Top 10 Mistakes Employees Make Before Signing a Severance

You’ve just been offered a severance package—do you sign it? Wait. What you do next could impact your future, your finances, and even your legal rights. That document in your hand may look like a parting gift, but in reality, it’s often a shield for the company—not a reward for your service. And if you sign it without fully understanding what’s inside, you could be signing away the ability to sue for wrongful termination, discrimination, retaliation, or unpaid wages.

Far too many people sign on the dotted line under stress, pressure, or false assurances from HR. Some think they have no legal ground. Others just want to move on. But whether you were let go suddenly or saw it coming for months, that severance offer is a negotiation, not a favor. You deserve to understand what’s at stake.

Michigan is an at-will employment state, which means employers can usually terminate employees for any legal reason—or no reason at all. But “legal” is the key word. You may have grounds for a claim under laws like the Elliott-Larsen Civil Rights Act (ELCRA), FMLA, ADA, or the Michigan Whistleblowers’ Protection Act (WPA). What many don’t realize is that signing a severance agreement often includes waiving your right to pursue these claims. And once you sign, there's rarely any turning back.

Since 1996, Scott Batey has been fighting for employees across Michigan who were wrongfully terminated, discriminated against, or pushed out under unlawful circumstances. Severance agreements are one of the most commonly misunderstood legal documents in the workplace—and he’s reviewed, negotiated, and litigated hundreds of them.

Scott Batey doesn’t just understand the fine print—he knows what employers are trying to hide inside it. If you’ve received a severance offer or suspect something is off about your termination, you need someone on your side who knows how to spot the traps and fight back.

1. Signing Without Reading Every Clause

It might seem obvious, but many employees sign severance agreements without reading the full document. You're upset, caught off guard, and just want closure. But this is not the time to skim.

These agreements are often filled with legal language ("legalese") that can be confusing—or downright deceptive. Hidden within those paragraphs could be:

• A waiver of your right to sue.
• A non-compete clause that limits your next career move.
• Language stating the agreement is “voluntary” when in reality, you felt pressured.

Take the time—or better yet, have an attorney like Scott Batey review it. A severance agreement is a legal contract, not a suggestion.

2. Failing to Negotiate Terms

One of the biggest myths about severance agreements? That they’re non-negotiable. In reality, most employers expect some pushback—and may be willing to adjust terms to avoid legal risk.

You can negotiate:

• More severance pay (especially if you were wrongfully terminated or laid off without warning).
• Extended health benefits or COBRA coverage.
• Job references, or even a neutral reference policy.
• A release of restrictive clauses, like non-competes.

You have leverage. Use it. But first, you need to know your rights—and that’s where a seasoned employment lawyer can make all the difference.

3. Not Understanding What Rights You're Waiving

Most severance agreements include a clause where you agree to waive any future claims against your employer. That might sound harmless—until you realize what you're actually giving up.

You could be signing away your right to pursue:

• Title VII claims (discrimination based on race, sex, religion, etc.)
• ELCRA protections under Michigan law.
• FMLA violations for denied or interfered-with medical leave.
• ADA claims for disability accommodation.
• WPA protections for whistleblowers.

Even if you were wrongfully terminated, harassed, or retaliated against—signing that agreement could eliminate your chance to take legal action. That’s why understanding the legal consequences of each clause is critical.

4. Ignoring Non-Compete or Non-Disclosure Clauses

That fine print about not working for competitors or sharing company information? It’s not just a formality—it could seriously restrict your career options.

Michigan has recently passed new legislation that limits how non-compete agreements can be enforced, but many employers still include them. If your severance contains a non-compete or NDA:

• It may limit your ability to work in your field.
• You could be sued for violating it, even unknowingly.
• It may remain enforceable for months—or years—after your termination.

These clauses aren’t always legally binding, especially if they’re overly broad. But you won’t know unless you have the agreement reviewed.

5. Believing the Employer’s “Take It or Leave It” Pressure

Many employers will make it sound like you must sign immediately—but that’s often not true. In fact, federal law requires that you get at least 21 days to review a severance agreement if it includes a waiver of age discrimination claims (under the Older Workers Benefit Protection Act).

Even if you're not over 40, you should never feel bullied into signing.

• You can ask for more time.
• You can walk away if the terms are unfair.
• And you can consult an attorney without informing your employer.

If they’re pressuring you, that’s a red flag—and you may have more rights than they’re letting on.

6. Not Getting the Agreement Reviewed by an Attorney

This might be the biggest mistake of all. Severance agreements can contain hidden legal landmines that the average employee won’t spot—until it’s too late.

• That one clause about waiving claims? It might block you from suing, even if your termination was illegal.
• A seemingly harmless line about “confidentiality” could stop you from talking to future employers—or even reporting illegal conduct.

A qualified employment lawyer—like Scott Batey—can review your agreement quickly and confidentially, flag problem areas, and help you negotiate better terms. The cost of a legal review is minimal compared to what you might lose by signing something you don’t fully understand.

7. Assuming Severance Is Generous (When It’s Not)

Many employees are relieved just to get anything—but that’s exactly what employers count on. If your severance offer is one or two weeks per year worked, that’s not generous—that’s industry standard minimum (or below).

You should consider:

• Your seniority and years of service.
• The circumstances of your termination—was it sudden, retaliatory, or following a complaint?
• Company policies and past precedent—what have others received?

Don’t let a quick paycheck distract you from what’s fair or legally owed. A lawyer can help you push for what you deserve, not just what’s offered.

8. Forgetting About COBRA and Health Insurance Gaps

In the chaos of losing a job, many forget about one of the most critical issues: health coverage.

• Severance agreements may or may not extend your health insurance.
• Under COBRA, you usually have the right to continue coverage—but at your own expense, which can be expensive.
• Some agreements offer to cover COBRA premiums for a time—but only if you ask or negotiate.

Don’t assume you’re covered. Ask specifically: When does my coverage end? Will the company pay for any COBRA period? What happens if I get sick next month?

9. Overlooking Tax Implications

Severance payments are usually taxed just like regular wages, but how they’re paid can affect your tax situation:

• A lump-sum payout might bump you into a higher tax bracket.
• Structured payments could spread your income more evenly and reduce your tax burden.

Also, if you’re receiving unemployment benefits, your severance may affect your eligibility.

Pro tip: Talk to an employment attorney—or even a tax advisor—before you sign. You don’t want a surprise IRS bill on top of job loss.

10. Failing to Document What Happened Before Termination

Before you sign anything—protect your story. Many legal claims are won or lost based on documentation.

Save copies of:

• Performance reviews, especially positive ones.
• Emails or messages showing retaliation, discrimination, or warnings.
• Witness names who saw or heard relevant events.
• Any complaints you made to HR or leadership.

This documentation can support a legal claim, strengthen your negotiation position, or serve as protection if the employer disputes your version of events later.

Don’t wait until after you’ve signed and lost access to your company email or internal systems.

Don’t Sign Away Your Rights Without a Fight

A severance agreement might look like a lifeline in the middle of job loss—but it can also be a trap. The fine print could waive your legal rights, silence your voice, restrict your next job, and cost you thousands in lost compensation or benefits.

This isn’t just about money—it’s about your future.

Before you sign anything, make sure you fully understand what’s in front of you. Employers have attorneys looking out for their interests. You deserve someone in your corner, too.

At Batey Law Firm, PLLC, we specialize in employment law and severance negotiation. Whether you’re facing a layoff, being pushed out, or pressured into signing a release, we’ll give you clear, experienced guidance—and fight for the best possible outcome.

Call Today for a Confidential Review

Batey Law Firm, PLLC
📍 30200 Telegraph Rd., Suite 400
Bingham Farms, MI 48025
📞 248-540-6800 📧 sbatey@bateylaw.com 🌐 www.bateylaw.com