Published by BOLO Health Law, LLC | October 30, 2026
A severance agreement is often presented as a standard exchange: the employer offers money or benefits, and the departing employee releases legal claims. In practice, it may also address compensation already earned, bonuses, equity, health insurance, reference requests, return of information, cooperation, confidentiality, non-disparagement, and what the employer will say about the separation. Each provision can change the risk and value of the deal. BOLO also addresses these issues through its New Jersey employment and workplace disputes practice.
For New Jersey employers, severance documents deserve more attention than a recycled form from another state. State discrimination law, federal age-waiver requirements, labor-law protections, contractual rights, and unemployment rules can intersect. A provision drafted too broadly may be unenforceable or create new exposure. A provision drafted too vaguely may generate a dispute that the parties believed they were settling.
The goal is not to make every separation agreement longer. It is to make the agreement accurate about what happened, clear about what is being exchanged, and careful about rights that cannot be waived in the manner proposed.
Start with the separation itself
Before discussing a release, the employer should identify the actual reason for separation and preserve the documents supporting it. A position elimination, performance-based termination, voluntary resignation, negotiated separation, and reduction in force require different supporting records. The label should reflect the facts; it should not be selected solely because it sounds favorable for litigation or unemployment purposes.
Review the offer letter, compensation plan, employment agreement, equity documents, restrictive covenants, policies, and relevant communications. Determine what amounts are already due regardless of whether a severance agreement is signed. Earned wages, vested contract rights, expense reimbursements, discretionary future payments, and negotiated severance are not the same category. A severance release should not conceal a dispute over compensation that was independently owed.
A disciplined separation file should identify decision-makers, consistent business reasons, any employee complaints or protected leave relevant to timing, and the documents used to reach the decision. This is especially important where the employee recently raised discrimination, retaliation, accommodation, wage, or safety concerns. A separation agreement is not a substitute for a lawful underlying employment decision.
What makes a release meaningful?
A release should describe the parties, consideration, relevant time period, and categories of claims it is intended to settle. The person signing must understand which rights are being exchanged. The company should also identify any entities or individuals to be included as released parties, avoiding definitions so vague that future disputes arise over who was protected.
Generally, a properly drafted separation may resolve many existing employment-related claims, but not every right is waivable, and legal requirements differ by claim. New Jersey law specifically states that certain prospective waivers of substantive or procedural rights relating to discrimination, retaliation, or harassment in employment contracts are against public policy. See N.J.S.A. 10:5-12.7. The distinction between releasing accrued claims in a negotiated settlement and attempting to waive future rights is critical.
Employers should avoid language that appears to prohibit filing administrative charges, cooperating with government investigations, making disclosures protected by law, or exercising nonwaivable rights. Different laws impose different rules regarding participation in agency proceedings and the availability of individual monetary relief. A general “release of all claims of every kind forever” is not a complete legal analysis.
Age discrimination waivers have their own timing rules
When an employer seeks a valid waiver of federal Age Discrimination in Employment Act claims from an employee age 40 or older, the Older Workers Benefit Protection Act (OWBPA) imposes specific requirements. In the ordinary individual-separation setting, the employee generally must receive at least 21 days to consider the agreement and at least seven days after signing to revoke the age-claim waiver. In qualifying group or exit-incentive programs, the consideration period is generally 45 days, and additional information-disclosure requirements apply. Other statutory conditions also matter, including plain language, identification of the claims waived, advice in writing to consult an attorney, and adequate consideration. Source: EEOC, OWBPA statutory text.
Those numbers do not mean every employee over 40 is automatically entitled to severance, or that every severance agreement involving a younger employee needs the same deadlines. They apply when the employer seeks the relevant ADEA waiver in the applicable circumstances. An employer that offers a 24-hour deadline to a covered older employee cannot simply assume that a general sentence saying “voluntary and knowing” solves the federal problem.
For a group program, HR should determine the decisional unit and required disclosures before circulating releases. An incorrect age chart or incomplete explanation of selection criteria can undermine the intended protection. If the separation is being negotiated after a charge or lawsuit has already been filed, specialized rules for settlement waivers may require a different analysis.
New Jersey restricts certain confidentiality provisions
New Jersey’s N.J.S.A. 10:5-12.8 makes unenforceable against a current or former employee certain provisions in an employment contract or settlement agreement that have the purpose or effect of concealing details relating to a claim of discrimination, retaliation, or harassment. The statute also requires a prominently placed notice in certain settlement agreements resolving those claims, and addresses circumstances in which confidentiality restrictions become unenforceable against the employer. Source: New Jersey statutory text.
This is not a blanket prohibition on every promise to protect a business’s confidential material. The statute expressly distinguishes agreements concerning nonpublic trade secrets, business plans, and customer information, as well as certain competition restrictions. Whether a specific restrictive covenant is otherwise enforceable is a separate question; that statutory language should not be treated as advance approval of any proposed noncompete.
For drafting purposes, separate business information from facts about workplace conduct. A covenant protecting customer lists or security credentials serves a different function from a clause prohibiting discussion of discrimination allegations. Combining both into one broad definition of “confidential information” can make the agreement more vulnerable, not more protective.
Non-disparagement clauses need legal boundaries
An employer may reasonably wish to prevent false statements that damage its reputation. But a broadly worded non-disparagement clause can also touch legally protected discussions about working conditions, labor disputes, or government investigations. In its 2023 McLaren Macomb decision, the National Labor Relations Board explained that offering severance agreements with overbroad restrictions on covered employees’ labor-law rights can violate the National Labor Relations Act. The application depends on NLRA coverage and current controlling law. Source: NLRB decision announcement.
That does not mean every narrowly tailored restriction is prohibited or that NLRA protections apply identically to executives, supervisors, and every worker category. The employer should ask what legitimate interest the provision protects and whether its language unnecessarily interferes with statutory rights. A well-drafted agreement can address truthful references, permitted disclosures, and lawful communications without demanding absolute silence.
The same care belongs in return-of-property and cooperation clauses. An employee can be required to return devices, credentials, records, and company property, but the document should not obstruct lawful document preservation, government reporting, or communications with counsel. When a litigation hold applies, preservation instructions must be reconciled with ordinary data-deletion expectations.
Severance is not the same as earned pay or salary continuation
Employers should provide a transparent payment schedule: what is being paid, why it is owed, whether it is conditioned on execution and nonrevocation of the release, applicable deductions, and when payment will occur. If multiple types of compensation are involved, use separate categories rather than one unexplained lump sum.
Unemployment treatment is another reason to be precise. New Jersey’s unemployment guidance distinguishes severance based on prior service from salary continuation through a termination date and certain payments in lieu of notice. The state advises claimants to apply promptly after full-time work ends and to report separation payments, allowing the Division to determine eligibility. Source: NJDOL unemployment FAQ. Parties should not assume that contract language alone binds the agency’s eligibility determination.
Health coverage, COBRA rights where applicable, accrued paid time off under the relevant policy or law, bonuses, commissions, deferred compensation, and equity awards also require separate review. The severance agreement may describe these interests, but it may not override the controlling plan documents or applicable statutes. Where equity vesting or a benefits election is imminent, timing is part of the negotiation, not an administrative footnote.
The employer’s practical drafting checklist
Before presenting an agreement, answer these questions in writing:
What is the business reason for separation? Confirm it is accurate and supported by records.
What is already due? Identify wages, reimbursements, and vested rights independently of severance consideration.
What new consideration supports the release? Describe the payment or benefit clearly, including timing and conditions.
Which claims are being released? Check state and federal statutes, existing claims, and limits on waiver.
Does an ADEA waiver apply? Determine whether the OWBPA’s age, consideration-period, revocation, and group-disclosure rules are triggered.
Do restrictions respect protected disclosures? Review confidentiality, non-disparagement, cooperation, no-rehire, reference, and non-solicitation language for applicable limitations.
Does the employer have the authority to promise what it is promising? Confirm benefits, equity, third-party coverage, reference language, and any board approval requirements.
What occurs if the employee declines to sign? Separate the lawful consequences of rejecting optional severance from any independent obligations the employer must still meet.
These questions should be answered before the agreement reaches an employee facing a deadline. A last-minute redline after the employee identifies inconsistencies can create unnecessary mistrust and avoidable expense.
The employee should review the economics, not only the release
From the employee’s perspective, the central question is the value received in exchange for the rights relinquished. That calculation includes more than the face amount of severance. Review tax withholding, benefit continuation, payment timing, equity treatment, unemployment representations, reference commitments, disputed compensation, possible litigation rights, and the practical burden of ongoing restrictions.
Employees should not assume that an offer is nonnegotiable, but neither should they assume that every claim is viable merely because the termination felt unfair. Evidence, deadlines, coverage, damages, and available remedies matter. Counsel can help evaluate the proposed exchange and identify terms that may be illegal, unclear, economically unfavorable, or simply unnecessary.
A separation agreement is a risk-allocation document
A defensible severance agreement does not attempt to erase history. It accurately identifies existing obligations, offers clear consideration, addresses realistically foreseeable disputes, and respects statutory rights. For employers, that approach is more valuable than an aggressive template full of clauses that may not be enforceable. For employees, a careful review can prevent giving up meaningful rights in exchange for compensation that was already owed.
Before circulating or signing a New Jersey separation agreement, the parties should review the current law and the actual circumstances of the employment relationship. The best settlement document is one that reduces uncertainty rather than moving it into the next dispute.
How BOLO Health Law can help. BOLO Health Law advises New Jersey businesses and individuals on selected employment and commercial matters, including contract review and negotiated resolutions. For a severance or workplace agreement review, visit BOLO Health Law.
This article provides general educational information, not legal advice. Employment and benefits rules vary by circumstances, statutes, plan terms, worker status, and applicable federal law.