A severance agreement is a trade. The company pays you, and in return you usually give up the right to sue it. Before you sign, a severance agreement review should answer one question: what exactly are you giving up, and is the payment worth it? Here are 8 common mistakes, and what to check instead.
Mistake 1: signing on the day you get it
Ask how long you have to decide, and get the answer in writing.
If you are 40 or older, federal law sets a floor. A waiver of age discrimination claims is valid only if you get at least 21 days to consider it, or 45 days if the offer is part of a group layoff, and at least 7 days to revoke after you sign (29 U.S.C. 626(f)(1)(F) and (G)). The agreement must also advise you in writing to consult a lawyer (626(f)(1)(E)).
According to the EEOC’s guidance on severance waivers, you may sign earlier if you choose to. But the employer may not push you to sign early by threatening to withdraw or change the offer before the period ends. If the employer makes material changes to the final offer, the 21 days start over.
If you are under 40, no federal rule sets a minimum review period. Ask for a reasonable one anyway.
Mistake 2: missing what the release covers
Find the paragraph titled “release” or “general release” and read every word. Releases are often written to cover every claim connected to your job, known or unknown, up to the date you sign.
Check for:
- Claims you already know about, such as harassment, discrimination, or unpaid wages.
- Whether the release covers claims that arise after you sign. For workers 40 and over, a valid waiver cannot (626(f)(1)(C)).
- Whether it releases only the company, or also owners, managers, and related companies.
Mistake 3: letting a deadline run while you negotiate
A missed filing deadline can end a claim. Talking about severance does not pause the deadlines to file a discrimination or harassment complaint.
In Texas, a complaint to the Texas Workforce Commission must be filed within 180 days of the unlawful act, or within 300 days for sexual harassment (Texas Labor Code 21.202). The 300-day rule for sexual harassment took effect on September 1, 2021.
For a federal charge, the EEOC deadline is 180 calendar days, extended to 300 days where a state or local agency enforces a law against the same discrimination (EEOC time limits). The EEOC also says time limits generally are not extended while you try to resolve the dispute another way, such as mediation.
Write the date of the last incident on the first page of your severance file. Count forward 180 and 300 days.
Mistake 4: assuming you cannot talk to the EEOC after signing
A severance agreement can stop you from collecting money in your own lawsuit. It cannot stop you from filing a charge with the EEOC or taking part in an EEOC investigation. The EEOC’s guidance says any clause that tries to waive those rights is invalid and unenforceable (EEOC Q&A). The age discrimination statute says the same about waivers under it (626(f)(4)).
If a clause reads as if you may never contact any agency, flag it and ask for it to be rewritten.
Mistake 5: misreading what the Speak Out Act protects
The federal Speak Out Act covers nondisclosure and nondisparagement clauses in sexual harassment and sexual assault disputes. Its rule is narrow: a clause “agreed to before the dispute arises” is not judicially enforceable in those disputes when the conduct is alleged to violate federal, tribal, or state law (Speak Out Act, section 4(a), 42 U.S.C. 19403). It applies to claims filed on or after December 7, 2022, the day it was enacted (section 5, 42 U.S.C. 19404).
So the Act is about timing. A clause you agreed to before the dispute arose, such as one in an offer letter, falls within it. A clause in a severance agreement you sign after the dispute has arisen is outside the Act’s text. The Act also leaves room for state laws that protect speech at least as much (section 4(b)). Read any post-dispute clause on the assumption that it may be enforced, and ask a lawyer whether another law limits it.
Before you sign, ask:
- What exactly must stay confidential: the agreement’s terms, the amount, or the underlying events?
- Is the nondisparagement promise mutual, or does only one side make it?
- Can you still speak with a lawyer, a spouse, a tax adviser, and government agencies?
The act does not stop employers from protecting trade secrets or proprietary information (section 4(d)).
Mistake 6: treating money you are already owed as severance
Your final paycheck is not part of the deal. In Texas, an employee who is fired must be paid in full within 6 days of discharge (Texas Labor Code 61.014). For workers 40 and over, a valid age waiver must be paid for with something on top of what you are already owed (626(f)(1)(D)).
List what you are owed regardless of signing: final wages, earned commissions under your agreement, and anything your written policies promise. Then compare that list with the severance offer. The difference is the real price of your release.
Mistake 7: forgetting unemployment benefits
The Texas Workforce Commission says you cannot receive unemployment benefits while you receive certain types of severance pay or pay in lieu of notice (TWC guidance). You must report severance when you apply or by calling a TWC Tele-Center at 800-939-6631, and TWC mails you a decision on whether it affects your benefits.
Ask whether the payment is a lump sum or salary continuation, and what period it covers. That can change when benefits begin.
Mistake 8: signing a new noncompete without reading it
Some severance agreements add or extend a noncompete. In Texas, a noncompete is enforceable if it is part of an otherwise enforceable agreement and its limits on time, area, and type of work are reasonable and no broader than needed to protect the employer’s goodwill or other business interest (Texas Business and Commerce Code 15.50(a)). Check whether the agreement gives you anything new for a new restriction.
Your severance agreement review checklist
Print this and mark each line before you sign. It is a sample checklist of general points, not a review of your agreement. Adapt it to your situation, or ask a lawyer to read the agreement with you.
- Date I received the agreement: ____. Date it expires: ____.
- Am I 40 or older? If yes, does it give 21 or 45 days to consider and 7 days to revoke?
- Date of the last incident of harassment or discrimination: ____. 180 days from then: ____. 300 days: ____.
- What claims does the release cover, and who does it release?
- Does any clause limit contact with the EEOC or TWC?
- What must stay confidential, and is nondisparagement mutual?
- Total I am owed even without signing: $. Severance offered: $.
- How will the payment affect unemployment benefits?
- Any noncompete, nonsolicitation, or return-of-property duties?
- Questions to ask HR in writing before I sign.
If you have not yet decided whether your treatment at work was unlawful, our earlier posts on whether you can sue your employer for sexual harassment in Texas and how to prove wrongful termination explain the basics.
When to talk to a lawyer
Consider a review if you reported harassment before you were let go, if the release covers a claim you know about, or if a filing deadline is close. A lawyer reads the release, compares it with your claims and deadlines, and can negotiate terms with the employer. You can read how our workplace harassment practice works.
This article is general information, not legal advice. Laws change and every case is different. Reading it does not create an attorney-client relationship. For advice on your situation, book a case review.