Severance Agreement Template

In plain language: Identifies the employer and employee as legal entities and states the official last day of employment.

Common mistake: Using the employer's trade name instead of its registered legal entity name — this can complicate enforcement and create ambiguity about which entity is bound by the release.

In plain language: States the total severance amount, how it will be paid (lump sum or installments), the payment dates, and that payment is contingent on the agreement becoming effective.

Common mistake: Failing to condition payment on the agreement becoming irrevocable — paying before the revocation window closes means the employer has provided consideration without a binding release.

In plain language: Describes any continued health, dental, or vision coverage after separation, including whether the employer will subsidize COBRA premiums and for how long.

Common mistake: Promising specific benefits continuation terms that conflict with the employer's actual plan documents — insurance carriers control COBRA eligibility, and over-promising here creates breach exposure.

In plain language: The employee releases all known and unknown employment-related legal claims against the employer — the core provision that makes the severance payment worthwhile to the employer.

Common mistake: Using a release that attempts to cover future claims or claims that cannot legally be waived — such as EEOC charges, NLRA rights, or workers' compensation claims — which can void the entire release in some jurisdictions.

In plain language: For employees aged 40 or older, includes the mandatory disclosures, the 21-day review period, and the 7-day revocation right required to make the ADEA waiver enforceable.

Common mistake: Using a single generic release template for all employees regardless of age — omitting OWBPA disclosures for employees 40 and over renders the ADEA release unenforceable, exposing the company to age discrimination claims.

In plain language: Prohibits both parties from disclosing the terms of the agreement or making negative statements about each other after separation.

Common mistake: Making non-disparagement one-sided (binding only the employee) without disclosing this asymmetry clearly — in some jurisdictions this affects enforceability, and in all cases it creates negotiating friction.

In plain language: Requires the employee to return all company property — devices, documents, access credentials, and confidential data — by a specified date.

Common mistake: Not specifying a hard return date or omitting digital property (cloud files, email archives, code repositories) — departing employees with lingering system access create ongoing data security and IP exposure.

In plain language: Restricts the employee from joining competitors or soliciting the company's customers or employees for a defined period and geography after separation.

Common mistake: Copying the non-compete language from the original employment contract without checking whether the same terms remain proportionate given the circumstances of the separation and the applicable jurisdiction's current enforcement standards.

In plain language: Requires the employee to assist the company with ongoing litigation, regulatory matters, or transition activities after separation, typically with expense reimbursement.

Common mistake: Including an open-ended cooperation obligation with no time limit or compensation provision — courts and employees both view unlimited unpaid cooperation as unreasonable, which can color how a court reads the rest of the agreement.

In plain language: Specifies which jurisdiction's law governs the agreement, how disputes are resolved (arbitration or court), and confirms the written agreement is the entire understanding between the parties.

Common mistake: Choosing a governing law state with no meaningful connection to the employee's work location — California, for example, applies its own law regardless of a contrary governing-law clause for employees who worked in California.

A severance agreement is a legally binding contract between an employer and a departing employee that sets out the terms of separation — typically including severance pay, benefits continuation, and post-employment restrictions — in exchange for the employee's release of all employment-related legal claims. It gives the employer a clean legal break from the separation and gives the employee financial support and clarity about what they are entitled to receive.

In the United States, no federal law requires employers to offer severance pay or a severance agreement. However, if an employer's written policy, employment contract, or collective bargaining agreement promises severance, that promise is generally enforceable. In Canada, the UK, and the EU, statutory termination pay and notice requirements apply regardless of whether a severance agreement exists — an agreement typically provides additional consideration above the statutory floor.

At minimum: a clearly identified separation date, the severance amount and payment schedule, benefits continuation terms, a general release of claims, confidentiality and non-disparagement obligations, a return-of- property clause, post-employment restrictions (non-compete and non-solicitation where enforceable), a cooperation clause, and governing law. For employees aged 40 and over in the US, OWBPA disclosures — including the 21-day review period and 7-day revocation right — are also legally required.

No. Employees are never legally required to sign a severance agreement. The agreement is voluntary — the employee exchanges their right to sue for the severance benefits offered. If an employee declines to sign, they typically receive only whatever compensation is owed by law (final wages, accrued PTO) and no additional severance. Employees have the right to take time to review the agreement and consult an attorney before deciding.

For employees under 40 in the US, there is no federal minimum review period, but giving at least 5–7 business days is standard practice. For employees aged 40 or older, the OWBPA requires a minimum 21-day review period and a 7-day revocation window after signing before the agreement becomes irrevocable. For group layoffs involving employees 40 and over, the review period extends to 45 days and additional disclosures are required.

A properly drafted severance agreement can release most employment-related claims, including discrimination, wrongful termination, and breach of contract claims. However, certain rights cannot be waived regardless of what the agreement says — including the right to file a charge with the EEOC, rights under the NLRA to engage in protected concerted activity, workers' compensation claims in most states, and vested pension benefits under ERISA. Attempting to waive these in a release can void the entire agreement in some jurisdictions.

The terms are often used interchangeably, but there is a subtle distinction in practice. A severance agreement typically focuses on the employer's payment obligations and the employee's release of claims. A separation agreement is sometimes used as a broader term covering all terms of the end of the employment relationship, including severance, reference arrangements, equity treatment, and transition obligations. Both documents serve the same core legal function — trading compensation for a release of claims.

There is no universal formula in the US, but one to two weeks of base salary per year of service — with a minimum of two to four weeks total — is a widely used benchmark for non-executive employees. Executives typically receive one to three months per year of service. The appropriate amount depends on the employee's tenure, the reason for separation, the risk of litigation, and the terms of any pre-existing employment contract. In Canada and the UK, statutory minimums set a floor that the offer must meet or exceed.

For straightforward separations of non-executive employees in a single US state or Canadian province, a high-quality template reviewed by HR is often sufficient. Legal review is strongly recommended when the employee is aged 40 or older (OWBPA compliance), when the separation involves equity, outstanding litigation, or an existing employment contract, when the employee works across multiple jurisdictions, or when the separation carries significant discrimination or retaliation risk. A one-hour employment attorney review typically costs $300–$600 and is worthwhile for any departure with material legal exposure.