Washington Severance Agreements: What to Know Before You Sign

Quick Answer: Severance agreements offer money or benefits in exchange for waiving your right to sue your employer. Washington does not require employers to offer severance, but many do when terminating employees. Before signing, understand what rights you're giving up, negotiate if possible, and consider consulting an attorney—especially if you may have legal claims. You typically have time to review (and often negotiate), so don't sign under pressure.

A severance offer isn't just free money—it's a contract. Know what you're trading.

What Is a Severance Agreement?

Basic Structure

Severance agreements typically include:

• Payment to you (lump sum or continued salary)
• Release of claims (you agree not to sue)
• Confidentiality clause (can't discuss terms)
• Non-disparagement (can't speak negatively)
• Return of property (company items returned)
• Other restrictions (non-compete, non-solicit)

Why Employers Offer Severance

Employers benefit by:

• Avoiding potential lawsuits
• Ensuring clean separation
• Maintaining confidentiality
• Protecting company reputation
• Reducing unemployment insurance impact

Why Employees Accept Severance

Employees benefit by:

• Immediate financial cushion
• Continued health insurance
• Positive reference
• Time to find new job
• Avoiding litigation stress

Is Severance Required?

No Legal Requirement

Washington does not require severance. Employers offer it voluntarily or per policy.

Exceptions:

• Employment contract guarantees severance
• Company policy creates expectation
• WARN Act violations may require payments
• Collective bargaining agreements

When Severance Is Common

More likely with:

• Mass layoffs
• Longer-tenured employees
• Higher-level positions
• Potential legal claims
• Company policy

Less likely with:

• For-cause terminations
• Short-term employees
• Entry-level positions
• Small employers

What You're Giving Up

Release of Claims

The core trade: You waive your right to sue for:

Employment claims:

• Wrongful termination
• Discrimination (race, age, sex, disability, etc.)
• Harassment
• Retaliation
• Wage and hour violations
• FMLA/leave violations

Contract claims:

• Breach of employment contract
• Breach of implied contract
• Bonus or commission disputes

Tort claims:

• Defamation
• Intentional infliction of emotional distress
• Negligent supervision

What Can't Be Waived

Some rights cannot be waived:

• Right to file EEOC charge (though you waive monetary recovery)
• Workers' compensation claims
• Unemployment benefits
• Future claims (not yet accrued)
• Rights under law that can't be contracted away

Non-Compete and Non-Solicit

May include restrictions on:

• Working for competitors
• Soliciting former clients
• Recruiting former coworkers

Note: Washington heavily restricts non-competes. They're only enforceable above certain income thresholds ($116,593 for employees in 2026).

Key Severance Terms to Review

Payment Terms

Questions to ask:

• How much is the payment?
• Is it lump sum or installments?
• When will you receive it?
• Are taxes withheld?
• Does it affect unemployment?

Health Insurance (COBRA)

Options may include:

• Company pays COBRA for specified period
• Lump sum to cover COBRA costs
• Direct continuation on employer plan
• Nothing beyond COBRA rights

References

Consider requesting:

• Neutral reference policy (dates/title only)
• Positive letter of recommendation
• Agreement on what will be said

Confidentiality

Typical restrictions:

• Can't disclose severance amount
• Can't discuss circumstances of departure
• May limit what you can say about company

Consider: Can you discuss with spouse, attorney, financial advisor?

Non-Disparagement

Mutual vs. one-way:

• Best: Both parties agree not to disparage
• Watch for: Only you are restricted
• Carve-outs for truthful statements, legal proceedings

Cooperation Clause

May require:

• Assisting with transition
• Responding to questions
• Participating in legal matters
• Providing testimony

Consider: How long? Will you be compensated?

Age Discrimination Special Rules

OWBPA Requirements

For employees 40+, federal law (OWBPA) requires:

• Agreement must be in writing
• Specifically refers to ADEA claims
• Doesn't waive future claims
• Provides consideration beyond what's already owed
• 21 days to consider (individual layoff)
• 45 days to consider (group layoff)
• 7 days to revoke after signing

Group Layoff Disclosures

When part of reduction in force:

• Employer must disclose ages of those selected/not selected
• Must explain eligibility criteria
• Must identify decisional unit

Why This Matters

If employer doesn't follow OWBPA requirements, the age discrimination release may be invalid—and you could sue even after signing.

Negotiating Severance

You Can Negotiate

Severance offers are not final. Employers expect some negotiation.

What to Negotiate

Payment:

• Higher amount
• Longer salary continuation
• Bonus or commission inclusion
• Payment timing

Health coverage:

• Longer COBRA coverage
• Company payment of premiums
• Direct insurance continuation

Other terms:

• Positive reference letter
• Outplacement services
• Equity vesting acceleration
• Relaxed non-compete
• Extended exercise period for stock options

Leverage Points

Your negotiating power increases if:

• You have potential legal claims
• You have company secrets/knowledge
• Replacement will be difficult
• You're being asked to train replacement
• Company wants fast, clean exit

Negotiation Tactics

Effective approaches:

• Ask for time to review
• Request specific changes
• Don't accept first offer
• Be professional, not emotional
• Get changes in writing
• Consider attorney review

When to Get Attorney Review

Definitely Consult Attorney If

• You have potential legal claims (discrimination, harassment, retaliation)
• You're over 40 (OWBPA compliance)
• Severance is substantial (>$20,000)
• Non-compete will significantly affect career
• Terms are confusing or seem unfair
• Employer is pressuring you to sign quickly
• You're being singled out (not group layoff)

What Attorney Can Do

• Identify problems with agreement
• Assess value of potential claims
• Negotiate better terms
• Ensure proper OWBPA compliance
• Explain what you're giving up
• Help you make informed decision

Finding an Attorney

• Employment law specialists
• Many offer free initial consultations
• Contingency or hourly arrangements
• May be covered by employer if you negotiate

Common Mistakes to Avoid

Signing Too Quickly

Don't rush. You usually have time:

• Standard: Days to weeks
• Age 40+: Minimum 21 days
• Group layoffs: Minimum 45 days

Ask for more time if needed.

Not Reading Carefully

Read every word. Key issues often buried:

• Scope of release
• Definition of "claims"
• Non-compete terms
• Cooperation requirements
• Remedy limitations

Assuming Terms Are Standard

Every agreement is negotiable. "Standard language" can be changed. Ask for modifications.

Ignoring Potential Claims

Before signing, consider:

• Were you discriminated against?
• Were you harassed?
• Were you retaliated against?
• Are you owed wages?
• Did employer break promises?

These claims have value. Don't give them away for standard severance.

Not Getting Promises in Writing

If employer promises something verbally, get it in the agreement. Oral promises may not be enforceable.

Tax Implications

Severance Is Taxable

Treated as ordinary income:

• Subject to federal and state income tax
• Subject to FICA taxes
• May push you into higher bracket

Withholding

Employer may:

• Withhold as regular wages
• Withhold as supplemental income (flat rate)
• Structure payments across tax years

Consulting Tax Professional

For substantial severance, consider:

• Payment timing (this year vs. next)
• 401(k) rollover implications
• Health insurance deductibility
• Structuring to minimize taxes

Unemployment Benefits

Severance and Unemployment

Severance may delay unemployment benefits:

• If severance = salary continuation, may be delayed
• If severance = lump sum, varies by allocation
• Washington ESD makes determination

Don't Assume

Always apply for unemployment. ESD determines eligibility—don't self-disqualify.

After Signing

Keep Your Copy

Maintain records:

• Signed agreement
• All related correspondence
• Payment records
• Evidence of compliance

Follow the Terms

Comply with:

• Confidentiality provisions
• Non-disparagement clauses
• Return of property
• Non-compete restrictions (if enforceable)

Breach can void agreement or trigger penalties.

Monitor Employer Compliance

Ensure employer:

• Makes payments on time
• Continues benefits as promised
• Provides agreed references
• Doesn't disparage you (if mutual)

Frequently Asked Questions

Can I be fired if I don't sign?

Yes. Refusing severance doesn't prevent termination. You may be fired without severance if you don't sign.

How much severance is typical?

Common formulas: 1-2 weeks per year of service. But varies widely by employer, position, and circumstances.

Can I negotiate after signing?

Generally no. Once signed, you're bound by terms. That's why review before signing is crucial.

What if employer breaches the agreement?

You may have breach of contract claim. Document the breach and consult attorney.

Do I have to sign on the spot?

No. Never sign immediately. Take time to review and consider. Pressure to sign fast is a red flag.

Can severance be revoked if I'm over 40?

You have 7 days to revoke after signing (OWBPA). After that, agreement is final.

What happens if I violate confidentiality?

Agreement may specify penalties. Could include forfeiting severance or facing lawsuit for breach.

Related Topics

• Washington Wrongful Termination
• Washington Workplace Discrimination
• Washington Non-Compete Agreements
• Washington Employment Contracts
• Washington Final Paycheck Requirements

Take Action

Severance agreements are binding contracts that affect your legal rights and future. Don't treat them as formalities.

Before signing:

1. Read every word carefully
2. Identify what rights you're waiving
3. Assess whether you have potential claims
4. Negotiate for better terms
5. Consider attorney review for significant agreements
6. Take your time—don't sign under pressure

What you sign today affects your rights tomorrow. Make an informed decision.

Legal Disclaimer

This article provides general information about severance agreements in Washington and is not legal advice. Every situation is different. For advice about your specific circumstances—especially before signing a severance agreement—consult a qualified employment attorney.

Severance agreements are legally binding contracts. Understanding what you're signing is essential to protecting your rights.