The Exit Package With a Trapdoor: Auditing Seven Severance Clauses Before the Signature

A separation agreement is one of the few documents an employer hopes never to litigate over. Yet the release is not self-executing. It is a contract, and like any contract it can fail on timing, scope, consideration, or statutory carve-outs. For mid-size US employers, the expensive mistake is rarely a missing signature. It is a clause that looked standard in the template but does not survive the employee's age, the state of employment, or the current regulatory climate.

The following seven provisions deserve a deliberate review before the next exit package leaves the building. None of this replaces counsel for a specific separation. It is a compliance discipline: read the release as a challenger would.

1. The Consideration Clock and Revocation Window

Under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, a release of age claims must be knowing and voluntary. For an individual exit, the employee generally must receive at least 21 days to consider the agreement. For a group termination program, the period is generally 45 days. The employee also generally has seven days after signing to revoke.

Problems appear when the agreement treats those periods as formalities. A clause that demands signature before the consideration period expires, or that makes payment contingent on waiving revocation, invites a challenge. So does a release that folds the revocation period into the signature date or fails to tell the employee when the release becomes effective.

A workable clause separates three dates: delivery, execution, and effectiveness. It states the applicable consideration period, preserves the seven-day revocation right where required, and confirms that the release becomes effective only after the revocation period ends. For employees under 40, the ADEA timing rules do not apply, but state law may impose its own waiting or revocation requirements. The template should not assume otherwise.

2. The Group-Termination Disclosure

In a group exit, the OWBPA requires more than a release. It requires written disclosure of the job titles and ages of employees eligible and ineligible for the program, along with information about the decisional unit and the selection criteria. The purpose is to let older workers assess whether the program is discriminatory.

A common failure is a disclosure that is technically attached but substantively hollow: a list from the wrong decisional unit, omitted job titles, or selection criteria described in language so general that it explains nothing. Another failure is a snapshot that is never updated when the eligible group changes before the deadline.

HR should treat the disclosure as an exhibit that is reviewed with the same care as the release itself. Confirm the decisional unit, verify the age and title data, and describe the selection criteria in plain terms. If the group changes materially during the consideration period, counsel should determine whether a revised disclosure is required.

3. Future Claims, Unknown Claims, and Vested Rights

A release cannot lawfully wipe out claims that arise after it is signed. It also should not purport to eliminate rights that are vested or protected by law. Yet templates sometimes contain sweeping language releasing all claims 'of any kind, known or unknown, suspected or unsuspected, arising at any time.'

Some states permit waivers of unknown claims only with specific statutory language. California, for example, requires an express waiver under Civil Code Section 1542 if unknown claims are being released. Other states restrict or prohibit such waivers in employment contexts. The safer drafting approach is to release claims through the effective date and preserve rights that are not intended to be waived: vested retirement benefits, COBRA continuation, unemployment compensation, workers' compensation, indemnification, and claims that cannot be released as a matter of law.

Redline language should say what the release does not cover. A release that is clear about preserved rights is more defensible than one that relies on a broad catch-all and hopes no one reads it closely.

4. Confidentiality and Non-Disparagement After the Speak Out Act and NLRB Scrutiny

The Speak Out Act limits the enforceability of pre-dispute nondisclosure and non-disparagement clauses covering disputes involving sexual harassment or sexual assault. The statute does not invalidate every confidentiality provision, but it does mean a boilerplate clause cannot be assumed to cover those subjects.

Separately, the National Labor Relations Board has scrutinized confidentiality and non-disparagement provisions that could chill employees in the exercise of Section 7 rights. Since the Board's 2023 decision in McLaren Macomb, employers have had to revisit language that broadly prohibits employees from discussing the terms and conditions of employment or from communicating with co-workers, unions, or government agencies.

A compliant clause should include express carve-outs. Employees should not be restricted from discussing wages, hours, working conditions, or other protected concerted activity; from filing a charge with a government agency; from cooperating in an investigation; or from testifying truthfully. For sexual harassment and assault disputes, counsel should review whether the Speak Out Act applies and whether state law imposes additional limits.

5. Government-Agency and Whistleblower Carve-Outs

A release that prohibits an employee from contacting the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration, the NLRB, or the Securities and Exchange Commission is not merely overbroad. It can create independent liability. SEC Rule 21F-17, for instance, prohibits impediments to whistleblower communications with the Commission.

The release should state plainly that nothing in it prohibits the employee from communicating with a government agency, filing a charge or complaint, participating in an agency investigation, or receiving an award from a government agency. Avoid vague phrases such as 'except as authorized by law.' A specific carve-out is easier to administer and easier to defend.

Where the agreement includes a covenant not to sue, it should be paired with the same carve-outs. A release can waive the right to recover monetary damages in some circumstances, but it should not be drafted to prevent the employee from filing a charge or cooperating with an investigation.

6. Cooperation, Non-Participation, and No-Admission Clauses

Cooperation clauses are common and often legitimate. Problems arise when they are unbounded: requiring an employee to be available indefinitely, without reimbursement for time or expenses, or requiring cooperation that conflicts with the employee's own legal interests.

No-participation clauses are riskier. A provision that forbids an employee from participating in an agency investigation or from assisting others in protected activity may be unenforceable and may itself violate the law. A no-admission clause is generally permissible, but it should not be used to contradict the release or to suggest that the employee has waived rights the agreement elsewhere preserves.

A practical redline limits cooperation to reasonable requests, provides for reimbursement of reasonable expenses, and acknowledges that the employee may respond to lawful subpoenas and government inquiries.

7. Governing Law, Venue, and State-Specific Addenda

A choice-of-law clause does not permit an employer to opt out of mandatory employee protections. Several states impose their own timing, notice, consideration, or revocation rules for releases, and some restrict confidentiality or non-disparagement provisions in specific contexts. A release that relies on a generic governing-law clause may be enforceable in one state and vulnerable in another.

Before signature, confirm the employee's state of employment and review whether a state-specific addendum is required. Pay attention to venue provisions as well; a forum-selection clause that operates as a practical barrier to a statutory claim may be challenged. When the employee has worked in multiple states, the analysis should account for each relevant jurisdiction, not just the employer's headquarters.

A Pre-Signature Checklist for HR

• Confirm the employee's age and whether ADEA/OWBPA timing rules apply.
• Verify the consideration period and the seven-day revocation window.
• For group exits, attach and review the required disclosure exhibit.
• Check that the release does not reach future claims or improperly waive vested rights.
• Review confidentiality and non-disparagement language for Speak Out Act and NLRB carve-outs.
• Confirm government-agency and whistleblower protections are expressly preserved.
• Limit cooperation obligations to reasonable, reimbursed requests.
• Identify any state-specific release or addendum requirements.
• Calendar the effective date, revocation deadline, and payment trigger.
• Route high-risk exits to counsel before the package is delivered.

The severance agreement is not a closing document. It is a risk instrument. The trapdoor is usually visible in the clause language, but only if someone reads it before the employee signs.