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Severance Agreements

2025-11-05 10:45

You just lost your job. Your employer hands you a severance agreement offering several weeks or months of pay in exchange for signing a release. You need the money, and the pressure to sign immediately is intense.

Stop. Don’t sign yet.

Severance agreements require you to give up substantial legal rights—including the right to sue for discrimination, harassment, unpaid wages, and wrongful termination. Once you sign, you typically cannot sue your employer for anything that happened during your employment, even if you later discover evidence of illegal conduct.

This guide explains what Texas severance agreements require you to release, special protections under federal law for workers age 40 and older, negotiation strategies, and critical provisions to review before signing.

What Is a Severance Agreement?

A severance agreement (also called a separation agreement or release) is a contract between you and your employer when employment ends. The basic exchange:

You receive: Severance pay (and sometimes other benefits like continued health insurance, outplacement services, or neutral references)

You give up: The right to sue your employer for employment-related claims

Key characteristic: These agreements are optional. In Texas, employers are not required to offer severance pay. It’s a negotiated exchange of money for legal claims.

What Claims Are You Releasing?

Most severance agreements contain broad release language covering virtually all employment-related claims:

Typical Claims Released

Federal discrimination and harassment claims:

  • Title VII (race, sex, religion, national origin discrimination)
  • Age Discrimination in Employment Act (ADEA)
  • Americans with Disabilities Act (ADA)
  • Sexual harassment and hostile work environment

Wage and hour claims:

  • Fair Labor Standards Act (FLSA) overtime violations
  • Unpaid wages, commissions, or bonuses
  • Minimum wage violations

State law claims:

  • Texas Commission on Human Rights Act (TCHRA) discrimination claims
  • Texas Payday Law wage claims
  • Breach of contract
  • Wrongful termination
  • Defamation
  • Intentional infliction of emotional distress

Other employment claims:

  • FMLA violations
  • Retaliation claims
  • Whistleblower protections
  • Workers’ compensation retaliation

Typical Release Language

Example: “Employee hereby releases and forever discharges Employer from any and all claims, demands, causes of action, and liabilities of any kind arising out of or relating to Employee’s employment or termination of employment, including but not limited to claims under federal, state, or local law.”

What this means: You’re giving up the right to sue for anything that happened during your employment, known or unknown, even if you discover evidence of illegal conduct after signing.

Special Protections: The Older Workers Benefit Protection Act (OWBPA)

If you’re age 40 or older, federal law provides critical protections when releasing age discrimination claims under the ADEA.

OWBPA Requirements

The OWBPA requires employers to:

1. Use clear, understandable language: The release must be written in plain language you can understand.

2. Specifically reference the ADEA: The release must specifically mention your rights under the Age Discrimination in Employment Act.

3. Provide 21 days to consider (individual terminations): You must have at least 21 days to review the agreement before signing.

4. Provide 45 days to consider (group layoffs): If the termination is part of a group layoff or early retirement program, you get 45 days to review.

5. Provide 7 days to revoke: After you sign, you have 7 days to change your mind and revoke the agreement. The severance doesn’t become final until the 7-day revocation period expires.

6. Advise consulting an attorney: The agreement must advise you to consult with an attorney before signing.

7. Provide information about group layoffs: If you’re part of a group termination, the employer must provide information about the job titles and ages of all employees selected for termination and those not selected.

Why OWBPA Matters

If your employer violates OWBPA requirements, the release of your age discrimination claims is invalid. You can still sue for age discrimination even if you signed the agreement and kept the severance pay.

Example: Your employer gives you a severance agreement and tells you to sign it by the end of the day. You’re 52 years old. The agreement doesn’t give you 21 days to consider or 7 days to revoke. You sign. Later you discover evidence of age discrimination. The release is invalid because it violated OWBPA. You can sue for age discrimination while keeping the severance pay.

What to Review Before Signing

Before signing any severance agreement, carefully review these provisions:

1. Severance Amount

Consider:

  • How much are you being offered?
  • How does this compare to your salary? (Common: 1-2 weeks per year of service)
  • Is this adequate compensation for giving up all legal claims?

Remember: In Texas’s at-will employment system, you’re entitled to nothing unless you have a contract guaranteeing severance. Any offer is more than your legal entitlement, but that doesn’t mean you should accept the first offer.

2. What You’re Releasing

Key questions:

  • Does the release cover all claims or only specific ones?
  • Are you releasing claims you didn’t even know about?
  • Does it release future claims (generally not enforceable)?

Red flag: Releases of “unknown claims” mean you’re giving up claims even for illegal conduct you haven’t discovered yet.

3. Continuing Obligations

Look for:

  • Non-compete agreements: New restrictions on working for competitors
  • Non-solicitation agreements: Restrictions on contacting customers or employees
  • Confidentiality obligations: What you can and cannot say about your employment
  • Return of property: Deadlines for returning company equipment
  • Cooperation: Requirements to cooperate with investigations or litigation

Important: Some agreements impose NEW restrictions (like non-competes) in addition to requiring releases. Read carefully.

4. Payment Terms

Clarify:

  • When will you receive payment? (Lump sum immediately, or installments over time?)
  • Are payments contingent on your compliance with the agreement?
  • Can the employer stop payments if you violate any term?
  • Will payments be subject to normal payroll deductions and taxes?

Caution: Some agreements allow employers to stop severance payments if you violate confidentiality or non-disparagement clauses, even accidentally.

5. Continued Benefits

Review:

  • Health insurance continuation (COBRA): Will the employer pay for any period?
  • Outplacement services: Job search assistance
  • Vesting of equity or retirement benefits
  • Accrued vacation pay (you’re entitled to this in Texas regardless of severance agreement)

6. Non-Disparagement and Confidentiality

Common provisions:

  • Non-disparagement: You cannot make negative statements about the employer
  • Confidentiality: You cannot discuss the terms of the severance agreement or circumstances of your termination

Important: Non-disparagement clauses can prevent you from posting negative reviews, discussing your experience on social media, or even truthfully describing why you were fired.

Exception: You generally cannot waive your right to file administrative charges with the EEOC or participate in government investigations, but the agreement might prohibit you from receiving monetary damages from such proceedings.

7. Admission of Liability

Look for: “This agreement does not constitute an admission of wrongdoing or liability by Employer.”

What this means: The employer is not admitting they did anything illegal. They’re just paying you to avoid the risk of litigation.

Negotiation Strategies

Severance agreements are often negotiable, especially if you have potential legal claims:

1. Don’t Sign Immediately

Use your time:

  • Review the agreement thoroughly
  • Identify provisions you want to change
  • Consult an employment attorney
  • Assess whether you have potential legal claims worth more than the severance offer

Leverage: If you’re age 40+, you have 21 days minimum by law. Use it.

2. Assess Your Leverage

You have stronger leverage if:

  • You have evidence of discrimination, harassment, or retaliation
  • The employer violated wage and hour laws
  • You have witnesses or documentation supporting claims
  • Your termination appears pretextual or retaliatory
  • The employer wants you to sign restrictive covenants (non-compete, non-solicitation)

You have weaker leverage if:

  • The termination was clearly for legitimate business reasons
  • You have no evidence of illegal conduct
  • The employer has strong documentation of performance issues
  • This is a broad-based layoff affecting many employees

3. Propose Specific Modifications

Negotiate for:

  • Higher severance amount: Especially if you have strong legal claims
  • Longer benefit continuation: Extended health insurance coverage
  • Removal of restrictive covenants: Eliminate or narrow non-compete or non-solicitation provisions
  • Neutral reference: Agreement to provide neutral job references
  • Outplacement services: Professional job search assistance
  • Accelerated vesting: Stock options or retirement benefits

4. Present Counteroffer Professionally

Approach:
“Thank you for the severance offer. After reviewing the agreement, I’d like to propose the following modifications: [list specific changes]. I believe these changes are fair given [my years of service / concerns about the circumstances of my termination / the restrictive covenants you’re asking me to sign].”

Important: Be professional. Severance negotiations are business transactions, not emotional confrontations.

5. Consult an Employment Attorney

An attorney can:

  • Review the agreement for unfair or unusual provisions
  • Assess whether you have legal claims worth more than the severance offer
  • Negotiate with the employer on your behalf
  • Advise you whether to accept or reject the offer

When legal consultation is critical:

  • You believe you were fired for illegal reasons (discrimination, retaliation)
  • The severance amount is substantial
  • The agreement includes significant restrictive covenants
  • You don’t understand provisions in the agreement

What You Cannot Waive

Even with a severance agreement, you cannot waive certain rights:

1. Future Claims

You cannot release claims for events that haven’t happened yet. Releases only cover claims arising from conduct that occurred before signing.

2. Filing Administrative Charges

You generally cannot waive your right to file charges with the EEOC, TWC, or other government agencies. However, the agreement might prohibit you from receiving monetary damages from such proceedings.

3. Workers’ Compensation Benefits

You cannot waive your right to workers’ compensation benefits for work-related injuries.

4. Unemployment Benefits

You cannot waive your right to apply for unemployment benefits (though receiving severance might affect eligibility).

5. WARN Act Rights

You cannot waive rights under the Worker Adjustment and Retraining Notification (WARN) Act for mass layoffs.

Don’t Sign Under Pressure

Employers often create artificial urgency: “This offer expires in 48 hours” or “Sign now or we withdraw the offer.”

Reality:

  • If you’re age 40+, OWBPA requires 21 days minimum. Artificial deadlines violate federal law.
  • Even if you’re under 40, rushing you to sign suggests the employer wants you to sign before you discover something.

Best practice: Take time to review, consult an attorney if needed, and make an informed decision. Legitimate severance offers don’t require instantaneous decisions.

Related Topics

Frequently Asked Questions

Do I have to sign a severance agreement?

No. Severance agreements are completely optional. In Texas, employers have no obligation to provide severance pay (unless you have a contract guaranteeing it). You can decline the severance and pursue legal claims if you believe you have them. However, you’ll receive no severance pay if you decline.

Can I negotiate my severance agreement?

Yes. Severance agreements are often negotiable, especially if you have potential legal claims or significant leverage. Employers may be willing to increase severance amounts, remove restrictive covenants, or modify other terms. It never hurts to ask professionally.

How long do I have to review a severance agreement?

If you’re age 40 or older, federal law (OWBPA) requires at least 21 days to review (45 days for group layoffs) and 7 days to revoke after signing. If you’re under 40, Texas law doesn’t mandate a specific review period, but employers typically provide at least a few days.

Can I keep my severance pay and still sue my employer?

Generally no. If you sign a valid severance agreement and don’t revoke it within the revocation period, you’ve released your claims and cannot sue. However, if the release violates OWBPA (for age 40+ workers) or is procured by fraud, it might be invalid.

Should I consult a lawyer before signing?

If the severance amount is significant, you believe you were terminated illegally, or the agreement includes restrictive covenants, consulting an employment attorney is strongly recommended. The attorney can assess whether your potential legal claims are worth more than the severance offer and negotiate better terms.

Legal Disclaimer: This article provides general information about Texas severance agreements and should not be construed as legal advice. Severance agreements involve fact-specific analysis that depends on the specific terms of the agreement, the circumstances of your termination, and your potential legal claims. Before signing a severance agreement or declining a severance offer, consult a qualified Texas employment attorney for advice specific to your situation.

References

  • Older Workers Benefit Protection Act (OWBPA), 29 U.S.C. § 626(f)
  • Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq.
  • Texas Payday Law, Texas Labor Code § 61.001 et seq.
  • Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.