Severance Agreement Checklist: What to Review Before Signing

What to Check in a Severance Agreement

A severance agreement is a contract between an employer and a departing employee. You typically receive money or benefits in exchange for releasing legal claims and agreeing to certain restrictions. Review these items before signing.

Severance Pay

• How much severance is offered (lump sum or installments)?
• Is the amount negotiable, and what is the basis for the calculation?
• When do payments begin, and over what period?
• Are benefits (health insurance, stock vesting) included or continued?
• What happens to unused PTO, commissions, or bonuses?

Release of Claims

• What claims are you releasing (discrimination, wrongful termination, wage claims)?
• Is the release mutual, or does only the employee release claims?
• Are there claims you cannot legally release (workers' comp, unemployment, EEOC charges)?
• If you are 40 or older, does the agreement comply with the Older Workers Benefit Protection Act (OWBPA) — including the 21-day consideration period and 7-day revocation period?

Non-Compete and Non-Solicitation

• Is there a non-compete clause, and what is its scope and duration?
• Does a non-solicitation clause restrict contact with former clients or colleagues?
• Are these restrictions enforceable in your state?
• Is the severance pay adequate consideration for these restrictions?

Confidentiality and Non-Disparagement

• Is a confidentiality clause limiting what you can say about the separation?
• Is non-disparagement mutual (does the employer also agree not to disparage you)?
• Are there exceptions for legally protected activity (filing complaints, cooperating with investigations)?
• Note: Under the NLRA, non-disparagement and confidentiality clauses in severance agreements may be unlawful if they are overly broad (see McLaren Macomb, 2023).

Reference and Rehire

• What will the employer say if contacted for a reference?
• Is there an agreed-upon statement about the reason for departure?
• Are you eligible for rehire?

Timing

• How long do you have to consider the agreement?
• Is there a revocation period after signing?
• What is the deadline for returning the signed agreement?

When to Consult a Lawyer

Severance agreements involve giving up significant legal rights. Consider consulting an employment attorney before signing — especially if you believe you have potential claims, the non-compete is restrictive, or the severance amount seems low.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.