Severance Agreement Review: What to Look For Before You Sign

Severance agreement review starts with one question

What are you being paid to give up?

A severance agreement review is not just proofreading. It is a trade analysis. Your employer is offering money, benefits, or both. In exchange, you are usually giving up legal claims and accepting new restrictions.

That trade may be fine. It may even be generous. But you should know what is in the box before you tape it shut and ship it back to HR.

Most severance agreements contain the same basic pieces:

• Severance pay. The amount, payment date, tax treatment, and whether it is paid lump sum or over payroll.
• Release of claims. Your promise not to sue the company for claims connected to your employment or termination.
• Confidentiality. Limits on who you can tell about the agreement or the amount paid.
• Non-disparagement. A promise not to make negative statements about the company, sometimes with exceptions and sometimes without them.
• Restrictive covenants. Non-competes, non-solicits, confidentiality, invention assignment, or customer restrictions.
• Benefits and final pay. COBRA, PTO, commissions, bonuses, equity, retirement plans, and final paycheck language.
• Return of property. Laptop, badge, phone, files, documents, passwords, and company data.

The agreement may look like a standard HR template. That does not mean it is harmless. Standard templates can still contain expensive landmines. Very democratic of them.

What a severance agreement review should catch

Some clauses are normal. Some should make you pause.

Severance agreements are repetitive. That is helpful. Once you know the usual parts, the weird parts stand out.

These clauses are common:

• Release of legal claims against the employer
• Severance payment amount and timing
• Confidentiality around the agreement
• Return of company property
• Non-disparagement language
• Cooperation with transition issues
• Confirmation of final wages, PTO, benefits, or COBRA information

Common does not mean automatic. You still need to check the wording. A normal clause can become a problem if it is too broad, too vague, or sneaks in something that has nothing to do with severance.

These clauses deserve a harder look:

• A release that covers claims you do not understand or claims that have not accrued yet
• A non-compete or non-solicit clause that goes beyond your actual role, geography, or customer relationships
• Clawback language that lets the employer take severance back for vague reasons
• Language waiving wages, commissions, bonuses, PTO, or benefits you already earned
• A non-disparagement clause with no carve-out for legally protected activity
• Confidentiality language that blocks you from talking to a lawyer, spouse, tax advisor, government agency, or unemployment office
• Equity, bonus, or commission language that contradicts your plan documents

The key is not whether a clause sounds intimidating. Legal documents love sounding intimidating. The key is whether the clause changes your actual rights in a way that matters.

Red flags that matter more than the severance number

The severance amount gets all the attention. But the most expensive part of the agreement may be a clause that affects your next job, equity, commissions, legal claims, or unemployment.

Overly broad release language is the first thing to check. Most employers want a broad release. That is the point of paying severance. But the agreement should not release rights that legally cannot be released, stop you from filing agency charges, or waive claims you do not understand.

Non-competes and non-solicits deserve special attention. State law varies a lot. A clause that is enforceable in one state may be illegal or heavily limited in another. Even when a non-compete is not enforceable, it can still scare off a future employer. Annoying, but real.

Clawback language can be worse than it looks. Some agreements say the company can recover severance if you breach confidentiality, disparage the company, challenge the agreement, or fail to cooperate. If the trigger is vague, you may be accepting money with a string tied around it.

Non-disparagement clauses should include carve-outs. You should still be able to talk to government agencies, respond to subpoenas, speak with your lawyer, participate in investigations, and engage in legally protected activity.

Equity, bonus, and commission provisions need to match the documents that actually govern those rights. Severance agreements sometimes summarize plan rules badly. Sometimes the summary is convenient for the company. What a strange coincidence.

What is actually negotiable in a severance agreement

More than people think. HR may say the agreement is standard. That usually means “we would prefer not to negotiate.” It does not mean negotiation is impossible.

The company wants finality. You want enough money and clean terms to move on. That creates room to negotiate.

Common negotiation points include:

• More severance money.
• A longer COBRA subsidy or extended health coverage.
• Faster payout timing.
• Neutral reference language.
• A mutual non-disparagement clause.
• Narrower confidentiality language.
• A narrower non-compete, non-solicit, or IP clause.
• Outplacement support, laptop purchase rights, or transition language.
• Treatment of bonus, commission, PTO, equity, or vesting issues.

Your leverage depends on the facts. Strong leverage can come from a discrimination or retaliation issue, unpaid wages, inconsistent termination reasons, a long tenure, a senior role, pending commissions, equity, or the employer needing a smooth transition.

Weak leverage does not mean no leverage. Even in a clean layoff, you may be able to ask for better reference language, more time to review, a COBRA subsidy, or removal of language that could hurt unemployment.

The ADEA 21/7-day rule

If you are 40 or older, timing matters.

If you are 40 or older and your severance agreement asks you to release federal age discrimination claims, special rules usually apply under the Older Workers Benefit Protection Act.

In a typical individual termination, the agreement should give you at least 21 days to consider the release and 7 days to revoke after signing. The release usually does not become final until that 7-day revocation period expires.

For certain group layoffs, the consideration period is often longer. You may also be entitled to information about the decisional unit, eligible employees, selected employees, job titles, and ages. That sounds bureaucratic because it is. It can also be important.

Do not treat the 21 days as a dare. You can sign before the period ends if you choose, but you usually do not have to. Use the time to understand the agreement, ask questions, and negotiate if the terms are not right.

When a full employment attorney is worth it

Some severance situations are too valuable or too messy for a light review. That is when paying for a traditional employment lawyer can make sense.

Consider full representation if:

• The severance is over $100,000. At that level, a few thousand dollars in legal fees may be rational.
• You have a strong discrimination, harassment, retaliation, or whistleblower claim. The release may be worth much more than the severance offer.
• There is a serious non-compete fight. Especially if your next job, clients, or industry access is at risk.
• Equity, bonus, commission, or clawback amounts are large. Plan documents, vesting schedules, and forfeiture provisions need careful review.
• You are an executive or founder-level employee. The agreement may involve fiduciary duties, board issues, securities, indemnification, insurance, or public statements.
• The employer already has outside counsel involved. That does not mean panic. It does mean you should take the process seriously.

The simple rule: if the downside is life-changing money or career restriction, do not cheap out. Get full counsel.

When DIY severance review is probably fine

Not every severance agreement needs a lawyer. Sometimes the document is boring in the best possible way.

DIY review may be reasonable if:

• The severance is small. Roughly under $5,000, unless other legal issues are involved.
• It was a clean layoff. No misconduct allegation, no resignation fiction, no dispute about why you left.
• There are no restrictive covenants. No new non-compete, non-solicit, customer restriction, or invention assignment surprise.
• You have no potential legal claims. No discrimination, retaliation, unpaid wages, leave issues, harassment, or whistleblower facts.
• The agreement does not touch meaningful bonus, commission, PTO, equity, or benefits issues.

Even then, read carefully. Make a list of every obligation that applies after signing. If you cannot explain the agreement in plain English, do not sign it yet.

Flat-fee severance agreement review is the middle-tier sweet spot

Most people do not need $2,000 in billable hours. They need a smart read and a usable counter.

Traditional employment attorneys often charge $300 to $500 per hour. A severance agreement review can easily take 2 to 4 billable hours. That means $600 to $2,000 to review a document when the severance offer itself may be $5,000 to $30,000.

That math is why many workers skip review entirely. Not because review is useless. Because the old pricing model does not fit the size of the problem.

Flat-fee review is built for the middle tier:

• Your severance is meaningful but not executive-level.
• You want to know what the agreement actually says.
• You need red flags called out in plain English.
• You want a counter-proposal you can send to HR.
• You do not want to gamble $1,500 just to learn the agreement is mostly standard.

This is where a $250 severance agreement review makes sense. It is enough legal help to make an informed decision without turning a modest severance into an attorney fee donation drive.

For more on when legal help is worth the cost in employment-related disputes, see our unemployment appeal attorney stats guide.

What a good severance agreement review should produce

A useful review should give you more than “looks fine” or “do not sign.” You need specific guidance you can act on before the deadline.

A good severance agreement review should include:

1. Clause-by-clause commentary. The review should explain what each important section does in normal language.
2. Red-flag callouts. Broad releases, clawbacks, restrictive covenants, unemployment language, unpaid compensation, equity issues, and agency-rights carve-outs should be flagged.
3. State-specific notes. Severance law, wage rules, non-compete enforceability, PTO treatment, and protected categories can vary by state.
4. A negotiation plan. You should know what to ask for, what is realistic, and what is probably not worth spending leverage on.
5. A counter-proposal letter. The easiest way to negotiate is to send HR clean language they can forward internally.
6. A sign-or-do-not-sign risk summary. Not a guarantee. A practical read on whether the deal is acceptable, risky, or missing key protections.

The best review makes the agreement less mysterious. The goal is not to create drama. The goal is to help you sign, counter, or walk away with your eyes open.

Practical timing tips before you sign

The days after a layoff are stressful. That is exactly why you should slow the paperwork down.

• Do not sign same-day. Even if HR says the agreement is standard, review it after the meeting when your nervous system has stopped doing jazz hands.
• Ask for more time in writing. A short email is fine. You do not need to over-explain.
• Ask for referenced documents. If the agreement mentions another policy or plan, read that too.
• Confirm final pay separately. Severance and earned wages are not the same thing.
• Check benefit deadlines. COBRA, health coverage end dates, retirement plan access, and equity exercise windows can move fast.
• Keep negotiation professional. Your counter should be calm, specific, and easy for HR to approve.

If you negotiate, ask for the changes that matter most. More money is great. Clean reference language, removal of a bad non-compete, or fixing unemployment language may matter more.