Should I sign my severance agreement?

How long do you actually have?

The date on the letter is not always the whole story.

If you are 40 or older and the agreement asks you to waive age discrimination claims, the Older Workers Benefit Protection Act sets out requirements the waiver must meet to be considered knowing and voluntary. Among them: you must be advised in writing to consult an attorney, you must be given at least 21 days to consider the agreement, and you must have 7 days after signing in which to revoke it. Where the separation is part of a group program, the consideration period is 45 days, and the employer must also provide information about the job titles and ages of the individuals selected and not selected for the program.

That last disclosure is genuinely useful and is routinely ignored by the people who receive it. It tells you how the selection actually fell across age groups in your unit.

If you are under 40, or the agreement does not release age claims, there is generally no statutory review period. The deadline is whatever the employer set. Asking in writing for another week is common, costs nothing, and is frequently granted, particularly where you explain that you want to review it properly.

The checklist

1. Total the package, not the headline

Cash, COBRA contribution, PTO payout, bonus, equity. The calculator does this in a minute, and it frequently changes how the offer feels in both directions.

2. Work out whether the number is reasonable

Divide the severance weeks by your years of service. One to two weeks per year is the most common structure in written employer policies. Below one, particularly at longer tenure, is where questions are usually justified. See is my severance offer fair?

3. Read the release

This is what the money is buying. Expect it to be broad. Look for whether it is mutual, what it carves out, and whether it purports to cover claims that cannot be waived. A well-drafted release will already exclude the things it legally must.

4. Look for restrictions that are new

A noncompete, non-solicitation, or non-disparagement clause you did not previously have is something the employer is buying from you now, and it should be reflected in the price. Compare the agreement against your original offer letter and employment agreement rather than assuming the terms carried over.

5. Check the equity terms against your grant documents

The severance agreement often says little or nothing about equity, while your grant agreements and the plan document say a great deal. Forfeiture of unvested shares, and the post-termination window to exercise vested options, are where the largest sums are usually lost. If you have meaningful equity, read those documents before you respond to anything.

6. Confirm what happens to what you have already earned

Your final paycheck for work performed is owed regardless of whether you sign. Accrued PTO payout depends on state law and company policy. If earned wages appear to be conditioned on signing, that is worth raising, and in some states it raises a wage claim issue.

7. Check how the payment is structured

Lump sum or salary continuation is not a neutral choice. It can affect the tax year the income lands in, and in some states it affects unemployment benefit timing. Ask your state workforce agency before agreeing to a schedule.

8. Decide whether to ask for anything

If you are going to ask, do it before signing, in writing, and with two or three specific requests. See how to negotiate a severance offer.

What you generally cannot sign away

A release is broad, but it is not unlimited. These generally survive regardless of what the document says.

• The right to file a charge with the EEOC or an equivalent state agency, and to participate in an agency investigation. An agreement can typically waive your right to personally recover money from such a proceeding, but not your right to bring it to the agency’s attention.
• Vested retirement benefits. Your 401(k) and other vested plan benefits are yours.
• Claims arising after you sign. A release covers the past, not future conduct.
• Unemployment and workers compensation claims, in most states.
• Various whistleblower protections, including the ability to report possible violations to government agencies.

If an agreement appears to bar you from contacting a government agency at all, that is a drafting problem worth pointing out, and a good reason to have a lawyer look at the document.

What happens if you do not sign

You generally give up the severance payment. You keep any legal claims you might have had. You still receive wages you have already earned, and your accrued PTO where state law requires it to be paid. You can still apply for unemployment benefits; eligibility does not depend on signing a severance agreement.

For most people in an ordinary layoff, declining severance in order to preserve claims they do not intend to pursue is a poor trade. The calculation is different when there are real facts behind a potential claim, which is precisely the situation in which an employment attorney should be looking at it rather than a website.

When to get a lawyer before signing

• The termination closely followed a complaint to HR, a report of misconduct, a protected leave, or an accommodation request.
• You believe the decision was related to age, race, sex, pregnancy, disability, religion, national origin, or another protected characteristic.
• The agreement contains a noncompete that would genuinely prevent you from working in your field.
• You have substantial unvested equity or deferred compensation.
• You have an employment contract, particularly with change-in-control provisions.
• There are unpaid wages, unpaid commissions, or a disputed bonus.
• The consideration period offered is shorter than the law appears to require for your situation.

Many employment attorneys offer a short paid review of a severance agreement for a fixed fee, which is a very different proposition from full representation and is often proportionate when a few thousand dollars are at stake.

Frequently asked questions