The Severance Package Your Employer Offered Is a Starting Point. Here Is How to Negotiate It.

Every year, I get calls from executives who accepted a severance package — signed the agreement, cashed the check, moved on — and then learned, months later, that they had legal claims worth far more than what they received.

The pattern is consistent: the employer presents a severance offer as if it is fixed, the executive assumes there is nothing to negotiate, and the agreement is signed before anyone assesses what the executive is actually giving up.

What You Are Giving Up When You Sign a Severance Agreement

Before you can negotiate a severance package, you need to understand what you are giving up. Most severance agreements require the executive to release all legal claims against the employer — including claims for:

• Wrongful termination (discrimination, retaliation, contract breach)
• Unpaid wages, bonuses, and commissions
• Unvested equity and deferred compensation
• Benefits continuation
• Non-disparagement violations
• Reference letter obligations

The value of the severance offer should be measured against the value of the claims you are releasing. If you have a strong wrongful termination claim worth $500,000, a $50,000 severance offer is not a good deal — regardless of how it is presented.

The Leverage You Have (That You May Not Know About)

Legal Claims

The most powerful leverage in a severance negotiation is the existence of legal claims. If you were terminated in circumstances that suggest discrimination, retaliation, or contract breach — even if you are not certain you have a claim — that uncertainty has value. Employers pay to make legal risk go away.

I assess every severance situation for potential legal claims before advising on negotiation strategy. In many cases, the executive does not realize they have claims — and the employer is counting on that.

Unvested Equity and Deferred Compensation

Equity awards, deferred compensation plans, and long-term incentive plans often have provisions that affect vesting upon termination. Whether those provisions are enforceable — and whether the termination was structured to avoid triggering vesting — are legal questions that can significantly affect the value of the severance package.

Non-Compete Enforceability

If the employer is asking you to sign or reaffirm a non-compete as part of the severance agreement, that non-compete has value to the employer — and you should be compensated for it. The enforceability of the non-compete is also a negotiating point: if the non-compete is overbroad or otherwise unenforceable, the employer has less leverage.

Reputational Considerations

Employers who terminated executives in circumstances that could be characterized as discriminatory or retaliatory have reputational exposure — particularly if the executive is well-known in the industry. That exposure has value in a negotiation.

The Negotiation Framework

Step 1: Assess the Full Value of Your Claims

Before you respond to the severance offer, have an attorney assess the full value of your potential claims. This includes not just the obvious claims — wrongful termination, discrimination — but also unvested equity, deferred compensation, and any other obligations the employer may have.

Step 2: Identify the Employer's Exposure

The employer's willingness to negotiate depends on their assessment of their legal exposure. An employer who terminated an executive in clearly discriminatory circumstances has more exposure — and more incentive to negotiate — than an employer who terminated for legitimate business reasons.

Step 3: Make a Specific Counter-Proposal

Vague requests for “more money” are less effective than specific, documented counter-proposals. A counter-proposal that identifies specific claims, specific damages, and a specific settlement number is more likely to be taken seriously — and more likely to result in a meaningful increase.

Step 4: Negotiate the Non-Economic Terms

Severance negotiations are not just about money. The non-economic terms — the reference letter, the non-disparagement provisions, the characterization of the termination, the treatment of unvested equity — can be as important as the cash payment. I negotiate all of these terms as part of every severance negotiation.

The OWBPA and Age Discrimination

If you are 40 or older, the Older Workers Benefit Protection Act (OWBPA) requires that severance agreements include specific provisions — including a 21-day period to consider the agreement and a 7-day revocation period. Agreements that do not comply with the OWBPA may not effectively waive age discrimination claims. This is a significant source of leverage for executives over 40.