A severance agreement is the document an employer asks an employee to sign in exchange for severance pay, benefits, or other exit-related consideration.

Most severance agreements include a release of claims. That means the employee gives up the right to sue the employer for many claims arising from the employment relationship or termination. These agreements often also include confidentiality provisions, non-disparagement language, cooperation obligations, restrictive covenants, and other post-employment duties.

In New York, employers generally are not required to offer severance unless a contract, policy, plan, offer letter, employment agreement, or other enforceable promise requires it. But once an employer offers severance, the agreement should be evaluated carefully before signing.

The most critical forensic indicator is whether the document is labeled "Severance Agreement" or "Separation and Settlement Agreement." Severance is the default legal instrument for termination; it's what companies offer to avoid litigation risk and establish finality. Settlement language—phrases like "in consideration of the mutual waiver and full and final settlement of any and all claims," explicit reference to "potential claims," or language addressing "disputes," "alleged violations," or "claims arising from or related to employment"—indicates the company is treating this as a settlement with known claims in play.

A severance offer that includes settlement language is the company's way of confirming, without admission, that specific violations occurred and value is being exchanged for silence. This distinction is crucial for negotiation positioning: if you're being offered a "settlement," the amount should be valued against the cost of litigating the underlying claim, not against mere severance custom.

Additionally, watch for asymmetrical release language: agreements that require the employee to release all claims but permit the company to retain the right to enforce restrictive covenants, defend claims, or pursue counterclaims signal unequal risk allocation. Sophisticated negotiators demand mutual releases with equal carve-outs.

The presence of unusual carve-outs—for example, "Employee retains the right to file administrative charges with the EEOC or participate in EEOC investigations but waives the right to recover damages"—is company counsel's attempt to comply with EEOC policy while limiting exposure; a signal that there could claims on the table.

This is general process-oriented advice and does not constitute legal advice nor am I your attorney, although I can be. www.severance.co

A severance agreement is often presented as a benefit. In reality, it is also a risk-control document for the employer.

The company may be seeking protection from:

• Discrimination claims

• Retaliation claims

• Wage and hour claims

• Bonus or commission disputes

• Equity disputes

• Contract claims

• Reputation risk

• Internal complaints

• Future litigation

That does not mean every termination gives rise to a claim. But it does mean the severance offer should be reviewed in context. The strength of the employee’s position often depends on the surrounding facts:

• performance history,

• timing,

• protected activity,

• unpaid compensation, inconsistent explanations,

• equity rights,

• internal complaints, or

• contractual promises.

Once a severance agreement is signed, the employee may have limited ability to reopen the issue. That is why review before signing is critical. You simply dont know what you may be giving up. As I often remind clients, “You dont know what you dont know.” Dont assume something is out of reach or forfeited.

Ive helped clients assess:

• Whether the payment is low relative to the claims or rights being released

• Whether bonus, commission, or equity rights have been preserved

• Whether the release is too broad

• Whether the agreement improperly restricts agency filings or protected communications

• Whether restrictive covenants should be narrowed

• Whether confidentiality or non-disparagement language is one-sided

• Whether there is room to negotiate better payment, timing, benefits, references, or mutual protections (imo, the answer is always yes).

I regularly negotiate severance and executive-exit matters where initial offers are materially improved by reframing the risk, identifying legal exposure, and pushing the employer toward a business resolution.

In one matter, an initial severance offer of approximately $43,000 was increased to approximately $141,000. In another, a zero-severance termination was converted into a $45,000 resolution within days. When a start up CEO tried to clawback equity given to an employee right before a merger, I intervened and secured the employee a million dollar payout within a week. Like I said, never assume you have no options.