Understanding Severance Agreements

A severance agreement can offer valuable financial support after a job loss, but signing one also means giving up legal rights — making careful review before signing essential.

What Severance Agreements Typically Include

Most severance agreements offer a lump sum or continued salary payments, and sometimes continued health insurance coverage, in exchange for the departing employee releasing the employer from legal claims related to their employment.

Agreements often also include confidentiality provisions, non-disparagement clauses, and sometimes a reaffirmation of any existing non-compete or non-solicitation obligations.

What You're Giving Up

Signing a severance agreement typically waives the right to sue for claims arising up to that point, including potential discrimination, wrongful termination, or wage claims — even ones the employee may not have fully considered at the time of signing.

Certain rights generally cannot be waived, such as the right to file a charge with the EEOC (though the right to individual monetary recovery from that charge can often still be waived) and rights to unemployment benefits in most states.

Negotiating Before You Sign

Severance amounts and terms are often negotiable, particularly when there's some question about the circumstances of the termination — employees don't have to accept the first offer presented.

Federal law requires specific disclosures and a minimum consideration period (21 or 45 days, depending on the situation) for employees 40 and older being asked to waive age discrimination claims, along with a right to revoke after signing.

Frequently Asked Questions

Do I have to sign a severance agreement to receive severance pay?

If the severance offer is conditioned on signing a release, generally yes — but the terms of that offer are often negotiable before you sign.

Can I have a lawyer review my severance agreement?

Absolutely, and it's strongly recommended, particularly for higher-value agreements or when there's any question about the circumstances of the termination.

Severance agreements involve a real trade-off between immediate financial support and giving up legal claims. An employment attorney can review your specific agreement and help you negotiate better terms if appropriate.