Career recovery guide

Severance Checklist: What to Review and Negotiate Before You Sign

You almost never have to sign a severance agreement on the spot. It is a contract, and the pay is offered in exchange for something, usually your agreement not to sue. So the first move is simple: ask for time, confirm the deadline in writing, and read the whole thing twice before you decide. Three things drive that decision, what you are paid, what you give up, and the exact deadline to respond.

Work through the agreement in parts. Confirm the money, both the severance itself and the wages, PTO, commission, and equity you have already earned. Pin down the benefits deadlines, since health insurance and enrollment windows are where the real time pressure lives. Then read the legal clauses closely, the release of claims, non-disparagement, confidentiality, and any non-compete, so you know exactly what you are agreeing to. Most of these terms are negotiable, and a calm written ask costs you nothing.

This is general guidance, not legal, tax, or financial advice. Rules vary by state and by employer, and for anything significant, a non-compete, a contested departure, or real money on the line, have an employment attorney review the document before you sign. The checklist below is what to review, in the order that protects you.

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  1. Do not sign in the room. Confirm the real deadline in writing.

    You almost never have to sign the day you get the agreement. Say plainly that you want to review it, and ask in writing for the exact deadline to respond. If you are 40 or older and this is part of a group layoff, federal law generally gives you a longer window to consider it and a short period to revoke after signing, but treat that as general guidance and verify with an employment attorney. Signing in shock is how people give up money and rights they did not have to.

  2. Read the whole agreement twice, slowly.

    Read every clause, not just the severance number. A severance agreement is a contract, and the pay is offered in exchange for something, usually a release of your right to bring legal claims. Mark anything you do not understand and do not sign until someone has explained it. The parts that cost people money are almost always in the language they skimmed past.

  3. Confirm the money, including what you are already owed.

    Separate the severance offer from pay you have already earned. Write down the severance amount and whether it arrives as a lump sum or salary continuation, then confirm your final paycheck date, any payout of accrued PTO (rules vary by state), and any owed commission, bonus, or reimbursements. Note your equity or stock options and the exact window to exercise them, since that deadline can be short. Earned wages are generally owed to you regardless of whether you sign, but verify the specifics for your state.

  4. Pin down health insurance before your coverage lapses.

    Benefits are where the hard deadlines live. Find your last day of coverage, then compare your options: COBRA continues your current plan but you pay the full premium yourself, the ACA marketplace is often cheaper and losing job coverage usually opens a special enrollment window, and a spouse's plan may also open to you. Verify the exact enrollment dates, because a missed window is one of the few mistakes that is genuinely hard to undo.

  5. Handle retirement and unemployment on the right timeline.

    Your 401(k) is not an emergency. You can leave it where it is, roll it to an IRA, or roll it into a future employer's plan later, and cashing it out on impulse can trigger taxes and penalties, so verify with a professional before moving anything. File for unemployment promptly, ideally the week you lose the job, since benefits generally start from when you file. Signing a severance release does not usually waive unemployment, but the stated reason for separation can affect eligibility, so file and let the state decide.

  6. Read the restrictive clauses closely.

    Look specifically for a non-compete or non-solicit, a non-disparagement clause, and a confidentiality clause, and understand exactly how each one limits you going forward. A non-compete can constrain where you work next, and a one-sided non-disparagement clause can bind you while leaving the company free to speak. None of these are automatically dealbreakers, but you should be able to state precisely what each one restricts before you agree to it. For any clause that limits your future employment, an employment attorney can tell you what is actually enforceable where you live; that is general guidance, not legal advice.

  7. Decide what to ask for, and ask in writing.

    Most severance terms are negotiable, and a calm written ask costs you nothing. Common requests include more severance weeks, extended benefits coverage, a neutral or agreed reference, keeping your laptop or phone, a longer equity exercise window, softer language about how your departure is described, and making a non-disparagement clause mutual. Lead with a specific reason for each request rather than a demand. The worst realistic outcome is that they keep the original offer.

  8. Get a professional review before you sign anything significant.

    This checklist is general guidance, not legal, tax, or financial advice. If the agreement involves meaningful money, a non-compete, a contested departure, or anything you do not fully understand, have an employment attorney review it before you sign. A single review often costs far less than the terms you might otherwise give away. Use the confirmed deadline from step one to book that review with time to spare.

What the data says

  • Losing job-based health insurance, even if you quit or were fired, triggers a Marketplace Special Enrollment Period: you have 60 days from losing coverage to apply, and coverage can start the first day of the month after your job-based coverage ends. (Source: HealthCare.gov (U.S. Centers for Medicare & Medicaid Services))
  • COBRA lets you stay on your former employer's health plan for a limited time (usually 18 months) after your job ends, but you usually pay the full premium yourself plus a small administrative fee; you are not required to take it and can compare COBRA against Marketplace plans first. (Source: HealthCare.gov (U.S. Centers for Medicare & Medicaid Services))
  • If you are 40 or older and your severance agreement asks you to waive age-discrimination claims, federal law (ADEA/OWBPA) requires that you get at least 21 days to consider the offer (45 days in a group layoff), 7 days to revoke after signing, and written advice to consult an attorney; if any requirement is missing, the age-claim waiver is invalid and unenforceable. (Source: U.S. Equal Employment Opportunity Commission)
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Common questions

Do I have to sign my severance agreement right away?

Usually not. In most cases you can say you want time to review it and ask, in writing, for the exact deadline to respond. If you are 40 or older and it is part of a group layoff, federal law generally provides a set period to consider the offer and a short period to revoke after signing. Treat that as general guidance and confirm the specific timelines with an employment attorney.

Can I negotiate severance, or is the first offer final?

It is often negotiable, even when it is presented as standard. People commonly ask for more weeks of pay, extended benefits, a neutral reference, keeping equipment, a longer equity exercise window, or softer departure language. Put your request in writing with a specific reason, and stay calm and professional. The realistic downside is that the company keeps its original offer.

Does signing a severance agreement affect my unemployment benefits?

Signing a release generally does not waive your right to file for unemployment, but the details matter. How severance is paid can affect the timing of benefits in some states, and the stated reason for separation can affect eligibility. File promptly regardless, save your claim number, and let the state make the determination. This is general guidance, so verify with your state unemployment office.

What am I actually giving up when I sign?

Most severance agreements ask you to release your legal claims against the employer, meaning you agree not to sue over the employment or the termination. Many also include a non-disparagement clause, a confidentiality clause, and sometimes a non-compete or non-solicit. None of these are automatically bad, but you should be able to state exactly what each one restricts before you sign. If any clause is unclear, ask before signing.

Should I pay a lawyer to review my severance?

For anything significant, it is usually worth it. If the agreement involves meaningful money, a non-compete or other restrictive covenant, a contested or unusual departure, or language you do not understand, an employment attorney can review it and tell you what is enforceable where you live. A single consultation often costs far less than the money or rights at stake. This is general guidance, not legal advice.

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