Severance Agreements: What You're Signing Away, Line by Line

They handed you a check and a pen and hoped you would not read past page one.

Severance is not a gift and it is not a thank you. It is a purchase. The company is buying something specific from you, and the price is the number on page one. Everything after that is what you are selling.

Here is what is in the document, in the order it usually appears.

The release of claims is the entire document

Every other clause is decoration around this one. The release says that in exchange for the payment, you give up your right to sue the company for anything that happened during your employment.

Read what it covers. A standard release reaches:

• Discrimination and harassment claims
• Wrongful termination claims
• Wage and hour claims, sometimes including unpaid overtime and unpaid commissions
• Retaliation claims
• Claims you do not know about yet

That last category is the one worth slowing down for. Many releases include a general waiver of unknown claims. In California, that means a specific waiver of Civil Code section 1542, which otherwise preserves claims you did not know existed when you signed. If that section number appears in your agreement, you are being asked to release things neither of you has discovered.

Some claims cannot be waived no matter what the paper says. You generally cannot be stopped from filing a charge with the EEOC or a state civil rights agency, from participating in a government investigation, or from reporting to the SEC or OSHA. An agreement that claims otherwise is overreaching, and that overreach is a useful thing to point at in a negotiation.

Non-disparagement, or why nobody can warn you

The non-disparagement clause says you will not make negative statements about the company, its officers, or its employees. Breach it and you can be sued for the severance back, sometimes more.

Take one step back and look at what that clause accomplishes across an entire workforce. Every departing employee who signs one becomes contractually silent. The public record about that employer then consists of the people who never worked there, the people still working there, and marketing.

That is not an accident. It is the mechanism. It is why employer review scores are structurally unreliable.

Two things to check:

• Is it mutual? Yours is enforceable. Ask whether the company's officers are bound the same way. Many will agree, and a mutual clause is a fair trade instead of a one-way gag.
• Does it carve out truthful statements to government agencies and in legal proceedings? It should. If it does not, that is a change to request.

Non-compete and non-solicit

If a non-compete appears in a severance agreement, read the scope, the geography, and the duration as three separate questions. A clause barring you from your entire industry nationwide for two years is asking you to fund the company's competitive position out of your own unemployment.

The enforceability of non-competes varies enormously by state, and the law here has been moving. California voids most of them outright. Other states enforce them if the scope is reasonable. Do not assume your clause is either automatically void or automatically binding.

Non-solicit clauses are quieter and often broader than people notice. Some bar you from recruiting former colleagues. Some bar you from contacting former clients. Some bar you from accepting inbound contact from either, which is a very different thing.

The consideration window if you are 40 or older

Federal law gives older workers a specific procedural protection here, and it is one of the few places where the deadline works in your favor.

Under the Older Workers Benefit Protection Act, a waiver of age discrimination claims is only valid if you get:

• At least 21 days to consider the agreement, or 45 days if the layoff is part of a group reduction in force
• 7 days to revoke after signing, and the agreement cannot take effect until that window closes

In a group layoff, the agreement must also disclose the ages and job titles of the employees selected for the layoff and those not selected. That disclosure is the most useful document you will receive all week. It is a list, produced by the employer, showing exactly who got cut and how old they were. Read it carefully.

If any required element is missing, the age discrimination waiver is unenforceable, even though you signed.

So when someone tells you the offer expires at end of day and you are over 40, they are describing a document that may not do what they need it to do.

What is actually negotiable

More than they imply. Severance terms people successfully change:

• The amount, especially if you have a specific claim to point at
• The payment structure, lump sum versus salary continuation, which affects taxes and unemployment timing
• Extended health coverage, with the company paying COBRA premiums for a set number of months
• The reference and the departure language, including exactly what HR confirms to future employers
• Mutual non-disparagement in place of one-way
• Narrowing or removing the non-compete
• Keeping your equipment or transferring your phone number
• Accelerated equity vesting, which is often the biggest number in the room
• More time to decide

You have leverage in exactly one window: after they hand it to you and before you sign. Once you sign, you have a check and no leverage.

When to stop reading and call someone

Get an employment attorney on the phone if any of these are true:

• The severance is large enough that a percentage of an improvement exceeds the consultation fee
• You are 40 or older and were part of a group layoff
• You complained about anything before the layoff
• You have equity, deferred comp, or unpaid commissions in play
• The release mentions claims you did not know you had
• The non-compete would change what job you can take next

Many employment attorneys review severance agreements on a flat fee or a free initial consultation. Against a five-figure severance, that math is not close.

After you sign

Whatever you sign, the experience still happened. If your agreement includes a non-disparagement clause, understand what it binds and get advice about what it does not.

And when you can, put it on the record for the person who is about to accept that same offer letter. Anonymous, no email, no account, nothing stored.

This is general information, not legal advice. Severance agreements are contracts, and the specific language in yours controls. Have an employment attorney review it before you sign.