Severance Agreement 7-Day Revocation Periods: A Brief Guide

What is a seven-day revocation period? If you aren’t sure, you might need to better understand the details of severance agreements. After all, while these contracts can help legally protect your business during a reduction in force (RIF) or layoff event, some finer points are crucial for them to be legally binding.

In this article, we’ll go over the severance agreement consideration and revocation periods, as well as best practices for navigating the severance process to ensure optimal protection and support for everyone involved.

As a quick refresher, a severance agreement is a legal contract between an employer and an outgoing employee that states all of the termination details in clear language. It also offers the employee a payment in exchange for their signature, which waives the right for them to sue the organization for wrongful termination.

In the end, severance agreements should help both parties. The payment—also called “consideration”—allows the employee to make their career transition without breaking the bank. At the same time, it protects the business from the possibility of a lawsuit.

How severance agreements work can differ from state to state. So always speak to your legal counsel before implementing one. In fact, it’s a good idea to work with your legal team during any layoff or RIF event to ensure that you comply with all local, state, and federal laws.

With those background details out of the way, it’s essential that you understand how to ensure that the contract is legally binding. This is where a firm understanding of the consideration and revocation periods comes into play.

After you craft your severance agreement and have your legal team review it, you will be ready to extend the severance offer to your employee. Your severance agreement should include details about how long the person has to reject or sign the offer. This is called the “consideration period.”

The consideration period usually lasts 21 days, as that is the amount of time mandated by law that companies must give to workers over age 40.

Since, by law, employers have to give workers over 40 at least 21 days to consider the agreement, many organizations have simply adopted that time frame as their standard for all employees. This practice makes it easier to have a policy in place that can be used for most of those impacted by a reduction event.

During this consideration period, the employee can review the document with their lawyer, family, or whomever they need before signing. The employee can then sign the agreement at any time until the 21st day. If they don’t sign by the 21st day, the severance agreement will be void.

We always recommend advising the employee to have someone look over the agreement to make sure it works for them. This level of transparency is vital to protect your corporate brand and show that you aren’t trying to force a signature (which is illegal).

Need help determining the right severance pay for your employee severance agreements? Click below to check our free severance pay calculator tool, which ensures fairness and compliance by simplifying the calculation process based on key factors such as industry standards, employee tenure, and company policies.

After the employee signs the severance agreement, they are then entitled to a seven-day revocation or contract rescission period during which they can choose to reject the offer. Think of this as a way to ensure that they agree to the severance terms. If they sign too hastily, they may need this period to ensure they have made the right decision. That’s why this time frame is also known as the “cooling-off period.”

No matter what the employee says when they first sign the document, you cannot skip the severance agreement seven-day revocation period. It’s there on purpose, by law, to make sure that the employee wasn’t coerced into signing the agreement. Again, this goes back to the Older Workers Benefit Protection Act (OWBPA), which states that all workers over 40 must be given 21 days to consider the offer and 7 days to revoke it.

Remember that having an employee sign a severance agreement negates many claims against your business, but not their ability to file a suit with the EEOC. So you still want the employee to leave your company knowing that you did all you could to ensure their exit was smooth and painless.

Emotions can flare during a reduction event, making it vital that the process goes off without a hitch. To achieve this and save everyone a lot of headaches in the future, the legally binding aspects of the severance agreement revocation period must be handled adequately.

While it’s essential to handle the severance agreement properly, you should also give close attention to your overall layoff or RIF process. Providing support beyond financial compensation can make a huge difference in how affected and surviving employees perceive the transition.

A perfect example is to include outplacement in your severance packages. These services combine expert career coaching, digital resources, and networking opportunities to help outgoing employees find new roles quickly.

By offering outplacement services, your company will show people that it values their future and is committed to helping them land on their feet. You’ll support individuals during a difficult time and protect your organization’s public image and brand reputation at the same time.

Here’s a breakdown of the benefits of offering outplacement during a layoff, both for individuals and the business as a whole:

• Landing new jobs faster: Outplacement services help impacted employees update resumes, practice interviews, and use job platforms effectively. This will lead to more recruiter contacts, interviews, and quicker job placements.
• Mitigating negative emotions: Offering outplacement eases tensions after layoffs by showing support and care. This offer helps stabilize team morale and prevents reputational damage from public frustration or fear.
• Feeling supported and valued: Employees impacted by layoffs feel recognized and cared for, reinforcing a people-first culture and encouraging pride in the organization—even during difficult transitions.
• Receiving tailored support: Outplacement is customized by career level and background, ensuring that each person—from entry-level to executive—receives personalized coaching and tools that match their individual job search needs.
• Preserving reputation and values: Including outplacement in your severance plan shows respect and empathy. Those services will strengthen your company culture and public image, and demonstrate that your values hold firm under pressure.
• Increasing productivity and retention: Employees who see colleagues treated with dignity are more engaged, loyal, and productive. Outplacement can boost morale and help attract future talent aligned with your values.
• Defusing tension and stress: Outplacement relieves pressure on HR and remaining staff by providing expert-led support to impacted employees. This way, you’ll lower workplace anxiety and preserve a calm, focused environment.

If you need help preparing to handle a layoff event carefully, you can click below to download our free Careerminds layoff script. It offers five clear, easy-to-use steps to help guide you through the process with empathy and professionalism.

Here are some quick FAQs with our main takeaways about severance agreement seven-day revocation periods:

A seven-day revocation period gives laid-off employees time to change their minds after signing a severance agreement. This “cooling-off period” ensures that decisions aren’t made under pressure, and that both parties have entered the agreement voluntarily and with clarity.

While the seven-day revocation period is primarily required for employees over 40 under the OWBPA, many companies apply it to all severance agreements to ensure consistency and fairness. This strengthens the legal enforceability of the agreement for every departing employee.

No, the seven-day revocation period cannot be waived. Even if an employee chooses to skip it, the law mandates this protection to ensure fair treatment. This safeguard is a key feature of the employment contract revocation process.

If an employee revokes their agreement within the allotted seven-day time period, the severance deal becomes void. This allows them to reconsider the severance terms without consequence, ensuring full agency, transparency, and legal protection for all involved.

Yes, offering outplacement services supports the employee’s next steps and shows that you care about their future. While separate from severance agreement revocation terms, this also reflects well on your organization and helps protect your employer brand.

Need more help navigating layoffs and severance? We’ve got you covered. Our arsenal of Careerminds articles, templates, and industry-leading outplacement services can help you navigate the delicate process. Click below to contact our experts and see how we can support your organization.