Should You Sign a Severance Agreement?


Only you can decide whether signing a severance agreement is the right choice for you, but there are several factors you should consider before making your decision, including:

  • The reason you were terminated
  • Your relationship with your employer
  • Whether your severance package is negotiable
  • What you can or cannot do after signing
  • The tax implications of your severance payment

In general, you should not sign a severance agreement if your employer’s reasons for firing you are illegal. You could make more money from a retaliation or wrongful termination lawsuit, and most severance agreements ask you to waive your right to sue your employer.

Your Employer Does Not Have to Offer You Severance

Unless your employer promised you severance in an employment contract, you are not entitled to it. Most employers offer severance agreements as a sign of goodwill, especially during layoffs and restructuring.

If you have a good relationship with your employer, you may want to accept the gesture and move on. After all, severance is designed to help you, and leaving on good terms could benefit you in the future.

You can even discuss your severance package with your employer and let them know what kind of assistance would help you the most. The majority of severance packages are negotiable, and negotiating is easier when the parties get along.

Negotiating Your Severance Package

Usually, severance packages include several elements, such as:

  • Extra compensation
  • PTO payouts
  • Continued health insurance
  • Training and job search assistance

Almost all these elements are negotiable. For example, you may be able to negotiate more severance pay if you were a top performer and worked at the company for a long time, or you can use these bargaining chips to extend your health insurance for longer.

Often, employers will give you what you ask for (within reason) – or change the terms of your severance agreement to meet industry standards.

You should have plenty of time to consider your severance package before signing. If your employer is rushing you, this may be a sign that something is wrong, and you should consult an attorney.

Lawyers can always help you negotiate legal contracts, including severance agreements.

Think About What You’re Giving Up

Even though severance packages are designed to help you, they also benefit employers. Most employers will not give you severance unless you release your right to sue. If you have any major grievances with your employer, talk to an attorney before signing a severance agreement.

Employers may also ask you to sign a non-compete or non-disclosure agreement (NDA) in exchange for severance. Sometimes, an NDA means you may not publicly share your experience with the company, and a non-compete agreement could prevent you from working in your field for a period of time.

Consider how much you are getting for what you are giving up. If you feel like the severance agreement is more favorable for your employer than it is for you, you can negotiate or refuse to sign.

Once again, never sign a severance agreement if your employer has done something illegal. If this is the case, you should be speaking with a lawyer and signing a settlement agreement instead.

Decide How You Want to Be Paid

Your employer may offer severance in a lump sum or continue paying you in installments. Lump-sum payments may have tax implications that periodic payments do not.

If you are expecting a large severance package, discuss the terms of payment with your employer. Negotiating how severance is paid could save you money during tax season.

When You Should Talk to an Attorney

Ideally, you should talk to your attorney anytime you sign a legal document. Your lawyer can evaluate your employer’s offer and help you negotiate a favorable severance agreement.

If your employer retaliated or discriminated against you, your attorney can also help you file a lawsuit to get the compensation you deserve and hold your employer accountable.

At Donati Law, PLLC, we want what’s best for you, and our team will fight to protect your rights. We have been helping people through severance agreements and wrongful termination suits since 1980, and we can help you, too.

All you have to do is call us at (901) 209-5500 or send us a message online.

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To discuss your case with an accomplished attorney who cares, give our firm a call at (901) 209-5500 or fill out the form below.

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