What You May Be Giving Up in an Employment Severance Agreement

You just lost your job. Your employer hands you a severance agreement and tells you to sign. It feels like the obvious move. Take the money and move on. But what you sign, and what you give up in signing it, can follow you for a long time.

Employees are often asked to evaluate severance agreements while dealing with the immediate stress of losing a job. That makes it easy to focus on the payment without giving the release and other restrictions equal attention.

What a Severance Agreement Actually Does

A severance agreement is a legal contract. In exchange for a payment, you typically agree to release claims arising from your employment or termination through the date you sign. Depending on how the release is written, that can include claims for discrimination, retaliation, breach of contract, and other employment-related disputes.

Not every right can be signed away. An ordinary private severance agreement generally cannot waive an employee’s rights to minimum wages or overtime under federal law. An employee who signs a broad release also cannot be prevented from filing a charge with the EEOC or participating in an EEOC investigation or proceeding, even if the agreement uses language that suggests otherwise. Any provision attempting to block that right is unenforceable.

A broad release may cover potential claims you do not yet realize you have. The employer has usually had time to prepare the agreement. The employee may be seeing it for the first time while also dealing with the loss of a job.

You May Have More Time Than You Think

An employer can set a deadline on a severance offer. What that deadline cannot always do is override legal protections that require time for review. A contractual expiration date is not the same as a legal mandate to sign immediately.

Depending on the nature of your agreement and your age, you may be entitled to a formal review period and a revocation window after signing. We covered the specific requirements in detail in a separate post on the 21-day review period. Pressure to sign immediately should be a signal to slow down, not speed up.

Under the federal rules governing waivers of age discrimination claims, the review period generally begins with the employer’s final offer. A material revision may restart that period. An employee may sign before that period expires, provided the decision is knowing and voluntary and was not induced by fraud, misrepresentation, a threat to withdraw the offer early, or better terms for signing early.

What Confidentiality Clauses Can and Cannot Do

Many severance agreements include confidentiality and nondisparagement clauses. A clause limiting disclosure of the payment amount or specific settlement terms is different from one that attempts to prevent an employee from discussing wages, working conditions, or conduct that affected coworkers.

Federal labor law protects many private-sector employees when they discuss wages, benefits, and working conditions or act together concerning workplace issues. Overly broad confidentiality and nondisparagement provisions may interfere with those rights, although coverage depends on the employee's position and workplace. Whether a specific clause in your agreement crosses that line is worth understanding before you sign.

What Else the Agreement May Contain

The payment may receive the most immediate attention, but it is rarely the only term that deserves careful review. Depending on how the agreement is drafted, it may also address what happens to health insurance and other benefits after your last day, whether you are restricted from working for competitors or reapplying to the company, whether you are required to cooperate with the employer in future litigation, how the company will handle employment references and internal records, and when and how the severance payment will actually be made.

It may also include a nondisparagement clause that restricts what you can say about the company after you leave, sometimes indefinitely. Understanding what you are agreeing to across all of these terms is as important as knowing what you are receiving.

Signing Is Not Just an Acknowledgment

Signing a severance agreement is not merely an acknowledgment that you received the offer. Signing can make the promises in the agreement binding, subject to any applicable revocation period. Once signed and the revocation period has passed, a properly executed release is very difficult to undo.

You can ask to negotiate the payment and other terms before signing. The employer does not have to revise its offer, but many employees do not realize that asking is an option. Where a statutory review period applies, the time it provides exists precisely so you can make a considered decision, including whether to accept, negotiate, or decline.

A Severance Agreement Is More Than a Payment

A severance agreement may affect existing legal claims, future employment, benefits, and what an employee may say after leaving the company. Those consequences can continue long after the severance payment has been received.

The Siegel Law Firm reviews and negotiates severance agreements for New York employees and advises employers preparing them. Call 516-558-7559 or email info@thesiegelawfirm.com to discuss your situation.