Don’t sign your severance agreement until you negotiate these 3 points

When you’re fired or laid off, a severance package can offer a sense of relief—but it often brings a wave of overwhelm, too.

A severance agreement ends the employment relationship between the employee and the employer. These packages are typically designed to support employees during their transition out of the company, usually with financial compensation and sometimes additional benefits.

However, the initial shock of job loss can cloud your judgment, which may lead you to rush into signing an agreement without fully understanding your options. While many employees may feel pressured to sign the agreement as quickly as possible, there’s usually room for negotiation—and things you don’t want to overlook, says Brett Kaplan, an employment lawyer from Kaplan Employment Law.

“Sometimes there’s pressure from HR, saying, ‘You have to sign this,’ even though the severance agreement can be six or seven pages long—sometimes about 3,000 words of tightly packed text,” Kaplan says. “[Employees] don’t realize that, ‘Hey, I can make a counteroffer to my employer regarding the consideration.’”

While it’s important to note that there’s no legal requirement for employers to provide a severance agreement, if one is provided it’s crucial to approach it with a clear understanding of your rights and options.

To make sure you don’t overlook anything crucial, you may consider consulting with an employment lawyer to review your severance package. But regardless of whether or not you retain legal counsel, here are three key things you don’t want to overlook, and what you should consider negotiating if needed:

1. The pay

Severance package compensation often depends on the salary you were earning and how long you worked at the company. It can also be worth trying to negotiate.

Working with a lawyer may give you an extra ability to leverage factors like unused vacation days or sick time. “If you ask HR, straight up, ‘Hey, can I have my unpaid overtime?’ They’re more than likely just going to say no,” Kaplan says. However, involving a lawyer could change that dynamic.

According to Kaplan, union workers may be entitled to certain benefits in the event of a termination, depending on their collective bargaining agreements, so checking your contract is important.

Additionally, the Worker Adjustment and Retraining Notification (WARN) Act requires a severance if there are mass layoffs without a certain amount of prior notice given to the employees, Kaplan says.

2. Neutral references

If leaving on not the best terms, consider asking for a “neutral reference,” which is when an employer agrees to provide only basic information to prospective employers.

“If you get a neutral reference, they can only verify the dates of employment, your position held, and can’t really give anything more detailed,” says Kaplan.

So, if an employer you’re interviewing with calls and asks, “Hey, what is this employee like?” they cannot respond by saying, “They were terrible,” or “We put them on a performance plan.”

This arrangement can help protect your future job prospects by preventing potential employers from receiving negative feedback that could impact their hiring decision.If there’s no neutral reference, such as you don’t ask for one, an employer is free to say whatever they’d like about you to a prospective employer, Kaplan says.

3. Noncompete Agreements

Noncompete agreements are something else to consider. These agreements restrict you from working for a competitor after leaving a job and can significantly impact your future job prospects, limiting your ability to pursue opportunities in your field.

According to Kaplan, “a noncompete agreement should be looked at, because it could really limit your career moving forward,” especially if you’re in a niche industry.

A noncompete agreement can prevent you from working in your field for up to two years, and may restrict you to a specific geographic area. “Noncompetes go by state law, and every state has their own case law for the enforceability of noncompetes,” Kaplan says.

Understanding any noncompete clauses in your severance package is crucial, as they can affect your career long after you’ve left the company. Employees should note that noncompete agreements might be going away entirely. While not out yet, it’s something that employees should look out for, Kaplan says.

Why you shouldn’t sign on the spot

It’s important to view a severance agreement as a mutually created document, Kaplan emphasizes. “It’s an agreement between two parties, and oftentimes it’s slanted,” he says.

When someone is fired or let go, they’re likely in an emotional state. HR sometimes seizes on that opportunity to get that quick signature they need, especially if they have concerns about an employee pursuing legal action or negotiating for a better severance deal.

It’s important to ask how much time you have to sign, if the agreement doesn’t specify. If needed, you can also ask for a few extra days to review. Kaplan says this might take the form of a very concise and polite email that reads, simply, “May I please have a couple more days to consider signing the agreement? I’m consulting with lawyers about my rights.” The employer isn’t required to provide you with extra time, but Kaplan says you should ask anyway.

Additionally, if a company has more than 15 employees, and the employee being let go is over 40 years of age, that employee automatically has 21 days to consider signing any agreement, Kaplan says, citing a federal law called the Older Workers Benefit Protection Act.

The bottom line is, you don’t want to sign until you fully understand what you’re agreeing to.