Severance agreements, decoded
This is general information, not legal advice. A severance agreement is a legal contract, and the right move depends on your situation, your state, and the exact wording. Before you sign, have an employment attorney review your specific agreement. Many offer flat-fee severance reviews.
A severance agreement is a trade: the company gives you something (usually pay, sometimes benefits) in exchange for you giving something up (usually your right to sue them). Here's what's typically inside, section by section, so it reads less like a wall of legalese.
Release of claims
This is the heart of almost every severance agreement. In exchange for the money, you agree not to sue the company over your employment or the layoff.
•
It usually covers claims you might not even know you have.
•
A few things generally can't be waived, like filing for unemployment, workers' comp, or certain agency complaints.
•
Watch for: how broad it is, and whether it reaches further than feels fair for the amount offered.
Severance pay
How much, and how it's paid out.
•
Often tied to tenure (say, a week or two per year of service), but there's no legal default amount. It's whatever was offered or negotiated.
•
A lump sum vs. installments (salary continuation) changes the tax timing.
•
Watch for: whether installments stop the moment you start a new job.
Benefits & COBRA
What happens to your health coverage and other benefits.
•
The agreement may or may not contribute toward your COBRA premiums.
•
Check the exact date your active coverage ends. (See the Health Coverage guide for the two 60-day windows.)
Non-compete, non-disparagement & confidentiality
The restrictions you'd agree to going forward.
•
Non-compete: limits where you can work next. Enforceability varies a lot by state; some barely enforce them.
•
Non-disparagement: you agree not to bad-mouth the company. Ask whether it's mutual.
•
Confidentiality: you agree to keep the agreement (and sometimes the circumstances) private.
•
Watch for: one-sided clauses and non-competes broad enough to block your whole field.
The signing clock
If you're 40 or older, federal law (the ADEA/OWBPA) usually gives you 21 days to consider the agreement and 7 days to revoke after signing. For group layoffs it's often 45 days. No one can legally make you sign on the spot. Don't let urgency rush a permanent decision.
Source: [EEOC, waivers in severance agreements](https://www.eeoc.gov/laws/guidance/understanding-waivers-discrimination-claims-employee-severance-agreements).
What's often negotiable
More than most people assume. Politely, and in writing, you can often ask about:
A common ask
Severance amount
More weeks, especially with long tenure
Timeline
More time to decide, or to land your next role
COBRA
The employer covering a few months of premiums
References
A neutral or positive reference, in writing
Non-disparagement
Making it mutual
Equity / vesting
Extending the window to exercise options
Red flags
•
Pressure to sign immediately ("today only").
•
A release far broader than the severance is worth.
•
A non-compete that would block your entire field.
•
Anything that contradicts what you were told out loud.
Questions to ask before you sign
1
Is the severance amount or the timeline negotiable?
2
Will you cover any COBRA premiums, and through when?
3
Can I get a reference commitment in writing?
4
Is the non-disparagement clause mutual?
5
What exactly am I releasing, and does any of it waive something I'd want to keep?
General information only. Have an employment attorney review your specific agreement before signing.