JUNE 30, 2025

 

Before You Sign: What Your Severance Agreement Isn’t Telling You

A Legal Guide for Employees Navigating Termination, Layoffs, or Exit Packages

Being laid off, asked to resign, or offered a voluntary exit package can be traumatizing and confusing. While wanting to leave the experience behind you is understandable, do not let your former employer take advantage of your state of mind. Signing any severance agreement, even if presented as a formality, are binding contracts with lasting consequences that can follow you to your next job and beyond.

Severance agreements are contracts between employers and employees describing the terms of an employee’s termination.¹ These agreements offer an additional payment known as severance for an employee’s release of legal claims against the former employer.² Employers are motivated to have employees sign such agreements to protect themselves from litigation, competition, and negative press by limiting actions an ex-employee can take against the former employer.³

Employers are motivated to have employees sign agreements. Recognizing that employers are motivated to have employees sign agreements to protect legitimate business can help you combat the mindset that the package is a gift and the terms of the contract favor you. This agreement is just another deal for your former employer, do not let them take advantage of you.

Employees who have signed severance agreements without legal review often regret signing binding forfeitures of a broad scope of legal rights without understanding the implications. To protect your future interests, when presented with a termination agreement from your employer, avoid future regret, and use the severance agreement to make the best of the situation and set yourself up for future success. 

This guide explains how to navigate this complex process:

(1) debunking common myths about severance agreements that favor employers,
(2) identifying employer coercion tactics,
(3) explaining employee legal rights,
(4) identifying employee leverage points in negotiations,
(5) pointing out clauses to look out for,
(6) posing questions to assess your understanding of the agreements implications,
(7) listing the practical next stapes to take after being offered a severance agreement and,
(8) exploring options for those who have already signed such agreements.

Common Myths about Severance Agreements:

Do not let the following commonly held misconceptions about severance agreements prevent you from leaving your position in the position most aligned with your future interests:

• “Everyone gets the same standard agreement, and I cannot negotiate my severance pay or reason for termination.”
  • Depending on the circumstances of your departure you may be able to negotiate for higher severance or other benefits.
• “If I ask questions about a severance agreement, they will rescind the offer.”
  • Employers are motivated to acquire severance agreements and free themselves from liability just as newly unemployed signees are motivated to acquire severance pay.
• “Getting a lawyer will make my former employer angry and it will be awkward to negotiate the terms of a severance agreement.”
  • If getting a lawyer to review the severance contract offered by your employer upsets them, this could indicate employer pressure.⁴

Recognizing Employer Coercion: Red Flags Before You Sign

Severance agreements are not the exit formalities your employer would have you believe; they instead insulate your former employer’s liability by destroying your ability to bring a claim against the company for events that occurred during employment.⁵

After termination companies are quick to force these agreements on former employees so that the employer is legally protected.⁶ Employers often take advantage of an employee’s lack of familiarity with the law.⁷

Employers can use the power dynamic between themselves and former employees to pressure them into involuntarily and unknowingly signing severance agreements.⁸ In my experience, employers may hand you such an agreement after termination and misrepresent facts to have you sign a document you do not understand without giving you time to consult a lawyer or negotiate the terms and severance amounts.⁹ These tactics exist and are used by employers to shield themselves from liability.¹⁰ Your experience with the employer is crucial to assessing whether you may have a claim worth pursuing.

Although this time is difficult, empower yourself by understanding of the realities of the severance process. Do not let your employer, who likely had an attorney draft the agreement tailored to your situation, benefit from any confusion or uncertainty you may feel.¹¹ Any apprehension you have about contacting a lawyer to review the document will allow your future to be limited by your employer. Do not give them that power over you.

Warning signs concerning the content of your severance agreement contract content include:

• Being rushed to make a decision
• Lack of time to retain an attorney to review the document
• Confusing language 
• Peer pressure

Choosing to have a lawyer review your severance agreement allows you to protect yourself and financial future is normal. If you’re reviewing a severance agreement or uncertain about whether the agreement is fair, I offer confidential consultations to help you understand your options before you sign.

Understanding Legal Rights and Identifying Leverage Points

As a former employee, you have rights in this process and may be able to leverage certain aspects of your position to negotiate with former employers.¹² Leverage points are highly dependent on the terms of your severance. Employers are less likely to negotiate with employees who were fired for misconduct or a large reduction in force, but there are exceptions in cases of discriminate selection. If your employer has terminated you for non-misconduct-related reasons, it may be easier to negotiate. 

You can identify leverage points by asking yourself the following questions:

• What was the reason given for my termination?
• Do I have any legal claims against the company for discrimination, harassment, retaliation, or wrongful termination that the company would pay to not pursue in the future?

What to Look For: Key Clauses to Understand

When offered an agreement, examine whether there are any of the following clauses that may indicate your former employer is insulating themselves from liability:

1. Waiver of claims provisions
   Waiver of claims provisions can prevent you from bringing legal claims against your former employer.¹³
2. Non-Disparagement Clauses
   Non-disparagement clauses stop you from negative statements about your employer under threat of legal action. Within this clause, identify whether your specific non-disparagement clause applies to your former employers as well.¹⁴
3. Confidentiality clauses
   Confidentiality clauses can restrict you from talking about your former employer. The inclusion of confidentiality agreements in a separation agreement can have varying terms that can be negotiated.¹⁵
4. Clauses Concerning Severance Payment¹⁶
   The amount of severance payment depends on your salary and length of time they held the position.
5. Non-compete/non-solicit terms.
   Former employers will seek to limit an employee’s use of confidential information in ways that may benefit competitors. Therefore, signing these agreements can limit your future employment opportunities, and negotiation can have a big impact on your future.¹⁷
6. Health Benefits
   Employees may sometimes be able to negotiate the length of continued health insurance benefits.

Ask Yourself Before Signing:

• How was this contract presented to me? Did my employers try to persuade me to sign this contract without reviewing its terms?
• What was the reason given for termination? 
• How can this affect my future employment efforts?
• Have I identified the common clauses in severance contracts, including:
  • Waiver of claims provisions
  • Non-disparagement clauses
  • Confidentiality restrictions
  • Non-compete provisions
  • Severance calculations
    • How was the severance amount calculated? Is this amount just the minimum required by law?
• After identifying the previously discussed clauses, assess your understanding of the consequences of each clause by asking yourself:
  • What am I agreeing not to do, say, or claim?
  • How could agreeing to these various agreements restrict in my future career?
  • Will I be content with this decision in 6 months? 1 year? 5 years?
• Have I read each of the prior clauses and understand how they apply to my situation? Do the circumstances of my employment and termination indicate possible legal claims against the employer?
• Do I understand what I’m giving up and what I’m getting?

Practical Next Steps after being offered a severance agreement include:

1. Do not agree to sign the agreement immediately.
2. Read the contract to determine what the decision-making timeframe is for the agreement to know how long you have and review the contents.
3. If you are still not sure what the consequences of signing the agreement are, you may need to seek legal help. It is important to consider if you may have a relevant claim. Give yourself time to find yourself a lawyer to review the contract and your circumstances which may take time.
4. Take time to gather information that will be relevant to an attorney assessing your claim. This would typically include the severance agreement itself along with any relevant emails, texts, or employee handbooks. Discuss the relevant termination agreement and future goals with your attorney.

What If I Already Signed?

If you have already signed a severance agreement, you still have options. The agreement may still be worth reviewing your agreement with an attorney, especially if you suspect coercion or misrepresentation. Such employer encouragement to agree to the contract can cross the line into coercive conduct.¹⁸

How We Can Help

The Law Office of Bhavleen Sabharwal provides comprehensive legal guidance to employees navigating severance agreements and termination situations. Our experienced team offers confidential consultations to review severance terms, identify potential legal claims, negotiate favorable modifications, and ensure you understand the full implications of any agreement before signing. We help employees recognize employer coercion tactics, assess leverage points for negotiation, and protect their future employment opportunities while maximizing severance benefits.

Contact us for a confidential consultation to review your severance agreement and protect your interests.

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¹ See Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements, U.S. Equal Employment Opportunity Commission (Jun. 27, 2020, 10:37AM),
https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements#I.

² See Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements, supra note 1.

³ See id.

⁴ See id.

⁵ See id.

⁶ See id.

⁷ See id.

⁸ See id.

⁹ See id.

¹⁰ See id.

¹¹ See Manager Responsibilities – Waivers of Discrimination Complaints, U.S. Equal Employment Opportunity Commission (Jun. 27, 2020, 10:04AM),
https://www.eeoc.gov/employers/small-business/manager-responsibilities-waivers-discrimination-complaints#:~:text=You%20may%20ask%20employees%20who,her%20agreement%20not%20to%20sue.

¹² See Manager Responsibilities – Waivers of Discrimination Complaints, supra note 11.

¹³ See Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements, U.S. Equal Employment Opportunity Commission (Jun. 27, 2020, 10:37AM),
https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements#I.

¹⁴ See Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements, U.S. Equal Employment Opportunity Commission (Jun. 27, 2020, 10:37AM),
https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements#I.

¹⁵ See Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements, U.S. Equal Employment Opportunity Commission (Jun. 27, 2020, 10:37AM),
https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements#I.

¹⁶ See Severance Pay, U.S. Department of Labor (Jun. 27, 2020, 10:37AM), https://www.dol.gov/general/topic/wages/severancepay.

¹⁷ See Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements, U.S. Equal Employment Opportunity Commission (Jun. 27, 2020, 10:37AM),
https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements#I.

¹⁸ See Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements, U.S. Equal Employment Opportunity Commission (Jun. 27, 2020, 10:37AM),
https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements#I.