Should I Sign My Severance Agreement? 5 Things Every NJ/PA Employee Must Check First

Jurisdiction note: This article provides general information for employees in New Jersey and Pennsylvania, including Philadelphia and South Jersey, and is not legal advice. Severance rights depend on the agreement, employer, work location, circumstances of separation, applicable law, and available evidence.

A severance agreement is an exchange, not simply a payment

A severance agreement may also be called a separation agreement, settlement agreement, release, or termination agreement. Whatever title appears at the top, it is usually a contract.

The employer may offer:

• A lump-sum severance payment;
• Salary continuation;
• Installment payments;
• Continued health-insurance contributions;
• Payment of a bonus, commission, or accrued benefit;
• Outplacement assistance;
• Reference language;
• Extended stock-option exercise periods; or
• Other transition benefits.

In return, the employer may require:

• A release of legal claims;
• Confidentiality;
• Non-disparagement;
• A promise not to compete or solicit customers;
• A no-rehire agreement;
• Cooperation with future investigations or lawsuits;
• Return of company property;
• Confirmation that all wages have been paid; or
• Repayment of severance if the employer claims that you breached the agreement.

The important question is not simply, “How much money am I getting?”

It is:

What am I receiving, and what am I giving up?

1. Check what you are actually being paid

The first step is to separate true severance from compensation or benefits that may already be owed.

Your agreement may list several categories of payment:

• Final wages;
• Overtime;
• Earned commissions;
• Earned or vested bonuses;
• Unused vacation or PTO;
• Expense reimbursements;
• Salary continuation;
• Payment in lieu of notice;
• Contractual severance;
• Statutory severance; and
• Additional severance offered in exchange for the release.

These categories should not automatically be treated as the same thing.

If an employer already owes wages, commissions, or another payment under an employment agreement, compensation plan, policy, or applicable law, paying that amount may not provide meaningful additional value in return for a broad release.

Calculate the real value of the package

Review:

• The gross payment amount;
• The estimated amount after withholding;
• Whether payment will be made in a lump sum or installments;
• The payment date;
• Whether payments stop if you obtain another job;
• Whether the employer can offset amounts it claims you owe;
• Whether a claimed breach triggers repayment;
• Whether benefits are included in the headline number; and
• Whether the employer is paying anything beyond what it already owes.

Severance is generally treated as taxable wages for federal purposes. A large gross offer may therefore be substantially different from the amount you ultimately receive.

For additional context on common formulas, review Swartz Swidler’s guide to how severance pay is calculated.

Is severance legally required?

Most individually terminated employees in New Jersey and Pennsylvania do not have an automatic statutory right to severance.

Severance may nevertheless be required under:

• An employment agreement;
• A severance plan;
• A collective bargaining agreement;
• An employer policy;
• A legally enforceable promise; or
• A statute covering a qualifying group layoff or closing.

In Pennsylvania, benefits such as vacation, severance, or similar payments commonly depend on the employer’s written policy, contract, or established obligation. The employer generally must follow the terms of its own policy or agreement.

New Jersey WARN severance may be different

New Jersey’s WARN law can require severance in certain covered mass layoffs, transfers of operations, or terminations of operations.

For qualifying events involving a covered employer, the law generally requires:

• At least 90 days of advance notice;
• Severance equal to one week of pay for each full year of employment; and
• An additional four weeks of pay when the required notice is not provided.

This is a specialized statute. Employer size, employee counts, establishment definitions, timing, location, and the type of employment loss all matter.

An employee included in a substantial New Jersey layoff should not assume that every amount labeled “severance” is discretionary payment offered solely in exchange for a release. Part of the amount may involve statutory rights. Waivers of New Jersey WARN severance are also subject to special approval requirements.

Red flags in the payment section

Look more closely when:

• The agreement combines final wages and severance into one number;
• The employer does not explain how the amount was calculated;
• Earned commissions or bonuses are described as discretionary without reviewing the compensation plan;
• The employee must sign before receiving the final paycheck;
• The agreement states that all wages have been paid when there is an unresolved pay dispute;
• Payment may stop when the employee finds another job;
• The employer can demand repayment for vaguely defined conduct; or
• The offer is part of a New Jersey group layoff and does not explain WARN rights.

2. Check which legal claims you are releasing

The release of claims is often the most important part of a severance agreement.

A broad release may cover claims arising under federal, state, and local laws involving:

• Workplace discrimination;
• Sexual harassment;
• Retaliation;
• Wrongful termination;
• Age discrimination;
• Disability discrimination or failure to accommodate;
• Pregnancy discrimination;
• FMLA or medical-leave violations;
• Whistleblower retaliation;
• Unpaid wages or overtime;
• Commissions and bonuses;
• Employment contracts;
• Employee benefits; and
• Other workplace disputes.

The release may cover claims you know about and claims you have not yet identified.

It may also release more than the company itself. The language can include parent companies, subsidiaries, affiliates, benefit plans, owners, officers, directors, managers, supervisors, employees, insurers, attorneys, successors, and related entities.

Review what happened before the termination

Before deciding what the release may be worth, write a short timeline.

Ask:

• Did I report discrimination or harassment?
• Did I request medical leave?
• Did I ask for a disability accommodation?
• Did I complain about unpaid wages, overtime, commissions, or classification?
• Did I report fraud, safety concerns, patient-care issues, or illegal conduct?
• Did I participate in an investigation?
• Did my performance reviews change suddenly?
• Was I replaced by someone outside my protected group?
• Did the employer give inconsistent reasons for the decision?
• Was I pressured to resign?
• Were comparable employees treated differently?

A severance offer made during a routine restructuring may require a different analysis from an offer made shortly after an employee reported sexual harassment, requested FMLA leave, complained about unpaid wages, or disclosed illegal activity.

If the termination may involve unlawful conduct, review the firm’s pages on workplace discrimination, how to prove workplace retaliation, and wrongful termination.

Check the time period covered

A release ordinarily addresses claims based on events occurring on or before the date of signing.

Read carefully for language that appears to release:

• Future claims;
• Claims arising after signing;
• Rights unrelated to employment;
• Claims against unidentified parties;
• Claims based on facts the employer has not disclosed; or
• Wage or benefit rights that may not be waivable in the same way as other claims.

A severance agreement generally should not be treated as permission for the employer to discriminate, retaliate, withhold wages, or violate the agreement after it is signed.

Check the government-agency language

A severance agreement cannot lawfully prevent an employee from filing a charge with the Equal Employment Opportunity Commission or participating in an agency investigation.

The agreement may still state that the employee waives an individual right to receive money based on released claims. That distinction should be clear.

Look for language preserving the right to:

• Contact government agencies;
• File an administrative charge;
• Respond to a subpoena;
• Provide truthful testimony;
• Participate in an investigation;
• Report suspected legal violations; and
• Receive a government whistleblower award when applicable.

3. Check every restriction that continues after employment

Some of the most consequential provisions appear after the payment and release sections.

The agreement may limit what you can say, where you can work, whom you can contact, and whether you can return to the company.

Noncompete and nonsolicitation clauses

Review whether the agreement:

• Creates a new noncompete;
• Reaffirms an earlier noncompete;
• Extends the duration of an earlier restriction;
• Changes the geographic area;
• Expands the list of competitors;
• Restricts an entire industry rather than specific job duties;
• Prohibits contacting customers you did not serve;
• Restricts recruiting former coworkers; or
• Applies across New Jersey, Pennsylvania, New York, or another broad territory.

There is no currently enforceable nationwide FTC rule eliminating all employee noncompetes. Enforceability generally depends on state law, the language of the agreement, the employee’s work, the employer’s legitimate interests, the burden on the employee, and the surrounding facts.

Even a restriction that may ultimately be narrowed or found unenforceable can create practical problems. A former employer may send a demand letter, contact a new employer, threaten litigation, or delay a job opportunity.

Employees who work across the New Jersey–Pennsylvania regional market should consider whether the clause could prevent them from accepting comparable employment within a realistic commuting area.

Confidentiality provisions

Confidentiality can refer to several different things:

• The amount of severance;
• The existence of the agreement;
• The employer’s trade secrets;
• Customer information;
• Business plans;
• Personnel information;
• Details of workplace misconduct; or
• The circumstances surrounding termination.

A clause protecting legitimate trade secrets is different from a clause attempting to silence an employee about discrimination, harassment, retaliation, wages, or working conditions.

The agreement should contain appropriate exceptions for communications with:

• An attorney;
• A tax professional;
• A spouse or immediate family member when appropriate;
• A court;
• A government agency;
• A union;
• A medical or mental-health provider; or
• Another person when disclosure is legally required.

New Jersey limits on discrimination and harassment gag clauses

New Jersey law provides important protections involving confidentiality and non-disparagement provisions.

A provision in an employment or settlement agreement is generally against public policy and unenforceable against the employee when it has the purpose or effect of concealing details related to a claim of discrimination, retaliation, or harassment.

In 2024, the New Jersey Supreme Court held that the law can also reach a non-disparagement clause when its practical effect is to prevent discussion of those protected claims.

This does not mean that every confidentiality provision is invalid. Employers may still protect legitimate proprietary information, trade secrets, customer information, and other lawfully confidential business material.

Federal protection for certain employees

Under current National Labor Relations Board precedent, overly broad confidentiality and non-disparagement language may violate the National Labor Relations Act when it would discourage covered employees from discussing workplace conditions, severance terms, or other protected concerted activity.

The NLRA does not cover every worker. Supervisors, independent contractors, government employees, and certain other categories may be excluded.

Non-disparagement

A non-disparagement clause may prohibit negative statements about:

• The employer;
• Executives;
• Managers;
• Coworkers;
• Products;
• Clients; or
• The circumstances of separation.

Check:

• Whether the language is one-sided;
• Whether the employer will provide a mutual promise;
• Which employer representatives are covered;
• Whether truthful statements are protected;
• Whether testimony and agency communications are excluded;
• Whether the clause restricts discussion of working conditions; and
• What penalty applies to an alleged breach.

A promise by “the company” not to disparage the employee may have little value unless the agreement identifies which officers, managers, or representatives must comply.

No-rehire clauses

A no-rehire provision can cover much more than the employee’s former workplace. Large employers may have subsidiaries, affiliates, related healthcare systems, franchises, contractors, or acquired companies.

A broad clause can interfere with future applications without the employee realizing how many entities it covers.

Review whether the agreement:

• Prohibits applications;
• Allows the employer to reject future applications automatically;
• Requires termination if a related company hires the employee;
• Covers unknown future affiliates; or
• Requires repayment if the employee is rehired.

4. Check the effect on unemployment, insurance, and other benefits

The payment structure can affect employees differently in New Jersey and Pennsylvania.

Do not rely only on a statement that the agreement “will not affect unemployment.” State agencies make their own eligibility decisions.

New Jersey unemployment and severance

New Jersey advises employees to file for unemployment after they stop working full time, even if they expect to receive severance.

True severance based on years of service generally does not extend employment. However, salary continuation through a future termination date and payment in lieu of notice may extend the employment relationship and delay eligibility during the covered period.

The agreement should clearly identify:

• The last day worked;
• The formal termination date;
• Whether the employee remains on payroll;
• Whether benefits continue during salary continuation;
• Whether the payment is allocated to specific weeks; and
• How the employer will describe the separation to the state.

Pennsylvania unemployment and severance

Pennsylvania uses a different statutory formula.

Severance exceeding 40% of Pennsylvania’s average annual wage is generally allocated to the weeks immediately following separation based on the employee’s regular full-time wage.

For benefit years beginning in 2026, the Pennsylvania Department of Labor and Industry lists the 40% exclusion amount as $28,153.63. The annual number changes, so employees should confirm the current threshold when filing.

For example, if an employee receives severance above the annual exclusion, the deductible portion may be allocated across several weeks and reduce unemployment benefits during those weeks.

Employees should report severance accurately rather than assuming a lump-sum payment has no effect.

For a more detailed explanation, review Swartz Swidler’s guide on whether you can receive severance and unemployment benefits.

Health insurance and COBRA

Check:

• The last day of active health coverage;
• Whether coverage ends immediately or at the end of the month;
• Whether dependents remain covered;
• Whether the employer will subsidize COBRA;
• How long any subsidy lasts;
• Whether the subsidy ends when you obtain other coverage;
• When the COBRA election notice will arrive; and
• Whether another plan is available through a spouse or the health-insurance marketplace.

Federal COBRA generally applies to qualifying group health plans sponsored by employers with at least 20 employees. Eligible individuals typically have a 60-day election period and may be charged the full group-plan cost plus an administrative fee.

An employer contribution toward COBRA can be a meaningful negotiation point because the employee’s cost may be substantially higher than the amount previously deducted from each paycheck.

PTO, commissions, bonuses, and expenses

Check each category separately.

Questions may include:

• Does the employer’s policy require PTO payout?
• Was the commission earned before termination?
• Does the commission plan require employment on the payment date?
• Was a performance or annual bonus already earned?
• Does the employer have discretion over the bonus?
• Are approved expenses still outstanding?
• Does the agreement state that all compensation has been paid?

New Jersey and Pennsylvania do not use identical rules for PTO, commissions, and bonuses. The employee’s offer letter, handbook, compensation plan, past employer practices, and applicable wage law may all matter.

Equity, retirement, and other benefits

Employees with stock, options, restricted shares, retirement benefits, or deferred compensation should review:

• Vesting dates;
• Option-exercise deadlines;
• Forfeiture language;
• Treatment of unvested awards;
• Retirement-plan contributions;
• Pension rights;
• Life-insurance conversion rights;
• Disability coverage;
• Deferred-compensation rules; and
• Whether the separation is treated as a retirement, resignation, layoff, or termination.

The value of a lost equity award or approaching vesting date may exceed the cash severance being offered.

5. Check the signing deadline and revocation rights

A short deadline can create pressure, but not every employee has the same legally required review period.

The 21-day rule does not apply to everyone

Employees age 40 or older who are asked to waive an individual claim under the federal Age Discrimination in Employment Act generally must receive at least 21 days to consider the agreement.

When an age-discrimination waiver is offered as part of a qualifying group termination or exit-incentive program, the review period is generally at least 45 days.

The agreement must also provide a seven-day period after signing during which the employee may revoke the age-discrimination waiver. It does not become effective or enforceable under those federal requirements until the revocation period expires.

These rules come from the Older Workers Benefit Protection Act, or OWBPA.

Employees can review Swartz Swidler’s explanation of the Older Workers Benefit Protection Act for more detail.

Group layoffs require additional information

When the 45-day group-program rules apply, the employer generally must provide written information concerning:

• The group or decisional unit covered by the program;
• Eligibility factors;
• Time limits;
• The job titles and ages of employees selected; and
• The job titles and ages of employees in the decisional unit who were not selected.

These disclosures may help an employee evaluate whether older workers were disproportionately selected.

What if you are under 40?

Employees under age 40 generally do not receive the federal OWBPA 21-day, 45-day, and seven-day protections solely because they received a severance agreement.

The agreement itself may still provide a review or revocation period. Contract-law principles and other circumstances may also affect enforceability, but an employee should not assume that a seven-day cancellation right exists unless the document or applicable law provides one.

Do not wait until the final day

As soon as you receive the agreement:

• Calendar the exact deadline;
• Confirm the required delivery method;
• Save the email and original document;
• Confirm whether weekends or holidays affect the calculation;
• Request an extension in writing if needed;
• Gather the related employment records; and
• Schedule legal review early enough to allow negotiation.

An attorney reviewing an agreement on the final afternoon may identify concerns but have little time to gather evidence, contact the employer, or propose revised language.

Can you negotiate a severance agreement?

Sometimes.

An employer may say that the package is standard or non-negotiable. That statement does not necessarily mean no term can change, but it also does not mean every agreement should be challenged.

Negotiation may depend on:

• The employer’s severance policy;
• Whether other employees received a uniform offer;
• The employee’s position and tenure;
• Possible discrimination or retaliation claims;
• Unpaid compensation;
• WARN issues;
• The breadth of the release;
• Restrictive covenants;
• The employee’s need for a reference;
• The employee’s financial priorities; and
• The employer’s desire for a quick and confidential separation.

Possible negotiation requests include:

• Additional severance pay;
• Faster payment;
• A lump sum instead of installments;
• COBRA contributions;
• Payment of commissions, bonuses, PTO, or expenses;
• Removal or narrowing of a noncompete;
• Removal of a no-rehire provision;
• Mutual non-disparagement;
• Confidentiality exceptions;
• Neutral-reference language;
• An agreed job title and separation explanation;
• Extended stock-option deadlines;
• Continued vesting or alternative equity treatment;
• A contribution toward legal-review fees; or
• More time to consider the agreement.

For additional ideas, review Swartz Swidler’s severance negotiation tips.

New Jersey and Pennsylvania severance issues compared

Red flags that deserve closer review

A severance agreement may deserve prompt legal review when:

• You complained about discrimination, harassment, wages, leave, safety, fraud, or illegal conduct shortly before termination.
• You were terminated after requesting FMLA leave or a disability accommodation.
• The employer’s explanation conflicts with your performance history.
• The employer is asking you to sign immediately.
• You are age 40 or older and the agreement does not appear to include required OWBPA language.
• The termination is part of a group layoff and required disclosures are missing.
• The payment includes wages, commissions, bonuses, or other compensation you believe was already earned.
• The agreement contains a new or expanded noncompete.
• The agreement attempts to prevent agency complaints or truthful testimony.
• The agreement restricts discussion of discrimination, retaliation, or harassment.
• The employer will not explain how unemployment will be characterized.
• The agreement contains a broad no-rehire clause.
• The employer can demand repayment based on vague allegations.
• The agreement identifies the separation as a voluntary resignation when you were actually terminated.
• The agreement refers to exhibits, benefit plans, policies, or prior contracts you have not received.

Documents to gather before a severance review

What not to do before signing

Do not sign simply because HR says the agreement is standard.

Do not assume that the severance amount is the only negotiable term.

Do not delete emails, messages, documents, or screenshots.

Do not alter records or create evidence after the fact.

Do not take documents you are not authorized to possess, including privileged, proprietary, customer, patient, or confidential business records.

Do not secretly access company systems after your authorization ends.

Do not assume a seven-day revocation period applies unless the agreement or applicable law provides one.

Do not tell a state unemployment agency that you resigned if you were terminated or laid off merely because the agreement uses resignation language.

Do not wait until the last day to seek review.

Related Swartz resources

To understand how employers commonly calculate an offer, review how severance pay is calculated. For possible changes to compensation, benefits, restrictive clauses, and reference language, see Swartz Swidler’s severance negotiation tips.

If you are concerned about state benefits, read whether you can receive severance and unemployment. Employees age 40 and older should also review the guide to the Older Workers Benefit Protection Act.

If the agreement followed a workplace complaint, review how to prove workplace retaliation. If the separation may involve a prohibited reason, see the firm’s pages on workplace discrimination, wrongful termination, FMLA and medical leave, unpaid wages and overtime, and whistleblower retaliation.

If you are unsure whether the surrounding facts may support an employment claim, start with Do I Have an Employment Law Case? To organize the agreement, timeline, and supporting records, use the guide on how to prepare for an employment lawyer consultation.

If a signing deadline is approaching, use the submit a claim page or the firm’s contact information page.