A layoff is stressful, and a severance offer can feel like a lifeline you should grab before it disappears. Often it is a fair deal worth taking. But a severance agreement is a legal contract, and in almost every case the money comes with a condition: you give up your right to sue your employer over the job. That is not a reason to refuse it, but it is a very good reason to read it carefully and know your rights before you sign.

Severance itself is generally not required by law. Most employers offer it voluntarily, and what they get in return is the release of claims. The federal agency that handles workplace discrimination, the Equal Employment Opportunity Commission, explains how these waivers work in its guidance on severance agreements. Here is what to focus on.

What you are actually giving up

The core of most severance deals is a release, a promise not to sue over your employment. That can include claims of discrimination, wrongful termination, and unpaid wages you might otherwise pursue. Signing does not erase every right; you generally cannot be barred from filing a charge with the EEOC or cooperating with a government investigation, even if you sign away your own right to collect damages. But you should assume that by signing, you are trading your ability to bring most legal claims for the severance payment.

The extra protection for workers 40 and older

If you are 40 or older, a federal law called the Older Workers Benefit Protection Act adds real safeguards to any waiver of age-discrimination claims. For an individual agreement, the law says you must be given at least 21 days to consider it before signing, and after you sign you have 7 days to revoke, during which the agreement is not yet final. If the severance is part of a group layoff, the consideration period rises to at least 45 days, and the employer must also give you information about the ages and job titles of who was and was not selected. These rules are detailed in the EEOC guidance linked above.

Those timelines exist for your benefit. An employer that pressures a worker over 40 to sign on the spot is not following the rules, and the deadline is yours to use. Take the days.

Read for these specific terms

Beyond the release, several clauses deserve a careful look. Check whether the agreement includes a non-compete or non-solicitation clause that could limit your next job. Look for confidentiality and non-disparagement terms that restrict what you can say. Confirm how and when the severance is paid, whether in a lump sum or over time, and what happens to unused vacation, your final paycheck, and any bonus you had earned. Make sure the document matches what you were told verbally, because the signed contract, not the conversation, is what controls.

Do not overlook health coverage

Losing a job usually means losing employer health insurance, and a severance agreement is the moment to sort that out. Ask how long your coverage continues, and get information about your right to continue it temporarily under COBRA or to enroll in a Marketplace plan, since job loss opens a special enrollment window. Sometimes an employer will agree to cover part of the cost of continued coverage for a period, but only if it is negotiated and written into the agreement.

When to get help, and how to negotiate

Severance terms are often negotiable, especially the amount, the timing, and specific clauses. A polite, professional counter is normal and expected, and the worst outcome is usually that the answer is no. For a significant package, or if you believe you were treated unlawfully, having an employment attorney review the agreement before you sign is money well spent; many will do a review for a flat fee.

None of this means severance is a trap. For most people it is welcome and fair. It just means you should treat the paper the way you would any contract that involves giving something up: understand what you are releasing, use the time the law gives you, check the fine print on pay and health coverage, and sign only when you are satisfied. A calm week of review is exactly what these rules were written to protect.

This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.