A severance agreement is usually presented as a take-it-or-leave-it package: accept these terms and sign this release, or get nothing. The release clause is the most important part — it's where you agree not to sue the company for anything that happened during your employment. But the release is often written so broadly that you're unknowingly waiving claims for unpaid wages, discrimination, harassment, or retaliation. Before you sign, you need to understand exactly what you're giving up.
What is a Release of Claims?
A release of claims is a waiver of your legal right to sue for employment-related disputes. Severance agreements typically include a broad release requiring you to waive claims for wrongful termination, discrimination, harassment, unpaid wages, breach of contract, defamation, and more. In exchange, you receive severance pay (typically a multiple of your salary) and sometimes continued benefits. The scope of the release is negotiable, but employers prefer maximum breadth.
Red flags to watch for
An overly broad release may waive your right to pursue unforeseeable claims (e.g., a company wrongdoing discovered later). Scope should be limited to employment-related claims.
A clause preventing you from telling others why you were fired (if it's discrimination) may be unenforceable or illegal. Courts scrutinize non-disparagement closely.
Courts scrutinize whether severance is 'adequate consideration.' If you're giving up valuable claims (e.g., a discrimination lawsuit worth $100,000), severance should reflect that.
An indemnity clause penalizes you for even attempting to pursue claims, even if the release is found unenforceable.
Certain claims (age discrimination over 40, some statutory claims) cannot be waived under federal law. A valid release must acknowledge this.
While employers often seek confidentiality, overly broad confidentiality can prevent you from disclosing discrimination/harassment to authorities or future employers.
Federal law (ADEA) requires 21 days to consider the agreement and 7 days after signing to revoke. If this isn't clear, the release may be unenforceable.
Your legal rights
Under the Age Discrimination in Employment Act (ADEA, 29 USC § 626), a severance agreement requiring a release of age discrimination claims is enforceable only if it meets strict requirements: written in plain language, explicit reference to ADEA rights, consideration beyond what's already owed, 21 days to consider and sign, 7 days to revoke after signing, and advice to consult an attorney. Many state laws (California Fair Employment and Housing Act, New York Human Rights Law) impose similar or stricter requirements. A release that doesn't meet these standards is void. Certain claims cannot be waived: vested pension benefits, workers' compensation claims (except structured settlements), and some statutory wage claims.
Questions to ask before you sign
- 1What exactly am I releasing? (Request detailed, plain-language description.)
- 2What is the severance amount, and how does it compare to severance for similar positions?
- 3Can I consult an attorney before signing, and do you recommend I do so?
- 4How long do I have to consider this agreement before I must sign?
- 5After I sign, how long can I take to revoke the agreement if I change my mind?
- 6Does the release cover all types of claims (wrongful termination, discrimination, harassment, unpaid wages)?
- 7Are there any claims I cannot waive (e.g., vested benefits, workers' compensation)?
- 8Will you provide references if I ask after the separation, or is that restricted by the agreement?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.