Should You Negotiate a Severance Package?

Severance is not required by federal law in most cases, but employers commonly offer it in exchange for a release of claims. That trade is what makes negotiation possible.

What is usually in a severance agreement

• Payment (often based on years of service)
• Benefits continuation or COBRA premium payments
• Release of claims: you give up the right to sue the employer for most claims
• Confidentiality and non-disparagement clauses
• Return of company property
• Restrictive covenants such as non-competes or non-solicitation
• Cooperation clauses

Special rules for workers 40 and older

Under the Older Workers Benefit Protection Act, a release of age discrimination claims must be knowing and voluntary. Among other things, it must be in writing and understandable, refer to ADEA rights, advise you to consult a lawyer, give you at least 21 days to consider it (45 days in group layoffs, with demographic disclosures), and allow 7 days to revoke after signing (29 U.S.C. 626(f); EEOC).

What you can negotiate

• More weeks of pay or a lump sum
• Paid COBRA premiums for longer
• Pro-rated bonus, commissions, or accelerated vesting
• Neutral reference and agreed explanation of departure
• Removing or narrowing a non-compete; see non-competes
• Mutual non-disparagement
• Outplacement services
• Not contesting unemployment

Your leverage

• Potential claims: discrimination, retaliation, unpaid wages, leave violations
• Long service or key knowledge
• The employer's interest in a smooth transition or confidentiality

Things you generally cannot waive

Rights to file a charge with the EEOC or to report to government agencies, and some wage claims, generally cannot be fully waived, although you may give up the right to money from such charges in some cases (EEOC).

Should you hire a lawyer?

If the payment is significant, you are 40 or older, or you think the termination may be unlawful, an employment lawyer review is often worth it. Many offer flat fees for severance reviews. See also what to do when you get fired.

Sources

1. Cornell Law School LII: 29 U.S.C. 626(f), Waiver of rights under the ADEA
2. EEOC: Understanding waivers of discrimination claims in employee severance agreements
3. U.S. Department of Labor: COBRA continuation coverage