What's Negotiable in a Michigan Severance Agreement? More Than Most Employees Think

Most people do not see it coming. One morning you are called into a conference room, and by the time you leave, you are holding a thick stack of papers and a deadline. Human resources tells you that you have 21 days to review and sign. What nobody tells you is that almost everything in those pages is negotiable.

Employers do not draft severance agreements out of generosity. They draft them to protect themselves, typically from the legal claims an employee might have after a termination. The document was written by the company's lawyers, with the company's interests in mind, and it reflects terms the employer hopes you will accept without question. Many employees do exactly that, either because they feel they have no leverage, or because they simply do not know what they could have asked for.

What a Severance Agreement Actually Does

Before you can negotiate, you have to understand what you are being asked to sign. A severance agreement is a contract. The employer pays you something of value, and in return, you give up something of value. Both sides of that exchange deserve careful attention.

What the Employer Gets

• A release of legal claims, often sweeping in scope, covering federal and Michigan state law claims
• A confidentiality obligation preventing you from discussing the terms or, in some cases, your experience at the company
• A non-disparagement clause restricting what you can say about the employer publicly
• In some cases, a noncompete or non-solicitation agreement reaffirmed or newly imposed

What the Employee Gets

• A severance payment, typically expressed as a number of weeks of pay
• Continuation of certain benefits, sometimes
• A neutral reference, if negotiated
• Whatever else they ask for, if they ask

The Money Is Just the Starting Point

What Can Increase the Number

• Length of service. Longer tenured employees often have more leverage, particularly if their institutional knowledge has real value to the business.
• Seniority and role. Senior employees and executives frequently see different formulas than those offered to entry-level staff.
• The circumstances of the termination. If the separation involved conduct that could give rise to a legal claim, that changes the negotiation entirely.
• The strength of potential claims. If an attorney reviews the situation and finds a viable legal claim, that is leverage. Employers know what litigation costs.

Lump Sum vs. Structured Payout

How you receive severance matters, not just how much. A lump sum may affect your eligibility for unemployment benefits differently than a structured payout spread over weeks or months. It also has tax implications worth discussing with a financial or legal advisor before you sign. Negotiating the timing and structure of payment is entirely appropriate.

Benefits, COBRA, and Health Insurance

Health insurance is often the most urgent concern for employees leaving a job, and it is one of the most negotiable items in a severance package. Many employees do not ask about it because they assume coverage ends with employment. That is not always true, and even when it is, the cost of continuation coverage is something you can push back on.

• Employer-paid COBRA coverage can be worth thousands of dollars. Negotiating three to six months of employer-paid premiums is not unusual in severance agreements for higher-level employees, but it rarely appears in a first offer.
• Life and disability insurance continuation is often overlooked entirely. Ask what happens to these policies and whether the employer will cover premiums during any transition period.
• 401(k) vesting schedules can leave significant money on the table if you are near a cliff vesting date. In some negotiations, accelerated vesting of unvested employer contributions is a realistic ask, particularly when the employee's separation was not for cause.

The Release of Claims: What You Are Actually Giving Up

This is the section Scott reads first, every time. The claims release is the legal heart of the agreement. It is where the employee formally waives the right to sue.

Most releases are written broadly and intentionally. They typically cover federal claims under Title VII (race, sex, national origin, religion), the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), and the Family and Medical Leave Act (FMLA). They also commonly release Michigan state law claims under the Elliott-Larsen Civil Rights Act (ELCRA), the Persons with Disabilities Civil Rights Act (PWDCRA), and the Whistleblowers' Protection Act (WPA).

Special Protections for Employees Over 40

Federal law under the Older Workers Benefit Protection Act (OWBPA) gives employees age 40 and older specific protections that cannot be waived by contract. You are entitled to 21 days to consider the agreement and 7 days to revoke your signature after signing. Any agreement that attempts to shorten those periods is unenforceable as to the ADEA waiver. 

What "General Release of All Claims" Really Means

Broad release language can cover claims you do not even know you have yet. Before signing anything that releases unknown claims, it is worth having an attorney evaluate whether your termination involved conduct that could support a legal claim. 

Noncompete and Non-Solicitation Clauses

It is not unusual to find noncompete language inside a severance agreement, either as a new restriction or as a reaffirmation of a prior agreement. Many employees accept these without question. They should not.

How Michigan Treats Noncompetes

Michigan's Antitrust Reform Act allows noncompete agreements but requires them to be reasonable in scope, duration, and geographic area. A noncompete that covers the entire country, lasts three years, and bars you from working anywhere in your industry is not automatically enforceable simply because it appears in a severance agreement. Michigan courts have modified and invalidated overbroad noncompetes.

What to Push Back On

• Geographic restrictions that go beyond where you actually worked or competed
• Duration longer than one year for most non-executive roles
• Industry scope that prevents you from using general skills in adjacent fields
• Non-solicitation of former colleagues, which can limit your professional network for years

Confidentiality and Non-Disparagement

Both parties usually want some degree of mutual confidentiality. The problem with most first-draft agreements is that these provisions are one-sided. The employee is restricted from saying anything negative about the company. The company retains the ability to say what it wants about the employee.

Mutual Non-Disparagement

Requesting a mutual non-disparagement clause is a standard and reasonable ask. It means the company also agrees not to say anything negative about you to prospective employers or publicly. Given that employers routinely communicate with each other informally, this protection has real practical value.

Reference and Employment Verification Language

What will the company say when a future employer calls? Many severance agreements say nothing specific about this. Negotiating a neutral reference, or a specific agreed-upon statement, is something Scott addresses for virtually every client who has concerns about how their departure will be characterized. A sentence in the agreement that specifies what the company will and will not say can be worth more than a week of severance pay.

Commissions, Bonuses, and Equity You May Already Be Owed

Michigan's Payment of Wages and Fringe Benefits Act generally requires employers to pay earned wages, including earned commissions, regardless of whether a severance agreement is signed. This means certain compensation may not actually be part of the severance negotiation at all. It may simply be money the employer owes you.

• Unpaid commissions for sales that closed or are in progress at the time of termination deserve specific attention. The agreement should address these explicitly.
• Pro-rated bonuses for the current performance period are negotiable, particularly when the termination occurs mid-cycle and was not for cause.
• Unvested equity, including stock options and restricted stock units, is often forfeited at termination. In some situations, negotiating an extended exercise window or partial vesting acceleration is possible.
• Expense reimbursements for documented business expenses are generally owed under Michigan law and should not be folded into a severance package as though they are a gift.

Sign When It Is Right, Not When They Say It Is

Severance agreements are written to close doors. Some of those doors lead to legal claims the employee may not even know they have. Others lead to better money, preserved benefits, or the freedom to work in their field without restriction. Before those doors close permanently, it is worth a conversation with someone who has been on the employee's side of this table for nearly three decades.

Scott Batey Reviews Severance Agreements

Michigan employees come to Scott before they sign, not after. If you have received a severance agreement, or if you were pushed out and no severance was offered at all, call for a free consultation. Scott has been handling Michigan employment law exclusively since 1996, and he can tell you quickly whether what you have been offered is worth signing.

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