Severance Agreement Review: What to Check Before You Sign

Losing a job is stressful enough. Then your employer slides a severance agreement across the table, gives you a deadline, and asks you to sign away your right to sue. Most people sign quickly because they need the money. That is exactly the wrong moment to rush. A careful severance agreement review can be worth thousands of dollars, protect your benefits, and keep future job options open. This guide walks through every clause that matters, what to negotiate, and when to get a lawyer involved.

What a Severance Agreement Actually Is

A severance agreement is a contract. In exchange for money and benefits, you generally agree to release the company from legal claims, keep certain information confidential, and follow rules about what you say about your former employer. The company is not doing you a favor by offering it. In most cases, it is buying certainty: protection against a future lawsuit. That means the terms are negotiable far more often than people realize. Nothing in a first offer is final until you sign it. Read every line, and never let a verbal promise substitute for written language: if it is not in the document, it does not count.

The Money: How Severance Pay Is Calculated

Severance pay is usually expressed as a number of weeks of salary, often tied to years of service. A common formula is one to two weeks of pay per year worked, but there is no law in the United States that requires any particular amount. Check whether the agreement states the gross amount, the payment schedule, and the tax treatment. A lump sum and salary continuation are not the same thing. Salary continuation may keep you on payroll, which can affect benefits, unemployment eligibility, and the timing of your final paycheck. Confirm whether unused vacation is paid separately and the exact dates of your last paycheck and severance payments.

Benefits That Matter More Than the Paycheck

Health insurance is often the most valuable part of a severance package. Find out whether the company will pay COBRA premiums, for how many months, and what happens when that support ends. If you are on a spouse's plan or the marketplace, compare costs before you sign. Also check what happens to your retirement accounts, vested stock options or restricted stock units, and any pending bonus or commission. Equity terms are full of traps: unvested awards may be forfeited on your last day, and vested options often expire within 30 to 90 days after departure. Get the exact deadlines in writing. If a bonus was earned but unpaid, the agreement should state whether and when you will receive it.

The Release of Claims: What You Are Giving Up

The heart of every severance agreement is the general release. By signing, you typically waive the right to sue the company for claims related to your employment, including discrimination, harassment, wrongful termination, and wage disputes. Read the release carefully and note what it does not cover. Certain rights usually cannot be waived, such as filing a charge with the Equal Employment Opportunity Commission, claiming unemployment benefits, or pursuing workers' compensation. If you believe you were fired for an illegal reason, or if you raised a complaint shortly before termination, do not sign before talking to an employment lawyer. A release signed under pressure can still be binding, and undoing it later is very difficult.

Non-Compete, Non-Solicitation, and Confidentiality Clauses

Many severance agreements restate or add restrictive covenants. A non-compete clause can block you from working for competitors for months or longer. A non-solicitation clause can prevent you from recruiting former colleagues or contacting former clients. Confidentiality clauses can limit what you say about the company and the agreement itself. Some states restrict or ban non-competes, so enforceability depends on where you live and work. Pay attention to the scope: the restricted activities, the geographic area, and the duration. If a clause would make it hard to earn a living, it is a strong reason to negotiate a shorter restriction, a narrower definition, or more severance pay in exchange.

Your Right to Review: The 21-Day Rule

If you are 40 or older and the severance is offered in connection with a group layoff, federal law under the Older Workers Benefit Protection Act generally requires the employer to give you at least 45 days to consider the agreement and 7 days to revoke your signature after signing. For individual terminations of workers over 40, the consideration period is generally 21 days. Younger workers are not covered by that specific rule, but employers often still offer a review period. Use the time: even a few days of review can reveal problems a quick signature would have missed. Do not let an employer pressure you into signing on the spot by claiming the offer will vanish. If the deadline is genuinely short, ask for an extension in writing.

Negotiation Levers Most People Miss

You can negotiate more than money. Useful asks include:

• Additional weeks of severance pay or a larger lump sum.
• Extended COBRA payments or a health insurance stipend.
• A neutral or positive reference and an agreed reference letter.
• A mutual non-disparagement clause, so the company cannot badmouth you either.
• A change to the termination reason on record, such as "mutual separation" or "position eliminated."
• Outplacement services, resume help, or paid job-search support.
• A longer exercise window for stock options or accelerated vesting.
• Removal or narrowing of a non-compete or non-solicitation clause.

Negotiate in writing, stay professional, and anchor your asks in facts: tenure, performance, unused benefits, and any legal claims you may have. Even one successful ask can change the value of the package significantly.

When to Get a Lawyer and Your Final Checklist

Consider an employment lawyer if the package is large, if you suspect discrimination or retaliation, if you signed a non-compete, if equity or deferred compensation is involved, or if anything in the agreement is unclear. Many lawyers review severance agreements for a flat fee, and the review often pays for itself. Before you sign, confirm: the exact severance amount and payment dates; the COBRA and benefits terms; the treatment of bonus, commission, and equity; the scope of the release; the restrictive covenants; the reference language; and the revocation period. For more plain-language explainers on money and workplace topics, visit our YouTube channel at Problem Solved. Disclaimer: this article is general information, not legal advice. Employment law varies by state and situation; consult a qualified employment attorney about your specific circumstances.