Before You Sign a Severance Agreement

When employment ends, the amount of severance offered naturally receives much of the attention. But the payment is only one part of the agreement. Before signing, it is important to understand both what you will receive and what you are agreeing to give up or continue doing in return.

Understand exactly what you are being paid.

Review the amount and timing of the severance payment and whether it will be paid as a lump sum or over time. The agreement should also be considered alongside compensation that may already be owed, such as salary, commissions, bonuses, incentive compensation, or other benefits. Not every payment made at separation is necessarily severance.

Know what claims you are releasing.

Severance agreements commonly require the employee to release legal claims against the employer and related parties. The scope of that release matters. Before signing, understand which claims are being waived, the period covered by the release, and whether the agreement contains additional representations concerning existing claims, complaints, or other rights.

Review the obligations that continue after employment.

Separation does not necessarily end contractual restrictions. Existing non-compete, non-solicitation, confidentiality, or other post-employment obligations may remain in effect, and a severance agreement may reaffirm or modify them. The agreement should be reviewed together with any prior employment, confidentiality, or restrictive covenant agreements rather than in isolation.

Pay attention to confidentiality and nondisparagement provisions.

A severance agreement may restrict disclosure of its terms or impose continuing confidentiality and nondisparagement obligations. Consider what conduct is actually prohibited, whether the obligations apply to both sides, and whether appropriate exceptions exist for communications with legal or financial advisors, government agencies, or as otherwise required by law.

Consider what happens after the agreement is signed.

Other provisions can affect the relationship long after the final paycheck. These may include cooperation requirements, return of company property, references, repayment obligations, benefits, and provisions addressing future disputes. Understanding these terms before signing can prevent unexpected obligations from surfacing later.