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Severance agreement: what to check before you sign

What to check in a severance package: what the agreement asks you to give up, the rules at 40 or older, and a sample read clause by clause.

Mimi PhanCo-founder and CTO

The short answer

A severance package is the pay or benefits an employer offers when your job ends 7. The severance agreement is the deal that comes with it: you get the package and give up legal claims. Federal wage law doesn’t require one 7. At 40 or older, federal law gives you at least 21 days to consider it (45 in a group layoff), then 7 days to revoke 1. Read it all and ask questions.

Key points

  1. The core of a severance package is a release: you give up claims in exchange for pay or benefits. Read the release first, because it decides what you are giving up.
  2. At 40 or older, the agreement has to give you 21 days (45 in a group program) to consider it and 7 days after signing to revoke 1. You still can’t be stopped from filing an EEOC charge 23.
  3. Unemployment, final pay and non-competes depend on your state. Check your state agency, and talk to an employment lawyer if a clause worries you.

Does your employer have to offer a severance package?

Not under federal wage law. The Department of Labor says the Fair Labor Standards Act has no severance requirement, and that severance “is a matter of agreement” between employer and employee 7.

So the severance package you are offered is a deal between two sides, not a form set by law.

If an employer-sponsored plan promised severance and you didn’t get it, DOL’s Employee Benefits Security Administration may help 7.

The core trade is simple. The company pays you, and you sign a . The rest sets how and when.

What you get

What you give up

The core trade: pay or benefits on one side, a release of claims on the other. Select an item to jump to its note in the sample agreement below 7.

What does a sample severance agreement look like, clause by clause?

Below is a short, made-up agreement. Real ones run longer and differ. Every name, company, number and date is fictional.

Read it, then read the note for each numbered clause.

Sample

SAMPLE. NOT A REAL AGREEMENT.(Names, amounts and dates are made up.)

SEPARATION AGREEMENT

Between Brightwater Example, Inc. (“Company”) and Jordan Sample (“Employee”). Employee’s last day of work is March 14, 2025.

1. Severance pay. Company will pay Employee $18,000, equal to 12 weeks of base pay, in six equal installments on regular paydays, less taxes and withholding.

2. Health coverage. If Employee elects COBRA, Company will pay its share of the premium for three months.

3. Release. Employee releases Company and its officers from all claims arising on or before the date Employee signs, including claims under the Age Discrimination in Employment Act.

The release

This is the center of the deal. You give up claims that arose before you sign. A waiver of age claims has to name the Age Discrimination in Employment Act and can’t cover later claims 1.

4. What is not released. Nothing in this Agreement stops Employee from filing a charge with, or taking part in an investigation by, the EEOC or another government agency.

5. Time to consider; revocation. Employee was given this Agreement on February 24, 2025 and has 21 days to consider it. Company advises Employee in writing to consult an attorney. Employee may revoke within 7 days after signing. The Agreement takes effect on the eighth day.

6. Confidentiality. Employee will keep the terms of this Agreement confidential, except from a spouse, tax adviser or attorney, or as the law requires.

7. Non-disparagement. Employee will not make statements that disparage Company or its officers.

8. Return of property. By the last day, Employee will return the laptop, badge and all company files.

9. Restrictions. For 12 months, Employee will not work for a competitor within 50 miles or solicit Company customers.

10. Taxes. Payments are wages. Company will withhold as required.

Signed: Date:

Why it is there

The release

This is the center of the deal. You give up claims that arose before you sign. A waiver of age claims has to name the Age Discrimination in Employment Act and can’t cover later claims 1.

Note 5 of 12
A made-up sample. Select a numbered pin to see why that clause is there and where it comes from 135791115.

What if you are 40 or older?

The federal age-discrimination law protects people who are at least 40 1. Extra rules apply to waiving those claims. They come from the (OWBPA), part of 29 U.S.C. 626(f). At a minimum, a waiver of age claims needs this 1:

  • It is written so you, or an average person eligible for it, can understand it.
  • It names age claims under the Age Discrimination in Employment Act.
  • It doesn’t waive claims that arise after you sign.
  • You get something extra in exchange, beyond what you were already owed.
  • You are told in writing to consult an attorney first.
  • You get at least 21 days to consider it, or 45 days for a .
  • You get at least 7 days after signing to revoke it.
Pick a situation

Example

Time to consider and revoke

21days to consider

At least 21 days to consider it, or 45 days for a group program. 1

7

days to revoke

Revocation: agreement not yet effective. At least 7 days after signing to revoke. 1

  • A material change to the final offer restarts the 21 or 45 days. A change that isn’t material does not, unless both sides agree otherwise 2
  • The 7-day revocation period can’t be shortened 2
Example: the two clocks for a 40-or-older worker. Pick a situation to see the days to consider and the days to revoke 12.

If a waiver of age claims misses any of these, the EEOC says it is invalid and unenforceable 3. The side relying on the waiver must prove in court that it was knowing and voluntary 1. A waiver that settles an EEOC charge or a lawsuit has a lighter test: the first five items above plus a reasonable time to consider 1.

In a group program, the employer also has to give you written information when the period starts. It covers who is included, the eligibility factors and time limits, and the job titles and ages of those selected and not selected 1.

The EEOC’s rule adds details. A material change to the final offer restarts the 21 or 45 days. A change that isn’t material does not, unless both sides agree otherwise 2. The 7-day revocation period can’t be shortened 2.

Which claims can you not give up?

The EEOC’s rule protects two rights: filing a charge, and taking part in an EEOC investigation or proceeding. No waiver agreement may prohibit either 2.

You can still file after you sign. Under the age law you don’t have to return the severance first. For other discrimination laws, the EEOC says courts differ 3.

A waiver of age claims also can’t reach claims that arise after you sign. The EEOC gives the example of retaliation after you file a charge 3.

The EEOC has a deadline for filing: generally 180 calendar days from the day the discrimination took place, or 300 if a state or local agency enforces a similar law 4. Check the date if discrimination may be part of your story.

Federal minimum wage and overtime rights are different. The Supreme Court has said they cannot be waived by contract 18. Lower courts differ on whether a private settlement of a real dispute over hours or pay needs DOL or court approval 18. The answer can depend on where you are.

Can this be waived?

  • File an EEOC charge

    No waiver agreement may prohibit filing a charge, or taking part in an EEOC investigation or proceeding 2.

    Cannot be taken away

  • Claims that arise after you sign

    A waiver of age claims can’t reach claims that arise after you sign. The EEOC gives the example of retaliation after you file a charge 3.

    Not covered by an age waiver

  • Minimum wage and overtime

    The Supreme Court has said federal minimum wage and overtime rights cannot be waived by contract 18.

    Cannot be waived by contract

The EEOC’s deadline for filing 4

180
calendar days from the day the discrimination took place
300
if a state or local agency enforces a similar law
Three things a severance agreement can’t take away, and the filing deadline for the first 23418.

Can the agreement keep you quiet?

Agreements often include a confidentiality clause and a . The question is how far they can go.

In February 2023 the National Labor Relations Board held in McLaren Macomb that offering a severance agreement that makes employees broadly give up their rights under the National Labor Relations Act violates it 5. In February 2025 the Acting General Counsel rescinded the 2023 memo on severance agreements, GC 23-05 6.

That did not undo the decision. In April 2026 the Board applied McLaren Macomb as existing precedent. Two members added that they would be open to reconsidering it 17. In an August 26, 2026 memo, the General Counsel’s office listed arguing to overrule it as a priority 17.

As of October 29, 2026, we found no NLRB page showing the Board has overruled it. Check the NLRB’s site for the latest.

The decision is about employees covered by the National Labor Relations Act 5. Whether you are covered is a question for the NLRB or a lawyer.

Status note

  1. Feb. 21, 2023

    The Board holds in McLaren Macomb that offering a severance agreement that makes employees broadly give up their rights under the National Labor Relations Act violates it 5.

  2. Feb. 14, 2025

    The Acting General Counsel rescinds the 2023 memo on severance agreements, GC 23-05 6.

  3. Apr. 2026

    The Board applies McLaren Macomb as existing precedent. Two members add that they would be open to reconsidering it 17.

  4. Aug. 26, 2026

    The General Counsel’s office lists arguing to overrule it as a priority 17.

  5. Oct. 29, 2026

    We found no NLRB page showing the Board has overruled it.

Clause as written in the sampleClause 6

Employee will keep the terms of this Agreement confidential, except from a spouse, tax adviser or attorney, or as the law requires.

What the decision looked at

The agreements it reviewed barred sharing the terms 5.

Clause as written in the sampleClause 7

Employee will not make statements that disparage Company or its officers.

What the decision looked at

The same 2023 decision involved a clause barring statements that could disparage the employer 5.

Where the 2023 decision stands as of October 29, 2026, and the two sample clauses it concerns 5617.

What should you check in a severance package, and what can you ask for?

Run through these before you decide. The list says which items come from law and which from practice.

  • The deadline. Find the date. For workers 40 or older, see the minimums above 1. For others we found no federal minimum, so check the agreement.
  • Health coverage. COBRA applies to group plans of employers with 20 or more employees 9. The plan must give you at least 60 days to elect. Job loss other than for gross misconduct means 18 months of coverage. The first payment can’t be due sooner than 45 days after you elect 10.
  • Unemployment benefits. This varies by state. In New York, weekly severance above the maximum weekly benefit rate can block benefits while it lasts 12. In Texas, you cannot get benefits while receiving certain severance pay 13. California has its own definition of severance for unemployment 14. Ask your state unemployment agency before you sign or file.
  • Final pay. Federal law doesn’t require immediate payment of a final paycheck. Some states do 8. Your state labor department can tell you your state’s rule.
  • What you give up. Read the release and every clause that limits you later, including confidentiality, non-disparagement and restrictions on future work.
  • Taxes. A severance package is taxable. The IRS says severance payments are wages, subject to Social Security and Medicare taxes and federal income tax withholding 11. Ask about withholding before the first payment.
  • Who it covers. Look for the names of the people and companies you are releasing.

0 of 7 checked

  • Law

    Find the date. For workers 40 or older, see the minimums above 1. For others we found no federal minimum, so check the agreement.

  • Law
  • Law
  • Law
  • Practice
  • Law
  • Practice

What people commonly ask forCommon practice

  • The amount
  • The length of paid health coverage
  • More time to decide
  • A narrower non-compete
  • A neutral reference
Tick items off as you check them. Your ticks stay in this browser only 1891011121314.

What people commonly ask for. Our sources don’t include a neutral list of what is negotiated. As common practice, people who negotiate a severance package ask about the amount, the length of paid health coverage, more time to decide, a narrower non-compete, and a neutral reference. A lawyer can tell you what is realistic where you live.

Nothing in the rules we read stops you from asking what a clause means, or from asking for more time.

When should you talk to a lawyer?

Consider an employment lawyer if the release covers claims you think you may have, such as wrongful termination, discrimination, retaliation or unpaid wages. Consider it, too, if a clause limits where you can work next, or if the deadline is short.

For workers 40 or older, the statute lists written advice to consult an attorney as a minimum for a valid age waiver 1.

There is free and low-cost help:

  • The American Bar Association’s Find Legal Help page links to lawyer referral services and to free legal help. Federally funded legal aid offices help low-income people 16.
  • LawHelp.org gives free legal-rights resources and referrals to nonprofit legal aid in every state 16.
  • The EEOC takes discrimination charges 4. DOL’s Wage and Hour Division takes pay questions at 1-866-487-9243 16. Your state labor department can help too.

Consider an employment lawyer if

  • The release covers claims you think you may have, such as discrimination, retaliation or unpaid wages
  • A clause limits where you can work next
  • The deadline is short

Employment lawyer

The American Bar Association’s Find Legal Help page links to lawyer referral services and to free legal help 16.

ABA Find Legal Help

  • Legal aid

    LawHelp.org gives free legal-rights resources and referrals to nonprofit legal aid in every state. Federally funded legal aid offices help low-income people 16.

    LawHelp.org

  • EEOC

    The EEOC takes discrimination charges 4.

    EEOC time limits

  • Wage and Hour Division

    DOL’s Wage and Hour Division takes pay questions at 1-866-487-9243 16. Your state labor department can help too.

    DOL Wage and Hour Division

Before a call, gather

  • The agreement
  • Any earlier offers
  • Your employment letter
  • A list of key dates
Who can help, and what to gather before a call 416.

Before a call, gather the agreement, any earlier offers, your employment letter and a list of key dates. Here’s what to bring to the first consultation.

Talk it through with Scribe

Tell Scribe what your agreement says. It helps you understand your options in plain English and writes a summary you can share with a lawyer. Talking with Scribe is free.

Talk to Scribe for free

Scribe is an AI assistant, not a lawyer. AI can make mistakes. Check important details, and talk to a lawyer before you act.

Common questions

What is a severance package?

It is the pay and benefits an employer offers when your employment ends. The Department of Labor says severance pay is often granted at termination. Federal wage law doesn’t require it, so it is a matter of agreement 7. The severance agreement is the paper that sets the terms.

How is severance pay calculated?

Federal wage law sets no amount. The Department of Labor says severance pay is usually based on length of employment and is a matter of agreement 7. Look for the amount in your agreement and any employer plan. The sources we read give no typical amount.

Do I have to give the money back if I file an EEOC charge?

Under the age law, the EEOC says you don’t have to return severance first. For other discrimination laws the law is less clear, and courts differ 3.

Can I sign sooner than the deadline?

For workers 40 or older, the EEOC’s rule allows signing before the 21 or 45 days end, if the choice is knowing and voluntary and not pushed by the employer 2. The 7-day revocation period still runs 2.

Sources

  1. 29 U.S.C. 626(f), Older Workers Benefit Protection Act waiver rules; 29 U.S.C. 631(a), age limit of 40 · Cornell Law School Legal Information Institute · 29 U.S.C. 631(a), age limit of 40
  2. 29 CFR 1625.22, Waivers of rights and claims under the ADEA · Cornell Law School Legal Information Institute
  3. Q&A: Understanding Waivers of Discrimination Claims in Employee Severance Agreements · U.S. Equal Employment Opportunity Commission
  4. Time Limits For Filing A Charge · U.S. Equal Employment Opportunity Commission
  5. Board Rules that Employers May Not Offer Severance Agreements Requiring Employees to Broadly Waive Labor Law Rights (February 21, 2023) · National Labor Relations Board
  6. GC 25-05 Rescission of Certain General Counsel Memoranda (February 14, 2025) · National Labor Relations Board
  7. Severance Pay · U.S. Department of Labor
  8. Last Paycheck · U.S. Department of Labor
  9. Continuation of Health Coverage (COBRA) · U.S. Department of Labor
  10. An Employee’s Guide to Health Benefits Under COBRA · U.S. Department of Labor, Employee Benefits Security Administration
  11. Publication 15 (2026), Employer’s Tax Guide · Internal Revenue Service
  12. Dismissal/Severance Pay and Pensions FAQ · New York State Department of Labor
  13. How Money from Other Sources Can Affect Your Benefits · Texas Workforce Commission
  14. Severance Pay, Dismissal or Separation Pay (TPU 460.35) · California Employment Development Department
  15. Noncompete Rule · Federal Trade Commission
  16. Find Legal Help (American Bar Association); LawHelp.org; U.S. Department of Labor, Wage and Hour Division, Contact Us · American Bar Association; LawHelp.org; U.S. Department of Labor · LawHelp.org · DOL Wage and Hour Division, Contact Us
  17. General Counsel Memorandum GC 26-04, Further Guidance Regarding General Counsel Priorities (August 26, 2026); Summary of NLRB Decisions for Week of April 6-10, 2026 (JetStream Ground Services, Inc.) · National Labor Relations Board · NLRB weekly summary, April 6-10, 2026
  18. Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945); Barrentine v. Arkansas-Best Freight System, Inc. (1981), on FLSA rights not being waivable by contract; Jackson Lewis, Has Lynn’s Food Grown Stale? (secondary, for how lower courts differ on settlements) · CourtListener; Jackson Lewis · Barrentine v. Arkansas-Best Freight System (CourtListener) · Jackson Lewis, Has Lynn’s Food Grown Stale? (secondary)

Mimi Phan

Co-founder and CTO

Mimi leads Scribe’s engineering. She started with a NASA Langley apprenticeship and spent 21 years at Northrop Grumman before five years leading startup engineering.

Scribe is an AI assistant, not a lawyer. A conversation does not create an attorney-client relationship. This article is general information, not legal advice.

release of claims

A promise not to sue over certain legal claims, given in exchange for pay or benefits.

COBRA

A federal law that lets people who lose group health benefits keep them for a limited time, often at up to 102% of the plan’s cost 9.

Older Workers Benefit Protection Act

The part of the age-discrimination law that sets the rules for waiving age claims, in 29 U.S.C. 626(f) 1.

non-disparagement clause

A promise not to make statements that put the employer in a bad light. How broad it can be is the issue in the NLRB decision above 5.

group program

An exit incentive or termination program offered to a group or class of employees, such as a layoff. The OWBPA gives group programs 45 days and extra written disclosures 1.

All writing

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