• Severance package is a general term describing the total compensation or benefits offered when someone departs (salary continuation, health benefits, stock, etc.).

• Severance agreement is the legal contract or document you sign, which often lays out what you get in exchange for giving up certain rights (e.g. the release of claims).

• The agreement often includes a “release” clause, confidentiality, non-disparagement, noncompetition / nonsolicitation, and other legal terms.

• A good practice is to ask: Does the agreement reflect the full package offered, and are there hidden strings or excessive waivers?

Below are the standard and often negotiable provisions to expect in a severance agreement. Understanding them helps you spot red flags and negotiate better.

Payment / Compensation Terms

• Lump-sum severance pay or installments

• Salary continuation for a fixed period

• Additional pay for unused vacation, PTO, sick time, or bonuses

• Payment of commissions, deferred compensation, stock / option buyouts

Benefit Continuation

• Health insurance (COBRA continuation or employer bridge)

• Life insurance / disability benefits

• Retirement / 401(k) vesting or contributions

Waiver / Release of Claims

• The employee typically agrees to release (waive) legal claims against the employer (e.g., wrongful termination, discrimination, harassment)

• The release must be knowing and voluntary under federal and state law

• In the case of employees over 40, the OWBPA (Older Workers Benefit Protection Act) imposes additional requirements

Revocation & “Cooling Off” Periods

• Many agreements grant a period (e.g. 7 days) during which the employee can revoke after signing

• If you are 40 or older, you must be given 21 days (in many cases) to consider the offer. New Jersey’s practice often reflects that. (See our NJ severance page.)

• The agreement must clearly explain these rights

Confidentiality / Non-Disparagement / Public Statements

• Provisions preventing you from speaking negatively about the employer

• Clauses that require you to keep the terms and existence of the agreement confidential

Non-Compete, Non-Solicitation & Restrictive Covenants

• Some agreements require you to abide by non-competition or non-solicitation terms

Cooperation / Assistance / Transition / Non-Disparagement

• You might be asked to assist in internal investigations or litigation

• Terms requiring you to cooperate with the company post-departure

Representations, No Admission of Liability, Governing Law & Venue

• The agreement typically states that the employer is not admitting wrongdoing

• It will include choice-of-law and venue clauses (e.g. governed by NJ law, jurisdiction in NJ courts)

Tax, Indemnification & Withholding

• Provisions about tax withholding (FICA, federal, state)

• Any indemnification or legal cost clauses

Miscellaneous Provisions

• Integration clause (agreement is the entire agreement)

• Severability (if part is invalid, rest remains)

• Arbitration or dispute-resolution clauses

• Employers are not required by federal law to offer severance to all terminated employees

• Severance is often offered:

  • as part of contractual obligations (e.g. executive contracts)

  • in employment agreements or handbooks

  • during reductions in force / layoffs

  • as part of a negotiation or settlement

• Factors that influence whether an offer is made:

  • the employee’s tenure, position, or leverage

  • presence of legal risks (e.g. discrimination claims)

  • industry or company custom

• In New Jersey, recent changes (especially for group layoffs under NJ WARN law) may make severance more common in mass terminations.

When you sign a severance agreement, you’re often giving up significant legal rights. Understanding the consequences is crucial:

• You may be waiving the right to sue for:

  • Wrongful termination

  • Discrimination or harassment

  • Wage & hour violations

  • Breach of contract / bonus claims

  • Retaliation, whistleblower claims, etc.

• The waiver must be knowing, voluntary, and specific (especially for older workers under OWBPA)

• You risk overly restrictive post-employment covenants (noncompetes, non-solicits)

• Some agreements may limit your ability to obtain unemployment benefits or file administrative claims

Because these agreements can have profound impact on your future, legal review is often essential.

• In New Jersey, if you are 40 or older, your employer must give you 21 days to consider a severance agreement, and another 7 days to revoke after signing. (This is reflected in our New Jersey Severance Agreement Lawyer page.) Steinberg Law, LLC

• NJ courts scrutinize waivers and release language, particularly for discrimination or wrongful termination claims

• Our 9 Questions Answers About Severance Agreements in NJ page dives into common client concerns. Steinberg Law, LLC

• Because Steinberg Law offers risk-sharing and contingency billing, clients often receive full legal review without upfront high cost. Steinberg Law, LLC

• For mass layoffs in NJ, new state laws (NJ WARN / mass layoff statutes) may require severance in certain cases

• Do I have to sign the severance agreement?
  No — signing is voluntary. But refusal may mean you walk away from the offer.

• How long do I have to review a severance agreement in NJ?
  If you’re 40 or older, you must get at least 21 days (plus 7 days to revoke).

• Can I negotiate the severance agreement?
  Yes — especially if you have leverage or potential legal claims.

• What happens if I miss the revocation period?
  Then typically your waiver becomes final and binding.

• Will a severance agreement affect my unemployment benefits?
  Usually not — severance isn’t wages for unemployment, but you should check with NJ unemployment rules and your attorney.

• Are noncompete or restrictive covenants enforceable if in the severance agreement?
  Possibly — but enforcement depends on state law, reasonableness, and whether adequate consideration was given.

• Why should I have a lawyer review it?
  Because the employer drafts the agreement, and a lawyer can spot hidden risks, negotiate better terms, and protect your rights.