Severance Agreements: What Employees Should Read Before Signing

A severance agreement is not just "here is some money on your way out" — it is a contract, and like any contract, the company is asking for something specific in return for the payout. Understanding what that something is matters more than the headline severance amount, because the terms attached to it can restrict what a former employee can say, do, or pursue afterward.

This applies on both sides: an employer offering severance needs the agreement to actually accomplish what it is meant to (usually a release of claims), and an employee receiving one needs to understand exactly what they are giving up.

What a severance agreement typically asks for

In exchange for severance pay, the employee is usually asked to sign a release of claims — agreeing not to sue the company over the termination or anything related to their employment. This is the core purpose of most severance agreements from the employer's side.

A release of legal claims related to employment and termination

Confidentiality about the terms of the severance itself

A non-disparagement clause covering public statements about the company

Sometimes an extension or reaffirmation of a non-compete or non-solicitation clause

A defined severance amount, payment schedule, and continuation of benefits (if any)

The review period is a real legal protection, not a formality

For employees 40 or older, the Older Workers Benefit Protection Act requires at least 21 days to consider a severance agreement (45 days for group layoffs), plus a 7-day period to revoke a signed agreement. This exists specifically because severance decisions are often made under pressure, right after unexpected news, and the law builds in time to actually think it through or get advice.

Even where that specific law does not apply, taking a few days before signing anything is reasonable, and no legitimate severance offer should require an on-the-spot signature.

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What is negotiable more often than people assume

The initial severance offer is frequently treated as fixed, but the payout amount, the length of benefits continuation, and the scope of a non-disparagement or non-compete clause are all commonly negotiated, especially for longer-tenured employees. Asking is rarely held against someone, since companies generally expect some negotiation on a first offer.

Frequently asked questions

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

Generally yes — severance pay in the US is not legally required in most cases (unless promised in a contract or policy), so it is typically offered specifically in exchange for signing the agreement.

Can I still collect unemployment if I sign a severance agreement?

Usually yes, but this depends on your state and the specific terms — it is worth checking your state unemployment agency's rules before assuming either way.

Should I have a lawyer review a severance agreement?

For a small severance amount with standard terms, many people review it themselves. For a larger payout, a senior role, or a non-compete extension, a brief attorney review is a reasonable investment.

Can a severance agreement be signed electronically?

Yes — severance agreements are commonly sent and signed electronically, though the required review and revocation periods still apply regardless of signing method.