Severance Agreements When a Vet or Staff Member Leaves

Start with the rule that surprises practice owners: under the Fair Labor Standards Act, the federal wage law, there is no requirement to pay severance.

The U.S. Department of Labor puts it plainly — severance pay is a matter of agreement between an employer and an employee.

The statute that governs wages and hours imposes no obligation to write a check to a departing receptionist, kennel attendant or associate DVM.

The “usually” in that sentence carries a caveat worth respecting.

The federal rule is what the research behind this page verified; it did not audit every state’s law on severance.

Whether your state adds a requirement of its own, in any situation, is a question for employment counsel before you assume you owe nothing.

Why offer it, then?

Severance is a business decision, and its leverage is the exchange.

You pay something the employee is not already entitled to, and in return they sign a release of claims — a written agreement to give up the employment claims the law allows them to waive.

Without a signed release, the payment buys goodwill; with one, it buys certainty.

A severance conversation makes the most sense when the practice is initiating the separation and there is no misconduct driving it.

It is worth deciding the separation itself is safe before attaching money to it — the checkpoints that come first are in our guide to terminating an employee.

The release is the engine of the severance agreement: the employee gives up the employment claims the law allows them to waive, and the agreement is only as strong as the rules that govern it.

For claims under Title VII, the ADA and the Equal Pay Act, the EEOC says courts judge whether a release was knowing and voluntary using factors such as clarity, the time the employee had to read and think it over, whether they consulted a lawyer, and whether the consideration exceeded existing entitlements.

That last factor is where practices trip.

According to the EEOC, severance consideration must be something beyond what the employee is already entitled to — it cannot simply be earned vacation, sick leave or a pension benefit already owed.

If the check is just wages they were owed anyway, you have paid nothing for the release.

Two things a severance release won’t reliably cover:

• EEOC charges. No waiver can be used to interfere with an employee’s right to file an EEOC charge or take part in an EEOC investigation or proceeding, and the EEOC says a waiver provision that attempts to bar participation is invalid and unenforceable. An employee who signs can still file a discrimination charge.
• Unpaid wage claims under the FLSA. In Brooklyn Savings Bank v. O’Neil (1945), the Supreme Court refused to enforce an employee’s private release of Fair Labor Standards Act liquidated damages, reasoning that a statutory right affecting the public interest may not be waived where the waiver would thwart the statute’s policy. Read practically: a general severance release is not something to rely on to settle FLSA wage claims.

Age claims have their own, stricter set of rules — the next section.

Arbitration carries a limit of its own: under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, at the election of the person alleging sexual harassment or sexual assault, a predispute arbitration agreement or joint-action waiver is not valid or enforceable for that case.

If the employee signing your release is at least 40 years old, the age-discrimination rules stack on top of everything above.

The ADEA covers employers with 20 or more employees for each working day in 20 or more calendar weeks in the current or preceding year, and it protects individuals who are at least 40.

Under the OWBPA, the Older Workers Benefit Protection Act, a waiver of age-discrimination claims is valid only if it is knowing and voluntary, which at minimum requires an agreement that is:

• written in a way the employee understands, and specifically refers to ADEA rights or claims;
• supported by consideration beyond what the employee is already owed;
• limited to claims up to the signing date — it waives no future claims; and
• accompanied by written advice to consult an attorney before signing.

Then come the clocks.

An individual employee must be given at least 21 days to consider the agreement.

When the waiver is requested in connection with an exit incentive or other termination program offered to a group or class of employees, each person must be given at least 45 days — and for a group program the employer must also disclose in writing the eligibility factors and time limits, the job titles and ages of those eligible or selected, and the ages of everyone in the same job classification or organizational unit who is not.

Signing is not the end.

The employee must have at least 7 days after signing to revoke, and the agreement does not become effective or enforceable until that revocation period expires.

Practical translation: do not treat the separation as final, and do not treat the severance as earned, until the 7-day window has closed.

For an employee 40 or older, this standard is not optional — a release that skips these steps does not waive the age claims at all.

The clauses most likely to cause trouble are the ones that feel safest: don’t badmouth us, don’t discuss the terms.

Since February 21, 2023, the National Labor Relations Board has read broad versions of those clauses as unlawful in severance agreements offered to non-supervisory employees.

In McLaren Macomb (372 NLRB No. 58), the Board held that merely offering employees a severance agreement that requires them to broadly give up rights under Section 7 of the National Labor Relations Act violates Section 8(a)(1) of the Act.

Section 7 gives employees the right to engage in concerted activities for mutual aid or protection — union or not.

The agreements in the case barred furloughed employees from making statements that could disparage the employer and from disclosing the terms of the agreement itself.

Where that decision stands, as of October 2026: still Board law.

On February 14, 2025, the NLRB’s Acting General Counsel rescinded the prior General Counsel’s guidance memo on McLaren Macomb — prosecutorial guidance, not the decision itself.

On April 7, 2026, in Prime Communications, LP, the Board applied McLaren Macomb as extant precedent and found overbroad nondisparagement and confidentiality provisions unlawful; two members said they were open to reconsidering the precedent but lacked a three-member majority to overrule it.

And as of August 26, 2026, the current General Counsel was arguing in Valley Radiology, P.A. that the Board should overrule it — our research found no overruling decision as of October 7, 2026, so draft to the rule as it stands.

Two scoping notes for a clinic roster.

First, Section 7 protections do not reach true statutory supervisors — the NLRA’s definition of employee excludes supervisors — but whether a head tech, practice manager or medical director counts as a supervisor turns on the authority test in the Act, and it is not safe to assume an associate DVM is one.

Second, breadth is what these decisions turn on: the McLaren agreements required employees to broadly give up Section 7 rights, and the provisions condemned in Prime Communications were overbroad too.

A blanket ban on talking about wages and working conditions, filing charges or cooperating with agencies asks employees to give up Section 7 rights broadly — the shape the Board condemned.

Keep such clauses narrow and have counsel read the final language; treat that as drafting direction, not a safe harbor.

Federal law adds one more limit.

Under the Speak Out Act, enacted December 7, 2022, a nondisclosure or nondisparagement clause agreed to before a sexual assault or sexual harassment dispute arises is not judicially enforceable where the conduct is alleged to violate federal, tribal or state law.

It reaches clauses signed before a dispute exists — confidentiality language in an offer letter or handbook, for example — and it does not stop you protecting trade secrets or proprietary information.

If your confidentiality clause governs trade secrets or other confidential information, one notice is mandatory: under the Defend Trade Secrets Act, an employer must give notice of whistleblower immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.

Skip it and the cost is concrete — you cannot recover exemplary damages or attorney fees under the DTSA against an employee who did not get the notice.

California goes further than the federal rules.

California Government Code 12964.5(b) makes it unlawful to include in any agreement related to an employee’s separation a provision that prohibits disclosure of information about unlawful acts in the workplace, and it requires nondisparagement clauses to carry specified carve-out language.

The same law requires an employer offering a separation agreement to tell the employee of the right to consult an attorney and to provide at least five business days to do so — though the employee may still sign earlier if the signing is knowing and voluntary and not induced by the employer.

California still allows keeping the amount paid confidential, and still allows protecting trade secrets and confidential information that does not involve unlawful acts.

And once a claim has actually been filed, California Code of Civil Procedure 1001 prohibits settlement-agreement provisions that restrict disclosure of factual information about sexual harassment, workplace harassment or discrimination, or related retaliation claims filed in court or an administrative action — though the claimant’s identity can still be shielded at the claimant’s request.

Run severance through payroll.

Per IRS Publication 525 (2025), severance pay is taxable income and is subject to Social Security and Medicare taxes, income tax withholding, and FUTA tax — it does not get friendlier treatment because the employment ended.

Health insurance is its own track.

Termination of employment — other than for gross misconduct — or a reduction of hours is a COBRA qualifying event, and for that kind of qualifying event the maximum required continuation period generally ends 18 months after it.

The small-practice wrinkle: federal COBRA does not apply to a group health plan for a year if all employers maintaining it normally employed fewer than 20 employees on a typical business day in the preceding calendar year.

Paying the employee’s continuation premiums for some months is one way to put consideration beyond what is already owed on the table.

Finally, severance is not the final paycheck.

The timing rules for wages a departing employee has already earned were outside the research behind this page — confirm your state’s rules with your state labor agency before the separation date.

And never hold earned wages hostage to a signature: the consideration rule exists because the release has to be bought with something extra beyond those wages.

More employer guides on contracts and separations are in our veterinary hiring hub.

If the departing associate signed an employment agreement, read it before you draft anything.

A written contract may already say what happens at separation — notice periods, terms on early termination, buyout amounts — and a severance offer that contradicts it creates a second dispute.

Written contracts also change the legal backdrop.

In Montana, the Wrongful Discharge from Employment Act does not apply to employees covered by a written employment contract for a specific term — so a Montana associate on a fixed-term agreement sits outside the statute’s good-cause framework, and the contract’s own termination terms do the work.

That is Montana’s statute; how any other state treats a specific-term contract is a question for counsel, not for a template.

When the exit means buying the contract out, the tax point follows the money: per IRS Publication 525, payments for cancellation of an employment contract are included in income just like severance pay.

One clause deserves a second look: if the contract contains a non-compete or a client non-solicit, the release should say what happens to it — and whether the clause holds up where you practice is its own subject, covered state by state in our guide to veterinary non-competes.