Short answer: A severance agreement sometimes comes with a routine layoff or reorganization, and sometimes it’s a way for an employer to cover up an unlawful motive like retaliation or discrimination. Offers that arrive soon after a protected activity, such as taking medical leave, reporting harassment, reporting a workplace injury, or complaining about wage and hour violations, deserve a closer look. Signing releases any and all employment claims against your employer, whether you know about those claims or not. Before you sign, take the time you’re given to consider the agreement, gather your documentation, and talk with an employment law attorney about your rights.
Being handed a severance agreement can feel like the ground has shifted beneath you. Maybe you’ve given an employer ten, twenty, or even thirty years of your life, and you’d pictured retiring there. Now you’re sitting with a stack of legal language and a lot of questions. What does my future look like? How am I going to find new work? Should I sign and move on, or is something else going on here? These questions are scary, and they come at a moment when you’re already facing the loss of a job you counted on. Understanding why employers offer severance, and what you give up when you sign, can help you make this decision with a clearer head.
Why Employers Offer Severance Agreements
Employers offer severance agreements to protect themselves from future liability. Once the employment relationship ends, they want assurance that you won’t later sue them over wage and hour violations, discrimination, or retaliation. In exchange for a sum of money, you release your employer from those potential claims.
“The severance agreement is a liability shield,” says attorney Nancyrose Hernandez, “and so it enables the employer to kind of break that relationship without the fear of future litigation.”
A severance agreement doesn’t always mean your employer is worried about a legal claim, though. Some employers offer severance to soften the landing and help you transition into new employment, since finding a job may take time. A routine layoff, a reorganization, or a mass layoff often comes with severance for exactly that reason. Other times, a severance agreement serves as a cover up for a retaliatory or discriminatory motive. Understanding why your employer is offering you severance is the first step toward deciding what to do with the offer.
Subtle Signs Your Severance Offer May Be Covering Something Up
Timing often tells the story. Severance agreements that cover up retaliation or discrimination typically follow some protected activity: a medical leave of absence, a report of a workplace injury, a harassment complaint, a safety complaint, or a report of wage and hour violations. A severance offer that arrives close in time to one of these activities can show a causal connection between your protected activity and the offer. In those situations, your employer may be worried about legal liability and trying to avoid it by getting you to sign.
Pay attention to how your employer describes the reason for your separation, too. We often see employers say a job has been eliminated when the duties haven’t really gone anywhere. Someone takes over those responsibilities, and the position may even get posted again under a different title. Calling a role eliminated can be a way to mask a retaliatory or discriminatory motive, and running your situation by an employment law attorney can help you see whether there’s more going on.
Pressure to sign quickly is another warning sign. Employers sometimes tell employees they only have a few days to decide, or that they have to sign the same day to receive their final paycheck. “Oh, you only have five days to sign. Oh, you only have a week to sign. Oh, you have to sign today if you want your final check. That’s coercion,” Hernandez says.
What You’re Giving Up When You Sign
Signing a severance agreement means releasing any and all employment law claims against your employer, whether you know about those claims or not. Once you sign, you can never bring a future action against that employer. Employees sometimes realize after the fact that what happened to them may have involved age discrimination, medical condition discrimination, or a violation of leave laws, but by then their right to pursue those claims is gone. Without a clear understanding of the legal language, you could be leaving money on the table or giving up a claim worth pursuing.
Severance agreements also typically include a confidentiality provision and a non disparagement clause. Together, these provisions work like a gag order: you can’t talk about the terms of the agreement, and you can’t make negative comments about your employer.
There’s also language employees tend to miss. Many agreements spell out your right to consult with an attorney, along with time to consider the agreement and a window to revoke your signature afterward. Typically, an employee has 21 days to consider a severance agreement and seven days to revoke after signing, though agreements vary. Read carefully so you know exactly how much time you have.
A Client Story: Eleven Years of Loyalty, Then a Severance Offer
We worked with an employee in the medical industry who’d spent about 11 years as a billing specialist. She was deeply loyal to her employer. Early on, she regularly worked 10 to 12 hour days and put in extensive overtime to make sure her work got done and got done well. For eight years, she thrived and excelled in her role.
Then her mother became terminally ill. Our client kept working through her mother’s illness, clocking in from beside her mother’s hospital bed and taking her to doctor’s appointments. As her mother’s condition grew more serious, she took a medical leave of absence to care for her mother before she passed away.
When she returned to work, the shift was immediate. Her overtime hours disappeared, and the flexible schedule she’d enjoyed was replaced with a short 9 to 5. Meetings she used to attend went on without her. She started getting written up for things she’d never been written up for before, and her employer began favoring the employees who’d taken over her duties while she was out. On top of grieving her mother, she was now dealing with depression and sleepless nights brought on by how she was being treated at work.
She spoke up. She raised her concerns, sent emails to HR, and provided documentation showing she’d been singled out only after taking medical leave. Then one morning, shortly after she clocked in, she was called into a meeting that came out of nowhere. She sensed something was coming, and she was right. Her employer handed her a severance agreement offering four months of pay.
She knew the offer wasn’t right. The agreement came on the heels of her complaints and her medical leave, and four months of pay wasn’t enough to give up her right to pursue legal action. She contacted our office to understand her rights and the value of what her employer was offering, then chose to retain us as her advocate and negotiator instead of handling the process on her own.
Having someone review her situation gave her the courage to hold her employer accountable instead of walking away silently. She’s now out of a toxic work environment and looking for a new job, where she’ll bring the same dedication she always has. Just as importantly, she’s free to heal. She can focus on her treatment and therapy while our office serves as her voice.
What to Do Before You Sign
The biggest mistake an employee can make is signing a severance agreement right away, often the same day it’s handed over, without fully understanding the agreement or their legal rights. Take the time the agreement gives you. Talk with your family and friends, and consult with an employment law attorney who can assess your fact pattern and tell you whether you have potential claims.
While you’re still employed, start gathering information and documentation: emails, text messages, internal Teams messages, any complaints you’ve made, and anything else you’ll lose access to once your employment officially ends.
An attorney can help you explore every option, whether that means accepting the severance agreement, negotiating for a higher amount, or declining to sign and pursuing claims against your employer. Many employees want to know whether the amount being offered is worth accepting, and answering that question starts with understanding your potential claims and their value.
“Take a minute, take a deep breath, talk to a professional and understand your rights before signing a severance agreement,” Hernandez says.
You have a right to understand what you’re releasing before you sign anything. Asking those questions is the first step toward protecting your future.
Disclaimer
This content is for informational purposes only and does not constitute legal advice. Every situation is different. Consult with a qualified employment law attorney to discuss the details of your case.
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