Estimated reading time: 6 minutes
Table of Contents
- What's Typically Included in a Standard Severance Agreement
- What Rights & Claims Employees Waive When Signing
- Why Employers Offer Severance Following a Layoff or Termination
- Why It's Crucial to Have an Attorney Review the Agreement Before Signing
- How Gaines & Gaines, APLC Can Help
A severance agreement is a legal contract, and once you sign it, you are typically bound by its terms for good. These agreements often include a payout in exchange for giving up your right to sue your former employer, which makes reviewing every clause before signing an important step.
Standard severance agreements usually cover payment terms, benefits continuation, confidentiality clauses, and a release of claims. Employees who sign without a close read may unknowingly waive rights related to discrimination, wage disputes, or other workplace issues.
Because these agreements are drafted by the employer's legal team with the company's interests in mind, having someone review it on your behalf before you sign can help you understand exactly what you are agreeing to.
Below, we break down what's typically included in a severance agreement, what rights employees commonly waive, why employers offer severance in the first place, and why a legal review matters before you put pen to paper.
What's Typically Included in a Standard Severance Agreement
While every agreement looks a little different, most severance agreements include some combination of the following:
- Severance pay. A lump sum or series of payments, often based on years of service or salary, offered in exchange for signing the agreement.
- Benefits continuation. Details on how long health insurance or other benefits will continue, and under what terms (such as COBRA coverage).
- Release of claims. Language stating that the employee agrees not to sue the employer for issues related to their employment or termination.
- Confidentiality and non-disparagement clauses. Terms restricting what the employee can say publicly about the company, the terms of the agreement, or the circumstances of their departure.
- Non-compete or non-solicitation clauses. Restrictions on working for a competitor or contacting former colleagues or clients for a set period of time.
- Return of company property. Requirements to return equipment, documents, or access credentials.
- Deadline to sign and revocation period. Federal law often requires a review period (commonly 21 or 45 days) and a short window afterward to revoke acceptance, particularly for employees over 40.
What Rights & Claims Employees Waive When Signing
The release of claims section is often the most consequential part of a severance agreement. By signing, employees typically waive their right to bring legal action related to claims such as:
- Wrongful termination
- Discrimination based on age, race, gender, disability, or other protected categories
- Harassment or a hostile work environment
- Unpaid wages or overtime violations
- Retaliation claims
- Breach of contract
Some rights cannot be waived by law, such as the right to file a charge with certain government agencies or the right to unemployment benefits, but the specific language in each agreement determines exactly what is and isn't covered. This is one of the biggest reasons a careful review matters. A broadly worded release could cover more ground than an employee realizes, especially if they had an unresolved issue with their employer before the termination.
Why Employers Offer Severance Following a Layoff or Termination
Employers offer severance for a number of reasons, and it's rarely just a gesture of goodwill. Common reasons include:
- Reducing legal risk. A signed release lowers the chance of a future lawsuit, which is often worth more to the company than the cost of the payout.
- Maintaining goodwill. Severance can help preserve the company's reputation and relationships with departing employees.
- Encouraging a smooth transition. Severance packages sometimes come with conditions, like cooperating during a transition period or refraining from disparaging the company.
- Meeting policy or contractual obligations. Some companies have established severance policies, or the payout is spelled out in an employment contract or offer letter.
Understanding the employer's motivation can help put the offer in perspective. If a company is offering severance, it's often because there is something of value to them in getting your signature, which means there may be room to negotiate certain terms.
Why It's Crucial to Have an Attorney Review the Agreement Before Signing
Severance agreements are written by the employer, for the employer. The language is often dense, and the full impact of certain clauses isn't always obvious on a first read. Before signing, it's worth having someone review the agreement to help you understand:
- Whether the severance amount reflects what you may be owed under wage and hour laws
- Whether you have any existing claims, such as discrimination or unpaid overtime, that the release would waive
- Whether confidentiality, non-disparagement, or non-compete clauses are overly broad or enforceable
- Whether the timeline given for review and signing complies with applicable law
- Whether there is room to negotiate the payout or other terms before signing
Once signed, a severance agreement is generally difficult to undo. Taking the time for a review before signing can help you make an informed decision rather than a rushed one.
To see how our firm has helped employees in similar situations, take a look at our case results and read what past clients have said about working with us.
How Gaines & Gaines, APLC Can Help
Gaines & Gaines, APLC is a law firm that represents employees and consumers exclusively. We do not represent large corporations, and our attorneys focus solely on advocating for individuals dealing with workplace and consumer issues. With over five decades of combined legal experience, our firm has developed a strong understanding of how courts and employment disputes work, which we apply on behalf of clients facing issues such as overtime pay violations, discrimination, harassment, and severance disputes.
Gaines & Gaines, APLC handles cases in both state and federal court, including complex class actions and representative actions, and every case is prepared as though it may go to trial. The firm offers contingency fee arrangements for many types of employment and consumer matters, so clients are not paying out of pocket while their case is being handled.
Our legal team is able to communicate with clients in Spanish and offers severance review consultations for a flat fee. Clients consistently point to our firm's responsiveness and clear communication as reasons they trust Gaines & Gaines, APLC with their case. Be sure to check out our case results and client testimonials to see how we've supported employees in situations like yours.
If you've been offered a severance agreement, it's worth having it reviewed before you sign anything. Contact Gaines & Gaines, APLC online or call (866) 400-4450 today to schedule your flat-fee review consultation