Severance Agreements and Releases: Making Them Hold Up

What a release can and cannot do

A severance agreement is a contract in which the company pays, or gives, something it did not already owe, and the employee gives up the right to sue over the employment and its end. It is enforced like any other contract under Texas law, with one large overlay: the federal employment statutes set their own conditions on waiving the claims they create, and several things cannot be waived at all.

The release does its real work only if it survives the moment the employee's lawyer reads it. The clauses below are the ones that decide whether it does.

Knowing and voluntary: the standard for every release

Courts enforce a release of discrimination claims under Title VII, the Americans with Disabilities Act and similar laws when the employee signed it knowingly and voluntarily. The EEOC's guidance on waivers lists the factors most courts weigh: whether the language was clear enough for the employee's education and experience; whether there was fraud, duress or undue influence; whether the employee had enough time to consider the agreement; whether the employee consulted a lawyer or was encouraged to; whether the employee could negotiate the terms; and whether the employer offered consideration beyond what the employee was already entitled to.

None of these is a formal requirement for employees under 40, but each one is a fact the employee's lawyer will probe. An agreement handed over at a termination meeting with a demand that it be signed before leaving the building, written in dense legal language, with no suggestion to consult counsel, is the one that gets challenged.

Consideration: pay for the release, not for what is already owed

A release is unenforceable if the employee got nothing new for it. Final wages, accrued vacation the company's written policy promises, earned commissions and bonuses, and reimbursements are already owed and cannot be the consideration. The severance payment, continued benefits, a neutral reference, or the waiver of a repayment obligation can be.

Texas adds a trap here. The Texas Payday Law, Labor Code chapter 61, defines wages to include severance pay owed under a written agreement or written policy. A handbook or offer letter that promises severance without conditioning it on a release turns that severance into wages the employee can claim from the Texas Workforce Commission whether or not he or she signs anything, and payment of it buys no release. Severance that is meant to be the price of a release should exist only in the severance agreement, expressly conditioned on signing and not revoking.

The age-waiver rules: 21 days, 45 days, 7 days

For any employee aged 40 or older, the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f), sets minimum requirements for a waiver of age discrimination claims. The waiver is not knowing and voluntary unless, at a minimum:

1. it is written in a manner calculated to be understood by the employee or the average eligible participant;
2. it specifically refers to rights or claims under the Age Discrimination in Employment Act;
3. it does not waive claims arising after the date it is signed;
4. the employee receives consideration in addition to anything of value already owed;
5. the employee is advised in writing to consult an attorney;
6. the employee is given at least 21 days to consider the agreement, or at least 45 days if the waiver is requested in connection with an exit incentive or other group termination program;
7. the employee has at least seven days after signing to revoke, and the agreement does not become effective until that period has run; and
8. in a group program, the employer discloses in writing at the start of the consideration period the class or unit covered, the eligibility factors and time limits, and the job titles and ages of those selected and those not selected.

The employer bears the burden of proving these requirements were met. A waiver that misses any one of them is invalid as to the age claim, and the EEOC's position is that the defect cannot be cured by a later letter supplying the missing piece. The statute also provides that no waiver may affect the EEOC's rights or interfere with the employee's right to file a charge or participate in an investigation.

What cannot be waived

A release can waive the employee's right to recover money on a claim. It cannot waive the right to file a charge with the EEOC or the Texas Workforce Commission Civil Rights Division, or to testify or participate in an agency investigation. The EEOC guidance states that an employee can still file a charge after signing a broad waiver, that any clause limiting the right to testify is unenforceable, and that a valid waiver still bars the employee from personally recovering money, whether in his or her own suit or one the agency brings. An agreement that purports to prohibit charge filing invites a challenge to the whole release and, in the agency's view, is itself a problem. The better practice is a sentence saying so expressly.

Other rights sit outside a private release by their nature, such as claims for unemployment benefits and workers' compensation benefits, and claims that had not arisen when the agreement was signed. A release that reaches for them does not capture them and makes the rest of the document look overreaching.

Confidentiality and non-disparagement after McLaren Macomb

Employers routinely want two more promises: that the employee keep the agreement's terms confidential and that the employee not disparage the company. For employees covered by the National Labor Relations Act, which excludes supervisors and managers, those clauses have been under a cloud since February 21, 2023, when the National Labor Relations Board decided McLaren Macomb. The Board held that merely offering a severance agreement with broad confidentiality and non-disparagement terms to covered employees violates the Act, because the offer itself tends to deter employees from exercising their rights to discuss working conditions and to communicate with the Board.

The Board's General Counsel issued a guidance memorandum on the decision in March 2023 and, on February 14, 2025, a new General Counsel rescinded that memorandum along with many others. The rescission withdrew the General Counsel's expansive reading; it did not withdraw the Board's decision, which stands until the Board itself revisits it. As of 2026 the careful course for non-supervisory employees is a narrowly drawn clause: confidentiality limited to the amount of the payment, non-disparagement limited to statements that are maliciously false, and an express carve-out for communications with government agencies and for the rights the Act protects. For executives and managers, who are outside the Act's coverage, broader clauses remain available.

Texas law adds one point in the employer's favor. The Texas anti-SLAPP statute, Civil Practice and Remedies Code section 27.010(a)(5), exempts from early dismissal a legal action arising from an employer-employee relationship that seeks to enforce a non-disparagement agreement. A former employee who breaches a valid non-disparagement clause cannot use that statute to end the enforcement suit at the outset. How online attacks by a former employee are handled, with or without such a clause, is covered in what a company can do when a former employee disparages it online.

Tender back and the cost of a bad release

If an employee signs, takes the money and then sues anyway, the first question is whether the release is valid. If it is, the suit fails. If it is not, the next question is whether the employee had to return the severance before suing. For age claims the answer is no: the EEOC's regulations provide that the tender-back and ratification doctrines do not apply to ADEA waivers, so the employee keeps the money and sues. For Title VII and ADA claims the law is less settled; some courts require tender back and others do not, and a court that does not may still reduce any award by the amount paid. Either way, a defective release means the company paid for a defense it does not have.

Example

Suppose a Dallas distributor eliminates a regional sales manager's position, along with two other positions in the same reduction. The manager is 52. HR offers him three months' pay for a release, using the company's standard individual-separation form, which gives 21 days to consider and seven to revoke, names the ADEA and advises consulting a lawyer. He signs on day 10 and is paid. Five months later he files an age discrimination charge, and his lawyer argues the release is invalid.

The lawyer is right about the age claim. Three positions eliminated in one decision is a group termination program; the manager was entitled to 45 days and to a written disclosure of the titles and ages of those selected and not selected, and received neither. Because tender back does not apply to ADEA waivers, he keeps the severance and proceeds with the age claim. The release still bars his other claims, such as any contract or Title VII theory, if it was otherwise knowing and voluntary. The company's exposure on the age claim is now the same as if it had paid nothing, and the fix would have cost it nothing but a different form and three more weeks.

A checklist before the agreement goes out

• Severance exists only in the agreement and is conditioned on signing and not revoking; nothing already owed is described as consideration.
• For employees 40 and over: ADEA named, lawyer advised in writing, 21 or 45 days, seven-day revocation, group disclosures where two or more people are offered agreements in one program.
• An express statement that nothing in the agreement bars filing a charge with, or participating in an investigation by, a government agency, while waiving personal recovery.
• Confidentiality and non-disparagement drawn to the employee's status: narrow for employees the National Labor Relations Act covers, with an agency carve-out; broader for supervisors and executives.
• Return of property, acknowledgment of continuing confidentiality and restrictive-covenant obligations, and a cooperation clause where the employee has knowledge of pending matters.
• Final wages paid on the Texas Payday Law schedule regardless of whether the employee signs.

A release drafted for the specific employee, and offered on the statute's timetable, usually ends the matter. One drafted from an old template usually ends up being read aloud in a deposition. For the related question of what the release is protecting the company from, see defending a wrongful termination claim in Texas; for releases that resolve a dispute already in progress, see how a business settlement is structured. Tina Wysk advises and represents employers in separation and release disputes in Dallas.