Severance Agreement Outline
How it works
A severance agreement provides additional compensation to a departing employee in exchange for a release of legal claims against the employer. The Severance Agreement Outline generates a framework for compliant separation agreements.
**Why employers offer severance** Severance is not legally required in most situations (exception: WARN Act obligations for mass layoffs). Employers offer it to: obtain a release of potential legal claims (discrimination, wrongful termination, wage disputes); ensure smooth offboarding and cooperation; maintain the company's reputation; satisfy contractual obligations (employment agreements, severance plans); incentivize confidentiality about business matters.
**ADEA requirements** For employees 40 or older, the Age Discrimination in Employment Act (ADEA) imposes specific requirements: employee must be given 21 days to consider the agreement (45 days for group layoffs); employee has 7 days to revoke after signing; the waiver must specifically reference ADEA claims; the waiver must not waive claims arising after the date of signing.
**Key provisions** Severance amount and payment schedule; continuation of benefits (COBRA notice); non-disparagement obligations (both parties); confidentiality obligations; return of company property; cooperation with ongoing business matters; non-solicitation of employees and customers; references/employment verification policy; general release of claims; ADEA-specific waiver language (if applicable); governing law.
**Claims that cannot be waived** Workers' compensation claims, NLRA rights, right to file EEOC charge (though money damages can be waived), wage claims for unpaid wages, ERISA benefits accrued, and whistleblower protection claims under certain statutes.
This tool generates an outline. Severance agreements involve significant employment law complexity — have a licensed employment attorney draft and review.
Frequently Asked Questions
- Severance pay amount and schedule, release of all claims against the employer (the core exchange), non-disparagement obligations (both parties), confidentiality of agreement terms, COBRA information, return of company property, cooperation clause (assist with post-departure matters), references policy, and revocation periods required by law. For employees over 40, specific ADEA requirements apply (21-day review period for individual separations, 45-day review period for group layoffs, 7-day revocation right).
- Yes, but with important limitations. For age discrimination claims (ADEA), the Older Workers Benefit Protection Act requires: knowing and voluntary waiver, written agreement in plain language, specific reference to ADEA rights, 21-day consideration period, 7-day revocation period, and advice to consult an attorney. Title VII and other discrimination claims can be waived but cannot waive rights to file charges with the EEOC (only the right to monetary recovery). Employees can't waive future claims (only past/current).
- There is no legal requirement for severance pay in the US (except WARN Act notice/pay for mass layoffs of 100+ employees). Common practices: 1–2 weeks per year of service for non-executives; 1–4 weeks per year for managers; 3–6 months for executives; 1–2 months for all employees in a RIF regardless of tenure. Many companies have written severance policies — follow them consistently to avoid discrimination claims. Severance is often negotiable, especially for long-tenured employees or those in sensitive roles.
- A clawback allows the employer to recover severance payments if the employee violates the agreement — typically by disparaging the company, disclosing confidential information, or violating non-compete provisions. Clawbacks must be reasonable and clearly stated. They're most common for executive severance packages. A clawback that requires repayment for any violation, even minor, may be unenforceable as a penalty clause. Courts are more likely to enforce clawbacks for material breaches that cause actual harm.