Michigan Severance Agreements: What You’re Actually Signing Away (and What You Can Negotiate)

The severance agreement usually arrives at the worst possible moment: you’ve just been terminated, you’re worried about the mortgage, and HR slides a stack of paper across the table with a number on it and a deadline. The implicit message is that this is a standard document, the number is the number, and you should be grateful.

None of those three things is reliably true. A severance agreement is a contract in which you sell something — your legal claims — and the employer is the buyer setting the opening price. Here’s what you’re actually selling, what you legally can’t sell, and where the number moves.

What the release actually covers

The heart of every severance agreement is the general release. Modern releases are drafted to be as close to total as the law allows: discrimination and retaliation claims under federal law and Michigan’s ELCRA, wrongful termination, whistleblower claims, wage claims, contract claims, “and all other claims known and unknown from the beginning of time to the date of this agreement.” That’s not an exaggeration; that’s roughly the standard phrasing.

Once you sign, the strong presumption is that it’s binding. If you have a genuinely valuable claim — a retaliation case with a tight timeline, a discrimination case with a skewed layoff list — the release extinguishes it for whatever the severance check happens to be. This is why I tell every client: the question is never “is this severance agreement fair?” in the abstract. It’s “what are the claims I’d be releasing worth?” You can’t answer the second question without a case evaluation, which is exactly why employers prefer you sign fast.

What you cannot sign away — no matter what the agreement says

• Your right to file an EEOC charge. No severance agreement can lawfully bar you from filing a charge with the EEOC (or the Michigan Department of Civil Rights) or from cooperating in an agency investigation. What you typically waive is your right to recover money from a lawsuit on the released claims — not the right to report. Well-drafted agreements admit this in a carve-out paragraph; poorly drafted ones pretend otherwise.
• Michigan unemployment benefits. Under Michigan’s Employment Security Act, your right to unemployment benefits can’t be waived by private agreement, and a severance agreement can’t lawfully require you to give up or not apply for them. Be aware, though, that severance pay itself can affect the timing of benefits depending on how it’s characterized and allocated — worth confirming with the UIA for your situation.
• Vested 401(k) and pension benefits. Money already vested in your retirement accounts is yours under federal law. A release doesn’t touch it, and any suggestion that severance is somehow tied to it should set off alarms.
• Future claims. A release covers claims existing as of the date you sign. It cannot waive claims arising from things the employer does to you afterward — including post-termination retaliation.

If you’re 40 or older: the OWBPA clock

For workers 40 and over, the federal Older Workers Benefit Protection Act sets minimum requirements before a release of age discrimination claims is valid: you must get 21 days to consider the agreement for an individual termination, 45 days in a group layoff (plus a disclosure of the job titles and ages of who was selected and who wasn’t — see my post on age discrimination in Michigan layoffs for why that list matters so much), a written recommendation to consult a lawyer, and 7 days after signing to revoke.

Two practical points. First, that consideration period is yours — “we need this back by Friday” is not a lawful demand when the statute gives you three weeks, and pressure to sign early is itself a yellow flag. Second, the window exists precisely so a lawyer can review the deal. Most people use zero of their 21 days. Use them.

The traps: non-disparagement, confidentiality, and the boilerplate that bites later

• One-way non-disparagement. The standard clause binds you and nobody at the company. The manager who pushed you out remains free to trash you to every reference-checker in the industry. Ask for mutuality — at minimum, a commitment binding named executives and HR. This costs the employer nothing, which is why it’s one of the easiest wins in negotiation.
• Vague disparagement definitions. If “disparagement” isn’t defined, truthful statements about your experience could arguably trigger a clawback of your severance. Ask for carve-outs for truthful statements to government agencies, in legal proceedings, and as otherwise required by law.
• Confidentiality with teeth. Clauses that make the severance amount confidential are common and usually tolerable. Clauses that purport to keep the underlying facts — say, the harassment you reported — confidential are a different animal, and their enforceability has limits. Don’t assume; have it read.
• Buried extras. Severance agreements increasingly smuggle in new obligations: a fresh non-compete or non-solicit, a sweeping cooperation clause requiring unpaid help with future litigation, or reaffirmation of old restrictive covenants. You are under no obligation to accept new restrictions as a condition of severance — that’s a negotiating point, and if a non-compete shows up, see my Non-Compete Defense page before you sign anything.

References and neutral-reference clauses

Your next job is part of the deal, so put it in the contract. At minimum, ask for a neutral-reference clause: the company will confirm only dates of employment, position, and (if you authorize) final salary, and all reference inquiries will be directed to one named person or to HR. Without it, you’re trusting every former supervisor’s discretion. If the separation was genuinely non-performance-based, push further: an agreed-upon reference letter attached as an exhibit, or an agreed characterization of the departure (“position eliminated”). Employers grant these routinely because they cost nothing — but only when asked.

When the severance number moves

The opening offer is priced for someone with no claims and no lawyer. The number moves when the employer’s risk calculation changes. In my experience, leverage comes from:

• A credible legal claim. A termination two weeks after an HR complaint, an FMLA request, or a harassment report; a layoff list that skews old; a denied accommodation. The strength of the underlying claim is, by far, the biggest driver. This is why the wrongful termination analysis comes before the severance negotiation, not after.
• Procedural defects. A botched OWBPA process, missing disclosure lists, or unlawful clauses give counsel something concrete to point at.
• Tenure and circumstances. Long service, proximity to vesting dates or bonuses, and internal-equity arguments (“others got more”) all matter at the margin.
• A lawyer’s letterhead. Not because letterhead is magic, but because it tells the employer the claims have been evaluated and someone is prepared to act on them.

Not every severance package is negotiable, and not every case justifies a fight. But I’ve rarely seen an employer pull an offer because an employee asked a lawyer to look at it first — and I’ve often seen the number change because one did.

If a severance agreement is sitting on your kitchen table with a deadline attached, get it reviewed before you sign — the consultation costs nothing and the release is forever. Schedule Free Case Evaluation or Call 814-821-1140.