When You Should Not Sign a Severance Agreement

A severance agreement may appear to provide you with generous benefits after being asked to leave your company. But you should always review this agreement closely before signing it, as doing so could also cause you to sacrifice certain rights or protections you would otherwise have. 

Learn when not to sign a severance agreement, and consider asking an employment lawyer to review this document with you to ensure that you fully understand what you are signing. 

What Is a Severance Agreement? 

If you were recently terminated or laid off from your job position in LA, your employer may have presented you with a severance or separation agreement. This is a legally binding contract between you and your employer that outlines the terms of your separation.

Often, they require employees to trade their legal rights for a severance package. Common terms include:

• Severance pay, with the contract detailing the amount and duration
• Release of claims, which would prohibit you from pursuing lawsuits against your employer for wrongful termination, discrimination, or unpaid wages
• Continued benefits, such as extended health insurance benefits past your termination date
• Restrictive covenants​​​​​, such as non-disclosure agreements or non-compete clauses (which are usually unenforceable in California anyway)

Many employees do not initially realize that they are not legally obligated to sign a severance agreement. Signing this contract is entirely voluntary, and it may not always be in your favor. 

When You Should Refuse To Sign a Severance Agreement 

Your company should provide you with a severance agreement review period during which you can carefully evaluate this contract and decide whether to sign it. Understanding when not to sign a severance agreement can help you make a more informed decision. 

Here are a few examples of when signing an agreement may not be in your best interests:

• You’re considering legal action against your employer: Severance agreements often include release of claims clauses that would bar you from taking legal action against your employer. If your employer violated your rights or you believe you experienced wrongful termination, retaliation, or discrimination, speak with an attorney before signing anything. 
• The agreement does not provide compensation beyond what you are legally owed: Upon termination in California, you are legally owed all of your earned wages, accrued and unused vacation time or PTO, and fully earned commissions. You don’t need to sign a severance agreement to receive this compensation. If your agreement doesn’t include any additional severance pay, it may not be worth signing. 
• The terms are overly restrictive or unfair: Your employer may try to convince you to sign a highly restrictive severance agreement to suppress your rights or limit their obligations. For example, watch out for non-compete, non-solicitation, and confidentiality clauses that may affect your future career. 
• You have not had ample time to review the agreement: Companies typically state a deadline by which time an employee must sign the severance agreement or forfeit the benefits in the agreement. If you feel this timeline is too restrictive, or the deadline is approaching and you have not had sufficient time to review the contract, you may not be able to make a fully informed decision about doing so. 
• You feel pressured or coerced to sign it: Your employer should not pressure or coerce you to sign the severance agreement. Such tactics may indicate that your employer wants you to agree to terms that are not in your best interests. 
• The agreement would impact your unemployment benefits: If you were involuntarily terminated, you may qualify for unemployment benefits. But some severance agreements require employees to agree that they voluntarily left the company, which could affect their eligibility for unemployment benefits. 

What Happens if You Don’t Sign a Severance Agreement? 

If you don’t sign a severance agreement, you will not receive the severance pay and benefits enumerated in the contract. But you will also retain your legal right to pursue a case against your employer and, if applicable, apply for unemployment benefits. You also would not be bound to any new non-compete or non-disclosure agreements introduced in the contract. 

Regardless of whether or not you sign the agreement, you have the right to receive your earned wages and other reimbursements that are legally owed to you based on the work you have performed. If you agree with certain terms in the severance agreement and not others, you may be able to negotiate changes to the contract. 

An attorney can help you draft a version of the agreement that is more acceptable to you or negotiate with your employer for a better offer. However, many companies are not willing to revise severance agreements and instead maintain a “take it or leave it” mentality. 

Once you pass the deadline for signing the agreement, you may no longer have the option to go back on your decision unless your employer extends or reopens the offer. 

When To Meet With an Attorney To Review a Severance Agreement 

Severance agreements have the potential to award you with a significant amount of money during a layoff, but they can also go the opposite direction and significantly restrict your future career opportunities. Reviewing the agreement with an attorney is often worthwhile, especially if the agreement is complex, you don’t fully understand all of its terms, and you cannot determine on your own whether signing it would be in your favor. 

An attorney can review the severance agreement with you and help you understand:

• Waiver of legal claims
• Non-disparagement clause restrictions
• Release of employment claims
• Concerns regarding eligibility for unemployment benefits  

They can also help you determine whether you may have grounds for legal action against your employer for wrongful termination, discrimination, or other violations of your legal rights. If so, you would generally not want to sign the agreement to maintain your right to hold them liable. 

Speak With an Employment Attorney Today 

Whether you are considering suing for wrongful termination or need help knowing when not to sign a severance agreement, our employment attorneys at D.Law offer legal guidance and representation. Contact us today at 818-275-5799 to request a free case evaluation.