Documents / Employment & HR
Severance Agreement
Offer severance pay in exchange for a release of claims when an employee's job ends — with ADEA-compliant terms for workers 40 and over.
Time
~10 min
Questions
16
Steps
3
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PDF · Word
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What we will cover
- 01
The Parties
Important: employees age 40 and over have specific federal rights under the Older Workers Benefit Protection Act (OWBPA), and state laws on releases vary. Have this agreement reviewed by an employment attorney before use.
- 02
Severance Pay & Benefits
- 03
Release & Protections
- 04
Review and generate
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About this document
A severance agreement — also called a separation agreement — pays a departing employee something extra in exchange for a release of legal claims against the employer. It typically also covers COBRA contributions, accrued PTO, return of property, confidentiality of the terms, non-disparagement, and what the company will say to future employers. Severance is almost never required by law; it is bought, and what it buys is finality.
Federal law imposes specific rules when the employee is 40 or older. Under the Older Workers Benefit Protection Act, a release of age-discrimination claims is valid only if the employee gets at least 21 days to consider it (longer for group layoffs), 7 days to revoke after signing, and a written recommendation to consult an attorney. A release also cannot stop someone from filing a charge with or cooperating with the EEOC, and a number of states now restrict confidentiality and non-disparagement clauses covering harassment or discrimination claims. Have an employment attorney review anything non-routine.
Common questions
How much severance pay is typical?+
There is no federal requirement to pay severance at all unless a contract, policy, or plan promises it. Where it is offered, a common formula is one to two weeks of pay per year of service, with more for senior roles and negotiated exits. Group layoffs may separately trigger advance-notice obligations under federal or state plant-closing laws.
How long do I have to decide whether to sign?+
If you are 40 or older, federal law gives you at least 21 days to consider an agreement releasing age claims, and 45 days when the offer is part of a group termination program, plus 7 days after signing to revoke. Employers may offer more time voluntarily. If you are under 40 there is no federal minimum, though pressure to sign on the spot is a reason to slow down and get advice.
Can I still collect unemployment if I accept severance?+
Usually yes, but timing varies by state. Some states treat severance as wages that delay the start of benefits, others disregard it entirely, and how the payment is structured — lump sum versus salary continuation — can change the answer. Check your state unemployment agency's rules before signing, since the structure is often negotiable.
General information, not legal advice — laws vary by state and change over time.
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