Severance Waiver Rights: What You Give Up When You Sign

When companies lay people off, it’s rarely because of one person’s performance. More often, it’s business: a division isn’t profitable, funding is tight, leadership shifts direction, or the numbers just don’t add up. In other words, the company is restructuring because capital, strategy, or markets aren’t working out.

Yet even in that moment, employers are willing to pay people to leave. Not because severance is a “gift,” but because it protects the company. Severance is a business exchange: the cost of paying you a few extra weeks or months is far less than the potential risk of future lawsuits, client loss, or intellectual property disputes.

That’s why nearly every severance agreement includes a waiver of rights. You get money, benefits, or health insurance coverage — and in return, the company gets peace of mind. But it’s important to understand exactly what you’re giving up before you sign.

This page walks through the legal and employment rights most employees waive in severance agreements — from lawsuits and class actions to non-competes, non-solicits, and nondisclosure clauses — so you know the tradeoffs in front of you.

What Is a Severance Waiver?

A severance waiver is the legal clause in your agreement where you agree not to pursue claims against your former employer. It’s sometimes called a “release of claims.”

The employer’s goal: protect against lawsuits, disputes, or messy exits.
Your side: you receive compensation or benefits in exchange for signing away those rights.

👉 Think of it as the core bargain of severance. You’re not being “thanked” for your service — you’re agreeing to legal peace in exchange for financial support.

Common Legal Rights You Waive

When you sign a severance waiver, here are the most common rights you’re giving up:

Right to sue your employer for wrongful termination, discrimination, harassment, retaliation, or unpaid wages.
Right to join a class action lawsuit, even if you’re automatically included.
Right to bring future claims. Most agreements use catch-all language like “all known and unknown claims, suspected or unsuspected.” That means if you discover an issue later, you usually can’t go back.
Wage & hour disputes. Overtime, missed bonuses, or PTO disputes are often included in what you waive.

What you can’t waive: Certain rights can’t legally be signed away, like unemployment benefits, workers’ compensation, and whistleblower protections. But everything else is usually on the table.

Known vs. Future Claims in Severance Agreements

When you sign a severance agreement, you’re usually waiving two buckets of rights:

Known claims. These are things you could already sue for today — wrongful termination, discrimination, harassment, retaliation, unpaid wages. Most employers want a clean break, and waiving known claims in exchange for severance pay is the standard value exchange.
Future or unknown claims. This is where things get risky. Some agreements say you’re waiving “any and all claims, known or unknown, suspected or unsuspected, now or in the future.” That means if something surfaces months or years later, you may have already signed it away.

👉 Real-world examples:

Your company’s payroll system gets hacked two years later, and your identity is stolen. If you waived future claims, you may not be able to sue.
You develop a serious illness tied to workplace conditions, but the waiver language cuts off your rights — and even your family’s rights — to pursue damages.

⚠️ Why it matters: With known claims, you can weigh the value — “is the severance worth more than what I could recover in court?” But with future claims, you can’t predict the value. That’s why many attorneys recommend negotiating to remove future claims from the agreement

Some waivers go even further and cover class action lawsuits. You’ve probably received a postcard or email at some point saying you were automatically included in a settlement for a company you once did business with. In severance agreements, I’ve seen clauses requiring employees to drop out of a class action within five days of being notified — even though they never joined it themselves.

That kind of clause is extreme, but it shows how aggressively employers draft waivers to protect themselves. Always read closely to see if your severance includes limits on class action participation and how fast you're required to act.

Entire Agreement Clause and Why It Matters

Nearly every severance agreement ends with an entire agreement clause. It looks simple — a sentence like “This agreement constitutes the entire agreement between the parties.” But legally, it carries big weight.

What it means: only what’s written inside the severance document counts.

Emails from HR confirming your bonus payout? Not enforceable.
A manager saying “don’t worry, commissions are included”? Doesn’t matter.
Side agreements, memos, or verbal promises? All wiped out.

The “four corners” rule applies — if it’s not on the four corners of the severance document, it doesn’t exist.

👉 How to use this to your advantage:
If you want clarity on something — whether commissions are included, whether COBRA covers your family, whether you can keep using a company perk — get it written directly into the severance agreement before you sign. Don’t rely on side emails or conversations.

This is where smart employees look professional: they use the entire agreement clause to tighten protections in their favor, not just the company’s.

Employment Rights You May Also Be Signing Away

Severance isn’t just about waiving lawsuits. Most agreements also bundle in employment restrictions that shape your next role. These are the fine-print clauses that can quietly control your future options.

Non-Compete Clauses

Prevent you from working for competitors, vendors, or in the same industry.
Typical duration: 6 months to 2 years.
Geographic scope can range from 25 miles to statewide or even nationwide.
Some are so broad they effectively block you from your entire career field.

👉 Balance check: If your non-compete lasts six months but severance only covers two, you may have months with no income. That’s negotiable.

Non-Solicitation Clauses

Ban you from taking clients, coworkers, or vendors with you.
Apply even if you weren’t in sales — for example, a project manager reaching out to a vendor.
Personal relationships are usually okay, but professional contacts tied to your old role belong to the company.

Nondisclosure (NDA) Clauses

Prohibit you from using or sharing company information, even if you remember it from memory.
Intellectual property (like software, inventions, or patents you created) usually belongs to the employer, not you.
Downloading files or taking templates as you exit = breach of confidentiality and potential clawback.

Non-Disparagement Clauses

Restrict you from making negative statements about the company.
Often one-sided — you’re gagged, but they aren’t.
You can negotiate mutual non-disparagement so both parties agree not to badmouth each other.

Rehireability Clauses

Many severance agreements state you’re not eligible for rehire.
Sometimes extends to subsidiaries, affiliates, or parent companies.
Why it matters: this language can limit your future opportunities if the company merges or gets acquired.

The Real Tradeoff — Why Employers Require Waivers

Why do employers go to all this trouble? Because the tradeoff is worth it.

Employer’s perspective: They spend a small amount on severance to avoid costly lawsuits, protect client relationships, and secure intellectual property.
Employee’s perspective: You get financial stability for a transition — but you give up significant rights and freedoms in exchange.

👉 Money Matters: The broader the rights you’re waiving, the stronger the severance package should be. If you’re giving up months of career flexibility, the payment should reflect that.

Negotiating Waiver and Restriction Terms

Can you negotiate a waiver? Not usually — employers rarely remove the waiver clause itself. But you can negotiate the scope of restrictions or the value of what you receive in return.

Narrow the scope: Shorten a non-compete from 12 months to 3.
Carve out exceptions: Keep specific clients, vendors, or roles off-limits.
Balance pay vs restrictions: If a non-compete is long, ask for severance to last equally long.
Make it mutual: Non-disparagement and references should apply both ways.
Get clarity in writing: “Neutral reference only” is safer than relying on HR goodwill.

👉 When to call an attorney: If you suspect discrimination, retaliation, or other serious claims, always get legal advice before signing away your rights.

Final Thoughts

At the end of the day, a severance agreement is about value exchange. The company isn’t just paying you to leave — they’re buying certainty: that you won’t sue, you won’t compete, you won’t solicit, and you won’t disparage.

Your side of the equation: make sure what you’re receiving — money, insurance coverage, benefits, time to transition — is worth more to you and your family than what you’re signing away.

Remember:

Severance is optional. You don’t have to sign.
Everything in the agreement is negotiable.
You still get what you’ve already earned (final paycheck, accrued PTO) whether or not you sign.

The takeaway: don’t trade away years of rights and career freedom for less than it’s worth. Slow down, read every line, and if needed, bring in a professional to help.

Handled wisely, severance can be more than an exit — it can be the bridge to your next opportunity.