Severance Agreement Review: Red Flags to Check Before You Sign
Published 25 May 2026
Severance can be helpful after a job loss, but the agreement may trade money for a broad release of legal claims. Employees often focus on the dollar amount and miss clauses that affect future work, references, confidentiality, unemployment, and the ability to pursue claims. Review the whole agreement before signing.
Key takeaways
A severance agreement often asks you to release legal claims in exchange for pay or benefits
Deadlines, revocation rights, confidentiality, non-disparagement, and restrictive covenants deserve careful review
Older workers may have specific waiver rules under federal law
Do not sign until you understand the claims, restrictions, and payment terms
What a Severance Agreement Usually Does
Most severance agreements provide pay, benefits, or other consideration in exchange for promises from the employee. Those promises may include releasing claims, returning company property, keeping terms confidential, agreeing not to disparage the employer, cooperating with future matters, and following restrictive covenants.
Red Flags to Review Before Signing
Broad release language
Check which claims you are waiving, whether unknown claims are included, and whether any agency-filing rights are preserved.
Restrictive covenants
Look for non-compete, non-solicitation, confidentiality, no-rehire, training repayment, or cooperation clauses that could affect your next job.
Unclear payment timing
Confirm the amount, tax treatment, payment date, benefits continuation, and what happens if the employer misses a payment.
Confidentiality and non-disparagement
Understand who you can speak with, what you can say, and whether the restrictions are mutual or only imposed on you.
Special Issues for Older Workers
Workers age 40 or older may have additional protections when an employer asks them to waive federal age discrimination claims. Review periods, revocation periods, and group layoff disclosures can matter. If the agreement mentions age claims, ADEA, or OWBPA, get legal review before signing.
What to Gather for a Review
Save the severance agreement, termination letter, handbook, offer letter, bonus or commission plans, recent performance reviews, emails about the termination, and any complaint or leave records. These materials help an attorney evaluate both the agreement and potential leverage.
Negotiation Is Often Possible
Employees may be able to negotiate payment, benefits, references, restrictive-covenant language, payment timing, tax wording, and mutual non-disparagement. The best strategy depends on the strength of potential claims, the employer's goals, and the agreement deadline.
Frequently Asked Questions
Do I have to sign a severance agreement?
Usually no, but refusing may mean you do not receive the offered severance. Get advice before deciding because signing may waive claims.
Can severance affect unemployment benefits?
It can, depending on state law and payment structure. Review the agreement and local unemployment rules before assuming the answer.
Can I negotiate after receiving a severance offer?
Often yes. The practical leverage depends on the facts, deadlines, possible claims, and what the employer wants in exchange for the release.
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