Severance Calculator

Frequently asked questions

By Severance Calculator Editorial · Updated

Severance basics

Whether you are entitled to severance and how it is computed.

Is severance required by law in the United States?
No federal statute requires private employers to pay severance to departing employees. The Worker Adjustment and Retraining Notification (WARN) Act (29 U.S.C. § 2102) mandates 60 days' advance notice before a qualifying mass layoff or plant closing — but it does not mandate severance pay. When an employer gives less than 60 days' notice, back pay for the shortfall period is available as a remedy, which is sometimes called "WARN pay," but that is distinct from a voluntary severance package. A handful of states have enacted statutory severance requirements in specific layoff scenarios. Maine (26 MRS § 625-B) requires one week of pay per year of service for employees with at least three years of tenure when a covered plant closes. New Jersey's NJ-WARN Act (N.J.S.A. 34:21-2) triggers a one-week-per-year-of-service payment for layoffs of 50 or more employees. Maryland's Economic Stabilization Act (§ 11-302) sets notice requirements for large employers but does not impose an outright severance formula. These state rules apply only when a layoff meets specific headcount and tenure thresholds. Outside those statutory windows, severance is a matter of employer policy, collective bargaining agreements, or individual negotiation. The calculator surfaces how your employer's stated formula compares to market benchmarks — it cannot determine whether a legal obligation to pay applies to your situation.
How is severance typically calculated?
The most common market benchmark for professional roles is one to two weeks of base salary for each year of service. An employee with eight years of tenure at a $100,000 annual salary ($1,923 per week) would receive roughly $15,400 to $30,800 under that formula. The multiplier — one week vs. two — generally tracks seniority, industry, and the employer's policy document. Directors, vice presidents, and executives often receive more generous terms. A common formula at the manager-and-above level is one month of base pay per year of service, sometimes with a floor (e.g., three months minimum) and a cap (e.g., 12 or 18 months). Individual contributors, by contrast, frequently receive a flat lump sum — commonly two to twelve weeks total — regardless of tenure, because the per-year multiplier would produce a small number anyway for shorter-tenured employees. Tech-sector layoffs in 2022–2024 produced a widely cited benchmark: a base amount (often 16 weeks) plus an additional amount per year of tenure (often four to eight weeks per year). That structure rewards long-tenured employees while setting a meaningful floor for newer hires. The calculator lets you model both per-year and flat-lump formulas so you can see how your package stacks up against each structure. Common practice is also to pro-rate partial years, though some policies only count completed years.
How is severance taxed federally?
The IRS classifies severance as "supplemental wages" under 26 CFR § 31.3402(g)-1. For most employees, the employer withholds federal income tax at the flat supplemental rate of 22% on amounts up to $1 million paid in a single calendar year. If the severance amount in that calendar year exceeds $1 million, the portion above $1 million is withheld at 37%. These are withholding rates, not the final tax owed — your actual federal income tax liability for the year is determined when you file your return using your marginal bracket, which may be higher or lower than 22%. Severance is also subject to FICA taxes: 6.2% Social Security (on wages up to the annual wage base, which the IRS publishes each fall in IRS Publication 15 / Circular E) and 1.45% Medicare with no cap. An Additional Medicare Tax of 0.9% applies to combined wages and self-employment income above $200,000 (single filers) or $250,000 (married filing jointly), and employers are required to withhold that once wages for the year cross $200,000 regardless of filing status. State income tax withholding also applies in states that have one, and the rate varies. The calculator surfaces a combined federal estimate (22% withholding + 7.65% employee FICA) as a quick illustration. For a $50,000 severance amount, that rough estimate implies about $14,825 in federal and FICA withholding before state tax — leaving approximately $35,175 in take-home, though your actual result will differ based on your full-year income and filing situation. Consider reviewing IRS Publication 15 and your state's employer tax guide for the rates that apply in your state.
Does severance count as wages for unemployment insurance?
Receiving severance does not automatically disqualify someone from unemployment insurance (UI) benefits, but the rules vary by state and by how the payment is structured. The majority of states treat severance as a one-time payment that does not offset weekly UI benefits — you can collect UI while also having received a lump-sum severance. However, some states treat severance paid in periodic installments (i.e., "salary continuation") as wages that delay or reduce benefits during the period those payments cover. California is an important example of the more favorable majority rule: Unemployment Insurance Code § 1265 provides that a lump-sum severance payment does not constitute "wages" for UI offset purposes, so a laid-off California worker who receives a lump-sum severance can generally file for and receive UI benefits without a waiting period caused by the severance itself. New Jersey, by contrast, applies a temporary benefit delay when NJ-WARN severance payments are treated as wages under N.J.S.A. 43:21-19(f)(1). If your severance is paid as salary continuation rather than as a lump sum, many states will treat each periodic payment as wages and may suspend or reduce your UI check for the weeks those payments cover. The practical takeaway is that the form of payment — lump sum versus installments — can matter as much as the total amount when it comes to UI timing. State workforce agency websites publish their specific rules, and the calculator notes the payment structure your employer uses so you can identify which rule is likely to apply.
What is the difference between severance and a separation agreement?
Severance is the payment — the money (and sometimes continued benefits) the employer provides to a departing employee. A separation agreement is the legal document that governs the terms of the exit, and it almost always requires the employee to give something in return. In the vast majority of employer-initiated separations, the employee signs a release of legal claims — including potential EEOC charges and employment discrimination claims — in exchange for receiving the severance payment. Without the signed agreement, most employers will not release the funds. For employees age 40 or older, the Older Workers Benefit Protection Act (OWBPA) imposes specific requirements on any waiver of Age Discrimination in Employment Act (ADEA) claims within a separation agreement. The statute provides a minimum 21-day review period for individual separations (45 days in a group reduction in force) and a 7-day revocation window after signing during which the employee can rescind the agreement. Employers must comply with these requirements or the age-discrimination waiver is not enforceable. Beyond the claims release, a separation agreement commonly includes several other provisions: a non-disparagement clause restricting what both sides may say publicly, a non-compete or non-solicitation covenant (enforceable to varying degrees depending on state law), a cooperation clause requiring the employee to assist with litigation, a return-of-property obligation, and a confidentiality clause covering the agreement's terms. The severance payment is the economic core, but the surrounding clauses define the ongoing obligations the employee accepts. Reviewing those provisions carefully — and understanding which are negotiable — matters as much as understanding the dollar amount.

WARN Act

Federal WARN and state mini-WARN notice requirements.

Does federal WARN apply to my layoff?
The federal Worker Adjustment and Retraining Notification (WARN) Act (29 U.S.C. §§ 2101–2109) covers employers with 100 or more full-time employees, or 100 or more employees who together work at least 4,000 hours per week excluding overtime. Part-time workers — those averaging fewer than 20 hours per week or employed fewer than six of the preceding twelve months — are generally not counted toward the 100-employee threshold, though they may still be affected workers entitled to notice. Two types of events trigger the 60-day advance written notice requirement. A "plant closing" occurs when a single employment site — or one or more operating units within that site — permanently or temporarily shuts down, causing 50 or more employees to suffer an employment loss during any 30-day period. A "mass layoff" occurs when at least 50 employees who constitute at least one-third of the active workforce at a single site are laid off, or when 500 or more employees at a single site are laid off regardless of the percentage. Both thresholds count "employment losses," which include terminations not for cause, layoffs expected to exceed six months, and hours reductions of more than 50 percent over each month of any six-month period. Certain exceptions narrow the statute's reach. The "faltering company" exception allows reduced notice when an employer was actively seeking capital or business and reasonably believed advance notice would have prevented obtaining that financing. The "unforeseeable business circumstances" exception covers sudden, dramatic, and unexpected conditions — such as the abrupt cancellation of a major contract — that were not reasonably foreseeable 60 days in advance. The "natural disaster" exception covers floods, earthquakes, and similar events. These exceptions reduce but do not eliminate the notice obligation; the employer must still provide as much notice as practicable and explain in writing why the shortened period was necessary.
Which states have a mini-WARN Act with stricter rules?
Many states have enacted their own plant-closing and mass-layoff notice laws — commonly called mini-WARN Acts — that impose requirements stricter than the federal statute. California's Cal-WARN Act (Cal. Lab. Code § 1400 et seq.) applies to employers with 75 or more employees and removes the federal 33-percent-of-workforce test for layoffs of 50 or more employees, meaning a California employer must provide 60 days' notice whenever 50 or more workers at a covered establishment are laid off, regardless of what percentage of the workforce they represent. New York's NYS-WARN Act (N.Y. Lab. Law § 860 et seq.) covers employers with 50 or more employees and extends the notice period to 90 days — 30 days longer than federal law. New Jersey's NJ-WARN Act (N.J.S.A. 34:21-1 et seq.) goes beyond notice to mandate severance: affected employees receive one week of pay per year of service when a covered layoff occurs, and this obligation is separate from any release-of-claims negotiation. Illinois WARN (820 ILCS 65) applies to employers with 75 or more employees. Washington State's SHB 1761, effective January 1, 2026, applies to employers with 50 or more employees and requires 60 days' notice. Additional states with notice statutes include Delaware, Hawaii (the Dislocated Workers Act), Iowa, Maryland (the Economic Stabilization Act), Tennessee (the Plant Closing/Reduction in Operations Act), Vermont (the Notice of Potential Layoffs Act), and Wisconsin (the Business Closing Notice law). Maine is distinct: rather than a notice statute, it requires severance of one week per year of service for qualifying plant closings under 26 M.R.S. § 625-B. Employers operating across multiple states must analyze each state's rules independently, as thresholds, notice periods, covered employers, and remedies vary considerably.
What is the difference between WARN notice and pay in lieu?
The federal WARN Act (29 U.S.C. § 2102) requires employers to provide 60 days' advance written notice to affected employees, the state dislocated-worker unit, and the chief elected official of the local government where the employment site is located. The statute's default requirement is actual notice — an affirmative written communication delivered while the employment relationship is ongoing, far enough in advance that affected workers have a meaningful opportunity to seek other employment or training. "Pay in lieu of notice" is a practical arrangement in which an employer that cannot or does not provide the full 60-day advance period instead pays employees the equivalent of 60 days' wages and maintains their benefits for that period. The WARN regulations at 20 C.F.R. Part 639 and subsequent case law recognize this as a remedial mechanism: an employer that fails to provide timely notice owes back pay and benefit-equivalent costs for each day of the shortfall up to 60 days, and tendering that amount prospectively is treated as satisfying the remedial obligation. Many employers package this payment as a lump sum combined with a release of claims. Several practical distinctions matter. First, pay in lieu is not a statutory option employers may freely elect in advance; it is a remedial equivalent that arises from the enforcement framework when notice is deficient. Second, for employees who receive pay in lieu, the employment loss date generally still occurs at or near the separation date, which can affect when the COBRA election clock begins and when unemployment insurance benefits become available. Third, some state mini-WARN laws — including California's — impose independent notice requirements, so satisfying the federal pay-in-lieu amount does not automatically resolve a parallel state obligation. Employees receiving a lump-sum WARN payment may wish to confirm whether their state imposes additional requirements.
Does WARN apply to remote employees?
Remote employees are counted under federal WARN, but their "site of employment" assignment determines which plant closing or mass layoff threshold they contribute to. Under 20 C.F.R. § 639.3(i), the site of employment for a worker who does not report to a single fixed location is generally the location to which they are assigned as their home base, from which their work is assigned, or to which they report for supervision. For traveling or field employees, that is ordinarily the office from which assignments originate. The practical implication is significant: a fully remote employee assigned to a corporate headquarters counts toward the headcount at that headquarters location, not toward any threshold tied to the city or state where the employee physically lives. If 50 or more employees assigned to a single headquarters suffer employment losses in a covered layoff, the plant-closing or mass-layoff threshold can be triggered even if those employees never worked at the headquarters physically. Post-COVID litigation has pushed courts and the DOL to address newer workforce configurations where no clear physical reporting location exists. Emerging case law treats the remote employee's designated home base — the location identified in their offer letter or employment records — as a relevant factor. Some courts have looked to where supervisors are located; others focus on where employment records are maintained. As of early 2026 this area of law remained actively developing. Employers with large remote workforces cannot assume geographic dispersion eliminates WARN exposure; the headcount analysis aggregates by assigned site rather than physical residence. Employees uncertain about their assigned site may find guidance from the DOL's WARN Act resources at dol.gov/agencies/eta/layoffs/warn.
What are my remedies if my employer violated WARN?
The federal WARN Act creates a private right of action that affected employees may pursue in federal district court (29 U.S.C. § 2104). If an employer fails to provide the required 60 days' advance notice, each affected employee is entitled to back pay for each day of the violation period — up to 60 days — calculated at the employee's regular rate of compensation. The statute also entitles employees to the value of benefits they would have received during the violation period, including the cost of medical expenses that would have been covered under the employer's health plan. In addition to individual employee remedies, the statute provides for a civil penalty of up to $500 per day of violation payable to the unit of local government where the employment site is located (29 U.S.C. § 2104(a)(3)). This penalty is avoided if the employer pays all owed back pay and benefits to affected employees within three weeks after the shutdown or layoff. Courts may also award reasonable attorneys' fees to prevailing plaintiffs, which makes class action litigation economically viable even when individual damages are relatively modest. WARN does not provide liquidated damages — a statutory multiplier on top of actual damages — or punitive damages. The remedy is limited to making affected employees whole for the notice period they were denied. Class actions are common in WARN cases because affected employees typically share identical legal claims arising from the same layoff event, allowing litigation costs to be spread across a larger combined recovery. The DOL does not adjudicate private WARN claims, but its employer guidance at dol.gov/agencies/eta/layoffs/warn can help employees assess whether the statute's coverage thresholds were met before pursuing litigation.

OWBPA (age-40+ waivers)

Older Workers Benefit Protection Act review and revocation windows.

What is OWBPA and when does it apply?
The Older Workers Benefit Protection Act of 1990 (OWBPA) amended the Age Discrimination in Employment Act (ADEA) to establish strict requirements for any waiver of age-discrimination rights. The statute is codified at 29 U.S.C. § 626(f). OWBPA applies whenever an employee who is 40 years of age or older is asked to waive ADEA claims — meaning rights arising under federal law that protect workers 40 and older from age-based discrimination — in exchange for severance or any other consideration. In practice, OWBPA applies to the vast majority of severance agreements for employees 40 and over, because standard general-release language almost always encompasses ADEA claims. Even if the release does not expressly name the ADEA, courts and the EEOC treat a broad release of "any and all claims" as reaching age-discrimination rights, triggering OWBPA's requirements. For a waiver to be "knowing and voluntary" under the statute, it must satisfy seven requirements: it must be written in plain language the employee can understand; it must specifically refer to ADEA rights; it cannot waive claims that arise after the date of signing; the consideration offered must be something the employee was not already entitled to; the employee must be advised in writing to consult an attorney; the employee must be given the applicable review period (21 or 45 days); and the agreement must provide a 7-day revocation window. A waiver that omits any of these elements is invalid as to ADEA claims, even if signed. The EEOC's enforcement guidance on OWBPA explains these requirements in detail.
How long do I have to review a severance agreement if I am over 40?
The review window depends on whether the exit is individual or part of a group program. For an individual separation — one employee being offered a severance package — 29 U.S.C. § 626(f)(1)(F)(i) and 29 C.F.R. § 1625.22 require that the employee be given at least 21 calendar days to consider the agreement. For a group exit incentive program or a group involuntary layoff affecting two or more employees, the required review period is 45 calendar days. Importantly, the 21- or 45-day period is a minimum, not a deadline. The EEOC's guidance confirms that an employee may sign before the window expires if the decision is truly voluntary; signing early does not waive the revocation right. Employers sometimes pressure employees to sign quickly, but OWBPA prohibits employers from inducing employees to sign before the review period ends. The clock generally starts running when the employer delivers the final version of the agreement (or the required disclosures in a group exit). If the employer modifies the agreement materially after delivery, the 21- or 45-day period restarts. Non-material changes — such as correcting a typographical error — do not restart the clock. Taking all 21 or 45 days is a common practice when the dollar value of the package or the legal complexity of the release warrants careful review with an attorney.
Can I revoke a severance agreement after signing?
Yes. Under 29 U.S.C. § 626(f)(1)(G), any waiver of ADEA rights must provide a 7-calendar-day revocation period after the employee signs. During those 7 days, the employee may revoke the agreement for any reason, and the agreement does not become effective — and the employer does not have to pay — until the revocation period expires without a revocation. The 7-day window is absolute: the statute expressly states it cannot be shortened or waived by the parties, regardless of what the agreement says. Revocation must be in writing. Common practice is to send a written revocation notice to the employer's HR department and legal counsel by a method that creates a timestamp — email with a read receipt, tracked mail, or overnight courier — before midnight on day 7. The day of signing counts as day zero; the first revocation day is the day after signing. Revoking means the entire agreement is typically unwound: the employee returns any consideration already received, and the employer is no longer bound to pay the severance. The Supreme Court addressed a related issue in Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), holding that an employee who signed a defective OWBPA waiver was not required to tender back the severance payments before suing for age discrimination — reinforcing that OWBPA requirements are mandatory and cannot be contracted around. After revocation or if the waiver is invalid, the ADEA claims remain intact.
Does OWBPA apply to group layoffs?
Yes, and OWBPA imposes additional requirements on group exits. The statute distinguishes between individual separations and "exit incentive or other employment termination programs offered to a group or class of employees." A group program arises whenever an employer offers severance as part of a voluntary reduction-in-force, an early-retirement window, or an involuntary layoff that affects two or more employees in a coordinated program — even if each employee receives an individual package letter. For group programs, the review period extends from 21 to 45 calendar days, and the employer must provide a written disclosure (often called a "Schedule A" or "Exhibit B" to the agreement) that gives the employee the information needed to assess whether age discrimination may be occurring. The 7-day revocation right applies equally to group exits. The EEOC's enforcement guidance on OWBPA notes that courts look at the circumstances as a whole — job titles, organizational units, selection criteria, timing — to determine whether an exit constitutes a "group program." An employer cannot avoid the 45-day window and the disclosure requirement simply by labeling individual terminations as unrelated events if they are part of a common plan. Employees over 40 who are part of a reduction-in-force should ask their employer directly whether the 45-day window and group disclosures apply.
What disclosures must my employer provide in a group exit?
For any group exit incentive or involuntary group termination program, 29 U.S.C. § 626(f)(1)(H) requires the employer to disclose, in writing and in a format calculated to be understood by the average individual eligible for the program: (1) the class, unit, or group of individuals covered by the program; (2) the eligibility factors for the program; (3) the time limits applicable to the program; and (4) the job titles and ages of all individuals who are eligible or selected for the program, alongside the ages of all individuals in the same job classification or organizational unit who are not eligible or selected. That fourth item — often called the "decisional unit" disclosure — is the most significant. It is designed to let an employee and their attorney identify a statistical pattern suggesting that older workers were disproportionately selected. If the employer selected ten people for layoff and eight were over 50 while the general population of the unit skewed younger, the age chart would reveal that. The EEOC's Q&A on waivers explains that this disclosure must cover the "decisional unit" — the pool from which selections were made — not just the company as a whole. If the employer fails to provide the required disclosures, the waiver of ADEA rights is invalid for that defect alone. The employee may still keep the severance under Oubre v. Entergy Operations, 522 U.S. 422 (1998), and proceed with an ADEA claim. Employees should request the disclosure in writing if it is not provided with the agreement, and the 45-day review period does not begin to run until the complete, compliant disclosure is delivered.

Equity and COBRA at termination

How vesting, exercise windows, and continuation coverage work after exit.

What happens to my unvested RSUs when I am laid off?
Unvested RSUs almost always forfeit at termination. The governing rule is your company's equity plan document — typically a Stock Plan and the corresponding award agreement you signed when the grant was made. Most plans state that unvested awards are cancelled immediately upon involuntary termination, with no consideration paid. The IRS treats RSUs as subject to 26 U.S.C. § 83 (property transferred in connection with the performance of services), so forfeited unvested RSUs produce no income and no tax consequence at the time of forfeiture. The main exception is a “double-trigger” acceleration provision, which is most common for executives and directors. Under a double-trigger structure, full (or partial) vesting of unvested RSUs is triggered only when two events both occur: (1) a change-in-control of the company and (2) an involuntary termination of the employee within a specified window (often 12 to 24 months following the CIC). A standard workforce reduction that is unconnected to a CIC does not activate double-trigger acceleration, so most laid-off employees at non-acquired companies forfeit their unvested grants. Some plans and individual award agreements do provide partial vesting on involuntary termination even outside a CIC context — for example, vesting the portion that would have vested through the next scheduled vesting date, or accelerating a fixed number of shares. Review your specific award agreement for any “involuntary termination” or “good leaver” provision. If your separation involves a severance agreement, the employer also has authority under most plan documents to grant discretionary acceleration as part of the negotiated terms, which is discussed in the next question.
Can I negotiate accelerated vesting in a severance package?
Yes — accelerated vesting of unvested equity is a negotiable term in many severance agreements, particularly at the director level and above. Most stock plans give the plan administrator (usually the board's compensation committee) express authority to accelerate vesting in connection with a participant's separation. This means an employer can legally grant acceleration without amending the underlying plan, as long as the award agreement or plan document reserves that discretion. The tax consequences matter. Accelerated RSUs are treated as ordinary income and wages under 26 U.S.C. § 83 at the time they vest — which is the delivery date after acceleration. The value of the shares on the delivery date is included in your W-2 and is subject to both federal income tax withholding and FICA (Social Security and Medicare). For nonqualified stock options (NSOs), the “bargain element” — the spread between the exercise price and fair market value — is ordinary income at exercise and is also subject to FICA. For incentive stock options (ISOs), exercise does not produce ordinary income, but the bargain element at exercise is an alternative minimum tax (AMT) preference item under 26 U.S.C. § 56. Common practice is for more junior employees to receive a fixed number of additional shares (e.g., one additional vesting tranche) while executives may negotiate full acceleration of all unvested awards. The leverage to negotiate acceleration is generally higher when the employee has been with the company longer, holds significant unvested value, or the employer has reason to want a clean separation (e.g., to prevent litigation). The request is most effective when made before signing the separation agreement, during the negotiation window.
How long is the post-termination exercise window for stock options?
The statutory default under 26 U.S.C. § 422(a)(2) is 90 days after termination for incentive stock options (ISOs). If you do not exercise within 90 days of your termination date, the options lose their ISO status and convert to nonqualified stock options (NSOs). The ISO tax advantage — no ordinary income at exercise, and potential for long-term capital gains treatment if the shares are held long enough — disappears once the 90-day window closes. Shares still exercised after day 90 under the contractual terms are treated as NSO exercises, meaning the bargain element is ordinary income at exercise. The 90-day window is a statutory minimum for ISO treatment, not a contractual hard stop on exercising at all. The actual deadline to exercise is set by the option agreement and can be longer — often three to ten years from the grant date or three to five years from the termination date — but exercising after day 90 forfeits ISO classification. Some companies, notably in the tech industry, have adopted extended post-termination exercise windows (PTEs) of five to ten years for all employees. Pinterest, Quora, and Coinbase are among the companies that moved to long PTEs in the 2015–2020 period; the Holloway Guide to Equity Compensation tracks this trend by company. For nonqualified stock options, there is no special statutory treatment to preserve, so the only relevant window is the contractual deadline in your option agreement. Review that document carefully after termination — particularly if you are in a pre-IPO company where a short exercise window combined with illiquid shares creates a difficult choice. If your option agreement has a short window, consult the plan document and a tax advisor before your termination date becomes final.
What does COBRA actually cost?
Under 29 U.S.C. §§ 1161–1169 and the parallel tax-code provision at 26 U.S.C. § 4980B, qualified beneficiaries who elect COBRA continuation coverage can be charged up to 102% of the full group health plan premium — meaning both the portion the employer was paying and the portion the employee was paying, plus a 2% administrative fee. For most employees, the shock of the COBRA premium reflects the fact that employers typically subsidize 70%–85% of the premium, so the employee's payroll deduction covers only a fraction of the actual cost. Concrete example: if the full premium for an employer-sponsored family plan is $2,000 per month, COBRA continuation costs up to $2,040 per month (102% of $2,000). If the full premium for individual (employee-only) coverage is $600 per month, COBRA costs up to $612 per month. COBRA coverage is available for up to 18 months for most qualifying events (job loss is a qualifying event). If a qualified beneficiary is determined to be disabled under Social Security standards within the first 60 days of COBRA, the continuation period extends to 29 months — and for months 19 through 29 of that disability extension, the maximum charge rises to 150% of the full premium (i.e., $3,000 per month on a $2,000 full-premium plan). Premium information is published by the Kaiser Family Foundation in its annual Employer Health Benefits Survey, which can help you benchmark whether your employer's plan cost is typical for your region and firm size. The DOL's EBSA publishes a plain-language guide — “An Employee's Guide to Health Benefits Under COBRA” — explaining your election rights, deadlines, and premium rules in detail.
Should I take the COBRA subsidy in severance or shop the marketplace?
When a severance package includes a COBRA subsidy — meaning the employer pays some or all of the COBRA premium for a fixed period, typically three to six months, or up to 12 months for executives — the practical comparison is between (1) the net cost of COBRA during and after the subsidy period and (2) the cost of a marketplace plan purchased through healthcare.gov. Job loss is a qualifying life event that opens a Special Enrollment Period (SEP) on the ACA marketplace under 45 CFR § 155.420. You generally have 60 days from the date you lose employer-sponsored coverage to enroll in a marketplace plan. Marketplace plans are often significantly cheaper than COBRA when the enrollee qualifies for the Premium Tax Credit (PTC). PTC is available to households with income between 100% and 400% of the federal poverty level (and, under extended rules, above 400% with no hard cap if the benchmark premium would otherwise exceed a set percentage of income). An individual earning $55,000 per year, for example, may find that a Silver-tier marketplace plan costs materially less per month than COBRA continuation at the full 102% premium. Common practice when evaluating this decision is to compare three figures side by side: (a) your out-of-pocket COBRA cost during the subsidy period, (b) your out-of-pocket COBRA cost after the subsidy expires, and (c) your estimated marketplace premium net of PTC for a comparable Silver plan. If the subsidy period is short (e.g., three months) and your income qualifies for a meaningful PTC, the marketplace may be less expensive even during the subsidized period once deductibles and network quality are factored in. Healthcare.gov provides a plan comparison tool and a PTC estimator. The EBSA COBRA guide explains the 60-day election and SEP windows so you can time enrollment without a gap in coverage.

Negotiation and signing

What is negotiable, signing strategy, and when to bring a lawyer.

What parts of a severance agreement are actually negotiable?
The decision to reduce the workforce is almost never open to challenge in a negotiation — and in a group exit program, the EEOC's guidance on the Older Workers Benefit Protection Act (OWBPA) makes clear that the terms of a group exit incentive plan must be uniform across the affected class to preserve the validity of ADEA waivers. What that leaves room for, in most individual negotiations, is everything else. On the economic side, the most commonly negotiated items are the total severance amount (particularly the number of pay periods), the duration of an employer COBRA subsidy, and — for employees with unvested equity — an acceleration of vesting or an extension of the post-termination exercise window for stock options. In immigration-sensitive situations, the precise employment end date can be negotiated to preserve visa status or HSA contribution eligibility. On the non-economic side, reference language is frequently negotiable: many employers will agree to provide a neutral reference (title, dates, and eligibility for rehire) or even a pre-agreed written statement. Non-compete and non-solicitation covenants are worth examining because their enforceability varies widely by state, and some employers will narrow the geographic scope, shorten the duration, or remove the clause entirely when asked. Non-disparagement clauses often include one-sided language; requesting mutual non-disparagement (where the employer is also restricted) and carve-outs for truthful statements, EEOC charges, and cooperation with government investigations is common practice.
Should I sign on the spot or take the review period?
Common practice — and in certain cases federal law — is to take the full review window rather than signing immediately. Under the Older Workers Benefit Protection Act (29 U.S.C. § 626(f)), any waiver of Age Discrimination in Employment Act (ADEA) claims must be "knowing and voluntary." The statute requires at minimum 21 days to consider the agreement in an individual layoff, and 45 days in a group reduction in force. An employer cannot lawfully shorten those windows for ADEA-covered employees (generally those age 40 and over), and pressure to sign before the window closes does not waive the statutory right. After signing, there is an additional 7-day revocation window that cannot be contracted away. For employees not covered by OWBPA — either because they are under 40 or because the employer is not seeking an ADEA waiver — there is no federal statutory minimum, but common practice is a 7-to-14 day review period. Even without a legal floor, most employers expect you to take a few days. Signing on the spot rarely produces a better outcome and eliminates your ability to consult anyone or compare the terms against your employment contract, equity plan documents, or offer letter. The practical value of the review period is that it gives you time to check whether the agreement's non-compete, non-solicitation, and non-disparagement terms are consistent with your state's law, to assess whether your equity accelerates or lapses on your stated termination date, and to identify which provisions are worth pushing back on. The 7-day post-signing revocation window under OWBPA is a backstop, not a substitute for reading the agreement before you sign.
When is it worth hiring an employment lawyer?
Employment attorney fees for a severance review commonly run $400–$800 per hour, or a flat project fee of roughly $1,500–$5,000 depending on complexity. Whether those costs make sense depends on the size of the package and the nature of the issues. The cost-benefit math typically favors engagement when the total severance value exceeds $50,000, because even modest improvements to the terms can exceed attorney fees by a significant margin. The math also favors it when the offer includes executive-level compensation — equity acceleration, deferred compensation, or long-term incentive plans — where the contractual interplay between plan documents and the separation agreement is complex. Similarly, if the circumstances of the termination involve potential discrimination, retaliation, or whistleblower activity, an attorney can evaluate whether claims exist that the release would extinguish and what they might be worth. Restrictive covenants are another common trigger. Non-compete and non-solicitation clauses vary dramatically in enforceability by state — California, North Dakota, and Oklahoma have near-categorical bans; many other states apply a reasonableness test. An attorney familiar with the applicable state law can assess whether a clause is enforceable as written, whether to request narrowing, and what the practical exposure looks like if you accept a role with a competitor. If the only open issue is whether the severance multiple seems fair relative to market, reviewing the EEOC's published guidance and the employer's own severance policy document (if available) is often sufficient without professional engagement.
What is a non-disparagement clause and is it enforceable?
A non-disparagement clause is a contractual provision in which one or both parties agree not to make statements that harm the other's reputation. In a severance agreement, it typically prohibits the departing employee from making negative public or private statements about the employer, its officers, and its products. In exchange for severance consideration, courts have generally found these clauses enforceable in private employment agreements. Several regulatory limits constrain how far non-disparagement clauses can reach. The National Labor Relations Board's 2023 decision in McLaren Macomb (372 NLRB No. 58) held that overbroad non-disparagement and confidentiality clauses in severance agreements violate Section 7 of the National Labor Relations Act (29 U.S.C. § 157) when they interfere with non-supervisory employees' rights to engage in protected concerted activity — for example, discussing wages or working conditions with co-workers or unions. The NLRB has held that clauses with carve-outs for legally protected activity are more likely to survive scrutiny. The SEC's whistleblower rule, Rule 21F-17 (in effect since 2015), makes any provision that impedes an individual from communicating directly with the SEC about a possible securities law violation unenforceable to that extent, regardless of what the agreement says. Similarly, no private contract can prohibit someone from filing a charge with the EEOC or cooperating with a government investigation. The FTC's final rule targeting non-competes (April 2024) does not prohibit non-disparagement clauses, so those remain permissible from a federal antitrust standpoint. Common negotiating practice is to request mutual non-disparagement (binding on the employer as well) and explicit carve-outs for truthful statements in legal or regulatory proceedings.