Insights & Publications
Severance Agreement Review: What to Check Before You Sign
Should you sign a severance agreement? A severance agreement is a contract, typically to receive pay and/or benefits in exchange for giving up the right to bring certain legal claims. A severance agreement review before signing is worth the time. Here is a 10-point checklist from FairPlay Law.
By Darah Okeke
Arguably, the worst moment of a job loss isn’t the surprise meeting scheduled with no agenda, when a manager is joined by HR to inform you that your job is being eliminated or your employment is terminated for performance reasons. It’s the moment when too many professionals succumb to the pressure to sign the severance document without taking the time to review it or seek legal counsel.
When a newly laid-off or terminated employee signs a severance agreement without review, that employee is potentially giving up rights, money, advantages that could impact their finances, reputation, career mobility and future employment; but, despite the pressure, there is generally less real urgency for employees to sign.
Available data, while limited, suggests that in the current environment, more professionals are at risk of losing their jobs and too few take the time to negotiate severance documents before signing. As of September 2026, employers had announced 573,195 job cuts in the US, according to Challenger, Gray & Christmas, with AI-related reorganization cited as the reason for one in five layoffs. In a 2023 YouGov survey commissioned by JustAnswer, fewer than half (42%) of workers who received severance said they negotiated it.
Employees who’ve been presented with severance agreements should take the time to review these documents carefully before signing. In this article, I offer a review of what’s at stake, what to look for, and how to get insights and guidance on severance terms.
What is a severance agreement, and do you have to sign it?
A severance agreement is a contract between a soon-to-be-former employer and the laid-off or terminated employee. The employee is not required to sign it but should assess whether what is being offered by the employer outweighs what the employee is being asked to give up.
Typically, a severance agreement offers extra pay, benefits, and/or support from the employer in exchange for the departing employee releasing potential claims. For example, the employer might offer additional money to the employee if the employee promises not to bring a future lawsuit against the employer for wrongful termination or some other reason.
Severance pay is not required by federal law nor by most state laws (U.S. Department of Labor). However, wages, including commissions, earned are owed to the employee regardless of whether the employee signs a severance agreement or not; state laws vary as to whether final pay will also include bonuses and accrued but unused Paid Time Off or vacation (U.S. Department of Labor: Last Paycheck).
Thus, the employee is not required to sign a severance agreement but should understand what is being offered by the employer in exchange for promised releases or other obligations, and weigh the tradeoff.
How long do you have to sign a severance agreement?
Although employees may feel pressured to sign severance agreements as quickly as possible, deadlines in severance offers often reflect employer preference, and it is reasonable for employees to ask for more time (ideally in writing). Additionally, if the severance agreement includes a release of age discrimination claims, federal and state laws may require employers to offer employees, especially older employees (age 40+), more time to consider offers. See table 1 below for specific timeframes for signing severance agreements.
Table 1: How long employees have to sign severance agreements
Employee group | |
All employees | The deadline in the letter is often an employer choice, |
All employees age 40+ | If the agreement includes a release of age discrimination |
All employees in California | At least 5 business days to consider an agreement, |
All employees in New York | The pending No Severance Ultimatums Act would |
What should you look for in a severance agreement?
Severance agreements are not always standard, and employees who receive them should assess them carefully and critically. But employees should at minimum check for the types of items in the checklist below.
Severance agreement checklist: 10 things to review
Deadline to sign and revocation period. Check whether the deadline meets relevant rules above and remember that it is reasonable to ask for more time.
Money offered. Check the amount, whether it conforms with the employer’s policy, will be paid in a lump sum or in installments, and any conditions that could stop or rescind payments.
Earned pay. Check that earned pay is kept separate: final wages, payout of accrued but unused PTO/vacation where state law requires it, and earned commissions shouldn't depend on signing.
Bonus and equity. Unvested stock, pending bonuses, and equity could represent a significant aspect of professional compensation that may require negotiation in a severance agreement; we will unpack this topic in a future FairPlay Law article.
Health coverage. Laid-off and terminated employees are typically eligible to continue group coverage through COBRA, usually for up to 18 months, and have at least 60 days to elect it (U.S. Department of Labor). Check whether the employer subsidizes premiums and for how long.
The release. What claims are you being asked to give up? Some claims cannot be released: for example, employees retain by law the right to file an EEOC charge or to report the employer to another government agency (EEOC).
Non-disparagement and confidentiality. Check that the non-disparagement is mutual, i.e., that both the employee and representatives of the employer are required not to disparage the other party.
Non-compete, non-solicit and confidentiality obligations that carry over or are new. Does the severance agreement add requirements not to work for a competitor or solicit clients or employees above and beyond the obligations to which the employee agreed when hired or during employment? Limitations on future work significantly impact future earnings and will be addressed in detail in a future FairPlay Law article.
References and how the departure is described. Check whether the agreement includes an offer to provide a reference and how the departure will be positioned; to aid finding a next job, a laid-off employee should consider the severance discussion an opportunity to advocate for a preferred narrative or, at the very least, a neutral reference including dates of employment and last position held.
Repayment and cooperation clauses. Check for the conditions under which an employer can "claw back" severance.
Can you negotiate a severance agreement?
Severance agreements are usually negotiable, to the extent that employees are willing to advocate for themselves and employers are incentivized to listen. Too often, employees who are offered severance do not make the effort to negotiate because they assume terms are standard or that if they don’t agree to everything they will receive nothing.
However, the terms in a first severance offer are frequently open to discussion, including but not limited to the timing required for signature, severance payment amount, whether COBRA premiums will be subsidized by the employer, how equity will be treated, and whether a neutral reference will be provided.
The role of AI in understanding and negotiating severance agreements
As noted above, AI is already a top reason cited by employers for involuntary separations and is likely to continue to be an increasingly common rationale. But laid-off and terminated employees can also use AI to advocate for themselves when they receive severance agreements.
For example, through its affiliated technology company FairPlay Global, Inc., FairPlay Law offers employees the ability to securely upload their severance documents and receive a free FairPlay Analytics report that will explain the severance offer in plain language, rank the offered terms on a proprietary employee-favorability scale, and benchmark them against a growing dataset of agreements for similarly situated professionals. This report gives employees a data-driven view of their severance agreements and flags issues for negotiation. Employees who want help negotiating can schedule a consultation with a FairPlay lawyer and decide whether or not to engage counsel who will offer guidance on the negotiation or negotiate directly on their behalf.
Conclusion: before you sign
Being laid off is an unhappy experience, but you need not make the mistake of leaving money or rights on the table by rushing to sign the first offer your employer puts forward on their schedule and terms. The agreement is your chance to set the terms of your exit, and it’s yours to negotiate. If you have recently received a severance agreement, use the severance agreement checklist above to review your document. And before you sign, upload your severance agreement at fairplay.law for a free report.
About the author:
Darah Okeke is a Partner and the Employment Law Practice Leader of FairPlay Law, PLLC. An employment lawyer with nearly two decades of experience, she has spent much of her career advising employers on complex and high-stakes workplace matters and now brings that experience to representing professionals navigating consequential moments in their careers. Prior to joining FairPlay, she held senior in-house employment law roles at Uber Technologies, Twitter, and Etsy.
FAQs
Can I still file an EEOC charge after signing a severance agreement?
Yes. A severance agreement can’t stop you from filing a charge with the EEOC, though it may waive your right to recover money from that charge (EEOC).
Does severance affect unemployment benefits?
Whether severance delays or extinguishes unemployment benefits depends on the state, so check your state's labor department (the U.S. Department of Labor's CareerOneStop finder lists each state’s office) before you sign.
What happens if I don't sign by the deadline?
Failing to meet the deadline to sign provided by the employer may mean the employer withdraws or changes the offer. However, the deadline provided by the employer to sign a severance agreement may simply reflect the employer’s own preference; if you need more time, ask for it in writing before the deadline.
Sources
Challenger, Gray & Christmas, “September 2026 Job Cuts Report” (released Oct. 1, 2026)
JustAnswer/YouGov, Layoffs, Severance & Employment Law Survey (fieldwork Mar. 21–22, 2023)
U.S. Department of Labor, “Severance Pay”
U.S. Department of Labor, “Last Paycheck”
U.S. Department of Labor, “An Employee’s Guide to Health Benefits Under COBRA”
California Government Code §12964.5
New York State Senate Bill S372 (No Severance Ultimatums Act)
Speak Out Act, Public Law 117-224 (2022)
IRS Publication 15 (2026), Employer’s Tax Guide
CareerOneStop (U.S. Department of Labor), Unemployment Benefits Finder