Well, for employers who offer severance pay in exchange for an exemption agreement, here are some pitfalls to avoid. Conventional wisdom suggests that if the employer offers severance pay, it should receive in return a promise not to sue. (The benefits of a liberation agreement may also include other commitments, such as. B an agreement to collaborate in the future or to refrain from competition or advertising to customers and employees.) If an employer does not receive this promise not to sue and is then sued, they tend to regret the decision to effectively fund the former employee`s lawsuit with the severance pay provided “free of charge and clearly.” Termination and compensation agreements provide employers with a valuable way to avoid costly litigation if agreements are well formulated. In fact, a full discussion of the many state and federal laws that govern the applicability of releases, which can vary greatly from state to state, is well outside the scope of this section. Therefore, over time, employers are well advised to continue to consult with employment and employment counsellors to identify significant legislative changes and avoid outdated standard contracts when using termination and dismissal agreements. The employer must inform the employee that he or she has a certain period of time to decide whether or not to accept severance pay and sign the exemption. For example, it`s 21 days in Michigan, but varies by state. After signing the statement, the employee has an additional seven days in Michigan to reverse his decision. .