A severance agreement may provide valuable compensation, but signing it can also mean giving up significant legal rights. Employees should understand the entire agreement — not just the severance amount — before deciding whether to sign.
What Are You Giving Up?
Most severance agreements include a release of legal claims. The release may cover known and unknown claims arising from employment or separation, subject to legal limits. The agreement may also include confidentiality, non-disparagement, cooperation, or other obligations.
Does the Payment Reflect the Value of the Release?
The answer depends on the employee’s compensation, tenure, contractual rights, potential legal claims, benefits, future employment prospects, and the strength of the employer’s position.
Check Deadlines Carefully
Some agreements provide a short review period. Certain federal age-discrimination waivers have specific statutory review and revocation requirements for employees age 40 and older.
Terms Beyond Money
Consider references, announcement language, benefit continuation, commissions, bonuses, equity, expense reimbursement, unemployment issues, return of property, and any restrictions on future conduct.
Can You Negotiate?
Often, yes. An employer may agree to improve payment or modify nonfinancial terms, particularly when the employee has leverage or the employer wants a prompt, final resolution.
Before You Sign
North Law reviews severance agreements for California employees and can advise whether negotiation may be appropriate. Contact the firm for a confidential consultation.