Losing your job can be a deeply unsettling experience, both emotionally and financially. In the immediate aftermath of being fired, your former employer may present you with a severance agreement—a legal document that outlines the compensation and terms being offered to you upon your departure. At first glance, this may seem like a welcome offer of support during a difficult time.
However, a severance agreement is NOT a goodwill gesture; it’s a binding contract. These agreements often include provisions that require you to waive important legal rights, such as your ability to sue the company for wrongful termination or discrimination. While the promise of severance pay or extended health benefits may be tempting, signing too quickly—especially without a clear understanding of what you’re giving up—can have lasting consequences.
That’s why it’s critical to take the time to understand the full scope of the agreement before putting pen to paper. Knowing what’s at stake allows you to make an informed decision, rather than one driven by fear, urgency, or financial stress.
If you’ve been presented with a severance agreement, the Law Office of Fahim Rahman can help you evaluate the terms, identify any hidden risks, and determine whether negotiating better conditions is possible.
What Is a Severance Agreement?
A severance agreement is a legal contract between an employer and an employee that outlines the terms of the employee’s departure from the company. While not legally required in most cases, severance agreements are commonly offered when an employee is laid off, terminated, or asked to resign. The agreement typically includes compensation and other benefits in exchange for the employee waiving certain legal rights.
Typical components of a severance agreement may include:
- Severance pay – a lump sum or ongoing payments for a set period.
- Health benefits continuation – an extension of health insurance coverage, often through COBRA.
- Unpaid wages or accrued vacation – payment for time already worked or earned leave.
- Outplacement services – career coaching or job placement assistance.
- Waiver of legal claims – a clause stating the employee won’t pursue legal action against the employer.
- Confidentiality and non-disparagement clauses – provisions preventing the employee from disclosing terms or speaking negatively about the company.
Employers offer severance agreements to limit legal exposure, maintain company reputation, and support smoother transitions during layoffs or terminations.
Whether you receive a voluntary severance package (such as during company downsizing or early retirement) or an involuntary one (after being terminated), the legal implications are similar—you’re likely waiving your right to pursue legal claims.
Before signing anything, it’s essential to consult with an employment attorney like Fahim Rahman to ensure you’re not giving up important legal rights without fully understanding the consequences.
Can You Negotiate a Severance Agreement? YES!
Severance agreements are not set in stone. Many terms can be negotiated to improve your financial security, protect your rights, or reduce restrictive clauses. Key points that can often be negotiated include:
- Severance pay – request a larger lump sum or extended payment schedule
- Health benefits – additional coverage or continuation periods beyond what was initially offered
- Non-compete or non-solicitation clauses – modify scope or duration to protect future employment opportunities
- Confidentiality and non-disparagement language – narrow overly broad terms that limit your professional communication
- SeOutplacement support – request extra career services such as coaching, resume review, or networking assistance
You Can Negotiate
Many terms in a severance agreement, such as pay, benefits, and restrictive clauses, can be negotiated. Negotiation is not just allowed; it is encouraged. With professional guidance, you can request better severance pay, extended benefits, or adjustments to non-compete and confidentiality clauses, making the agreement more favorable and protective of your rights.
Key Clauses to Look For
Before signing a severance agreement, it’s critical to review the fine print. These agreements often contain clauses that significantly affect your rights, future employment opportunities, and financial security. Below are several key provisions you should look for and understand thoroughly:
- Release of Claims
This is one of the most important clauses in any severance agreement. A release of claims means you are giving up your right to sue the employer for any issues related to your employment or termination, including wrongful termination, discrimination, harassment, or unpaid wages. Once signed, this release is legally binding and difficult to challenge later. - Non-Disparagement and Confidentiality Clauses
These clauses prevent you from speaking negatively about your former employer or revealing specific details about your severance terms. While these provisions are designed to protect the company’s reputation, they can also limit your ability to discuss your experience honestly—even with potential future employers or colleagues. - Non-Compete and Non-Solicitation Clauses
Some agreements restrict your ability to work for a competitor or to solicit clients or former coworkers for a certain period after your departure. These clauses can seriously impact your job search, especially if you work in a specialized industry. Not all states enforce non-compete clauses (e.g., California generally prohibits them), but you should still review them carefully and seek legal advice if you have concerns. - Rehire Restrictions
Certain agreements include language that prohibits you from applying for or accepting a job with the company in the future. While this may not be an issue for everyone, it could affect your long-term employment options—particularly if the company owns or merges with other businesses in your field. - Severance Payment Terms and Timing
Make sure you understand how much severance pay you’re being offered, how it will be distributed (lump sum vs. installments), and when payments will begin. Also, check whether accepting severance affects your eligibility for unemployment benefits in your state.
Reading and understanding these clauses is essential before signing. If any of the terms seem unclear or overly broad, it’s wise to consult with an employment attorney who can explain the implications and help negotiate more favorable terms if necessary.
Potential Risks of Signing Without Review
Signing a severance agreement without fully reviewing and understanding its contents can carry serious risks—many of which may not be immediately obvious. While the offer of severance pay or benefits can be tempting, especially if you’re under financial stress, rushing into an agreement without careful consideration can cost you far more in the long run.
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Giving Up Legal Rights
One of the most significant risks is unknowingly waiving your right to take legal action against your former employer. Severance agreements almost always include a “release of claims” clause that prevents you from pursuing lawsuits related to your employment. This includes claims for:
- Wrongful termination
- Workplace discrimination or harassment
- Unpaid wages or overtime
- Retaliation for whistleblowing or reporting illegal activity Once you sign, these claims are typically gone for good—even if you later uncover strong evidence supporting your case.
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Accepting Restrictive Future Employment Terms
Many severance agreements contain non-compete or non-solicitation clauses that limit your ability to work in your field or contact former clients or coworkers. Signing without fully understanding these terms could make it difficult to:
- Take a job with a competitor.
- Start your own business in the same industry.
- Recruit former colleagues to join your new team. These restrictions may last for months or even years and can severely impact your career path and earning potential.
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Waiving Unemployment Benefits in Some Cases
Depending on how the agreement is worded and how the employer reports your termination to the state, accepting a severance package might affect your eligibility for unemployment benefits. Some agreements include language that could disqualify you from receiving benefits or delay them for the duration of your severance payments. This can create a financial gap if you’re counting on both severance and unemployment support to get by.
In short, signing a severance agreement without proper review may offer short-term relief at the expense of long-term rights and opportunities. It’s always wise to take your time, ask questions, and seek professional legal guidance if needed before making a final decision.
When You Should Not Sign Right Away
There are times when signing a severance agreement immediately after termination is not in your best interest. Whether due to unclear language, potential legal violations, or external pressure, rushing into a decision can lead to unfavorable outcomes. It’s essential to slow down, evaluate your circumstances, and seek advice if any of the following apply.
The Agreement Includes Overly Broad or Unfair Terms
Some severance agreements contain clauses that are too vague, one-sided, or restrictive. Examples include:
- Broad non-compete terms that limit your ability to work in your field
- A non-disparagement clause that prevents you from saying anything about the company, even if truthful
- A release of claims that covers not just the employer but any affiliated companies or unknown future claims
If the language seems excessive or confusing, it’s a sign you should seek clarification and legal review before signing.
You Suspect Wrongful Termination or Discrimination
If you believe you were fired because of your age, race, gender, disability, whistleblowing, or for exercising a legal right, signing a severance agreement could mean giving up the chance to pursue a valid legal claim. Severance packages often require you to waive the right to sue—even if your claim is strong. In California, the Fair Employment and Housing Act (FEHA) offers robust protections against workplace discrimination, including discrimination based on disability and other protected characteristics. If your termination may fall under one of these protected categories, signing an agreement without legal advice could mean forfeiting your right to seek recourse under FEHA. Before signing away your rights, it’s important to:
- Document the circumstances around your termination
- Gather any relevant communications or performance reviews
- Consult with an employment attorney to evaluate your options
You Feel Pressured or Were Given No Time to Consider
If your employer is pressuring you to sign immediately or without explanation, that’s a major red flag. You have the right to review the agreement carefully and should never feel rushed into signing on the spot. In many cases—especially if you are over 40 years old—you’re legally entitled to:
- At least 21 days to review the agreement
- 7 days to revoke your signature after signing
If you feel caught off guard or emotionally overwhelmed, take the time to step back and seek objective advice.
Ultimately, your signature on a severance agreement has long-term legal consequences. If anything feels unclear, unfair, or rushed, don’t sign right away. Pause, ask questions, and protect your rights before making a decision.
Your Legal Rights and Next Steps
You Don’t Have to Sign Immediately
The law provides you with time to review the agreement. Use it. If you’re 40 or older, you’re protected by the Older Workers Benefit Protection Act (OWBPA) and may have additional rights depending on the circumstances of your termination.
You Can Negotiate
Many terms in a severance agreement—such as the amount of pay, benefits, and restrictive clauses—can be negotiated. Negotiation is not just allowed; it’s encouraged.
You Should Consult an Attorney
This is the most important step. Attorney Fahim Rahman can review your severance agreement, identify any legal concerns, and help you negotiate better terms or pursue legal action if warranted.
If you suspect wrongful termination, FEHA violations, or any other workplace injustice, legal review ensures you don’t give up claims that could be worth far more than the severance pay.
Attorney Rahman can:
- Clarify what you’re waiving
- Assess whether you have a viable legal claim
- Guide you through California’s complaint process
- Help negotiate stronger severance terms
Consulting an employment attorney ensures that you’re making a fully informed decision based on your specific situation. You only get one chance to sign a severance agreement—don’t do it until you understand everything that’s at stake.
Signing a severance agreement is a major decision that can impact your legal rights, financial future, and career path. While the offer of severance pay may seem helpful, it often comes with significant conditions—such as waiving your right to pursue claims against your former employer or accepting restrictions on future employment. Rushing into an agreement without fully understanding the terms could limit your options moving forward. Before signing anything, take the time to carefully review the agreement and understand what you may be giving up. The Law Office of Fahim Rahman can provide the legal insight you need to make an informed decision. Attorney Fahim Rahman offers direct, personalized guidance to help you protect your rights and move forward with confidence.
If you believe your termination was unfair or that your rights have been violated, it’s important to seek legal advice before signing any severance agreement. The Law Office of Fahim Rahman is dedicated to advocating for employees facing workplace injustices. Contact Attorney Fahim Rahman today to schedule a consultation, review your situation, and explore your legal options.