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You were just fired. Before you’ve had time to process what happened, someone from HR slides a document across the table or emails it to you with instructions to review, sign, and return it within a set number of days. The document is a severance agreement. It offers you a specific amount of money, maybe a few weeks of pay, maybe several months, in exchange for your signature. The language is dense. The terms are unfamiliar. And somewhere in the middle of it, buried in paragraphs of legal text, is a release of claims that extinguishes your right to sue your employer for anything related to your employment and termination. The Mundaca Law Firm reviews severance agreements for New York City employees who are in exactly this position, and the firm’s consistent advice is the same: do not sign until you understand what the agreement actually says, what you’re giving up, and whether the amount being offered reflects the value of the rights you’re surrendering.
What a Severance Agreement Actually Is
A severance agreement is a contract. The employer offers money (and sometimes other benefits like extended health insurance, outplacement services, or a neutral reference). In exchange, the employee agrees to release the employer from legal liability. The release is the entire point of the agreement from the employer’s perspective. The money is the price the employer is willing to pay to make sure you never file a discrimination claim, a retaliation lawsuit, a wage complaint, or any other legal action related to your employment.
Severance is not required by law in New York. There is no statute that obligates an employer to offer it. When an employer does offer severance, it’s because the employer has decided that paying you a defined amount now is preferable to the risk and cost of defending against a potential claim later. That calculation tells you something. An employer who fires someone cleanly, with no legal exposure, has little reason to offer severance. An employer who offers a generous package immediately after a termination that looks questionable is buying something specific: your silence and your signature on the release.
This doesn’t mean every severance offer is an admission of wrongdoing. Some employers offer severance as a matter of policy. But the size and urgency of the offer, particularly when it arrives alongside a termination that involved suspicious timing, a protected complaint, or a recently exercised legal right, is worth paying attention to.
What the Release of Claims Covers
The release is the section of the agreement that matters most and the section most employees don’t fully read. A standard severance release is written as broadly as the law allows. It typically covers all claims, whether known or unknown, that arise from your employment or the termination of your employment. That language encompasses discrimination claims under Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the New York State Human Rights Law, and the New York City Human Rights Law. It covers retaliation claims. It covers FMLA interference and retaliation. It covers wage and hour claims. It covers breach of contract. It covers claims you might not even know you have yet.
Once you sign, those claims are gone. You cannot later discover that your termination was discriminatory and decide to pursue it. You cannot learn that your employer was shorting your overtime and file a wage claim. The release wipes the slate. That’s what makes the decision to sign consequential. You’re not just accepting money. You’re closing every legal door that your termination might have opened.
Some releases are more limited in scope. Employers occasionally carve out specific claims, like workers’ compensation or unemployment insurance, that can’t be waived as a matter of public policy. But the default drafting approach is maximum breadth, and the employee who signs without legal review is almost certainly waiving more than they realize.
The OWBPA Requirements for Employees Over 40
If you’re 40 or older, federal law provides specific protections around severance agreements through the Older Workers Benefit Protection Act (OWBPA). The OWBPA imposes requirements that the employer must satisfy for the release of age discrimination claims to be valid.
The agreement must specifically reference the Age Discrimination in Employment Act by name. It must advise you in writing to consult with an attorney before signing. It must give you at least 21 days to consider the agreement (or 45 days if the severance is offered in connection with a group layoff or exit incentive program). And it must give you 7 days after signing to revoke the agreement.
These requirements are not optional. An employer who fails to include the ADEA reference, shortens the consideration period, or pressures you to sign before the 21 days have elapsed has produced an agreement that may not validly waive your age discrimination claims. Employees over 40 who are being pushed to sign quickly should be aware that the pressure itself may violate the OWBPA, and the resulting release may be unenforceable as to age-related claims.
Why the Offered Amount May Not Reflect What You’d Recover
The most common mistake employees make when evaluating a severance offer is measuring it against their immediate financial needs rather than against the value of the claims they’re releasing. Two months of salary feels meaningful when you’re worried about paying rent next month. But if the termination was retaliatory or discriminatory, the potential recovery through litigation or a negotiated resolution may be substantially larger than what’s on the table.
A wrongful termination claim under the New York City Human Rights Law can include back pay from the date of termination through resolution, front pay for future lost earnings, uncapped compensatory damages for emotional distress, uncapped punitive damages when the employer acted with malice or reckless indifference, and attorney fees paid by the employer. The total value of a strong claim frequently exceeds the initial severance offer by a significant multiple.
That doesn’t mean litigation is always the right choice. Lawsuits take time. Outcomes are uncertain. The emotional cost of prolonged litigation is real. Some employees prefer the certainty of a severance payment over the uncertainty of a legal process, and that’s a valid choice when it’s made with full information. The problem is making that choice without knowing what the alternative is worth. An employee who accepts $15,000 in severance without realizing they had a $200,000 retaliation claim hasn’t made a strategic decision. They’ve made an uninformed one.
Negotiating a Better Severance
Severance agreements are negotiable. The first offer is rarely the best the employer is willing to pay, particularly when the employer knows the termination has legal exposure. An employee who responds to the initial offer with a counteroffer, supported by an attorney who can articulate the specific legal claims the release would extinguish, frequently obtains a substantially better package than what was initially presented.
The negotiation can address more than the dollar amount. Extended health insurance coverage (COBRA subsidy or continuation), vesting of stock options or restricted stock units, modification of non-compete or non-solicitation clauses, the terms of the reference the employer will provide, the treatment of unused vacation or PTO, and the confidentiality provisions that govern what each side can say about the separation are all negotiable terms that affect the employee’s financial and professional position going forward.
The employer’s willingness to negotiate depends largely on how much legal risk the termination created. An employer who fired someone two weeks after an FMLA leave request and is now facing a potential retaliation claim with uncapped damages under the NYCHRL has strong incentive to increase the severance rather than defend the litigation. An attorney who understands the employer’s exposure can leverage that risk into a better deal.
The Timeline Pressure Is Part of the Strategy
Most severance agreements include a deadline for the employee to sign. For employees over 40, the minimum is 21 days under the OWBPA. For younger employees, there’s no legally mandated consideration period, and some employers set deadlines as short as a few days. The deadline is designed to limit the employee’s ability to seek legal advice and evaluate the offer.
Don’t let the deadline prevent you from getting a review. In most cases, the deadline is flexible if you communicate that you’re consulting with an attorney. Employers who genuinely want to resolve the separation cleanly will extend the deadline by a few days when asked. An employer who insists that the offer expires tomorrow and refuses any extension is creating a pressure environment that should make you more cautious, not less.
The 7-day revocation period that applies to employees over 40 provides a final safety valve. Even after signing, you have 7 days to change your mind and revoke the agreement. If you signed under pressure and then consulted a lawyer who identified problems with the agreement or claims you didn’t know you had, the revocation window allows you to pull back.
How The Mundaca Law Firm Reviews Severance Agreements
The Mundaca Law Firm reviews severance agreements for New York City employees who want to understand what they’re being asked to sign before they sign it. The review covers the scope of the release, the adequacy of the offered amount relative to any potential legal claims, the enforceability of the agreement’s terms, and the opportunities for negotiation.
If the review reveals that the termination may have been unlawful and that the employee has claims worth substantially more than the offered severance, the firm advises on whether to negotiate a better package or pursue those claims through litigation. If the review confirms that the offer is fair relative to the legal landscape, the firm says so and the employee can sign with confidence that they’re making an informed decision.
Contact The Mundaca Law Firm before signing. The review takes days, not weeks, and it can be the difference between accepting an amount that reflects the employer’s interests and negotiating one that reflects yours. Once you sign the release, the legal options are gone.
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