The playbook / After you sign
If you lose, you pay our fees
A boilerplate sentence near the end of the agreement says the losing side pays the winning side's attorney fees. Read it from where you sit and it says something plainer: challenge anything in this document, and you may end up paying for the lawyers on both sides of the room.
What it looks like
It hides in the general provisions, a page past the money, in the same typeface as the notices clause and the governing law clause: "In the event of any action or proceeding arising out of or relating to this agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party." Some versions are drafted to name only the employer as the party who can recover. Either way, nobody mentions it in the meeting. It is presented as standard language, the kind every agreement has.
What it costs you
Before any judge hears a word about what actually happened, you have to make a bet. Your claim might be strong. It might be worth far more than the severance. But to find out, you stake your own savings against the legal bill of a company that treats legal bills as a routine cost of doing business. If you win, you are made whole on your own fees at best. If you lose, you pay yours and theirs. Most people do this arithmetic once, in a kitchen, at night, and quietly decide never to file anything.
What the law says
The clause is less one sided in California than it reads. Under Civil Code 1717, when a contract action is fought over a contract that gives attorney fees to one side, the clause is read both ways: the side that prevails on the contract can recover its fees, whichever side that is. A clause printed to frighten you is also a clause that can pay your lawyer if you sue on the agreement and win. Some uses of fee language are barred outright. A fee or penalty imposed for filing an EEOC charge, or for challenging an age discrimination waiver, is unenforceable under EEOC guidance and the federal waiver rules: 29 C.F.R. 1625.23(b) bars a waiver agreement from imposing a penalty, including recovery of the employer's attorney fees or damages, because an individual filed an age discrimination suit or challenged the waiver, and 29 C.F.R. 1625.22 separately bars provisions that prohibit filing a charge with the EEOC. And under Oubre v. Entergy, 522 U.S. 422 (1998), a worker does not have to tender back the severance to challenge an age waiver that fails federal law. Where the "breach" is talking to a regulator, the threat itself has legal problems: SEC Rule 21F-17 treats enforcing, or threatening to enforce, an agreement to impede direct communication with the SEC as a violation, and Sarbanes-Oxley rights and remedies under 18 U.S.C. 1514A(e) may not be waived by any agreement at all. A fixed repayment or penalty amount stacked on top is separately tested under Civil Code 1671(b), which asks whether it was reasonable when the contract was made. That test is fact specific. It does not make penalty clauses automatically void, and anyone who tells you otherwise is guessing.
What to do instead
- Before you sign, search the document for the words "prevailing party" and "attorney." Read the whole clause and find its trigger. Is it any dispute, a breach, or only a challenge to the agreement itself?
- Ask in writing whether the clause is mutual, and whether filings with government agencies and challenges to the agreement itself are carved out of it. Keep the answer with your copy of the agreement.
- Raise Civil Code 1717 with the lawyer reviewing your agreement. If a fee clause is printed one way, California law reads contract fee clauses both ways in an action on the contract, so ask what that means for your situation before you treat the clause as a one way street.
- Ask the reviewing lawyer which parts of your exposure are real and which are likely unenforceable, agency filings and waiver challenges especially, before you let the largest number in the room make the decision.
- If a letter arrives later invoking the clause, do not pay anything on the spot. Take the clause and the letter to an employment lawyer. A threat aimed at agency communication or a protected filing can be a problem for the sender, not only for you.
Not the severance. Their fees.
This entry has a close relative, and the two are easy to confuse because they are designed to work together. The repayment clause puts your severance at risk: breach the agreement and you repay money you already received. This clause reaches past the severance to your own savings. Lose a fight about the agreement and you owe the employer’s legal bill as well as your own. One clause holds what they paid you. The other prices what it would cost you to object. Read them as a pair, because that is how they were drafted.
The bet you are asked to make
A lawsuit is usually described as a search for the truth of what happened. The fee clause changes the subject before the search can start. The question it puts to you is not “were you treated unlawfully.” It is “how much can you afford to lose proving it.”
Notice the asymmetry inside the bet. The employer’s fees are a budgeted cost, spread across every separation it runs, handled by lawyers it already retains. Your fees come from one household account, in the months after your income stopped, competing with rent and health coverage. The same dollar figure is a line item on one side of the table and a catastrophe on the other. A clause does not need to be unfair on paper to be unequal in life. It only needs both sides to be looking at the same number from different distances.
The clause rarely has to fire
Like the clawback, this clause does its best work unused. Enforcement requires the employer to sue, or to defend your suit, and then to win. None of that has to happen for the clause to succeed. It succeeds every time a worker with a genuine claim reads it, cannot price the risk, and decides that silence is the affordable option.
The uncertainty is part of the deterrent. Slices of the clause are unenforceable: fees for filing an agency charge, penalties for challenging a defective age waiver, threats aimed at communication with the SEC. But a worker cannot know where the enforceable part ends and the unenforceable part begins without paying a lawyer to map it, which means the clause charges you once for the threat and again for finding out whether the threat was real. Even the good news hidden in Civil Code 1717, that the clause can pay your fees if you prevail on the contract, only becomes usable once you have advice. The clause counts on you never getting that far.
The ideal
In the ideal process, the fee clause is mutual on its face, not made mutual by a statute the worker has never heard of. It carves out, in words, filings with government agencies, participation in agency investigations, truthful testimony, and a good faith challenge to the agreement itself. Fee exposure for claims brought in good faith is capped or excluded, so that the price of asking a court a real question is the cost of asking, not the cost of the other side’s entire defence. An employer confident that its agreement is lawful does not need the worker’s savings standing behind the worker’s signature.
Why it works
Two findings from the research do most of the explaining. The first is loss aversion, from Kahneman and Tversky’s prospect theory: losses hurt more than equivalent gains please, in their original estimates roughly twice as much. Your possible recovery is abstract, delayed and uncertain, an amount no one can name yet. The employer’s fees are easy to imagine losing, because everyone has seen a legal bill described as ruinous. The clause trades on that gap in imagination. It does not argue that your claim is weak. It argues that your downside is vivid.
The second is the structural asymmetry Marc Galanter described in “Why the ‘Haves’ Come Out Ahead” (1974): repeat players litigate as a routine, with expertise, retained counsel and the ability to spread losses across a run of cases, while one shotters play once, for everything, with no infrastructure behind them. A prevailing party clause is that asymmetry written into a single sentence. For the repeat player it is a modest hedge. For the one shotter it converts a legal right into a financial wager, and a wager is something a person who just lost their job is in the worst possible position to take.
What employer-side guides say
Start with the advice that runs against the clause. A severance agreement checklist in the California Employment Law Report, a management side publication written by employment attorney Anthony Zaller and dated September 14, 2024, tells employers, under the heading “No prevailing party and attorney’s fees,” to “ensure that the agreement does not include provisions that would allow either party to claim attorney’s fees if legal disputes arise.” The checklist gives no reason for that instruction, and this page will not invent one for it. It simply records that a lawyer who advises employers, in California, currently tells them to leave the clause out.
The older advice runs the other way, and it says the quiet part out loud. In a 1994 article for employers and human resources executives, lawyers John Coil and David Rice of Kilpatrick and Cody recommended adding a covenant not to sue to a release, in their words, to “put some teeth into the agreement that will cause the employee to think twice before pursuing a claim barred by the release,” backed by an indemnification provision expressly including attorneys’ fees and by payback of part of the severance. That article is dated for a reason. The application it recommended to age discrimination suits is now barred: under 29 C.F.R. 1625.23(b), no waiver agreement may impose a penalty, including recovery of the employer’s attorney fees or damages, because an individual filed an age suit or challenged the waiver, and the EEOC treats fee penalties for filing a charge as unenforceable.
The deterrent function is not only a worker side reading of these clauses. Gordon Feinblatt, a firm that advises employers, describes separation agreements this way: they “often impose financial penalties, such as forfeiture of the consideration received, payment of liquidated damages and attorney’s fees, in the event that the individual files a claim.” The same firm then explains what the EEOC rule did to that design: it “significantly reduce[s] an employer’s ability to deter such claims through the imposition of financial penalties.” Deter is their word, chosen in advice to their own clients.
Finally, the employer-side severance guides checked for this page, including SHRM’s, say nothing about fee clauses at all. The clause does not live in the guides’ advice. It lives in templates, where the versions found are mutual in form: in an action to enforce the agreement or seek damages for its breach, the prevailing party recovers its reasonable attorney’s fees. The worker facing the clause is rarely told any of this. The advice to omit it, the 1994 advice to give it teeth, and the modern limits on both sit in publications written for the other side of the table.
This is why the campaign exists
Three simple rules would remove most of the leverage described on this page. A copy by default, in a format you can open, with every change marked.Help get it introduced in 2027.