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Laid Off: Should I Sign a Severance Agreement?

By Stephanie Rabiner, Esq. on March 02, 2011 | Last updated on March 21, 2019

Upon termination, an employer may offer you a severance agreement. The intent of these agreements is to compensate a laid off employee in exchange for a promise not to sue the employer in the future. Because severance agreements are not mandatory, employers may choose to offer laid off employees a severance agreement with the terms of its choice.

If you've been laid off and presented with a severance agreement, it is important to understand the terms that you may be agreeing to. Here are a few things you should consider before you sign.

  • Is there a non-compete clause? If so, will it prevent you from finding employment locally? Attorney Donna M. Ballman also warns that a non-compete clause that lasts longer than severance payments may not be worth it.
  • How does the severance agreement handle your pension and any other employer contributions? The last thing you want is to sign your pension away.
  • Is the agreement mutual? In other words, does an employer also have to promise not to sue you in the future and maintain confidentiality?
  • Do you have any potential claims against the employer? It's possible that you have a wrongful termination suit as a result of being laid off. Such a suit can result in more compensation than a standard severance agreement.

The list doesn't end here. In addition to making sure the offered terms of a severance agreement are favorable, you may want to consider making them more favorable. It's possible to negotiate a severance agreement, or even to ask for one if not initially offered. This process, however, may require an employment attorney, as complicated issues of contract and employment law are involved.

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