Should You Sign a Severance Agreement?

It can be overwhelming and terrifying to be fired. Many employees are forced to think about the short term. How are they going to pay their rent or mortgage without their paycheck? How are they going to feed their families? Of course, these considerations are of the upmost importance but there are also other important factors to consider when you are fired. While it may be difficult, it is important to consider what you are giving up by signing a severance package that has been offered by your employer. The severance package may extend your pay for a little while or give you a small lump sum of money but is it worth it when you consider the claims that you are releasing?
Release of Claims
A severance package can require an employee to give up certain important claims. When an employer offers you a severance package it is important to carefully review the terms of the proposed agreement to determine if it requires you to give up your right to work for a competitor, your right to bring a legal claim against the employer, or your right to file and receive unemployment compensation. These rights can be even more important to your financial future than the compensation offered by your employer in a severance agreement. Therefore, it is important to think about all of these claims and how likely you are to want to work for a competitor, how strong a potential case may be against your former employer, and whether you will need unemployment compensation to pay your bills.
Weighing the pros and cons of Signing a Severance Agreement
Once you consider the whole severance package – including the financial incentives provided by your employer and the claims that you are agreeing to forego - you must make a decision. You have to weigh the pros and cons of signing the agreement and decide whether it is in your best interest. This is an intensely personal decision and often depends in large part on the strength of any claims that you may be foregoing, the amount of money offered in the severance package, your need for immediate financial resources and other personal factors. If you believe that signing the severance claim is in your best interest then you should do it.
Can I Refuse to Sign a Severance Claim?
However, if you believe that the severance claim is not in your best interest then you may refuse to sign it. The law does not require your employer to offer you a severance package and the law does not require you to sign it. Your employer cannot force you to sign a severance package. However, an employer can legally refuse to pay you any severance funds if you refuse to sign a release of claims.
Therefore, it is extremely important to consider your own personal financial and employment big picture when deciding whether or not to sign a severance package. If you want to work for a competitor, if you have valid legal claims against your employer, or if you anticipate being unemployed for a significant length of time then it may be in your financial best interest to turn down the severance money and refuse to sign the release of claims.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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