Severance Agreement Analyzer
Severance Agreement Red Flags: Provisions That Can Hurt You Long-Term
Not all severance agreements are equal. Learn the hidden clauses, overly broad releases, and restrictive provisions that can haunt you after signing.
Most employees focus on the dollar amount when reviewing a severance agreement. But the clauses around the money — non-competes, release scope, clawback provisions, and confidentiality terms — can affect you for years. These are the provisions experienced employment attorneys flag first.
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Overly Broad Release Language
The release of claims is the core of a severance agreement. The broader it's written, the more rights you're giving up.
Watch for:
- Releases that cover 'any and all claims, known or unknown' — this is designed to cover claims you don't know about yet
- Releases that extend to 'affiliates, predecessors, successors, officers, directors, and agents' — this is much broader than just 'the company'
- Releases covering 'any action or inaction at any time during employment' — this covers anything that happened during your entire employment history
The 'known or unknown' problem: If your state has a provision like California Civil Code § 1542 (which says a general release doesn't cover unknown claims), the severance agreement may explicitly waive that protection. When you see language like 'Employee expressly waives the protections of California Civil Code § 1542 or similar laws,' you're waiving the right to later raise claims you didn't know about at signing.
What's reasonable: A release covering claims arising from your employment and termination, that existed as of the signing date, is standard. A release covering future conduct, unrelated events, or claims that haven't accrued yet pushes beyond the norm.
Clawback Provisions
Clawback clauses require you to return severance money if certain conditions occur. Common clawback triggers:
- Violation of the non-disparagement clause: If you say something negative about the employer publicly, they can demand the severance back
- Breach of confidentiality: Disclosing confidential company information
- Violation of the non-compete: Working for a competitor within the restricted period
- Filing a legal claim: Some agreements (improperly) try to include clawback triggers if you file a charge with the EEOC or other agency
How to handle them:
- Narrow the triggering events to only material, provable violations
- Require a court determination before any clawback is enforceable (you shouldn't have to return money based on the employer's unilateral claim that you violated a term)
- Remove EEOC charge filing as a clawback trigger — this is illegal and unenforceable under NLRA and EEOC regulations
Clawback provisions give employers ongoing leverage over you even after the relationship ends. The more narrow and specific they are, the better.
Non-Disparagement Language That's Too One-Sided
Non-disparagement clauses are now standard and often mutual — both you and the company agree not to make negative public statements about each other.
Red flags in non-disparagement clauses:
- One-sided: You agree not to disparage; the company makes no similar commitment. Push for mutuality.
- Overly broad definition of 'disparagement': Clauses that prohibit any negative statement, including truthful ones or statements to the EEOC, are legally problematic.
- No carve-out for government agencies: You should always retain the right to communicate with government agencies (EEOC, OSHA, NLRB, DOL) without violating the non-disparagement clause.
- No carve-out for truthful testimony: You should be able to testify truthfully if subpoenaed or required by law.
The NLRB has issued guidance that overly broad non-disparagement clauses that chill workers' rights to discuss working conditions may violate Section 7 of the NLRA. Employers cannot prohibit you from discussing wages or working conditions with coworkers.
Confidentiality Clauses: What They Cover and Don't
Confidentiality clauses in severance agreements typically have two components:
Confidentiality of the agreement terms: You agree not to disclose the amount of your severance. This is extremely common and generally enforceable.
Confidentiality of company information: You agree to continue protecting trade secrets and proprietary information. This is generally an extension of your existing employment confidentiality obligations — not a new issue.
Red flags:
- Prohibiting you from talking about the termination at all — you should be able to say you were laid off and why (if known)
- Preventing you from talking about workplace conditions or harassment you experienced
- Confidentiality terms so broad that they might prevent you from applying for your next job without revealing what you did
Retained rights regardless of confidentiality clause:
- You can always file a charge with the EEOC or other government agency
- You can always cooperate with a government investigation
- You can always report a crime to law enforcement
- You can always testify truthfully if subpoenaed
Cooperation Clauses
Cooperation clauses require you to assist the employer in future legal matters after your termination — typically litigation involving your former employer where your knowledge is relevant.
Why they're concerning:
- They can obligate you to spend significant time assisting the employer (attending depositions, reviewing documents, meeting with attorneys) at no additional compensation
- The obligation can last indefinitely ('full cooperation at all times in the future')
- They may put you in a difficult position if the litigation involves claims against the employer that you personally experienced
What to negotiate:
- Reasonable compensation for your time (at least your current hourly equivalent)
- Time limits on the cooperation obligation
- Carve-out for situations where cooperation would conflict with your legal interests
- Reimbursement for any attorneys' fees you incur in connection with any such cooperation
The 'No Re-Hire' Clause
Some severance agreements include a clause prohibiting the employer from rehiring you — or prohibiting you from applying for employment with the company.
Why it matters: If you want to return to this employer in the future (common in industries with few major employers), agreeing to a no-rehire provision permanently closes that door.
Negotiate to remove it: Unless there's a specific reason the employer needs this (significant legal dispute, conduct issue), there's no reason to agree to it. A standard layoff should not result in a permanent ban.
For California employees, AB 749 (effective January 2020) generally prohibits no-rehire provisions in settlement agreements involving employment disputes. If you're in California and experienced a dispute, this law may make such a provision unenforceable regardless of what you sign.
Frequently Asked Questions
Quick answers to the most common questions on this topic.
Can I negotiate the release language in a severance agreement?
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Yes. Release language is negotiable. You can narrow it to specific claims, specific time periods, and specific parties. Employers expect some negotiation on release scope, especially for executive-level employees.
What happens if I violate the non-disparagement clause after signing?
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The employer may trigger the clawback clause (if one exists) and demand return of the severance, or sue for breach of contract. Whether a statement actually constitutes 'disparagement' under the contract is often litigated — your statement must actually violate the specific language of the clause.
Can the employer prohibit me from talking to the EEOC?
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No. Regardless of confidentiality or non-disparagement clauses, you cannot waive the right to file a charge with the EEOC. You can waive the right to recover money from an EEOC investigation, but not the right to participate. A clause that tries to prohibit EEOC filing is illegal and unenforceable.
Is a non-compete enforceable if it's part of a severance agreement?
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It depends on your state. Non-compete enforceability varies significantly by state — California, North Dakota, Minnesota, and Oklahoma essentially prohibit them. Even in states that allow non-competes, courts scrutinize scope and duration carefully. Consult a local employment attorney about your specific non-compete.
What is a 'garden leave' clause?
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Garden leave requires you to continue working during a notice period (collecting salary) but to stay away from the office and clients. During garden leave, you're still employed but not actively working — essentially paid to not start your new job. It limits your access to clients during the transition.