Three Ways to Ruin Your Career by Signing a Severance Agreement

A severance agreement is one of the more unpleasant employment contracts you may ever be asked to sign. While that agreement could include a hefty payout, it will probably also include several legally binding provisions that can significantly harm your legal rights and your professional career.

Look out for these three major ways you might inadvertently ruin your career by signing a severance agreement.

1. A One-Way Nondisparagement Clause

When you’re asked to sign a severance agreement, it generally signals that you and your former employer aren’t departing on good terms. For example, if your employer engaged in employment discrimination, it may be asking you to leave and stay quiet about it in exchange for significant benefits. Whatever the reason may be, your former employer may later be asked to explain what caused you to leave. If that answer paints you in a bad light, you may have trouble finding future employment.

You can get around this by including a nondisparagement clause in your severance agreement. This clause requires one party to not say anything bad about the other party. Often, because the employer’s attorney is the one to draft the severance agreement, the nondisparagement clause is written so it only restricts you, the employee, not your former employer. However, a nondisparagement provision can operate in both directions, where you and your former employer agree not to say anything bad about each other.

Don’t ruin your career with a one-way nondisparagement clause: make sure it applies both ways.

2. An Unfair Nonsolicitation or Noncompete Agreement

While not favored by the courts, properly written nonsolicitation and noncompete agreements are usually enforceable. You may have signed a nonsolicitation or noncompete agreement at the start of your employment, or you may only be asked to sign one when you are leaving your current job.

Depending on your future plans and the compensation you receive under the severance agreement, a nonsolicitation or noncompete agreement may not ruin your career. But in certain situations, these agreements could prevent you from earning a living, especially if they are overly restrictive. These restrictions can go too far if they last a long time, restrict too many activities, or cover a wide geographic scope. For example, if your nonsolicitation or noncompete agreement lasts several years or encompasses an entire state, you could be forced to move across the country or change careers. Note that a noncompete or nonsolicitation agreement this broad may not even be enforceable. But if you nonetheless honor this unfair contract, it could still ruin your career.

Don’t hamstring your future career with overly restrictive nonsolicitation or noncompete agreements.

3. An Admission of Wrongdoing

If you are leaving your job because of your actual or accused misconduct, make sure that your severance agreement does not include any findings about that wrongdoing. This is especially true if the alleged misconduct never occurred.

By admitting to wrongdoing in a severance agreement, you could face criminal repercussions, which could severely damage your potential for future employment. Even without a criminal charge, an admission of wrongful behavior could cause revocation of your professional licensure or certification—leading to the need to choose a different profession altogether.

If somehow you think you must agree to wrongdoing in the severance agreement, it’s probably a good idea to have an employment attorney review the agreement to make sure it won’t cause future problems, such as a blackballed career. If it might, you may decide it’s best not to sign the severance agreement, no matter how much severance pay it provides.

Don’t seriously limit your future employment by admitting to misconduct!

For More Information

Do you still have questions about severance agreements? Need help applying this information to your own case? Please feel free to contact us to discuss your specific situation.

1. Read payment and release language together

Identify what the employer says it will provide, when it will provide it, what must occur first, and which promises the document asks you to make in return. A release may identify statutes, claims, entities, dates, or types of disputes it purports to cover. It may also include a covenant not to sue, cooperation language, repayment, indemnity, liquidated damages, or fee-shifting language.

Federal law does not generally require severance pay under the Fair Labor Standards Act. That does not answer whether other amounts are governed by an employment agreement, plan, policy, or applicable law.

2. If you are 40 or older and the agreement includes an ADEA waiver, check the limited federal rules

The Age Discrimination in Employment Act protects individuals who are at least 40. For an individual termination offer that seeks a waiver of ADEA claims, federal law contains specific conditions for a knowing and voluntary waiver, including understandable writing, a specific ADEA reference, no waiver of future claims, consideration beyond what the person is already entitled to, and written advice to consult an attorney.

That same federal rule generally provides at least 21 days to consider an individual offer and at least 7 days after signing to revoke. A group or class exit-incentive or employment-termination program has different requirements, including at least 45 days and specified disclosures. These are conditional federal ADEA-waiver rules, not universal severance deadlines. Different standards can apply to a settlement of an EEOC charge or filed court action, and state-law questions can differ.

3. Read confidentiality and nondisparagement terms precisely

Look at what communications are covered, who is restricted, whether the clause covers the agreement’s terms or workplace experiences, what exceptions appear, and what consequences the agreement states for an alleged breach. Do not assume every confidentiality or nondisparagement term is a “gag order,” or that mutual wording answers every question.

Federal law can impose limited protections in particular circumstances. For example, the National Labor Relations Act protects certain covered employees engaging in concerted activity for mutual aid or protection, but coverage and application depend on the worker, employer, provision, and facts. The NLRB’s McLaren Macomb decision addressed particular broad provisions offered to particular employees; it was not a blanket rule that all such clauses are invalid. ADEA waivers also cannot interfere with certain EEOC charge and participation rights.

4. Map any post-employment work restriction

Identify whether the agreement adds or restates a noncompete, customer or employee nonsolicitation, no-rehire, noninterference, trade-secret, or confidentiality restriction. Note the defined activity, covered customers or competitors, territory, duration, exceptions, remedies, and interaction with earlier agreements. A noncompete and a confidentiality covenant are not the same thing.

The FTC’s 2024 Noncompete Rule is not in effect and is not enforceable. State law, a choice-of-law clause, occupation, timing, location, and the language used may all affect the analysis.

Questions to take from the document

What exactly is being offered, and what must happen before payment?
Which claims, entities, dates, and conduct does the release describe?
Does an ADEA waiver apply, and are its conditional federal rules relevant?
What communications, future work, references, benefits, and return-of-property terms does the agreement address?
Which terms depend on state law, worker status, a plan document, or the specific wording?

Review the actual agreement, offer communications, plan materials, and current official sources. Do not submit highly sensitive or protected workplace information through a general website form unless instructed to do so.

This article is general information, not legal advice. Employment law changes, and your situation may differ. For advice about your own case, talk to an attorney.

Three Ways to Ruin Your Career by Signing a Severance Agreement