Florida Severance Agreement Requirements: Releases, Taxes, and COBRA

Florida law does not require employers to offer severance, but when they do, the agreement is a private contract that has to meet specific Florida severance agreement requirements to be enforceable. Those requirements come from a mix of state contract law, Florida’s restrictive covenant statute, federal age-discrimination rules, National Labor Relations Board decisions, and tax law. Miss one of them and the piece of the agreement that depends on it can fall apart, sometimes in the employer’s favor, sometimes in yours.

Here is what has to be in the document, and what to look for before you sign.

The Employer Must Give You Something New

Every enforceable severance agreement rests on consideration: the employer has to provide something of value that you weren’t already entitled to receive. This is where a surprising number of agreements fail.

Wages you’ve already earned, accrued vacation pay the company owes under its own policy, and commissions that have already vested are yours whether you sign anything or not. None of them count as consideration. If an employer offers you $15,000 in “severance” but you were already owed $15,000 in earned commissions and accrued bonuses, you’re getting nothing new in exchange for waiving your right to sue, and a court can void that agreement.

Employers usually satisfy the requirement by offering additional weeks of salary, a lump-sum payment, or extended benefits like subsidized health insurance. Before you sign, separate out what the company already owed you from what the severance is actually adding.

The Release of Claims Has to Be Knowing and Voluntary

The heart of most severance agreements is the release, where you agree not to sue in exchange for the benefits. Florida courts will only enforce a release you signed knowingly and voluntarily, and that standard has teeth.

The agreement must be in plain language a typical person can understand. Overly complex legal jargon or ambiguous terms can be grounds for a court to throw out the release. The waiver should specifically identify the types of claims you’re giving up. Claims under the Florida Civil Rights Act, which prohibits employment discrimination based on race, color, religion, sex, pregnancy, national origin, age, disability, or marital status, should be listed by name if the employer wants them covered.¹ A valid agreement should also include a written recommendation that you consult an attorney before signing.

Future Claims Cannot Be Waived

A release only covers claims that exist as of the date you sign. An employer cannot ask you to give up rights tied to events that happen afterward. EEOC guidance is explicit: a valid release covers claims you “have had, now have or may have up to the date of this agreement.”² Language that purports to release future claims is unenforceable to that extent.

Extra Rules If You’re 40 or Older

If you’re 40 or older and the agreement asks you to waive age discrimination claims, the federal Older Workers Benefit Protection Act adds mandatory requirements. These aren’t suggestions. Missing any one of them voids the age-discrimination waiver, even if you signed willingly.

Under 29 U.S.C. § 626(f), the agreement must:³

Be written in language you can actually understand.
Refer specifically to the Age Discrimination in Employment Act by name. A generic release of “all claims” is not enough.
Cover only claims that arose before you signed.
Provide new consideration beyond what you were already owed.
Advise you in writing to consult an attorney.
Give you at least 21 days to consider the agreement (45 days if it’s part of a group layoff or exit incentive program).
Give you at least 7 days after signing to revoke, with the agreement not taking effect until that window closes.

Group Layoff Disclosures

When the waiver is offered during a group layoff, the employer also has to provide written disclosures at the start of the 45-day consideration period. Those disclosures must identify the group of employees considered for the layoff, the eligibility factors and time limits of the program, and the job titles and ages of everyone eligible or selected alongside the ages of those in the same job classification who were not selected.³ The point is to let affected workers assess whether the pattern of selections suggests age-based targeting. Skip the disclosures and the age-discrimination waiver isn’t enforceable.

Non-Competes and Other Restrictive Covenants

Severance packages often include non-compete or non-solicitation clauses. Florida Statute 542.335 governs these. The employer has to show the restriction protects a “legitimate business interest,” which the statute defines to include trade secrets, valuable confidential business information, substantial relationships with specific customers, customer goodwill, and specialized training.⁴

The restriction also has to be reasonable in duration, geographic reach, and the line of business it covers. For former employees, Florida courts presume any restriction of six months or less is reasonable in duration and any restriction over two years is unreasonable. Anything in between is a gray zone where the employer carries the burden of justifying the timeframe.⁴

One feature of the statute catches people off guard. If a court finds a covenant overbroad, it won’t simply throw it out. The statute directs the court to modify the restriction and grant only the relief reasonably necessary to protect the employer’s legitimate interest.⁴ Signing an aggressive non-compete doesn’t mean it’s unenforceable. It means a judge will likely narrow it and you’ll still be bound by some version.

Confidentiality and Non-Disparagement Clauses

Severance agreements routinely bar you from discussing the terms of your separation or saying anything negative about the company. In its 2023 McLaren Macomb decision, the National Labor Relations Board held that offering severance agreements with broad confidentiality and non-disparagement provisions violates the National Labor Relations Act because those clauses tend to chill employees’ Section 7 rights.⁵

Section 7 of the NLRA guarantees employees the right to organize, discuss wages and working conditions with coworkers, cooperate with NLRB investigations, and engage in other collective activity for mutual aid or protection.⁶ A blanket confidentiality clause that bars you from discussing your severance terms, or a non-disparagement clause broad enough to discourage reporting labor violations, interferes with those protections.

The enforcement posture is shifting. The current NLRB General Counsel rescinded the prior enforcement memorandum in early 2025, but Administrative Law Judges have continued applying McLaren Macomb, and until the Board formally overrules it, the decision is binding precedent. Narrowly tailored provisions that protect genuinely proprietary information or bar only defamatory statements carry far less risk than sweeping gag clauses. If your severance contains a broad confidentiality or non-disparagement clause, that’s a reason to push back or consult an attorney before signing.

How Severance Is Taxed

Severance is taxable income. The IRS classifies it as supplemental wages, so your employer withholds federal income tax at a flat 22% rate. If your total supplemental wages for the year exceed $1 million, the amount above that threshold is withheld at 37%.⁷

Severance is also subject to Social Security tax at 6.2% on earnings up to the 2026 wage base of $184,500, and Medicare tax at 1.45% with no cap.⁸ Your employer reports severance on a W-2, not a 1099. The U.S. Supreme Court confirmed in United States v. Quality Stores, Inc. (2014) that severance for involuntary termination is taxable wages subject to FICA. If your former employer tries to issue a 1099 for standard severance, raise it with a tax professional.

Section 409A Timing Rules

Internal Revenue Code Section 409A governs when deferred compensation must be paid to avoid a 20% penalty tax plus interest. Severance can fall outside 409A if it meets one of two exemptions: the short-term deferral exception, which requires full payment by March 15 of the year after termination, or the separation pay exception, which requires full payment by the end of the second calendar year after separation and caps the total at twice your prior-year annual compensation. If your severance fits neither, the payment schedule has to be locked in advance with specific dates and amounts. “Key employees” of publicly traded companies may face an additional six-month payment delay. If your severance is structured as installments running beyond a few months, confirm that 409A compliance is addressed in the agreement.

COBRA Coverage After Separation

Losing your job is a COBRA qualifying event. If you’re terminated for any reason other than gross misconduct, federal law lets you continue your employer-sponsored health coverage for up to 18 months, but you pay the full premium yourself, including the portion the employer used to cover.⁹

Some employers offer to cover part or all of your COBRA premiums for a set period as part of the severance. This is voluntary, and duration and amount vary.⁹ If your offer includes subsidized COBRA, note when the subsidy ends so you can either pick up the full cost or transition to a marketplace plan without a coverage gap.

Effect on Florida Unemployment Benefits

Accepting severance doesn’t permanently disqualify you from Florida’s reemployment assistance benefits, but it delays them. Under Florida Statute 443.101(3)(b), you are disqualified from unemployment for any week you are considered to be receiving severance pay. The state calculates the disqualification period by dividing your total severance by your average weekly wage from that employer, then rounding down to the nearest whole number of weeks.¹⁰

This applies even if severance is paid as a single lump sum before your last day. Twenty thousand dollars in severance against a $1,000 average weekly wage produces a 20-week disqualification from the date of separation. Once that period runs out, you can begin collecting benefits assuming you otherwise qualify. File your claim promptly regardless, since processing takes time and the disqualification clock runs from your separation date whether you’ve filed or not.

1
The Florida Legislature. Florida Code 760.10 – Unlawful Employment Practices
2
U.S. Equal Employment Opportunity Commission. Q&A – Understanding Waivers of Discrimination Claims in Employee Severance Agreements
3
Office of the Law Revision Counsel. 29 USC 626 – Recordkeeping, Investigation, and Enforcement
4
The Florida Legislature. Florida Code 542.335 – Valid Restraints of Trade or Commerce
5
National Labor Relations Board. Board Rules That Employers May Not Offer Severance Agreements Requiring Employees to Waive Their Rights
6
Office of the Law Revision Counsel. 29 USC 157 – Right of Employees as to Organization, Collective Bargaining, Etc.
7
Internal Revenue Service. Employer’s Tax Guide (Publication 15)
8
Social Security Administration. Contribution and Benefit Base
9
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers
10
FloridaJobs.org. R.A.A.C. Order No. 14-02009