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What’s in a Typical Severance Package? Your Guide to Navigating Severance Agreements in Texas

Whether you’ve just been laid off or are preparing for a potential exit, understanding what’s in a typical severance package is essential. Severance pay isn’t guaranteed by law, but many employers offer it as part of a separation agreement. These packages can affect your financial future, your right to unemployment, and even your ability to work elsewhere.

In this guide, we’ll walk through the common components of a severance package, your legal rights under Texas law, and what to consider before signing on the dotted line.

Understanding Severance Packages in Texas

Unlike some states with broader labor protections, Texas is an at-will employment state, which means employers can terminate employees for almost any reason — with some exceptions like discrimination or retaliation. Severance pay is not legally required unless:

• It is promised in an employment contract,

• Required by a union agreement, or

• The employer has a clear severance policy.

That said, many employers offer severance packages to reduce legal risks, maintain goodwill, or comply with corporate policies.

What’s Typically Included in a Severance Package?

A severance package may include more than just a lump-sum payment. Here are the most common components:

1. Severance Pay

This is usually the centerpiece of the package. It might be:

• One to two weeks of pay per year of service,

• A fixed number of weeks’ salary (e.g., 8 weeks’ pay),

• A lump sum payment.

Executives and long-term employees may receive more generous amounts, especially if negotiated during hiring.

2. Payment for Unused Vacation or PTO

Texas employers must pay out unused accrued vacation if their written policy promises it. This is separate from severance pay.

3. Extended Health Insurance Coverage

Employers may offer to continue health benefits for a period of time, or subsidize COBRA coverage. While not required, this is often included in large corporate severance packages.

4. Non-Compete or Non-Solicitation Clauses

Some severance agreements include new restrictive covenants, even if you didn’t agree to them during employment. Signing could limit your ability to work in the same industry or contact former clients.

5. Release of Claims

Most severance packages require you to waive your right to sue your former employer, including for discrimination, retaliation, or wage violations. This is why legal review is critical.

6. Outplacement Services

Some companies provide résumé support, job placement services, or career counseling to assist with your transition.

7. Confidentiality or Non-Disparagement Clauses

You may be asked not to speak negatively about the employer and to keep the terms of your severance confidential.

Are Severance Packages Negotiable?

Yes — and in many cases, they should be.

Here are common elements you may be able to negotiate:

• More money (especially if you’ve been with the company a long time)

• Favorable tax treatment (in some cases, splitting payments over two tax years)

• Waiver of non-compete clauses

• Additional months of health insurance coverage

• Revisions to the release of claims language

Employers are often open to reasonable negotiations, especially if they want to avoid a dispute.

Legal Considerations: What You Should Watch Out For

Even though Texas law doesn’t require severance, there are still legal traps to avoid:

➤ Signing Away Claims Without Realizing It

If you’ve experienced discrimination, retaliation, or harassment, a severance agreement may contain a release of claims that prevents you from seeking justice later. In some cases, that release may not be enforceable, but it’s best to consult an attorney.

➤ Age Discrimination Waivers

If you’re 40 or older, the severance agreement must meet certain requirements under the Older Workers Benefit Protection Act (OWBPA) — including a 21-day review period and 7-day revocation window.

➤ Waivers for Future Claims

Some employers try to sneak in waivers of future legal claims, which aren’t enforceable in most cases, but still signal aggressive legal positioning.

Severance and Unemployment in Texas

Many people wonder: Will accepting severance affect my unemployment benefits in Texas?

The answer depends on how the severance is paid:

• Lump sum severance: May not affect unemployment.

• Severance paid as continued salary: Could delay unemployment benefits until payments stop.

It’s important to notify the Texas Workforce Commission (TWC) and provide accurate information to avoid penalties or benefit denials.

Should I Hire a Lawyer to Review My Severance Package?

While some severance packages are straightforward, many include legal landmines. You should strongly consider consulting an employment attorney if:

• You’re being asked to sign a release of claims,

• You suspect your termination was unlawful,

• You’re subject to a non-compete,

• You’re over 40 and the agreement involves age-related waivers,

• You’re unsure how the severance affects unemployment.

An attorney can help you understand what you’re giving up and whether a better deal is possible.

Can Employers Take Back Severance Pay?

In rare cases, yes — but only if the agreement says so. For example:

• If you violate a non-disparagement clause,

• Breach confidentiality,

• Or break a non-compete.

Most severance agreements include a “clawback” provision outlining when the employer can demand repayment.

Final Thoughts: Know Before You Sign

A severance package can offer welcome financial relief during a career transition — but it often comes with strings attached. Before you sign, understand:

• What you’re being offered,

• What rights you may be giving up,

• And whether negotiation is possible.

If you’re unsure, seek guidance from an employment attorney who understands Texas law. At The Lange Firm, we’re committed to protecting employees and helping you move forward with confidence.

Need help reviewing or negotiating your severance package?
Contact The Lange Firm today to schedule a paid consultation with an experienced employment lawyer.