Losing a job is stressful, and receiving a severance agreement can feel like a lifeline. However, many severance agreements are crafted to benefit the employer more than the employee. If you are presented with a severance package, it is crucial to understand your legal rights, financial implications, and how such an agreement may impact your future employment opportunities.
An experienced employment lawyer can help you determine whether the severance pay offered is fair and whether you should negotiate for a more favorable outcome. Here are key warning signs that indicate when you should refuse a severance agreement and seek legal counsel.
Red Flag #1. Rushed Deadlines and High-Pressure Tactics
Many severance agreements come with an artificial sense of urgency. Employers may pressure you to sign quickly, giving you a short deadline to decide.
Why do employers do this? They want to prevent you from seeking legal advice and fully understanding the legal and financial implications of signing.
What should you do? Take your time. Federal law mandates that employees over 40 years old must have at least 21 days to review a severance agreement and an additional 7 days to revoke it after signing. Even if you are younger, you have the right to consult with an employment attorney before making a decision.
Red Flag #2. The Severance Offer Falls Short of What You Deserve
If the severance pay offered does not reflect your years of service, job performance, or contract terms, it may be inadequate.
Key financial considerations:
Does the initial severance package include sufficient severance pay?
Are unused vacation pay and other benefits included?
Does the package offer extended health insurance or other protections?
Your severance package should include:
A lump sum payment or structured severance pay
Extended benefits, such as continued health insurance or outplacement services
Unused vacation pay and termination pay
Additional perks to support your future employment opportunities
If the severance offer does not provide adequate compensation or financial stability, negotiating severance agreements with the help of legal representation may lead to a more favorable outcome.
Red Flag #3. Waiving Legal Rights Unnecessarily
Many severance agreements require employees to waive their legal claims against the employer. This includes claims related to wrongful termination, workplace rights violations, and potential legal disputes.
Hidden legal traps:
Some agreements contain confidentiality clauses that prevent you from discussing workplace misconduct.
Non-compete agreements may limit your ability to find future employment.
Such clauses can bar you from pursuing legal action if you later discover unlawful termination practices.
Red Flag #4. Restrictive Clauses That Harm Future Job Prospects
Your former employer may insert restrictive clauses in the severance package that impact your ability to secure future employment.
Common restrictive clauses include:
Non-compete agreements that bar you from working in the same industry for a specific time period.
Confidentiality agreements that prevent you from discussing employment conditions with prospective employers.
Non-disparagement clauses that prohibit you from speaking out about unfair treatment.
Such clauses can significantly impact your future employment possibilities and financial security.
How State Laws Affect Your Severance Agreement
Severance agreements must comply with federal and state-specific employment laws, which vary in worker protections and employer flexibility.
California (CA)
Non-Compete Clauses Are Prohibited: Business and Professions Code §16600 bans non-compete agreements.
Stronger Worker Protections: The California WARN Act (Labor Code §§ 1400-1408) mandates extended severance pay for mass layoffs (75+ employees).
Strict Confidentiality & Waiver Rules: SB 331 (Silenced No More Act) prevents severance agreements from waiving rights to disclose illegal workplace activity (harassment, discrimination).
New York (NY)
Severance & Unemployment Benefits: Continued wage severance may delay unemployment benefits (NY Labor Law § 591), but lump sum payments usually do not.
Stronger Non-Discrimination Protections: The New York Human Rights Law (NY Exec. Law § 296) prohibits severance agreements from waiving claims related to sexual harassment or discrimination.
Texas (TX)
Employer-Friendly Laws: Texas allows broad non-compete clauses under Texas Business & Commerce Code § 15.50, requiring them to be “reasonable” in duration and geographic scope.
Severance & Unemployment: Severance pay may affect unemployment benefits under Texas Labor Code § 207.049, depending on its classification.
Florida (FL)
Non-Compete Clauses Are Allowed: Florida enforces strict non-compete agreements under Florida Statutes § 542.335, often favoring employers.
Employment at Will: Florida does not require severance pay (FL Stat. § 448.109), but agreements must comply with existing employment contracts.
Illinois (IL)
Legal Review Period for Older Employees: Employees 40+ must receive 21 days to review and 7 days to revoke severance agreements under the Older Workers Benefit Protection Act (OWBPA), 29 U.S.C. § 626(f).
Restrictive Covenants: Illinois Freedom to Work Act (820 ILCS 90/1-90/50) limits non-competes for low-wage workers.
Massachusetts (MA)
Garden Leave Required for Non-Competes: The Massachusetts Noncompete Act (MGL c.149 § 24L) mandates employers pay 50% salary during the restriction period.
Severance & Unemployment Benefits: Severance may delay unemployment benefits under MGL c.151A, § 1(r)(3) if structured as continued wages.
An employment attorney can assess whether your severance agreement includes legally questionable terms and guide you on legal options.
EEOC Process & Right to Sue Letters: What You Need to Know
Many workers lose their rights simply by missing filing deadlines. However, if you’ve filed an EEOC charge, you don’t have to wait 180 days—you can request a Right to Sue letter early by emailing the EEOC, allowing you to pursue legal action sooner.
Severance agreements often include clauses waiving legal rights, preventing employees from filing EEOC claims or lawsuits. Always consult an employment attorney before signing to ensure you don’t give up your ability to seek fair compensation.
Many lawyers delay the EEOC process due to the strict 90-day filing deadline that comes with a Right to Sue letter. However, speed is crucial— some employers use delays to build defenses or even destroy evidence. Acting fast and securing legal counsel early strengthens your case.
Before requesting a Right to Sue letter, seek legal guidance. Once the 90-day window starts, options become limited, and many lawyers won’t take last-minute cases. Seeking legal advice early ensures the best outcome, whether negotiating severance or pursuing legal action.
Frequently Asked Questions About Severance Agreements
1. How do I know if my severance agreement is fair?
A fair severance package reflects your years of service, job role, and industry standards. If the severance pay offered seems low compared to your contributions, or if it lacks financial compensation like extended benefits, vacation pay, or bonuses, it may not be fair. An employment attorney can help assess whether the offer meets legal and financial expectations.
2. What should I consider before deciding to sign a severance agreement?
When signing a severance agreement, deciding to review the terms carefully is a wise choice. Look for restrictive clauses like non-compete agreements, confidentiality requirements, and waivers of legal claims. Check whether the severance agreement includes continued health insurance, outplacement services, and financial support. If key benefits are missing, negotiating for a more favorable outcome may be necessary.
3. What can I do if I receive insufficient severance pay?
If you are offered insufficient severance pay, do not sign the agreement immediately. Many employers start with a low offer, expecting negotiation. A lawyer can help you push for adequate compensation that better reflects your work history and contract terms.
4. How does a severance agreement affect my future job prospects?
Some agreements contain restrictive clauses that may hurt your future job prospects. A non-compete clause could block you from working in your industry for months or even years. Confidentiality agreements may prevent you from discussing your experience. These restrictions can severely limit career opportunities, so it’s crucial to ensure the agreement aligns with your long-term goals.
5. Does accepting a severance package impact my ability to collect unemployment insurance?
It depends on the terms of your severance payment and state laws. Some agreements disqualify employees from employment insurance benefits, while others do not. If the employer classifies severance as continued wages rather than a lump sum, it may delay or reduce your unemployment benefits. Always check your state’s protection act regulations and consult an attorney before signing.
6. Can I negotiate a better severance package?
Yes. Employers often leave room for negotiation. You can ask for a financial benefit, such as higher severance pay, extended healthcare, or career transition assistance. A lawyer can help you negotiate a separation agreement that provides better terms.
7. What legal implications should I consider before signing?
Signing a severance agreement can waive your rights to sue for wrongful termination, discrimination, or other claims. It may also restrict your ability to work in your field or discuss your experience with future employers. If you have any concerns about the legal implications, seek legal advice before signing.
8. What if my employer pressures me to sign quickly?
Do not rush. Employers sometimes impose short deadlines to prevent employees from seeking legal advice. If you are over 40, federal law gives you at least 21 days to review a severance agreement and 7 days to revoke it after signing. Even if you’re younger, you have the right to consult an attorney before making a decision.
9. Can my employer refuse to give me severance pay?
Severance pay is not legally required unless your contract or company policy states otherwise. However, if other employees in similar positions received severance, but you were denied, it may be worth investigating potential discrimination or unfair treatment. Is your employer withholding pay as punishment? In this case, it’s imperative to speak to a lawyer immediately.
10. What steps should I take before signing a severance agreement?
Read everything carefully – Look for hidden clauses that could impact your career.
Compare the offer – Research industry standards for severance packages.
Consult an employment attorney – Get a professional to review your severance agreement and negotiate better terms.
Clarify financial terms – Ensure the severance payment includes all owed wages, benefits, and bonuses.
Check for legal risks – Make sure you are not signing away important rights.
Seek Legal Counsel Before Signing
A severance agreement can have long-term legal and financial implications. If your severance offer falls short, contains restrictive clauses, or requires you to waive legal rights, refusing to sign may be the best course of action. An experienced employment lawyer at Bourassa Law Group can help you negotiate a fair severance package that provides adequate compensation, financial security, and protection for your future employment.
If you are facing a severance decision, contact us today for expert legal advice. Our employment attorneys will review your agreement, identify potential risks, and help you secure a more favorable outcome. Don’t sign away your legal rights—seek legal representation today!
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