When Should You Not Sign a Severance Agreement?

Pasadena, United States – June 19, 2026 / D.Law /

Employers often make unexpected changes to job positions. They might cut hours without notice or even execute mass layoffs that impact a large portion of their workforce.

When workers’ jobs are unexpectedly terminated, the employer may present a severance agreement that offers certain benefits in exchange for the employee sacrificing certain rights. D.Law, a California employment law firm, explains that signing these agreements is not always in a worker’s favor. The firm shares when not to sign a severance agreement and what would happen instead.

When You Should Not Sign a Severance Agreement in Pasadena

Severance agreements might include benefits like severance pay or continued health insurance. But they also commonly include restrictions, such as a release of claims that would bar the worker from pursuing legal action, or restrictive covenants that prevent them from working for competitors.

Workers should review severance agreements carefully to ensure they understand all terms and implications before signing. D.Law explains that in these cases, signing a severance agreement may not be in the employee’s best interests:

The worker is considering legal action. Severance agreements often include release-of-claims clauses that prohibit the employee from suing the employer for wrongful termination or other rights violations.
The terms in the severance agreement are overly restrictive. Agreements that include unreasonable non-compete or non-solicitation clauses may affect the worker’s long-term job prospects. In California, non-competes are generally unenforceable, but they often appear in agreements anyway.
The employer is pressuring the worker to sign. Any workers who feel pressured or coerced into signing a severance agreement should evaluate how their employer would benefit from their doing so and determine whether the agreement also benefits them.
The severance package does not provide compensation beyond what the employee is legally owed. California employers are legally required to pay out a terminated worker’s earned wages, accrued vacation time, and fully earned commissions upon firing them. Workers should understand whether their severance packages go beyond this legally required “compensation.”

These instances of when not to sign a severance agreement may lead to unreasonable waivers of employee rights.

What Happens if a Worker Does Not Sign a Severance Agreement in Pasadena?

Many workers believe they are required to sign severance agreements, but in reality, these contracts are typically optional. If a worker chooses not to sign it, they simply will not receive the severance pay and benefits enumerated in the contract. But they also would not be required to comply with release-of-claims clauses outside their existing employment contract obligations.

Seeking legal advice before signing a severance agreement helps workers determine whether declining to sign may be more beneficial than agreeing to its terms.

About D.Law

D.Law is an employment law firm that helps workers across California protect their employment rights. The firm commonly represents cases involving wrongful termination, discrimination, harassment, retaliation, and wage-and-hour disputes. Those interested in learning more about when not to sign a severance agreement or seeking legal representation can request a consultation by calling 818-275-5799.