Severance Agreement Template, Free Download 2026
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When Do You Need a Severance Agreement?
Your company is terminating an employee and wants to offer a severance package in exchange for a release of legal claims. A severance package template provides the structured framework for documenting the separation terms, including severance pay, benefits continuation, and the general release of claims that protects the employer from future lawsuits. This document is essential whenever the departing employee might have potential claims for discrimination, wrongful termination, or wage violations.
You are an employee who has been presented with a severance offer and want to understand every provision before signing away your legal rights. Reviewing a severance agreement template helps you identify which sections are standard, which terms are negotiable, and what rights you are waiving. Compare the offered agreement against a standard template to spot unusual or overly restrictive clauses such as broad non-compete template provisions that could limit your future employment.
Your organization is conducting a reduction in force (RIF) or group layoff and must provide severance agreements that comply with the Older Workers Benefit Protection Act (OWBPA). Group layoff severance agreements have additional disclosure requirements beyond individual separations, including providing affected employees with a list of job titles and ages of those selected and not selected for the layoff. The template includes the required OWBPA group disclosure exhibit.
You need to separate from an executive or senior employee who has access to trade secrets, client relationships, and proprietary business strategies. Executive severance agreements typically involve higher compensation and more detailed provisions for non-solicitation restrictions, cooperation obligations, and confidentiality terms. The template accommodates enhanced provisions for equity vesting, bonus clawback, and consulting transition arrangements.
An employee is voluntarily resigning, and your company wants to formalize the departure with mutual protections including non-disparagement commitments and confidentiality obligations that survive the end of employment. Even in amicable separations, a written separation agreement template prevents future misunderstandings about final pay, benefits, references, and post-employment obligations related to the original employment agreement.
You are settling an internal complaint, grievance, or potential legal claim by offering enhanced severance in exchange for a full release. Settlement-oriented severance agreements require particularly careful drafting to ensure the release language covers all potential claims arising from the underlying dispute. The severance offer must provide adequate new consideration beyond what the employee is already owed under existing employment terms.
What Should a Severance Agreement Include?
Severance Pay and Compensation Details
The severance pay section must specify the exact amount, payment method (lump sum or installments), and payment schedule. Include whether severance is calculated based on years of service, weeks of base salary, or a negotiated flat amount. Address tax withholding obligations, clarify whether the severance payment is subject to offset for other income, and specify how installment payments interact with re-employment. Many disputes arise from ambiguous payment timing, so state exact dates or triggering events for each payment.
General Release of Claims
The general release is the core provision the employer receives in exchange for severance. It must enumerate the specific categories of claims being waived, including discrimination (Title VII, ADA, ADEA), wrongful termination, harassment, retaliation, breach of contract, and wage claims. Certain claims cannot be waived: workers' compensation benefits, unemployment insurance rights, vested ERISA benefits, and the right to file charges with the EEOC. The release must be knowing and voluntary to be enforceable.
ADEA and OWBPA Compliance Provisions
For employees age 40 and older, federal law imposes strict requirements on the release of age discrimination claims. The agreement must provide a 21-day consideration period (45 days for group layoffs), a 7-day revocation period after signing, and written advice to consult an attorney. The language must specifically reference the Age Discrimination in Employment Act by name. Group layoff agreements must also include a decisional unit disclosure showing job titles and ages of affected and unaffected employees. Non-compliance renders the age discrimination release voidable.
Benefits Continuation and COBRA
Detail which benefits continue after separation and for how long. Common provisions include employer-paid COBRA continuation for a specified number of months, accelerated vesting of stock options or restricted stock units, continuation of life insurance or disability coverage, and outplacement services. Specify whether the employer will pay COBRA premiums directly or reimburse the employee, as the tax treatment differs. Address how benefits continuation interacts with the employee obtaining new coverage through a subsequent employer.
Non-Disparagement and Confidentiality
Non-disparagement clauses restrict both parties from making negative public statements about each other. Recent NLRB guidance under the McLaren Macomb decision has limited the enforceability of overly broad non-disparagement and confidentiality provisions in severance agreements, finding that provisions which could chill employees' exercise of Section 7 rights are unlawful. Draft these clauses narrowly: permit truthful statements to government agencies, allow responses to legal process, and avoid language that could be interpreted as restricting protected concerted activity.
<strong>Non-Compete</strong> and <strong>Non-Solicitation</strong> Restrictions
If the severance agreement includes or reinforces post-employment restrictive covenants, they must comply with applicable state law. Several states have banned or severely limited non-compete agreements, and the FTC has also proposed federal restrictions. Non-solicitation provisions restricting the employee from soliciting the employer's clients or recruiting its employees are generally more enforceable but still must be reasonable in scope, duration, and geographic reach. Specify the restricted period, the definition of restricted activities, and any carve-outs.
Reference and Employment Verification
This section defines what the employer will say in response to reference checks and employment verification inquiries. Many severance agreements include a neutral reference provision limiting the employer's response to dates of employment, job title, and confirmation of salary. Some agreements include a mutually agreed-upon reference letter or talking points for the departing employee's direct manager. Specifying reference terms prevents the employer from undermining the employee's job search after separation.
Return of Property and Ongoing Obligations
The agreement must specify the employee's obligation to return all company property, including laptops, phones, access cards, documents, and electronic files. Address the employee's cooperation obligations, requiring reasonable assistance with transitioning responsibilities, responding to questions about ongoing matters, and participating in litigation or regulatory proceedings. Set time limits on cooperation obligations and specify whether the employee will be compensated for cooperation time beyond a minimal threshold.
Legal Details: Key Clauses in a Severance Agreement
Parties
This Severance Agreement and General Release ("Agreement") is entered into between [Employer Name], a [State] [entity type] with its principal place of business at [Address] ("Company"), and [Employee Name], an individual residing at [Address] ("Employee"). This Agreement sets forth the terms under which the Company will provide severance benefits to Employee in connection with the termination of Employee's employment.
Employee has been employed by the Company since [Date] and most recently held the position of [Title]. The Parties acknowledge that Employee's employment is at-will and that the Company has no obligation to provide severance benefits except as expressly set forth in this Agreement. Employee acknowledges that the severance benefits provided hereunder constitute consideration to which Employee is not otherwise entitled.
Separation Date
Employee's last day of active employment with the Company shall be [Date] (the "Separation Date"). Employee's access to Company systems, premises, and resources shall be revoked as of the Separation Date. Employee shall receive payment for all earned but unpaid base salary through the Separation Date, plus accrued but unused vacation or PTO in accordance with Company policy and applicable state law governing final wage payments, regardless of whether Employee executes this Agreement.
The Company shall issue Employee's final paycheck in compliance with applicable state wage payment timing requirements, which vary by jurisdiction and may require payment on the Separation Date, the next regular payday, or within a specified number of days following termination. Any commissions or bonuses earned prior to the Separation Date shall be paid in accordance with the applicable plan documents and commission schedules.
Severance Payment
Subject to Employee's execution and non-revocation of this Agreement and compliance with all terms hereof, the Company shall pay Employee a severance payment equal to [Number] weeks/months of Employee's base salary, totaling $[Amount] (the "Severance Payment"). The Severance Payment shall be made in [lump sum / installments on the Company's regular payroll schedule] beginning on the first payroll date following the Effective Date of this Agreement, less applicable federal, state, and local withholdings.
The Severance Payment shall be treated as supplemental wages for federal and state income tax purposes and shall be subject to withholding at the applicable supplemental wage rate under 26 U.S.C. § 3402 and corresponding Treasury Regulations, or at the aggregate method, as determined by the Company's payroll department. The Company shall report the Severance Payment on IRS Form W-2 for the applicable tax year. The Company makes no representations regarding the tax treatment of the Severance Payment, and Employee is advised to consult an independent tax advisor.
It is the intent of the Parties that the Severance Payment complies with or is exempt from Section 409A of the Internal Revenue Code ("Section 409A"). To the extent any payment constitutes nonqualified deferred compensation within the meaning of Section 409A, such payment shall be made in accordance with the requirements of Section 409A to avoid the imposition of additional taxes and penalties. If Employee is a "specified employee" within the meaning of Section 409A(a)(2)(B)(i), any payment that constitutes deferred compensation shall be delayed until the first business day following the six-month anniversary of the Separation Date.
Benefits
Employee's eligibility for participation in the Company's group health insurance, dental, vision, life insurance, and disability insurance plans shall terminate as of the Separation Date or the last day of the month in which the Separation Date occurs, as determined by the applicable plan terms. The Company shall provide Employee with a COBRA election notice in compliance with 29 U.S.C. § 1166 within the timeframe required by law.
As additional severance consideration, the Company shall pay the full cost of COBRA continuation coverage (both employer and employee portions) for Employee and eligible dependents for a period of [Number] months following the Separation Date, or until Employee becomes eligible for substantially comparable group health coverage through another employer or government program, whichever occurs first. Employee shall promptly notify the Company upon becoming eligible for alternative coverage. Following the subsidized COBRA period, Employee may continue COBRA coverage at Employee's sole expense for the remainder of the applicable COBRA period.
Release of Claims
In consideration of the Severance Payment and benefits provided herein, Employee hereby releases and forever discharges the Company and its officers, directors, employees, agents, parents, subsidiaries, affiliates, successors, and assigns from any and all claims, demands, causes of action, and liabilities of any kind, whether known or unknown, arising out of or related to Employee's employment or the termination thereof, including but not limited to claims under Title VII, the ADA, the ADEA, the FMLA, ERISA, the WARN Act, 42 U.S.C. § 1981, and all applicable state and local employment laws, as well as all claims for wrongful termination, breach of contract, tort, and equitable relief.
This Release does not waive: (a) rights or claims arising after the execution of this Agreement; (b) claims that cannot be waived by law; (c) the right to file a charge with the EEOC or participate in an EEOC investigation (though Employee waives the right to monetary recovery); (d) vested benefits under ERISA-governed plans; (e) workers' compensation claims; (f) unemployment insurance claims; or (g) the right to enforce this Agreement. Employee represents that Employee has not filed or caused to be filed any complaint, charge, or lawsuit against the Released Parties, and that Employee is not aware of any basis for any such complaint, charge, or lawsuit, other than as may be disclosed in writing to the Company.
ADEA Waiver and Revocation Period
In compliance with the Older Workers Benefit Protection Act ("OWBPA"), 29 U.S.C. § 626(f), Employee acknowledges being advised to consult with an attorney before signing this Agreement. Employee has been given [twenty-one (21) / forty-five (45)] calendar days to consider this Agreement (the "Consideration Period"). Employee may accept this Agreement at any time during the Consideration Period. Changes to this Agreement, whether material or immaterial, do not restart the Consideration Period.
Employee has seven (7) calendar days after signing this Agreement to revoke Employee's acceptance by delivering written notice of revocation to [Contact Name and Title] at [Address/Email] (the "Revocation Period"). This Agreement shall not become effective or enforceable until the day after the Revocation Period expires without revocation (the "Effective Date"). If Employee timely revokes, this Agreement shall be null and void, and Employee shall not receive any Severance Payment or benefits described herein.
Confidentiality
Employee shall keep the terms, conditions, and amount of the Severance Payment strictly confidential and shall not disclose such information to any person except Employee's spouse/domestic partner, attorney, or tax advisor who agree to maintain confidentiality. Employee's pre-existing confidentiality obligations regarding Company trade secrets and proprietary information survive termination and remain in full force and effect in perpetuity to the extent the information retains its trade secret status under the Defend Trade Secrets Act and applicable state law.
Nothing in this Agreement prohibits Employee from reporting possible violations of law to governmental agencies, participating in governmental investigations, or making disclosures protected by whistleblower statutes. To the extent any jurisdiction restricts confidentiality provisions in separation agreements involving claims of harassment, discrimination, or retaliation, this provision shall be interpreted and applied consistent with such restrictions.
Non-Disparagement
Employee shall not make, publish, or communicate any disparaging or defamatory statements regarding the Company, its officers, directors, employees, products, or services. The Company shall instruct its senior management and HR personnel not to make disparaging or defamatory statements about Employee. This provision does not restrict truthful statements made in legal proceedings, government investigations, or as otherwise required by law, nor does it restrict Employee's rights under Section 7 of the National Labor Relations Act.
Return of Property
On or before the Separation Date, Employee shall return all Company property, including without limitation laptops, mobile devices, keys, access badges, credit cards, documents, files, records, and all materials containing Confidential Information, whether in hard copy or electronic format. Employee shall permanently delete all Company data from personal devices and cloud accounts and shall certify in writing that all Company property has been returned and all electronic copies have been destroyed.
Employee represents that Employee has not forwarded, copied, or transmitted any Company documents, data, or Confidential Information to any personal email account, personal device, cloud storage, or third party, except as was necessary in the ordinary course of performing Employee's job duties with Company authorization. Any breach of this representation may constitute a material breach of this Agreement and may subject Employee to legal liability.
Non-Compete
For a period of [Number] months following the Separation Date, Employee shall not, directly or indirectly, engage in, be employed by, consult for, or have any ownership interest in (excluding passive investments of less than 2% in publicly traded entities) any Competing Business within the Restricted Territory. "Competing Business" means [Definition]. "Restricted Territory" means [Definition]. This restriction shall apply only to the extent enforceable under the laws of the governing jurisdiction, and the Parties acknowledge that certain states prohibit or restrict post-employment non-compete covenants.
Employee acknowledges that the non-compete restriction is supported by adequate consideration (the Severance Payment) and is reasonably necessary to protect the Company's legitimate business interests, including trade secrets, confidential customer relationships, and specialized training provided to Employee. If a court of competent jurisdiction determines any restriction is overbroad, the court is requested to modify the provision to the minimum extent necessary to make it enforceable rather than invalidating it entirely.
General Provisions
This Agreement shall be governed by and construed in accordance with the laws of the State of [State] without regard to conflict of law principles. This Agreement constitutes the entire agreement between the Parties regarding the subject matter hereof and supersedes all prior negotiations, representations, and agreements, whether written or oral, except for any surviving provisions of prior confidentiality, non-compete, intellectual property assignment, or arbitration agreements, which remain in full force and effect.
If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall continue in full force and effect, and the invalid provision shall be modified to the minimum extent necessary to make it enforceable. This Agreement may be executed in counterparts, each of which shall constitute an original, and may be delivered by electronic transmission. No amendment or waiver shall be effective unless in writing and signed by both Parties.
Employee acknowledges that Employee has carefully read this Agreement, understands its terms, has had adequate opportunity to consult with an attorney, and is signing this Agreement voluntarily and without coercion. Employee further acknowledges that no representations, promises, or inducements have been made other than those set forth expressly in this Agreement.
Signature Requirements
E-Signature Valid
Severance agreements are valid with electronic signatures. Ensure ADEA/OWBPA compliance for employees over 40.
Related Employment Templates
A severance agreement is often used alongside other employment documents. Depending on your situation, you may also need:
How to Fill Out a Severance Agreement
Enter Employee Information and Separation Details
Fill in the employee's full legal name, job title, department, hire date, and last day of active employment. Specify the separation date, which may differ from the last working day if the employee is on garden leave or using accrued PTO. Note the employee's age, as employees 40 and older trigger mandatory ADEA/OWBPA compliance provisions. If this is part of a group layoff, indicate the decisional unit and attach the required age and job title disclosure exhibit.
Calculate and Enter <strong>Severance</strong> Compensation
Determine the severance amount using your company's formula (typically one to four weeks of base salary per year of service) or the negotiated figure. Enter the gross amount before tax withholding, specify the payment method (lump sum on a specific date or installments on regular payroll dates), and confirm that the amount constitutes adequate consideration beyond what the employee is already owed. If the employee has accrued but unused PTO, specify whether that will be paid out separately or included in the severance figure.
Customize the Release of Claims for Your <strong>Jurisdiction</strong>
Review the release language and ensure it references all applicable federal and state employment statutes. Add state-specific anti-discrimination and wage laws by name. Remove any claims that cannot legally be waived in your jurisdiction. For employees over 40, verify that the ADEA is specifically mentioned, the consideration and revocation periods are correctly stated, and the agreement advises the employee in writing to consult an attorney. For group layoffs, attach the OWBPA decisional unit disclosure.
Configure Post-Employment Restrictions
Review the non-compete and non-solicitation sections against your state's current law. Several states, including California, Minnesota, North Dakota, and Oklahoma, broadly prohibit non-compete agreements. Other states impose salary thresholds, duration limits, or additional consideration requirements. Narrow non-disparagement language to comply with NLRB guidance by excluding statements to government agencies, legal proceedings, and protected concerted activity. Set reasonable time periods; 12 months is the most commonly upheld duration for non-solicitation provisions.
Set <strong>Consideration</strong> and Revocation Periods
For employees under 40, there is no federally mandated consideration period, but providing at least 7 to 14 days demonstrates the release was knowing and voluntary. For employees 40 and older, you must provide at least 21 days to consider the agreement (45 days for group layoffs) and a 7-day revocation period after signing. Enter the specific dates: the date the agreement is presented, the deadline to sign, and the date the revocation period expires. The agreement does not become effective until the revocation period passes without revocation.
Execute and Store the Agreement
Have the employee sign and date the agreement within the consideration period. The employer representative who signs must have authority to bind the company. After the revocation period expires without revocation, the agreement becomes effective and binding. Process the first severance payment according to the schedule in the agreement. Store the executed agreement in the employee's personnel file with restricted access, as severance terms are typically confidential. Provide the employee with a fully executed copy for their records.
Free Template vs Custom Severance Agreement
| Feature | Free Template | Custom (AI or Attorney) |
|---|---|---|
| Basic <strong>severance</strong> pay and separation terms | ||
| General release of claims language | ||
| Standard non-disparagement clause | ||
| <strong>ADEA</strong>/OWBPA compliance provisions for 40+ employeesIncludes <strong>21-day</strong> and 45-day <strong>consideration</strong> period options | - | |
| Group layoff decisional unit disclosure exhibitRequired for RIF/mass layoff compliance | - | |
| <strong>Non-compete</strong> and <strong>non-solicitation</strong> restrictionsState-specific enforceability guidance included | - | |
| <strong>COBRA</strong> and benefits continuation provisions | - | |
| Equity vesting and bonus clawback provisionsFor executive-level separations | - | |
| Cooperation and transition obligations | - | |
| Attorney review and state compliance checkLicensed attorney reviews your completed agreement | - |
Key Facts About Severance Agreement Documents
Employer offers severance pay in exchange for release of claims.
ADEA requires 21-day consideration period for employees over 40.
Severance agreement typically includes non-disparagement clause.
Employee may negotiate severance terms before signing.
Revocation period allows employee to rescind signed agreement.
Key Legal Terms in a Severance Agreement
When a Free Template Is Not Enough
Free templates cover standard situations, but a professionally drafted severance agreement accounts for state-specific requirements, unusual circumstances, and enforceability considerations that generic forms miss. If your situation involves significant assets, complex terms, or potential disputes, request an attorney-drafted severance agreement with a custom quote based on your situation.
Severance Agreement Template FAQ
Is severance pay taxable?
Does <strong>severance</strong> pay affect unemployment benefits?
What is the difference between <strong>severance</strong> pay and a severance agreement?
Can an employer revoke a <strong>severance</strong> offer before I sign?
What should I look for before signing a <strong>severance</strong> agreement?
What claims cannot be waived in a <strong>severance</strong> agreement?
Can a signed <strong>severance</strong> agreement be challenged later?
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