Severance Agreement After a Layoff: How Long You Have to Sign and What to Negotiate

A severance offer is usually a trade: money for a release of legal claims. You are not required to sign, and in many cases you can ask for better terms. The review period depends on your age and whether the layoff is a group program.

How much time you get

• Workers 40 or older who are asked to release age discrimination claims generally get at least 21 days to consider, and 7 days after signing to revoke.
• In a group layoff or exit program, the consideration period is generally 45 days, along with required information about who was selected.
• Younger workers have no fixed federal period, but the agreement must be knowing and voluntary, and many employers set a deadline of a week or two.
• State laws may add requirements.

What the release usually covers

• Claims for discrimination, wrongful termination, retaliation and breach of contract.
• Sometimes a promise not to sue or file certain complaints. Rules limit what can be waived, such as filing a charge with an agency or claims for unpaid wages that the law protects.
• A confidentiality clause, a non-disparagement clause and sometimes a non-compete.
• Repayment or clawback terms if you breach.

What you can often negotiate

• The amount, such as extra weeks of pay.
• Continuation of health insurance or subsidy of premiums.
• Payout of earned bonus, commission, equity or accrued leave.
• A neutral reference and agreed wording about the reason for leaving.
• Narrowing the release, non-disparagement or non-compete.
• Outplacement help and a later end date.

How to respond

1. Read the whole agreement and note the deadline.
2. Check your age and whether the release covers age claims.
3. List what you have a claim for, since leverage comes from claims you would give up.
4. Ask for more time in writing if you need it.
5. Talk to an employment lawyer before you counter. A counteroffer can be treated as a rejection of the original offer, so choose wording with care.
6. Do not sign until you understand each clause, and keep a signed copy.

Taxes and benefits

Severance is generally taxable income, and the timing of payment may matter. It can also affect unemployment benefits in some states. Ask your state agency, and check how it interacts with health coverage options. See our guides to keeping claims after retaliation and to unemployment eligibility.

A hypothetical negotiation

An employee with 12 years of service is offered 8 weeks of pay and a broad release. She asks for 14 weeks, six months of health premium help and a narrower non-disparagement clause, and mentions an unresolved complaint about unpaid bonus. The employer counters with 11 weeks and three months of premiums. She accepts after a lawyer reviews the final language. The employer agreed because she had something to release and she asked in writing.

Read these clauses twice

Look for language about repayment if you breach, a broad waiver of all claims known and unknown, a requirement to cooperate in future litigation, restrictions on working for competitors, and wording that treats the severance as your only payment. Ask what happens to bonuses, stock and accrued leave. Ask for the agreement in editable form so changes can be tracked.

Frequently asked questions