Plain-English guide

Understand Your Employment Contract and Severance Agreement

Starting a new job or leaving one, the paperwork decides what you earn, what you own, and what you give up. Here is how to read both documents before you sign.

Offer letters and employment agreements

At-will language

Most U.S. offer letters say employment is "at-will," meaning either side can end it at any time for any lawful reason. That one phrase overrides friendlier language about growth and opportunity elsewhere in the letter. If you were promised a guaranteed term or a minimum commitment, it needs to be in writing — and it needs to override the at-will clause explicitly.

Pay, bonuses, and equity

Distinguish what is guaranteed from what is discretionary. "Eligible for an annual bonus of up to 15%" is not the same as a guaranteed bonus — check who decides, what the targets are, and whether you must be employed on the payout date to receive it. For equity, find the vesting schedule, the cliff, and what happens to unvested shares if you leave. Startup offers live and die in these paragraphs.

IP assignment

Almost every employment agreement says the company owns what you create on the job. The question is how far it reaches: does it cover side projects, open-source contributions, or inventions made on your own time with your own equipment? Overbroad assignment clauses can claim your nights and weekends — look for carve-outs for independent work.

Non-compete and non-solicit clauses

These often hide inside the offer letter rather than in a separate agreement. A non-compete limits where you can work next; a non-solicit limits whom you can recruit or serve. Enforceability varies enormously by state — some ban most employee non-competes outright — but even an unenforceable clause can intimidate. Note the duration, geography, and exactly which activities are restricted.

Severance agreements: what you are really signing

A severance agreement is a trade: money and benefits now, in exchange for giving up legal claims later. Because the trade is permanent, read it slowly.

The release of claims

This is the core of the document. You are typically waiving nearly every employment-related claim — wrongful termination, discrimination, wage disputes — known or unknown. Check the carve-outs: workers' compensation, unemployment insurance, vested retirement benefits, and the right to file charges with government agencies usually cannot be waived, and a fair agreement says so.

Money and timing

Confirm the severance amount, whether it is a lump sum or salary continuation, when the first payment arrives, and whether it is contingent on signing by a deadline. Salary continuation can affect unemployment eligibility in some states — a lump sum sometimes does not. Also check health coverage: does the company pay COBRA premiums, and for how many months?

Non-disparagement and confidentiality

Many severance agreements bar you from saying anything negative about the company. Check whether the obligation is mutual — a one-sided non-disparagement clause means they can badmouth you while you cannot respond. Also note what you must keep confidential: the existence and amount of the severance, or the underlying facts of your departure?

Deadlines and revocation

You usually get time to consider — often 21 days, or 45 in group layoffs — plus a short revocation window (commonly 7 days) after signing. Do not let urgency manufactured by HR override these windows; they exist precisely so you can think and get advice.

Red flags to watch for

• A release with no meaningful carve-outs — even vested benefits appear waivable.
• One-sided non-disparagement (you are gagged, they are not).
• Non-compete restrictions far broader than your actual role.
• IP assignment with no carve-out for independent side work.
• "Voluntary resignation" language in a layoff severance — it can affect unemployment benefits.
• Pressure to sign immediately, waiving your consideration period.
• Clawback of severance if you file for unemployment or talk to a lawyer.

Not legal advice. This guide explains what the words in employment and severance documents typically mean in plain English. Know the Fine Print is not a lawyer, and this is not legal advice. Employment law varies by state — for decisions with real consequences, talk to a licensed attorney.