Severance Agreement Clauses, Explained in Plain English

Last updated: October 2026 · General information, not legal advice

The short answer: a severance agreement is a trade — money and benefits from the company, in exchange for promises from you. The cash gets your attention; the clauses are where the cost lives. Here is every standard clause, what it actually means, and the thing to check before you sign it.

Release of claims

What it means: you give up your right to sue the company over your employment and its ending — pay disputes, discrimination, retaliation, wrongful termination, nearly everything, known or unknown. This is the core of the deal; the severance is the price of this signature.

Watch for: scope. Some releases try to cover things that can't legally be waived — earned wages, vested pension/401(k) benefits, unemployment insurance, workers' comp. A release also can't stop you from filing a charge with a government agency (like the EEOC), though it can waive your right to collect money from one. If the release covers claims in states or areas you've never worked in, or releases the company from obligations in other documents, note it.

The ADEA waiver (the age-discrimination release)

What it means: for workers 40+, the release specifically names the Age Discrimination in Employment Act. Federal law (OWBPA) makes this waiver valid only if it's written understandably, specifically references the ADEA, gives you the 21- or 45-day window, advises you in writing to consult an attorney, gives you something beyond what you're already owed, and includes the 7-day revocation period.

Watch for: missing pieces. If any of those elements are absent — most often the review window — the age waiver specifically is vulnerable. Details in the 21-day rule guide.

Noncompete

What it means: for a set period (commonly 6–24 months) and geography, you agree not to work for competitors — sometimes defined narrowly (a list of companies), sometimes as your entire industry.

Watch for: breadth vs. your state's law. Employee noncompetes are generally unenforceable in California, Minnesota, North Dakota, Oklahoma, and Wyoming; heavily restricted by salary in Colorado, Washington, Oregon, Illinois, D.C., Maine, and elsewhere; and judged for "reasonableness" in most other states. An unenforceable clause still chills your job search — future employers may not want the fight — which is why deleting or narrowing it is worth asking for even where it's legally weak. The kit contains the full 50-state snapshot.

Non-solicitation

What it means: you won't recruit the company's employees or poach its clients for a period. Often bundled with the noncompete but legally distinct — and in several states (including California) treated more leniently toward employers than noncompetes, though rules vary.

Watch for: whether it covers clients you brought with you or relationships that predate the job, and whether "solicit" is defined so broadly that a LinkedIn post counts.

Nondisparagement

What it means: you agree not to say negative things about the company, its officers, or its products. Watch for: one-way drafting. The standard signer's ask is mutuality — the company agrees to the same about you — plus an agreed reference protocol. Also check the carve-outs: truthful statements under subpoena, to agencies, and to your spouse, attorney, and tax advisor should be (and usually are) excepted.

Cooperation clause

What it means: after you leave, you'll help the company — transition questions, documents, and sometimes testimony in disputes or litigation — often with no pay, no time cap, and no end date. Watch for: exactly that openness. Bounded versions (12–24 months, reasonable notice, reimbursement plus an hourly rate for substantial time) exist and are a normal ask.

Equity and RSU treatment

What it means: unvested equity is almost always forfeited at termination; vested options usually must be exercised within a short window (commonly 90 days) or they're gone too. Watch for: your termination date relative to a vesting cliff — a date moved by two weeks can be worth more than the whole cash package — and whether the agreement shortens the standard exercise window. For executives and early employees, this section is where the real money is, and where a lawyer earns their fee fastest.

COBRA and benefits end dates

What it means: COBRA lets you continue your group health coverage for up to 18 months after termination, at the full premium plus up to 2% — unless the agreement says the company will pay for some months (a "COBRA bridge"). Watch for: the exact date your active coverage ends (often the last day of the termination month), whether the company contribution is paid as a subsidy, a lump sum, or not at all, and whether salary continuation keeps you on the active plan longer. Premiums commonly run several hundred dollars a month for an individual — price this clause, don't skim it.

The unemployment note

What it means: the agreement may characterize your exit ("resignation," "mutual separation," "position elimination") and state how the company will respond to an unemployment claim. Watch for: "resignation" language if you were laid off — it can complicate an unemployment claim in some states — and any promise not to contest. Severance itself can't waive your right to file for unemployment, but salary-continuation payments delay eligibility in some states while lump sums don't in others. Verify with your state workforce agency before assuming.

Repayment clawback

What it means: if you breach the agreement — work for a competitor, disparage, refuse cooperation — you may owe back severance already paid. Watch for: vague triggers ("any breach of this agreement") and clawbacks that reach signing bonuses or training costs too. The narrower and more specific the trigger, the safer the signature.

Rehire eligibility and the "entire agreement" clause

What it means: many agreements quietly mark you ineligible for rehire across the whole company (and affiliates), and nearly all end with an integration clause: this document is the whole deal, superseding every conversation. Watch for: any promise made to you verbally — a reference, a title change, a future role — that is not written into this document. Under an integration clause, it effectively doesn't exist.

Our free checker flags the six costliest clauses in your own agreement and prices your offer against current benchmarks. The Severance Kit decodes the full document clause by clause, with the exact headings each one hides under.