Sometimes companies give severance pay in exchange for the worker signing a release agreement. That means that the worker agrees never to sue the company for any reason - even if you don't know about it yet. Yes, they want you to promise not to sue them about things you might find out in the future!

The agreement is one-sided to benefit the company and is usually written by the company's lawyers. It doesn't say that the company agrees never to sue the worker.

Release agreements are legal contracts and courts don't overturn them very often. Many HR people get special training on how to get workers to sign agreements -- and sign them quickly. You may decide to sign the agreement, but make sure that you understand it completely and you've thought it through carefully. You may want to talk to a lawyer.

Parts of the agreement that you can negotiate over include:

  • how much money you will get (pay, commisions, and bonuses), how and when it will be paid (which can affect taxes and unemployment benefits), and what taxes will be taken out.
  • confidentiality (what you can say about the company in the future)
  • how vacation, bonuses, retirement and 401k payments, stock options are calculated.
  • when your health benefits end
  • references and recommendations - what will the company say about you
  • think about your situation - what else would help you in getting another job or protecting yourself.

Workers who are over 40 years old, must be given 21 days to review the release agreement before they sign it and 7 days to change their mind after they sign it. The Older Workers Benefit Protection Act (part of the Age Discrimination in Employment Act) says that without these limits, an older worker has not signed away rights to age discrimination claims.