How to draft a severance agreement in 2026: the 14 clauses that quietly void your release

Ten days ago the NLRB reaffirmed McLaren Macomb. Eighteen months ago the FTC's non-compete rule died. Four months ago Illinois HB 3638 took effect. Every severance template older than Q2 2026 is quietly wrong in at least three places. Here's the post-Prime-Communications, post-FTC-vacatur, OWBPA-Exhibit-A playbook for 2026 — and a free generator that produces it.

State of play as of April 17, 2026

A severance agreement is the last employment document most employees will ever sign with the company — and the most legally dangerous. In exchange for money the employee is giving up the right to sue for everything that happened during employment: discrimination, harassment, retaliation, unpaid wages, misclassification, wrongful termination, and more. Every word of the release matters, and a handful of 2022–2026 federal and state developments have quietly invalidated large chunks of every standard template written before them.

Here's what changed and when:

• February 21, 2023 — NLRB McLaren Macomb, 372 NLRB No. 58, held that the mere offer of a severance agreement with overly broad confidentiality or non-disparagement provisions violates Section 8(a)(1) of the NLRA for non-supervisory employees. Retroactive. Supervisors not covered except in narrow retaliation contexts.
• March 3, 2022 — Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (9 U.S.C. §§401-402) gave employees unilateral option to avoid pre-dispute arbitration of sexual-misconduct claims.
• December 7, 2022 — Speak Out Act (42 U.S.C. §19401 et seq.) made pre-dispute sexual-assault and sexual-harassment NDAs judicially unenforceable.
• April 10, 2023 — NJ WARN amendments kicked in: mandatory non-waivable severance of one week per year for mass layoffs, plus 4 weeks if notice is late.
• August 20, 2024 — Ryan LLC v. FTC vacated the FTC non-compete rule with nationwide effect.
• September 9, 2024 — SEC sanctioned seven companies for severance provisions impeding whistleblower reporting.
• September 5, 2025 — FTC formally accepted the non-compete vacatur and dismissed appeals 3-1. Federal non-compete rule is dead.
• January 1, 2026 — Illinois HB 3638 took effect, requiring separate consideration for any confidentiality clause covering unlawful employment practices.
• April 7, 2026 — NLRB Prime Communications, LP, 374 NLRB No. 88, reaffirmed McLaren Macomb. Chair Murphy and Member Mayer signaled openness to reconsideration but couldn't reach a three-vote majority to overturn.

If the last time someone updated the company severance template was 2022, it is almost certainly unenforceable in at least five separate ways. Let's walk through the 14 clauses that matter most.

1. McLaren Macomb after Prime Communications: narrow everything

The biggest shift in severance drafting in the last three years is McLaren Macomb, and the biggest question mark over it through 2025 was whether the Trump-appointed NLRB would survive long enough to overturn it. On April 7, 2026 — ten days before this article was published — the answer came.

In Prime Communications, LP, 374 NLRB No. 88 (Case 16-CA-309916), the NLRB upheld an ALJ's finding that Prime Communications' severance agreement — containing a non-disparagement clause stating it was to be interpreted "as broad[ly] as possible" and prohibiting "publication of any information related to the former employer's business, owners, employees, agents, or services" even if true, plus a blanket confidentiality clause — violated Section 8(a)(1). Chairman James Murphy and Member Scott Mayer (both Trump appointees) stated they were open to reconsidering McLaren but joined the decision because the Board lacked a three-member majority to overturn existing precedent.

The practical upshot: McLaren Macomb is still binding Board law as of April 2026, and the narrow-drafting standard applies. That standard boils down to three requirements for both confidentiality and non-disparagement provisions in severance agreements involving non-supervisory employees:

1. Narrowly tailored. Confidentiality can cover trade secrets, proprietary information, and the monetary terms of the agreement — not the existence of the agreement itself, not the circumstances of the separation, and not workplace conditions generally. Non-disparagement can cover defamatory statements — but not opinions, not reviews, not truthful statements about workplace conditions.
2. Time-bounded. A non-disparagement clause "at all times hereafter" is presumptively overbroad. Give it an end date — typically 1 to 3 years.
3. Section 7 carved out. Explicit language preserving the employee's right to discuss wages, hours, and working conditions with coworkers or a labor organization, and to file charges with the NLRB.

Supervisors as defined in NLRA §2(11) are generally outside Section 7 and so McLaren reaches them only in narrow retaliation scenarios — but the safe practice is to draft as though McLaren applies to everyone, because Faragher/Ellerth supervisors are the ones whose conduct most often creates severance-producing disputes, and whether a particular manager is or isn't a statutory supervisor under NLRA §2(11) is a fact-intensive question you don't want to be arguing about when the NLRB comes calling.

What happens next? President Trump nominated James Macy to the NLRB's vacant seat. If confirmed, the Board has a three-vote majority to overturn precedent. McLaren could be reversed in a future case. But as of today, it stands — and any severance agreement signed while it stands must comply.

2. OWBPA's 7 factors — miss one and the ADEA release is void

The Older Workers Benefit Protection Act, 29 U.S.C. §626(f), governs any severance agreement that releases age-discrimination claims for an employee 40 or older. OWBPA is unforgiving: if the waiver fails any one of seven statutory factors, the ADEA release is invalid, and the employee can pursue age-discrimination claims despite having signed the agreement. Worse — under Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the employee doesn't have to tender back the money to challenge the waiver.

Memorize these seven (codified at 29 C.F.R. §1625.22):

1. Plain language. Written in a manner calculated to be understood by the employee or the average individual eligible to participate. No 17-clause sentences.
2. ADEA by name. Must specifically refer to rights or claims arising under the Age Discrimination in Employment Act — the phrase "age discrimination" alone is not enough. Cite the statute.
3. No future claims. The release must not cover rights that may arise after the signing date.
4. Additional consideration. The employee must get something of value beyond what they were already entitled to. If the severance merely pays accrued PTO or a bonus that was already owed, OWBPA factor 4 fails.
5. Attorney advisement. Written advisement to consult an attorney before signing. Not "the opportunity to consult" — a direct written recommendation.
6. Consideration period. 21 days for an individual termination; 45 days if the agreement is in connection with an exit-incentive or termination program offered to a group or class of employees. The clock starts on the employer's final offer. Material changes restart it unless the parties agree otherwise.
7. Revocation period. At least 7 days after signing during which the employee may revoke. The agreement is not effective and no money is paid until the 7 days pass. Revocation rights cannot be waived.

Draft these as an acknowledgments section toward the end of the agreement ("ADEA / OWBPA Acknowledgments"), clearly labeled (a) through (g), with initialing lines for factors 5 (attorney advisement) and 6 (consideration period) if your state bar's practice favors extra documentation. Under Oubre, add the express notice that the employee may challenge the waiver's knowing-and-voluntary character without tendering back the consideration.

3. Exhibit A for group layoffs: the job-title-and-age chart

If two or more employees are offered severance waivers as part of an exit-incentive or termination program, OWBPA stops being just about the individual and requires a disclosure of the decisional unit — a chart showing who was selected for the program and who was not, so affected employees can evaluate whether the selection pattern reflects age discrimination. This is the "Exhibit A" — also called the "ADEA Attachment" or "OWBPA Chart" — and the most common way a group severance goes wrong.

The disclosure requirements are codified at 29 C.F.R. §1625.22(f):

• The class, unit, or group covered. This is the "decisional unit" — the pool of employees that was considered for the program. It is fact-specific: the whole company, a division, a job classification, a location. Get it wrong and the whole disclosure fails. Too narrow excludes comparators the employee needs; too broad makes the disclosure non-responsive.
• Eligibility factors. The criteria used to determine who was eligible for the program.
• Time limits. The 45-day sign-by window and the 7-day revocation window.
• Job titles and ages. For every individual in the decisional unit — both selected and not selected — the job title and the actual age. Ranges are not permitted. Names are not required and should be omitted for privacy.

The chart format is straightforward — a three-column table: Job Title, Age, Selected (Yes/No). Multiple rounds of layoffs within the same plan are aggregated. If the employer does multiple smaller layoffs spaced over six months that are part of the same decisional process, the disclosure covers all rounds.

4. Speak Out Act + EFAA: pre-dispute sexual-misconduct clauses are unenforceable

Two federal statutes adopted in response to #MeToo now override boilerplate severance language for sexual-misconduct disputes:

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (9 U.S.C. §§401-402, effective March 3, 2022) gives the employee unilateral election to void pre-dispute arbitration agreements covering sexual-assault or sexual-harassment disputes. Even if the severance agreement or a prior employment agreement contains a general arbitration clause, the employee can litigate a sexual-misconduct claim in court. The employer has no countervailing right. The court, not the arbitrator, decides whether the claim falls within EFAA's scope.

The Speak Out Act (42 U.S.C. §19401 et seq., effective December 7, 2022) makes judicially unenforceable any pre-dispute non-disclosure or non-disparagement clause covering sexual-assault or sexual-harassment disputes. "Pre-dispute" means agreed to before the conduct giving rise to the dispute occurred. It applies to claims filed on or after December 7, 2022, regardless of when the clause was signed.

The practical application to severance agreements gets subtle. A severance agreement is almost always post-dispute relative to the employment relationship — the employment is ending, often because of a known problem — so the agreement's confidentiality clauses are enforceable on already-raised disputes. But if the employee hasn't yet raised a sexual-misconduct allegation at the time of signing, and later does, any confidentiality or non-disparagement provision that would cover that later-raised allegation is unenforceable as to it.

The fix is a clear carve-out in the confidentiality section: nothing in this Agreement prevents Employee from discussing or disclosing conduct Employee reasonably believes to constitute sexual assault or sexual harassment. That removes the Speak Out Act risk entirely. Many state silenced-no-more statutes (California, Washington, Colorado) go broader and require carve-outs for discrimination and retaliation generally — see Section 7 below.

5. SEC Rule 21F-17(a): the $35M carve-out

SEC Rule 21F-17(a) (17 C.F.R. §240.21F-17(a)) prohibits "any action" that impedes an individual from communicating directly with SEC staff about a possible securities-law violation, including enforcing a confidentiality agreement. The SEC has become extremely aggressive about this in the severance-agreement context:

• February 3, 2023 — Activision Blizzard: $35 million settlement. The offending language was in severance agreements that required former employees to "provide notice to the company" of any disclosure obligations or requests from government agencies. No actual impediment, no blocked disclosure — just the chill effect of the notice requirement was enough.
• September 19, 2023 — CBRE: $375,000. Severance agreements required employees to represent they had not filed complaints with agencies. Representing something as a condition of receiving severance is impeding future complaints.
• September 9, 2024: The SEC charged seven companies in a coordinated sweep. Violations included waivers of monetary whistleblower awards and advance-notice requirements for agency communications.

The compliant language is a five-element carve-out in the severance release:

1. Employee retains the right to file charges or complaints with any federal, state, or local agency.
2. Employee retains the right to participate in any agency investigation or proceeding.
3. Employee retains the right to provide truthful testimony in any legal proceeding.
4. Employee may communicate directly with the SEC, EEOC, NLRB, OSHA, DOL, CFPB, or any other agency — without advance notice to the company.
5. Employee may receive and retain any whistleblower award to which employee becomes entitled.

Omit any one of these and the agreement is exposed. Most boilerplate templates from 2015-2020 had none of them.

6. California §1542: the unknown-claims waiver that isn't optional

California Civil Code §1542 creates a default rule that startles out-of-state employers every time:

"A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."

Translation: in California, a plain "general release of all claims" covers only known claims. The claim the employee discovers six months later about an unpaid bonus, or the wage claim they didn't know was a claim, survives the release — unless the employee expressly waives §1542.

The waiver is a two-part belt-and-suspenders: quote §1542 in full, then have the employee sign an express waiver acknowledging the content and intending the release to cover unknown claims. California courts strictly enforce §1542, and without the waiver, the value of the release to the employer collapses. Include §1542 whenever California is the governing state, the employee resides in California, or the agreement purports to release California claims.

7. State Silenced-No-More: CA, WA, IL, CO, MN, NM, OR, LA

Beyond the federal Speak Out Act, a growing number of states have enacted broader "Silenced No More" statutes that restrict confidentiality and non-disparagement clauses covering a wider range of unlawful employer conduct. These vary in scope but all cut the same direction:

Illinois HB 3638 deserves a closer look because it's the newest — effective January 1, 2026, just four months before this article. It amended the Illinois Workplace Transparency Act to require separate consideration for any confidentiality or nondisclosure provision covering alleged unlawful employment practices. That means consideration above and beyond what's paid for the general release. In practice, Illinois severance agreements now allocate a specific dollar amount — typically a few thousand dollars — as separate consideration for the confidentiality promise, in addition to the main severance consideration. The statute also voids agreements that shorten the statute of limitations on Illinois-employee claims, apply non-Illinois law to them, or require non-Illinois venue.

8. NJ WARN: the only mandatory severance statute

Most states do not require severance. Employer severance is almost always voluntary — something the employer offers because it wants a release, or because it's company policy, or because it's trying to land a layoff without a lawsuit. New Jersey is the exception.

The Millville Dallas Airmotive Plant Job Loss Notification Act, N.J.S.A. 34:21-1 et seq. ("NJ WARN"), as amended effective April 10, 2023, mandates severance for qualifying mass layoffs:

• Coverage. Employers with 100 or more employees nationwide that have operated in New Jersey for more than three years.
• Trigger. 50 or more terminations of New Jersey employees in any 30-day period, aggregated across all NJ locations (no 33%-of-workforce requirement, no single-location requirement).
• Severance. One week of pay per full year of service. If the employer fails to give 90 days' advance notice, add 4 weeks.
• Non-waivable. Cannot be waived in a severance agreement except with approval of the NJ Commissioner of Labor or a court.

In a New Jersey group severance, the NJ WARN severance is separate from and in addition to any voluntary severance you're paying as consideration for the release. You can't offset it. You can't condition release on it. If the employee has 8 years of service and a $2,500 weekly rate, that's $20,000 non-waivable under NJ WARN — plus whatever you're adding as consideration for the general release.

9. New York's pending No Severance Ultimatums Act

The New York No Severance Ultimatums Act (S.372 / A.6480) would, if enacted, require all severance agreements — not just those covering discrimination — to provide at least 21 business days to review and a non-waivable 7-day revocation period, plus notice of the right to consult an attorney. It passed the Senate on March 4, 2025 and was engrossed in the Assembly on February 26, 2026. It has not been signed into law as of April 17, 2026.

If enacted, it takes effect immediately. The pragmatic move is to structure New York severance agreements to the 21-business-day / 7-day standard now, as a protective measure. If the Act is signed while the consideration period is running, a non-compliant agreement is void.

10. Non-competes: the FTC rule is dead, state law controls everything

For a while in 2024 it looked like the Federal Trade Commission's non-compete rule was going to ban most post-employment non-competes nationwide. That's now firmly over:

• Ryan LLC v. FTC, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024) vacated the rule with nationwide effect.
• On September 5, 2025, the FTC voted 3-1 to dismiss its appeals in the Fifth and Eleventh Circuits and accede to the vacatur.
• There is currently no federal non-compete rule. Enforceability is entirely a state-law question.

State law is sharply fractured. Four states ban post-employment non-competes for employees outright: California (Bus. & Prof. Code §16600, plus the 2024 §16600.5 that voids out-of-state non-competes against California workers even when signed elsewhere), Minnesota (Minn. Stat. §181.988, effective July 1, 2023), North Dakota, and Oklahoma. Several more states restrict enforcement by compensation threshold: Colorado ($127,091+ in 2025), DC ($154,200+), Washington ($120,559.99+ with 2-week notice), Oregon (threshold plus garden-leave), Illinois ($75,000+ under the Freedom to Work Act), Massachusetts (garden-leave of 50% of base salary required under the Noncompetition Agreement Act).

In a severance agreement where a non-compete is desired, the drafting rule is simple: check the state. If the state bans non-competes, drop it and use narrower non-solicitation provisions (which most banning states still enforce). If the state imposes a threshold, confirm the employee meets it and all other procedural requirements. If the state enforces non-competes generally, keep the scope narrow — time, geography, and activity no broader than necessary to protect a legitimate business interest. Whether the severance itself can serve as consideration varies by state.

11. §409A: the $710,000 separation-pay cap for 2026

Section 409A of the Internal Revenue Code, 26 U.S.C. §409A, treats most severance payments as deferred compensation subject to strict timing rules — unless an exemption applies. A §409A violation is catastrophic for the employee: the entire severance becomes immediately taxable in the year of violation, plus a 20% additional tax, plus interest at the IRS underpayment rate plus 1% from the year of first deferral.

Two exemptions commonly save severance from §409A:

Short-term deferral (Treas. Reg. §1.409A-1(b)(4))

Severance paid in its entirety by March 15 of the year following the year of termination is exempt. Lump-sum severance paid shortly after signing almost always qualifies. A short stream of installments paid through Q1 of the year following termination qualifies.

Involuntary separation pay (Treas. Reg. §1.409A-1(b)(9)(iii))

Severance paid on account of involuntary separation is exempt up to 2 times the lesser of (a) the employee's prior-year annual compensation or (b) the IRC §401(a)(17) limit. For 2026 the §401(a)(17) limit is $355,000, so the cap is $710,000. Payment must be completed by December 31 of the second calendar year after separation. A "good reason" resignation can qualify as involuntary if the good-reason definition tracks Treas. Reg. §1.409A-1(n)(2)(ii) (material reduction in duties, material reduction in compensation, material relocation, etc.).

These exemptions stack. Installments paid by March 15 of the following year use short-term deferral; the remainder up to $710,000 uses separation pay. Amounts above the cap must either fit short-term deferral (rarely possible for large severance) or comply with full §409A: fixed payment schedule, no acceleration, six-month delay for public-company "specified employees" under §409A(a)(2)(B)(i), and release-of-claims timing structured so the employee doesn't control the tax year of payment (Notice 2010-6).

The release-timing trap is subtle and deserves its own callout. If the severance agreement says "payment will be made within 10 days after the employee signs this agreement," and the consideration + revocation period crosses a calendar year (say the offer is extended on December 1 and the 21-day consideration and 7-day revocation periods could push signing into January), the employee controls which year receives the payment. That can violate §409A. Fix: specify a fixed payment date after the revocation period expires, or — if the review window straddles two tax years — explicitly pay in the later year.

12. Clawbacks: SOX 304 + Dodd-Frank 954 + Rule 10D-1

For executive severance at a publicly traded company, the severance agreement should not purport to discharge any of three federal clawback regimes:

• SOX 304 (15 U.S.C. §7243): requires CEO and CFO to reimburse incentive-based compensation and stock-sale gains received in the 12 months before a restatement caused by material non-compliance with financial reporting requirements.
• Dodd-Frank 954 (15 U.S.C. §78j-4): broader — reaches current and former executive officers for incentive compensation received during the three fiscal years preceding an accounting restatement.
• SEC Rule 10D-1 (17 C.F.R. §240.10D-1): implements Dodd-Frank 954. Listed issuers must have a compliant clawback policy and must recover erroneously awarded compensation.

An executive severance agreement should include an express acknowledgment that the release doesn't limit the company's rights under these regimes and that any clawback recovery may be offset against future severance payments consistent with §409A. Without the acknowledgment, a clawback pursued after severance is paid becomes a contested issue about whether the general release covered it.

13. Use the free generator

All of the above — post-McLaren narrow confidentiality and non-disparagement, the OWBPA 7 factors, the Exhibit A decisional unit chart, the Speak Out Act and EFAA and SEC 21F-17(a) carve-outs, §1542 California, the state Silenced-No-More notices, NJ WARN calculation, the §409A structure with the 2026 $710,000 cap, SOX/Dodd-Frank/Rule 10D-1 clawback — is built into the Ultimate Design Tools Severance Agreement Generator, for free, in-browser, no signup, no paywall, across all 50 states and DC.

It produces 4 variants — individual standard, individual age 40+ with full OWBPA, group/RIF with Exhibit A and NJ WARN calculator, and executive with §409A short-term-deferral / separation-pay structuring plus clawback acknowledgment — and runs a 24-check compliance scorecard on whatever you generate. Exports to Word, HTML, Markdown, plain text, Print/PDF, and JSON config.

Related reading

• Employment Agreement Generator — offers, PIPs, termination letters, severance releases in 8 templates.
• Workplace Investigation Report Generator — the record that often precedes a severance.
• NDA Generator — post-McLaren, post-Speak-Out-Act NDAs with DTSA whistleblower notice.
• Contractor Services Agreement Generator — the adjacent classification question.
• LLC Operating Agreement Generator — entity-level companion.
• How to Conduct a Workplace Investigation (2026) — the predecessor document.
• How to Draft Employment Agreements (2026) — the front-end bookend.