Your employer has just informed you that you are being dismissed from your position. They have also handed you a severance package agreement and asked you to sign it.
Maybe they have given you a week to sign the offer. Maybe less. You are understandably processing a lot at once, and signing the agreement may feel like the fastest way to close the chapter and move on.
What should you do?
Our advice is to first stop, take a deep breath, and then carefully assess your rights and goals before signing any agreement.
There are many situations where, in our opinion, signing an offered severance package may not be in your best interest.
This can be the case where the offer does not, for example, reflect what you may actually be owed or if you do not yet understand what rights you are giving up.
A severance agreement is a legal release. Signing it means giving up your right to pursue any further claims against your employer. That is a significant step, and whether it makes sense depends entirely on what you are being offered and what you may actually be owed. This is what you need to think through.
Why Would Someone Decline a Severance Package?
Most initial severance offers are based on Employment Standards Act (ESA) minimums. The ESA sets out a floor for termination pay based on years of service, capped at eight weeks. For many employees, that number falls well short of what they are legally entitled to receive.
Under common law, employees are entitled to reasonable notice of termination, or pay in lieu. What you may be entitled to depends on factors such as your role, length of service, age, and how easy it is to find comparable work. For mid-career or senior employees, reasonable notice can be considerably longer than ESA minimums suggest. In practice, that gap can mean months of additional compensation.
Beyond the dollar amount, a severance package often includes a release, non-disparagement terms, and sometimes restrictions on future employment. Before agreeing to any of that, you need to understand what you are signing away. A severance package review with an employment lawyer will help give you that clarity before a decision is made, not after.
What to Know Before Signing a Severance Agreement
You do not have to sign right away. Some employers create urgency around the offer, but in most cases you have time—at least a few days, and often longer. If the deadline feels artificially short, it is reasonable to ask for more time to review the agreement.
It is important to understand the difference between what the ESA requires and what common law provides. Your employer must meet the ESA minimums, but what you may actually be owed under common law is a separate question. Whether and how much you are entitled to depends on your specific circumstances. The question of whether you are entitled to severance pay and in what amount is not always straightforward.
It also depends on how your employment ended. If you were let go without warning, that is one situation. If your role changed in a way that made it difficult to continue working, that may be something else entirely. These distinctions matter because they affect not only how much you may be owed, but also what claims you may have. Before signing anything, it is worth understanding how your situation fits into the broader legal picture.
Think about the context of your termination.
Were you let go shortly before a bonus was set to be paid? Did you recently raise a workplace concern? Were you dealing with a medical issue, pregnancy, or a family situation your employer was aware of? These details matter. If there is any connection between your termination and a protected ground under the Ontario Human Rights Code, such as disability, age, sex, or family status, signing a broad release may mean giving up those claims.
We strongly recommend that you read the full agreement, not just the compensation section. Review the release language, non-solicitation terms, any non-compete clause, and what happens to your benefits, pension, or equity. Some agreements include terms that go well beyond what courts would enforce. Understanding that before you sign is what matters.
What Are Red Flags in a Severance Agreement?
An overly broad employer release is one of the most common issues.
Release language often benefits the employer by requiring the employee to waive any and all claims. This gives the employer strong legal protection against future lawsuits related to the employment relationship. Without clear limits, such language can go beyond a standard wrongful dismissal claim.
Some releases extend to human rights claims, future claims, or claims you could not reasonably have known about at the time. Broad language benefits the employer.
It is important to remember that you do not have to agree to an employer-drafted release as written.
The signing timeline is another factor to watch. A 24- or 48-hour deadline with no opportunity to obtain legal advice reflects pressure, not a fair process. A reasonable offer should allow you time to understand what you are being asked to sign.
Non-competition clauses also deserve close attention. Under Ontario law, non-compete agreements signed after October 25, 2021 are generally unenforceable for most employees, with limited exceptions. Despite this, many agreements still include them. Even if a clause may not ultimately be enforceable, agreeing to it in writing can create uncertainty. You should understand what it means before deciding how much weight to give it.
If the offer is calculated solely on ESA minimums and does not reflect your years of service, seniority, or age, it is a starting point; not necessarily a fair settlement. Many employees can negotiate their severance package, and understanding that before you sign puts you in a stronger position to do so.
For employers, the same scrutiny applies in reverse. Severance offers that do not reflect reasonable notice obligations are more likely to be challenged. Working with a severance package lawyer helps ensure the terms align with what courts are likely to uphold.
Can You Withdraw or Revoke a Severance Agreement?
Once you sign a severance agreement it is almost always legally irreversible.
You should assume it is final. Feeling that you agreed to less than you were owed is not enough to undo it. That is the practical reality, and it is why reviewing the agreement before signing is worth the time.
There are limited circumstances where a signed agreement may be set aside, such as if you signed under duress, were misled about the terms, or if the agreement is unconscionable. These are high thresholds. Challenging a signed severance agreement is often difficult and expensive, far more so than taking the time to obtain proper advice upfront.
Ontario does not have a standard cooling-off period for employment severance agreements, unlike some jurisdictions in the United States. Once you sign, you should treat the agreement as final. If you have doubts, they need to be addressed before signing.
A lawyer can review a severance agreement quickly, often within a day or two. The cost of that review is usually small compared to the clarity and potential value it provides.
Legal Disclaimer: This post is for general information only. Nothing in it constitutes legal advice, and it does not apply to your specific situation. Every case depends on its own facts, and the only way we can advise you is through a proper consultation and engagement. Reading this post does not create a lawyer-client relationship with Sultan Lawyers. If you have questions about your situation, please contact us directly.
Your Case: Our Priority.
At Sultan Lawyers PC, we are the only firm specializing exclusively in employment and immigration law. Whether your case is straightforward or complex, we have the experience and commitment to achieve the best possible outcome. Trust us to navigate the toughest challenges with you.
