Reviewing a Severance Agreement Before You Sign
A severance agreement is a trade. The company offers pay and benefits. In return, you release your right to bring most legal claims. This guide covers what to check before you sign, how much time you have, and what you can ask to change.
What a severance agreement actually trades
Severance is rarely a gift. It is a contract: money in exchange for a release of claims. Knowing which side of the trade each item sits on tells you what is negotiable and what is already yours.
What the company gets: a release of claims
You agree not to bring most legal claims tied to your job or your termination. This release is the reason the company pays. Without it, they would simply owe you your final wages and nothing more.
What you get: severance pay and benefits
Money, and sometimes extended health coverage, outplacement help, or an agreed reference. Everything on this side of the trade is negotiable before you sign.
What is already yours: earned wages
Your final paycheck, earned commissions, and, in many states, accrued vacation are owed whether you sign or not. An agreement that counts these as severance is offering you less than it appears.
What cannot be traded away
Some rights survive any release. You keep the right to file a charge with the EEOC and to report violations to government agencies. Whether unemployment benefits are affected varies by state.
Six clauses to check before you sign
Read the whole agreement, then come back to these clauses. They decide what you can say, where you can work next, and what a future employer will hear about you.
Release of claims
The core of the agreement
Check which claims you give up and the date range. A release should cover past events only, not anything that happens after you sign. Ask whether it is mutual, so the company releases claims against you too.
Non-disparagement
What you can say afterward
Look for what counts as disparagement and who it binds. Ask to make it mutual and to carve out truthful statements to government agencies. A one-sided clause protects only the company.
Non-compete and non-solicit
Where you can work next
Check the duration, the geographic area, and the type of work covered. Enforcement varies by state, and some states limit or reject non-competes entirely. Ask to narrow or remove it before you sign.
References and rehire
What future employers hear
Ask what the company will say when someone calls. Many will agree to confirm dates and title only, or to a neutral reference letter. Check whether the agreement marks you ineligible for rehire.
Payment terms
How and when you are paid
Confirm the amount, whether it arrives as a lump sum or in installments, and the payment dates. Ask how bonuses, commissions, and vested equity are treated. Get every number into the document itself.
Confidentiality
Who you can tell
Some agreements restrict discussing the terms. Check for carve-outs that let you talk to your spouse, a tax advisor, and an attorney. You can always have a lawyer review an agreement before signing it.
How much time you have to decide
There is no single federal deadline for reviewing a severance agreement. But when you are 40 or older and the agreement releases age discrimination claims, federal age discrimination law sets minimum review periods.
21 days
Individual offer
The minimum consideration period when you are 40 or older and the offer is made to you alone. The clock starts when you receive the final agreement.
45 days
Group layoff
The minimum when the offer is part of a group layoff or exit program. The employer must also give you information about who is included in the group.
After signing, workers 40 and older generally have 7 days to revoke. If you are under 40, no federal minimum applies, but you can still ask for time in writing, and a reasonable employer will give it. Deadlines tied to state law claims vary by state, so check your state's rules before relying on any of these periods.
Red flags in a severance agreement
None of these make an agreement illegal on its own. Each one is a sign to slow down, ask questions, and consider a professional review before you sign.
The deadline to sign is days away and nothing in writing explains why
The release covers future claims, not just events that happened before signing
The non-compete blocks work far beyond your actual role, with no time or place limits
Non-disparagement binds you but says nothing about what the company can say
A clawback clause makes you repay all severance for any breach, however small
You are 40 or older and the agreement mentions no review or revocation period
The agreement counts your final paycheck or earned commissions as part of the severance
5 steps before you sign
Get the full agreement in writing
Do not agree to anything in a meeting. Ask for the complete document and the deadline by email, then read every clause before you respond.
Value what you are releasing
The release is what the company is paying for. If you believe your termination broke the law, the release is worth more, and so is your negotiating position.
Price the gaps
Estimate months of job searching, the cost of continuing health coverage, and anything unvested that you lose. This tells you what number to ask for.
Ask for specific changes
More pay, a later end date, paid health coverage, a neutral reference letter, a narrower non-compete, mutual non-disparagement. Put each request in writing.
Sign only the final version
Confirm every agreed change appears in the document. Keep a signed copy and note the payment dates so you can follow up if a payment is late.
Common questions about severance agreements
Do I have to sign a severance agreement?
No. It is a voluntary contract. If you do not sign, you keep your right to bring legal claims but usually give up the severance pay on offer. Your final paycheck and earned wages are owed either way.
How long do I have to review a severance agreement?
Ask for the deadline in writing. If you are 40 or older and the agreement releases age discrimination claims, federal law generally gives you at least 21 days for an individual offer, 45 days in a group layoff, and 7 days to revoke after signing. Other deadlines vary, so confirm yours.
Can I negotiate a severance agreement?
Yes. Common points: the amount, the payment schedule, health coverage, a neutral reference, and narrowing the non-compete or non-disparagement clauses. Ask in writing and sign only the version that includes the changes.
What claims do I give up when I sign a release?
A typical release covers most claims connected to your employment and termination that arose before signing. Some rights cannot be waived, including filing a charge with the EEOC. Rules on unemployment benefits vary by state.
Is severance pay required by law?
Usually no. Most US employment is at-will, so severance is an offer, not an entitlement. Exceptions come from an employment contract, a company policy, or a union agreement. Your final paycheck is separate and owed regardless.
This guide is general legal information, not legal advice. Severance rules and clause enforceability vary by state. Before you sign, have your agreement reviewed by a licensed attorney in your state.
Reviewing a severance agreement?
Paste the clauses you are unsure about and ask what they mean, what is standard, and what to push back on. Sidqo explains each term in plain English.