Before you sign a severance agreement

Most people are handed a severance agreement in the same meeting in which they learn that their job is ending. It is not the moment for careful reading. Fortunately, you are almost never required to sign on the spot.

It is an exchange

A severance agreement is a contract. The employer offers money, and sometimes continued benefits, that it is not otherwise required to pay. In return you give up the right to bring legal claims arising from your employment. Whether that exchange is a fair one depends on whether you have any claims worth bringing.

You have time

Federal law gives employees aged forty or over at least twenty-one days to consider a release of age discrimination claims, and seven days after signing to change their mind. In a group layoff the period is forty-five days. Younger employees have no fixed period, but most employers will allow a reasonable time if asked.

Read what else it says

• Non-compete and non-solicitation terms, which may limit where you can work next.
• Confidentiality and non-disparagement clauses, and whether they bind the employer as well.
• How the payment is made, and whether it is conditional on anything.
• What happens to bonuses, commissions and unused vacation pay you have already earned.
• What the employer will say when a future employer asks for a reference.

Some of it can be changed

Employers expect questions. The amount is sometimes negotiable, particularly where the employee has long service or a possible claim. More often it is the other terms that move: a longer period of health coverage, a narrower non-compete, an agreed reference or a later end date.

Unemployment benefits

Severance pay can affect when unemployment benefits begin and how much is paid in the weeks it covers. Report it accurately when you apply, and ask how it will be treated before you rely on either payment.

An hour with a lawyer before you sign costs little compared with what is usually at stake, and the deadline in the agreement leaves room for it.