When not to sign a severance agreement
You should consider not signing a severance agreement in the following situations:
- You Have Not Reviewed It Thoroughly
- If you feel rushed or pressured to sign.
- If you haven’t had time to review all the terms carefully.
- You Haven’t Consulted a Lawyer
- If the agreement includes complex legal language.
- If you’re unsure about your rights, potential claims, or future restrictions.
- The Severance Package is Unfair
- If the severance pay is too low compared to industry standards or your tenure.
- If your benefits (e.g., healthcare, unused PTO payout) are insufficient.
- You Have Valid Legal Claims Against Your Employer
- If you suspect wrongful termination, discrimination, retaliation, or harassment.
- If you were fired for whistleblowing or reporting illegal activities.
- It Includes Overly Restrictive Clauses
- If it has non-compete terms that limit your future job opportunities.
- If there are non-disparagement or confidentiality clauses that are too broad.
- You’re Owed Unpaid Wages or Bonuses
- If you haven’t received your final paycheck, commissions, or bonuses you earned.
- If the agreement doesn’t explicitly include these payments.
- You’re Being Forced to Waive Important Rights
- If signing means giving up legal claims (like a discrimination lawsuit).
- If you must release future claims even if you don’t yet know about them.
- You Have Another Job Lined Up
- If signing restricts your ability to work elsewhere.
- If you don’t need the severance and want to negotiate better terms.
- You Feel Coerced or Pressured
- If you were given an unreasonably short deadline to decide.
- If your employer is threatening or manipulating you.
What to Do Instead?
- Negotiate for better terms (more pay, better benefits, reduced restrictions).
- Consult a Lawyer to understand your rights.
- Take Your Time—you may have at least 21 days (under U.S. law for employees over 40) to decide.
Important Severance Agreement Clauses
When reviewing a severance agreement, you should carefully examine the following key clauses:
- Severance Pay
- Amount of severance compensation
- Payment schedule (lump sum or installments)
- Any conditions tied to receiving the payment
- Benefits Continuation
- Health insurance (e.g., COBRA coverage and who covers the cost)
- Retirement plans (401(k) vesting, pension eligibility)
- Stock options or equity grants (vesting or forfeiture terms)
- Release of Claims
- A waiver preventing you from suing the employer for wrongful termination, discrimination, etc.
- Whether it is a broad or specific release of claims
- Exceptions for claims that cannot be waived (e.g., unemployment benefits, workers’ comp)
- Non-Disparagement Clause
- Prohibits you from making negative statements about the company
- Check if it’s mutual, meaning the employer also cannot disparage you
- Non-Compete & Non-Solicitation Clauses
- Restrictions on working for competitors or soliciting former clients/employees
- Duration and geographic scope of the restrictions
- Whether the restrictions are enforceable in your state
- Confidentiality & Non-Disclosure Agreement (NDA)
- Prohibits discussing company trade secrets or business information
- Check for any overly broad language that could limit future job opportunities
- Unemployment Benefits
- Whether the agreement affects your eligibility for unemployment insurance
- Some agreements require you to state you are leaving voluntarily, which could disqualify you
- Return of Company Property
- Requirement to return laptops, documents, company IDs, etc.
- Whether you can retain any work materials (for portfolio purposes)
- References & Employment Verification
- Whether the employer agrees to provide a neutral or positive reference
- Who will handle employment verification requests
- Dispute Resolution & Governing Law
- Whether disputes must be resolved via arbitration or litigation
- The state laws governing the agreement
- Revocation & Review Period
- Under Older Workers Benefit Protection Act (OWBPA) (if 40+ years old):
- You must be given at least 21 days to review the agreement
- You have 7 days to revoke it after signing
Before signing, consider consulting an employment attorney to ensure fairness and compliance with labor laws.
how much severance pay should I get?
The amount of severance pay you should receive depends on several factors, including company policy, your tenure, industry standards, and negotiation leverage. Here are some general guidelines:
- Common Severance Pay Formulas
- Standard Formula: 1–2 weeks of pay per year of service (e.g., 5 years = 5–10 weeks of pay)
- Executive/High-Level Employees: Often receive 1–3 months per year of service
- Company Policy: Some employers have fixed severance policies (e.g., a minimum of 4 weeks, regardless of tenure)
- Factors That Affect Severance Pay
- Company Size & Industry: Larger companies or industries like tech, finance, and pharmaceuticals may offer more generous packages.
- Your Role & Seniority: Executives and senior employees typically receive more severance.
- Reason for Layoff: If part of a mass layoff, severance may be standardized. If termination was due to performance, severance may be minimal or nonexistent.
- Employment Contract: If you have a contract, it may specify severance terms.
- Additional Severance Components
- Unused PTO/Vacation Pay: Some states require payout of accrued vacation time.
- Bonuses & Commissions: Check if pending bonuses, stock options, or commissions are included.
- Healthcare Coverage: Some severance packages cover COBRA premiums for a period.
- Outplacement Services: Some companies provide career coaching or job placement help.
- How to Negotiate for More
- Compare Industry Standards: Research what similar companies offer.
- Highlight Your Contributions: Emphasize past performance and value to the company.
- Ask for More than Just Cash: If more severance pay isn’t possible, negotiate extended benefits, bonus payouts, or a neutral reference agreement.
does the employer have to give me severance pay?
Not necessarily. Even if a company has a severance policy, employers are typically not legally required to provide severance pay unless:
- A Contract or Policy Requires It
- If you have an employment contract or union agreement stating you are entitled to severance, the employer must honor it.
- If the company has a formal severance policy in its employee handbook or HR guidelines, it may be enforceable, especially if it’s consistently applied.
- The Layoff Is Covered by WARN Act
- Under the federal WARN Act, if a company with 100+ employees conducts a mass layoff (50+ employees at a single site), they must provide 60 days’ notice or pay instead of notice.
- Some states have “mini-WARN” laws with additional severance requirements.
- Discrimination or Retaliation Is a Factor
- If severance is denied unequally (e.g., based on age, gender, race, or retaliation for whistleblowing), you may have grounds to challenge it.
- Severance Was Previously Promised
- If your employer previously promised severance in writing or through past practice, you might argue for an entitlement under an “implied contract” theory.
Even if not required, many employers offer severance voluntarily to minimize legal risks and maintain goodwill.
can i sue if i sign a severance agreement?
It depends on the terms of the severance agreement. Most severance agreements include a release of claims clause, which means:
- If You Signed a Release of Claims, You Usually Cannot Sue
- The agreement likely states that you waive your right to sue the employer for most legal claims (e.g., wrongful termination, discrimination, harassment).
- This waiver typically covers federal, state, and local employment laws.
- Exceptions – When You Can Still Sue After Signing
You may still sue in certain situations, even if you signed the agreement:
- Unpaid wages or benefits: You can still sue for unpaid wages, overtime, or benefits owed under state or federal law.
- Workers’ compensation claims: These claims usually cannot be waived.
- Discrimination claims (EEOC/State Agency): Even if you waive the right to sue, you can still file a charge with the EEOC or state human rights agency.
- Retaliation or whistleblower claims: Some claims, such as those under the Sarbanes-Oxley Act or False Claims Act, cannot be waived.
- Fraud or coercion: If you were forced to sign or the employer misrepresented key facts, the agreement could be invalid.
- Older Workers Protection (OWBPA) violations: If you are 40+ years old, your waiver of age discrimination claims must meet specific legal requirements.
- Can You Revoke a Signed Agreement?
- If you are 40+ years old, the Older Workers Benefit Protection Act (OWBPA) gives you 7 days to revoke your signature after signing.
- If you did not receive adequate time to review (at least 21 days for individuals, 45 days for group layoffs), you might challenge the validity of the agreement.
Next Steps
If you’re unsure about your severance agreement or want to explore legal action, consider:
- Consulting an employment lawyer to review the agreement.
- Filing a claim with the EEOC or state labor board if you suspect discrimination or retaliation.
- Checking state laws for additional protections.
how to revoke a severance agreement
Revoking a severance agreement depends on your specific situation, but here’s a general guide on how to do it:
- Check If You Have a Legal Right to Revoke
- If you are 40 or older: Under the Older Workers Benefit Protection Act (OWBPA), you have 7 days to revoke a signed severance agreement that includes an age discrimination waiver.
- If you are under 40: There is no automatic right to revoke unless the agreement explicitly allows it.
- Review the Severance Agreement
Look for a revocation clause, which should specify:
- Whether you have a revocation period
- How to revoke (written notice, email, etc.)
- Where and to whom to send the revocation
- Draft a Written Revocation Notice
Your notice should be clear and formal. Example:
Subject: Revocation of Severance Agreement
Dear [Employer/HR Representative],
I am formally revoking my acceptance of the severance agreement signed on [date] pursuant to my rights under [OWBPA, company policy, or agreement terms]. Please consider this written notice of my revocation within the required timeframe.
Sincerely,
[Your Name]
[Your Contact Information]
- Submit the Revocation Before the Deadline
- Send it via email, certified mail, or hand-delivery (get confirmation).
- Keep a copy of your revocation letter for your records.
- Consider Legal Consultation
If the employer refuses to honor your revocation or if you’re outside the revocation period, an employment lawyer can help explore options such as:
- Challenging the agreement (e.g., fraud, coercion, illegal terms).
- Negotiating a new severance package.
This page is for general informational purposes only and should not be considered legal advice. Only an attorney with comprehensive knowledge of employment law can provide advice after reviewing the agreement and laws in your jurisdiction. You should always consult with an attorney before taking or refraining from any action.
