This guide is general legal information, not legal advice, and does not create an attorney–client relationship. Rules change and vary by state — verify current requirements with official sources or a licensed attorney.
The packet usually arrives at the worst possible moment: a short meeting, a folder with a check amount and a dense agreement, and a deadline to sign. What the paperwork actually says, in nearly every case, is this — the company will pay you money it does not legally owe you, and in exchange you will give up your right to sue it for almost anything.
That trade can be perfectly fair. But it is a trade, and the terms are more negotiable than most departing employees assume. This guide explains the legal baseline at termination, what a severance agreement typically contains, the special protections for workers 40 and older, and the points worth pushing on before you sign.
Key takeaways
- No federal law requires severance pay; it exists by contract, company policy, or negotiation — and it is almost always conditioned on a release of claims.
- Workers 40 and older waiving age claims must get at least 21 days to consider the agreement (45 in group layoffs) and 7 days to revoke after signing.
- No release can take away your right to file an EEOC charge or cooperate with government investigations.
- Large employers conducting plant closings or mass layoffs generally owe 60 days' advance written notice under the WARN Act.
- Amount, payment timing, benefits continuation, references, and restrictive covenants are all legitimately negotiable.
The legal baseline: what you are owed without an agreement
Most U.S. employment is at-will: either side may end it at any time, for any lawful reason, without severance. What terminated employees are entitled to, regardless of any agreement, is narrower but firm — final wages for all time worked (state law sets the deadline, sometimes the last day of work), payout of accrued vacation where state law or policy requires it, the option to continue group health coverage at their own cost under COBRA, and the ability to apply for unemployment benefits, which a private agreement cannot lawfully sign away in most states.
A firing crosses into "wrongful termination" only when it breaks a specific law or contract: discrimination or retaliation, termination in violation of public policy, or breach of an employment contract. If any of those may apply to you, the release in a severance agreement is exactly what extinguishes the claim — which is why the analysis in our guide to the EEOC charge process should happen before signing, not after. Unpaid wage and overtime issues deserve the same pre-signing review, using the framework in our wage and hour basics article.
Anatomy of a severance agreement
Beneath the formatting, most agreements contain the same building blocks: the consideration (pay, often calculated informally as some number of weeks per year of service, plus possibly benefits subsidies or vesting treatment); a general release of claims; and a set of ongoing obligations — confidentiality about the agreement or company information, non-disparagement, cooperation with future litigation, return of property, and frequently restrictive covenants.
The release is the heart of the document. It typically waives every employment-related claim you could bring "from the beginning of time through the date of signing" — discrimination, wage claims, contract claims, torts. A few things survive any release:
- Your right to file a charge with, or provide information to, the EEOC and other government agencies (though you may waive your right to recover money from a resulting suit);
- Claims that arise after you sign;
- Vested retirement benefits, unemployment insurance, and workers' compensation rights in most states; and
- Certain claims that require government or court approval to settle.
The over-40 rules: OWBPA's checklist for age-claim waivers
Congress decided that older workers need extra protection before waiving age-discrimination claims. Under the Older Workers Benefit Protection Act, codified at 29 U.S.C. § 626(f), a waiver of Age Discrimination in Employment Act claims is valid only if it is "knowing and voluntary," which requires all of the following, as explained in the EEOC's guidance on severance waivers:
| Requirement | Individual separation | Group layoff / exit program |
|---|---|---|
| Consideration period | At least 21 days | At least 45 days |
| Revocation period | 7 days after signing; cannot be shortened or waived | |
| Plain language | Written so the employee can understand it; must specifically mention ADEA claims | |
| Advice of counsel | Must advise the employee in writing to consult an attorney | |
| Extra consideration | Something of value beyond what the employee is already owed | |
| Group disclosures | — | Written disclosure of the decisional unit, selection criteria, and the job titles and ages of those selected and not selected |
If material terms change during negotiation, the 21-day clock restarts. A waiver that misses any element is unenforceable as to age claims — the employee can keep the money and still sue under the ADEA. Employees under 40 do not get these statutory periods federally, though some states impose their own review or revocation windows.
Group layoffs and the WARN Act
When a termination is part of a large-scale event, timing rules kick in. The federal Worker Adjustment and Retraining Notification (WARN) Act, summarized on the Department of Labor's plant closings page, requires employers with 100 or more employees to give 60 calendar days' written notice of a plant closing or mass layoff — generally one affecting 50 or more workers at a single site (with additional thresholds tied to workforce percentage). Notice goes to affected workers or their union, the state dislocated-worker unit, and local government.
An employer that fails to give required notice can owe back pay and benefits for up to 60 days. Several states run "mini-WARN" laws with lower thresholds or longer notice periods. Severance offered during a covered layoff does not replace WARN notice, though pay in lieu of notice may offset liability.
What is actually negotiable
Employers expect some negotiation, especially from long-tenured employees or where the departure carries legal risk. Before responding to an offer, work through this list:
- Amount and structure. Weeks of pay, lump sum versus installments (installments sometimes come with conditions), and treatment of bonuses or commissions already earned.
- Equity and retirement. Vesting acceleration or extended exercise windows for options; confirm what is already vested and untouchable.
- Health coverage. Employer-paid COBRA premiums for a defined period is a common and valuable ask.
- Restrictive covenants. Check whether the agreement adds or revives a noncompete — enforceability varies enormously by state, as our state-by-state noncompete guide details. Ask to strike or narrow covenants that outlive their purpose.
- Non-disparagement and confidentiality. Seek mutuality (the company's leadership won't disparage you either) and carve-outs for legally protected speech; overly broad gag terms directed at rank-and-file employees can raise issues under federal labor law.
- References and characterization. Agree on a neutral reference, the stated reason for departure, and eligibility-for-rehire status.
- Deadlines. Note the exact consideration and revocation windows and calendar them.
Practical note: Severance is taxable wages, subject to withholding and payroll taxes — a "$40,000 package" is a gross number. And signing early rarely helps: the offer generally cannot be pulled for taking the review period the agreement itself provides, though nothing requires an employer to keep an offer open beyond it.
Frequently asked questions
Can I still file an EEOC charge after signing a release?
Yes. No severance agreement can lawfully bar you from filing a charge with the EEOC or participating in its investigations. What a valid release can do is waive your right to recover individual monetary relief for the released claims. Agreements that purport to ban charge-filing outright are unenforceable on that point.
Do I forfeit unemployment benefits by accepting severance?
Generally no — releases cannot waive unemployment claims in most states — but severance pay can affect the timing or amount of benefits depending on state rules and how payments are structured (lump sum versus salary continuation). Report the severance accurately when you file; misreporting causes far bigger problems than any offset.
Is my employer required to offer severance at all?
Usually not. Federal law imposes no severance requirement, and most states follow suit. Obligations arise only from an employment contract, a promise in a handbook or policy, a pattern amounting to an enforceable plan, or a union agreement. That is precisely why employers attach conditions: severance is the payment they make to buy a release.
What happens if I revoke within the 7-day window?
For agreements covered by the OWBPA, revoking within seven days of signing cancels the deal: you get no severance, and you keep your right to sue. The revocation right applies to the ADEA waiver, and in practice most employers treat revocation as voiding the entire agreement. Revocation must follow the method the agreement specifies — put it in writing.
Putting it together
Treat a severance offer as the opening of a short negotiation, not a verdict. Read the release list slowly; inventory any claims you might actually hold (discrimination, unpaid overtime, contract promises) before valuing the offer; check every ongoing obligation you would carry away, especially covenants; and use the full review period — that is what it is for. If real claims are in play, the review period exists precisely so you can get advice from an employment lawyer in your state before the window closes.
Separation issues rarely travel alone — classification, wages, discrimination, and restrictive covenants all feed into what an exit is worth. Our employment law hub covers each piece of that picture.
