Employment guide

Severance & Release Agreements: What to Check

Severance is almost always offered in exchange for a release of claims — and if you are 40 or older, federal law gives you specific time and disclosure rights before you sign.

Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team

General information, not legal advice.

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Overview

Severance pay is generally a matter of agreement, not a legal entitlement, and it is almost always conditioned on signing a release that waives your claims against the employer. Understanding what you are giving up — and the protections the law gives you — is essential before you sign.

For employees 40 and older, the Older Workers Benefit Protection Act (OWBPA) adds specific requirements that make an age-claim waiver valid only if certain conditions are met.

Topics to check

Severance is usually a matter of agreementHigh confidence

There is no requirement under the federal Fair Labor Standards Act to pay severance; it is a matter of agreement between employer and employee, governed by contract, company policy, state law, and sometimes ERISA. So the amount, the conditions, and any tie to your restrictive covenants are all negotiable in principle.

Check how severance is calculated, whether it is paid as a lump sum or over time, and whether continued payments depend on your compliance with non-compete or non-solicitation covenants.

U.S. DOL — Severance Pay

You are usually releasing claimsHigh confidence

Severance is consideration for a release: by accepting it, you typically waive your right to sue the employer for most claims arising from your employment. Read the scope of the release carefully and confirm it does not purport to bar you from filing a charge with, or participating in an investigation by, a government agency such as the EEOC — which a valid waiver cannot prohibit.

Make sure you understand which claims survive (for example, vested benefits, unemployment, or claims that cannot be waived) before signing.

EEOC — Waivers of Discrimination Claims in Severance Agreements

Extra protections if you are 40 or olderHigh confidence

Under the OWBPA amendments to the ADEA, a waiver of age-discrimination claims is valid only if it is "knowing and voluntary," which requires specific conditions: the waiver must reference the ADEA by name, advise you in writing to consult an attorney, give you at least 21 days to consider it (45 days for a group layoff, with additional disclosures), and allow 7 days to revoke after signing. An employer also cannot make you "tender back" severance to challenge the waiver.

If you are 40 or older and these elements are missing, the age-claim waiver may not be enforceable — a reason to have counsel review it.

EEOC — Waivers of Discrimination Claims in Severance Agreements

Key takeaways

There is no federal requirement to pay severance; it is generally a matter of agreement.
Severance is almost always paid in exchange for a release of claims — read its scope.
A valid release cannot bar you from filing a charge with or assisting the EEOC.
Workers 40+ get OWBPA protections: 21/45-day consideration, 7-day revocation, and written advice to consult counsel.
Watch whether continued severance depends on complying with restrictive covenants.

Official resources

Covenant not to compete (Cornell LII Wex) FTC — Noncompetes: What You Should Know Employment-at-will doctrine (Cornell LII Wex) EEOC — Waivers of Discrimination Claims in Severance Agreements Defend Trade Secrets Act — 18 U.S.C. § 1836 (Cornell LII)

Legal-review notes

Guide confidence marker: Medium confidence.

Release scope, enforceability, and OWBPA compliance depend on the exact wording and your situation; have counsel review a severance agreement.
State law may add severance or final-pay requirements beyond federal law.

Frequently asked questions

Is my employer required to pay severance?

Not under federal law — the FLSA does not require severance pay. It is generally a matter of agreement governed by contract, company policy, state law, and sometimes ERISA, which means the amount and conditions are negotiable in principle.

What am I giving up when I sign a severance agreement?

Usually a release of most claims against the employer in exchange for the payment. A valid release cannot stop you from filing a charge with or assisting a government agency like the EEOC, and some claims (such as vested benefits) cannot be waived, so read the scope carefully.

I am over 40 — do special rules apply?

Yes. Under the OWBPA, a waiver of age-discrimination claims is valid only if it meets specific requirements, including referencing the ADEA, advising you in writing to consult an attorney, giving at least 21 days to consider (45 for group layoffs) and 7 days to revoke. Missing elements can make the age waiver unenforceable.