.

Step #4: Don’t Sign an Executive Severance Agreement Until You’ve Had Time to Think

Here’s a common move: the company hands you a severance agreement and tells you, “You have 21 days to sign it.” Most people read that as a deadline. It’s not.

What they’re actually doing is complying with federal law, the Older Workers Benefit Protection Act (OWBPA), which requires them to give employees over 40 at least 21 days to review any severance agreement that waives age discrimination claims. That’s a minimum, not a cap. They’re not saying you must sign in 21 days. They’re saying they’re not allowed to rush you faster than that.

Unless the agreement specifically says the offer expires after 21 days (which it usually doesn’t), there’s no real deadline. It’s just legal boilerplate to meet federal requirements. Don’t fall for the implied pressure. If you’re under 40, you don’t even get the 21-day minimum, but that doesn’t mean you should let them push you into a snap decision either.

Take the time you need. Review the agreement carefully. Get legal advice. You’re negotiating the terms of your exit and potentially signing away legal claims that could be worth real money. That’s not something you rush through because HR wants to “get this wrapped up.” Let them wait. They already made the decision to let you go; now you get to decide the terms under which you walk out.

FREQUENTLY ASKED QUESTIONS ABOUT NEGOTIATING SEVERANCE TERMS

What are the key terms to negotiate in an executive severance agreement?

Executives should focus on terms like release of claims, equity treatment, post-termination cooperation, confidentiality and non-disparagement clauses, COBRA benefits, and bonus or commission payouts. Each term has financial and reputational consequences that extend far beyond your last paycheck.

Can I negotiate my severance agreement even if I’m not planning to sue?

Yes. Many executives who don’t intend to litigate still negotiate for better terms. You can clarify vague language, remove overreaching obligations, and ensure you’re protected post-termination, all without threatening legal action.

Does signing a severance agreement waive my rights under California’s Fair Employment and Housing Act (FEHA)?

Yes. If not properly negotiated, the release of claims in your agreement may waive your rights to bring discrimination, harassment, or retaliation claims under FEHA. Understand exactly what you’re giving up before you sign.

What happens to my stock options or RSUs when I’m laid off?

That depends on your equity plan documents, not just the severance agreement. Most unvested equity is forfeited unless you negotiate otherwise. Get written confirmation about what happens to both vested and unvested equity before signing.

Can my employer require me to cooperate after termination?

Yes, but you don’t have to do it for free. You can and should negotiate limits on your availability, compensation for your time, and reimbursement for any expenses. California Labor Code section 2802 also requires your former employer to cover legal defense costs if a claim is brought against you for past work.

Should I accept a confidentiality or non-disparagement clause in my executive severance agreement?

Most agreements include these clauses, but they can be overly broad. Make them mutual, carve out your legal rights, and ensure you can still explain your departure to future employers.

What if my severance agreement misstates the reason for my termination?

Language that inaccurately frames your departure, like calling a layoff a resignation, can hurt your unemployment eligibility and professional narrative. Always make sure the language reflects the facts.

How much time do I have to review and revoke a severance agreement if I’m over 40?

Under the Older Workers Benefit Protection Act (OWBPA), you have 21 days to review the agreement and 7 days to revoke it after signing. If the company pressures you to sign faster, that may invalidate the waiver of your age discrimination claims.

Final Thoughts from Matt About Negotiating Executive Severance Agreement Terms

Executives and C-suite officers don’t often find themselves on the receiving end of a termination. When it happens, it’s disorienting. You’re used to making decisions, not reacting to them—and your employer is counting on that moment of uncertainty to slide a one-sided agreement across the table and get your signature without pushback.

You may not have leverage to demand more money. But you do have control over whether you accept vague, overreaching, or unbalanced terms. That means reading every section carefully. Don’t assume the language is harmless just because it looks standard. Go line by line. Understand what you’re agreeing to. If a clause doesn’t make sense or feels too broad, negotiate it. Push for clarity. Push for fairness.

This is your exit. Make sure the agreement reflects that.

Contact the Ruggles Law Firm at 916-758-8058 to Evaluate Your Potential Lawsuit

Matt Ruggles has a thorough understanding of California employment laws and decades of practical experience litigating employment law claims in California state and federal courts. Using all of his knowledge and experience, Matt and his team can quickly evaluate your potential claim and give you realistic advice on what you can expect if you sue your former employer.

Contact the Ruggles Law Firm at 916-758-8058 for a free, no-obligation consultation.

Blog posts are not legal advice and are for information purposes only. Contact the Ruggles Law Firm for consideration of your individual circumstances.