Severance Negotiation

Do Not Sign a Severance Agreement Without Understanding Your Rights

A severance agreement is more than a payment offer. It is usually a legal contract that asks an employee to give up claims against the employer in exchange for money or benefits. Once signed, it may waive discrimination, harassment, retaliation, wage, leave, contract, bonus, commission, equity, and other claims. It may also impose confidentiality, non-disparagement, cooperation, return-of-property, restrictive covenant, or clawback obligations.

Employees are often handed severance agreements at stressful moments: after being fired, laid off, pushed out, or told their position is being eliminated. Executives, managers, and employees who support CEOs or business owners may face additional pressure because the employer wants a quiet exit, especially when the separation follows harassment, sexual assault, whistleblowing, discrimination, wage complaints, or internal conflict with leadership.

Fingerhut Law helps employees evaluate severance agreements, identify leverage, negotiate better terms, and avoid signing away valuable rights without informed advice.

Why Severance Agreements Matter

A severance agreement may affect:

• The amount of money paid after termination.
• Health insurance or COBRA support.
• Bonus, commission, equity, stock option, or deferred compensation rights.
• Unpaid wages, expenses, PTO, or final pay.
• References and internal/external announcements.
• Non-disparagement and confidentiality obligations.
• Non-compete, non-solicitation, and non-interference restrictions.
• Cooperation obligations after departure.
• Claims for discrimination, harassment, retaliation, whistleblowing, leave violations, or wage theft.
• Employers usually draft severance agreements to protect themselves. The first offer is not always the best offer. Whether severance can be improved depends on the facts, the employee’s claims, the employer’s risk, the employee’s compensation, the circumstances of separation, and the language of existing agreements.

Common Severance Negotiation Issues

Severance negotiations may involve more than asking for additional weeks of pay. Important issues can include:

• Increasing the severance amount.
• Extending health insurance coverage or COBRA payments.
• Preserving earned bonuses, commissions, or equity.
• Clarifying vesting, option exercise periods, or equity repurchase rights.
• Removing or narrowing non-disparagement language.
• Protecting the employee’s right to speak with government agencies.
• Narrowing confidentiality restrictions.
• Negotiating a neutral reference or agreed separation language.
• Limiting cooperation obligations.
• Addressing non-compete or non-solicitation restrictions.
• Avoiding admissions of wrongdoing.
• Preserving indemnification or D&O coverage for executives.

When Employees May Have Leverage

Employees may have leverage when the separation followed or involved:

• Sexual harassment or sexual assault by a CEO, owner, executive, supervisor, client, or coworker.
• Complaints about race, age, disability, pregnancy, religious, or LGBTQ+ discrimination.
• Retaliation after protected activity.
• Whistleblowing about illegal, fraudulent, unsafe, or unethical conduct.
• Requests for FMLA, New York Paid Family Leave, disability accommodations, or religious accommodations.
• Unpaid wages, commissions, bonuses, overtime, or expense reimbursement.
• A disputed “for cause” termination.
• A breach of employment contract, offer letter, commission plan, or equity agreement.
• A layoff that may have targeted older workers or protected groups.
• The goal is not only to negotiate more money. The goal is to understand what legal rights may exist before releasing them.

Legal Standards and Waivers

Severance agreements often include a release of claims under federal, state, and local employment laws, including the New York City Human Rights Law, N.Y.C. Admin. Code § 8-107, the New York State Human Rights Law, N.Y. Exec. Law § 296, Title VII, the ADA, the ADEA, the FMLA, the FLSA, the New York Labor Law, the NJ LAD, and CEPA, depending on the employee and employer.

Special rules apply to certain age-discrimination waivers. The Older Workers Benefit Protection Act, 29 U.S.C. § 626(f), sets requirements for a knowing and voluntary waiver of federal age discrimination claims under the ADEA. In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the U.S. Supreme Court addressed the consequences of a release that did not comply with OWBPA requirements.

Employees should also be careful with wage claims. Federal and state wage rights may raise special issues, and employees should not assume that every release provision is enforceable exactly as written.

Severance for Executives, Managers, and High-Level Employees

Executives and senior employees often have additional severance issues. They may have employment agreements, equity documents, bonus plans, deferred compensation, restrictive covenants, fiduciary obligations, indemnification rights, or board-level concerns. A termination may be labeled “for cause” to avoid paying severance, bonus, equity, or other compensation.

For C-suite employees, founders, physicians, finance professionals, sales leaders, media employees, and senior managers, severance negotiation often requires reviewing multiple documents together, not just the separation agreement. These may include offer letters, employment agreements, stock option plans, operating agreements, commission plans, bonus plans, handbooks, and prior amendments.

Before You Sign

Before signing a severance agreement, employees should consider:

• What claims am I releasing?
• Is the severance amount fair compared to my potential claims?
• Am I owed wages, commissions, bonuses, PTO, expenses, or equity regardless of severance?
• Does the agreement restrict what I can say or where I can work?
• Does it affect my ability to cooperate with government agencies?
• Does it contain non-compete, non-solicit, confidentiality, or non-disparagement provisions?
• Does it include tax language or repayment obligations?
• Does it give me enough time to review and revoke if age claims are involved?
• Do not assume that an employer’s deadline is the final word. In many cases, counsel can ask for more time and negotiate terms.

Related Fingerhut Law Pages

Wrongful Termination, Sexual Harassment, Workplace Sexual Assault, Retaliation for Protected Activity, Whistleblower Retaliation, Breach of Employment Contract, Wage Theft, Age Discrimination.

Contact Fingerhut Law

If you received a severance agreement or were asked to sign a release after termination, layoff, harassment, discrimination, retaliation, or whistleblowing, contact Fingerhut Law for a confidential consultation before signing.

Attorney Advertising Disclaimer: This article is attorney advertising and is provided for general informational purposes only. It does not create an attorney-client relationship and is not legal advice. Prior results do not guarantee a similar outcome.