Understanding Severance Agreements: Key Points to Know

Apr 24 2025 20:00

About the Author

Lawrence Holzman is the founder of The Holzman Law Firm, LLC, an employment and personal injury practice based in Rockville, Maryland, serving clients throughout Maryland and Washington, D.C. A University of Maryland Law School graduate with an M.B.A. from Michigan State University, Lawrence has been litigating on behalf of workers and injury victims since 1992, is admitted to practice before the U.S. Supreme Court and multiple federal courts, and has served on the faculty at the University of Maryland and taught banking law and economics at the American Institute of Banking.

 

 

Navigating job loss is one of life’s more challenging experiences, and the legal jargon in severance agreements can make it even more overwhelming. While it’s a situation no one hopes to face, understanding what you’re agreeing to in a severance package is crucial. These agreements often have long-term implications for your career and financial future, so taking the time to educate yourself can make all the difference.

There are important elements to consider in a severance agreement:

  • General Release of Claims: This clause typically relinquishes your right to sue the company in exchange for severance pay. It's essential to evaluate whether the severance payment justifies this concession.
  • Non-Compete Clauses: These clauses might restrict your future employment opportunities. It's important to assess whether the severance package adequately compensates for this limitation.
  • Non-Solicitation and Confidentiality Agreements: These agreements could restrict contact with former colleagues or sharing company information. Evaluate the reasonableness of these clauses based on their scope and duration.
  • Reference to Unfulfilled Promises: Look out for any verbiage referencing obligations you did not previously agree to. Such statements might impact future employment opportunities.
  • Consideration Period: Employees 40 and older have a legal right to a 21-day review period. Use this time to thoroughly review the agreement and seek legal advice.

Understanding the details of a severance agreement is a vital step toward making informed decisions during a challenging time. If you’re facing a severance agreement or want to prepare for the unexpected, consult a legal professional who can guide you through the process.