A severance agreement is a contract that employers typically ask terminated employees to sign. By affixing your signature, you generally release all claims against your employer, usually in exchange for certain benefits, such as severance pay.
Signing a severance agreement may provide seemingly tempting benefits, but there are situations when refusing to sign it may be in your best interest. These situations include the following:
You have a case against your employer
Some employers who commit workplace violations have a terminated employee sign a severance agreement when they believe the employee has a strong case against them. If you intend to sue your employer for misconduct, it helps to check the agreement for provisions under “waiver of claims” or “release of claims.” This section typically lists the type of lawsuits you cannot pursue against your employer.
The severance package is too low
Some employers entice terminated employees to accept a severance package instead of filing a lawsuit. If the package on offer is too low, it is generally possible to refuse the agreement and negotiate better benefits or pursue the case instead.
The agreement is too restrictive
Some severance agreements contain noncompete provisions that might prevent you from finding employment in your employer’s competitors or opening a business within the same industry. If such provisions limit your future career, you might want to avoid signing the agreement.
The agreement is difficult to understand
It is generally unwise to sign a binding contract you do not understand. If the agreement contains convoluted language or vague provisions, you might unknowingly relinquish your rights or end up in prohibitive circumstances.
It is usually best to sign contracts when you have someone on your side who understands the law, such as an attorney. They can explain the provisions to you, help protect your rights, and ensure you are not putting yourself in an unfavorable and unfair situation.