Severance Packages: What's Negotiable and What You're Signing

Severance is not a payout. It's a purchase. The company is buying something specific from you — a release of legal claims — and the number on page one is the price they opened with.

Understanding that reframes the whole meeting. You are not being given a gift you'd be rude to question. You are being handed a contract, in a room engineered to make you sign it before you've read it, and the single most valuable thing you can do is not sign it in that room.

Nobody has to offer you severance

No federal statute requires severance pay. It becomes an obligation only if a written policy, an employment agreement, or a collective bargaining agreement creates one. Which means the offer in front of you is discretionary — and discretionary offers are, by definition, adjustable.

What federal law does require in some situations is notice. Under the WARN Act, 29 U.S.C. 2102, a covered employer "shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice," to affected employees or their representatives, the state dislocated worker unit, and local government. There are exceptions — unforeseeable business circumstances, natural disaster, and a faltering-company provision — and several states have their own versions with lower thresholds. If you were part of a large layoff with no warning, ask about it: pay in lieu of proper WARN notice is separate from severance.

If you're 40 or older, the clock is on your side

The Older Workers Benefit Protection Act sets specific conditions before you can waive age discrimination claims under the ADEA. The EEOC's guidance on severance waivers spells them out, and they are not optional:

• At least 21 days to consider the offer. If it's a group termination or an exit incentive program covering two or more employees, at least 45 days.
• Seven days to revoke after signing. The EEOC is explicit that this "period cannot be shortened by the parties, by agreement or otherwise."
• The waiver must be "written in a manner that can be clearly understood" — no burying it in jargon and long sentences.
• Consideration must be something of value in addition to what you're already entitled to. Paying out accrued vacation you'd get anyway doesn't buy a release.
• The agreement must advise you in writing to consult an attorney. "You may wish to" isn't enough; it has to affirmatively recommend it.
• In a group program, the employer must disclose the decisional unit, the eligibility factors, the time limits, and the job titles and ages of everyone eligible or selected — with ages listed individually, not in bands like "40–50."

If material changes are made to the final offer, the 21-day period starts over. And if you're handed a packet and told "we need this back by end of day," that instruction — for a worker over 40 — conflicts with the statute the packet is trying to comply with. Say you'll use the full period. Nobody withdraws an offer over that.

One more thing the EEOC makes plain: you can still file a charge with the EEOC even after signing a waiver, and "no agreement between you and your employer can limit your right to testify, assist, or participate in an investigation" the EEOC conducts. A clause purporting to do that is unenforceable. What the release generally does cut off is your ability to recover money for yourself on the released claims.

Read the release, not the number

The dollar figure takes ten seconds to evaluate. The release takes an hour and is where the actual terms live. Things to find and price:

• Scope. Most are general releases of all claims arising up to the signing date. Check whether it purports to release claims that arise after — that's a different and worse deal.
• Non-disparagement. Is it mutual? If only you are bound, ask for the same obligation on the company's officers and HR. Free to give, and it changes what gets said about you.
• Non-compete and non-solicit. If you signed one at hire, this is your best and possibly only chance to get it narrowed or released. Ask directly.
• Confidentiality of the agreement itself. Usually acceptable, but check that it carves out your spouse, your lawyer, your accountant, and any legally required disclosure.
• Cooperation clauses. Agreeing to help with future litigation is normal; agreeing to unlimited unpaid time is not. Ask for an hourly rate and expense reimbursement.
• Rehire bars. Many agreements say you'll never be considered for employment there again. If you'd want the door open, ask to strike it.

Some things you generally can't sign away: unemployment benefits, workers' compensation claims, vested retirement benefits, and the right to report unlawful conduct to a government agency. A clause that seems to waive one of those is worth a lawyer's eye.

What's actually negotiable

The number, obviously — and more often than people expect, because the manager approving it usually has a band. But the non-cash items are frequently easier yeses:

1. Employer-paid COBRA for a defined number of months. Under 29 U.S.C. 1162, continuation coverage runs up to 18 months after a termination or reduction in hours, and the plan may charge up to 102% of the applicable premium — which is why COBRA on your own dime is startling. Three or six months of paid premiums is real money and doesn't hit the severance line item.
2. The characterization of your departure. "Termination without cause" versus "resignation" changes your unemployment eligibility in most states and changes what recruiters hear.
3. A neutral reference commitment naming who will give it and what they'll confirm.
4. Timing of the separation date. A date after a bonus payout, a vesting cliff, or the start of a benefit month can be worth more than another week of pay.
5. Extended time to exercise vested stock options. The standard 90-day post-termination window is brutal for anyone holding options they can't afford to exercise.
6. Prorated bonus, accrued PTO payout where state law doesn't already require it, outplacement services, and keeping the laptop or phone number.

Ask for the whole list in one email rather than in sequence. Serial requests read as bad faith; a single organized ask reads as a professional closing a file.

Severance and unemployment do not always coexist

This is state law and it varies sharply, so check your own agency before you choose between a lump sum and salary continuation.

New York is a useful illustration of how the rules can bite. The state Department of Labor says you "will not be eligible for benefits if you receive weekly dismissal or severance payments that are greater than the maximum weekly benefit rate," and that you may be eligible if the first payment arrives "more than 30 days after the last day you worked." It also warns you to call as soon as severance starts within that 30-day window, or you'll be repaying an overpayment later.

Here's the arithmetic that makes it concrete. Suppose two offers are floated, both nominally worth $22,800 to someone who earned $1,900 a week:

• Offer A: twelve weeks of salary continuation at $1,900, benefits continuing through the period.
• Offer B: a $22,800 lump sum, coverage ending at the separation date, COBRA available at your own cost.

If your state treats continuation weeks as disqualifying wages, Offer A delays unemployment by twelve weeks. At a $500 weekly benefit that's $6,000 of foregone benefits. But under Offer B you're buying your own coverage: a family plan whose full premium is $2,100 a month costs up to $2,142 with the 2% administrative charge, so three months is $6,426. The two effects nearly cancel — which is precisely why you have to price both instead of assuming the lump sum is better because it's bigger-sounding.

Also remember severance is wages. It's subject to income tax and to Social Security and Medicare tax, and employers commonly withhold federal income tax on it at the flat supplemental rate. A $22,800 check does not deposit as $22,800, and budgeting off the gross is how a three-month runway turns into a two-month one.

The sequence for the next 48 hours

1. Say thank you, say you'll review it, and leave. Do not sign, do not negotiate on the spot, do not say anything about your plans.
2. Photograph or download every document while you still have access — offer letter, bonus plan, equity grants, handbook, the last three pay stubs, the benefits confirmation. Portals close fast.
3. Write down the exact deadline and, if you're 40 or over, check it against the 21- or 45-day requirement.
4. File for unemployment. Do it even if you have severance; the agency will tell you how it's treated, and a late filing can cost you weeks.
5. Get one consultation with an employment attorney. Many will review a severance agreement for a flat fee, and if there's a plausible discrimination or retaliation claim, the economics change entirely. If cost is the obstacle, our guide to free legal help lists where to look.
6. Send one consolidated counteroffer email with your asks and a short reason for each.

And the thing not to do: don't threaten to sue as a negotiating opener. It converts a routine HR transaction into a legal matter, hands the file to counsel, and typically freezes everything that was flexible ten minutes earlier. If you have a real claim, a lawyer raises it, properly, on your behalf. If you don't, the bluff costs you the goodwill that was going to pay for the extra month of COBRA.

This is a guide to how the rules work, not legal advice on your agreement. The one-hour consultation is worth more than anything on this page.