Layoffs and restructurings across the games industry have become a recurring feature of the business, and each one puts a spotlight on a document most studios only think carefully about when they need it: the severance agreement.

For the studio or publisher offering it, a severance agreement is the primary tool for closing out an employment relationship cleanly and predictably, releasing potential claims, and protecting the company’s confidential information and reputation on the way out. For the departing employee, it is often the first real negotiation they have with a former employer. Understanding what these agreements actually do, and why each piece is there, makes for a better outcome and fewer disputes after the fact.

Severance agreements in the video game and broader tech space tend to follow a familiar structure. Below is a general walkthrough of the core components from the perspective of the company offering one. This is not a substitute for reviewing a specific agreement with counsel, but it should help a studio understand what each provision needs to accomplish.

Severance Pay and Benefits

At the center of every severance agreement is consideration: something of value the company offers in exchange for the employee’s agreement to the terms. Most often this is a lump sum or series of payments tied to the employee’s tenure or role, sometimes supplemented by continued health coverage, accelerated vesting on equity, or outplacement services.

This section matters because the consideration supports everything else in the document. A company is not usually required to offer severance unless it has already committed to do so elsewhere, and the payment is what the employee receives specifically in exchange for the releases and other promises that follow. For that reason, a studio should make sure the agreement distinguishes severance from earned wages already owed, since consideration that merely repackages wages the employee is already entitled to may not support an enforceable release.

Waiver and Release of Claims

This is the core value of the severance agreement for the company. In exchange for severance, the employee releases the company from claims connected to the employment relationship and its termination, covering matters like wrongful termination, discrimination, retaliation, and wage and hour claims under state and federal law.

A well-drafted release is broad but not limitless. Some claims, such as the right to file a charge with the EEOC or a state labor agency, cannot be waived, so a studio should carve them out of the otherwise general release rather than risk overreaching. Other claims must be called out specifically to be waived at all. Getting this balance right is what makes the release both enforceable and genuinely protective, which is the whole point of offering severance in the first place.

Non-Disparagement

Non-disparagement provisions ask one or both sides to refrain from making damaging statements about each other after the relationship ends. For a studio, the value is largely reputational: it limits an unhappy departure from becoming a public account of the company. These clauses tend to run more heavily against the employee, but a company that agrees to a mutual clause should tie its own obligation to specific individuals, such as named officers or HR personnel, rather than promising to control every statement by everyone at the company.

The clause is not about pretending nothing happened. It is a practical tool that lets both sides move on without a public back-and-forth. To keep it enforceable, a studio should carve out truthful testimony required by law, statements made in legal proceedings, and, increasingly, protected activity like discussing wages or reporting unlawful conduct, since several states restrict provisions that would otherwise chill that kind of speech. An overbroad clause is more likely to be struck than a measured one.

Confidentiality

Confidentiality provisions in a severance agreement usually cover two different things, and a studio should keep them separate. The first is confidentiality of the agreement itself, meaning the employee agrees not to disclose the terms of the deal, including the amount of severance, which helps a company avoid setting an informal benchmark for future departures. The second is confidentiality of company information learned during employment, which is often already covered by a separate NDA or proprietary information agreement signed earlier and gets reaffirmed here for good measure.

Confidentiality of the settlement terms is generally enforceable, and most agreements build in reasonable exceptions for immediate family, financial and legal advisors, and disclosures required by law. Confidentiality of business information should track whatever the employee actually agreed to when they joined, and a studio is usually better served reaffirming the existing scope than trying to expand it as part of the exit, which can invite a challenge to the whole provision.

The ADEA and OWBPA: Special Rules for Employees 40 and Over

Federal law adds an extra layer of requirements when the departing employee is 40 or older. The Age Discrimination in Employment Act sets specific conditions for a valid waiver of age discrimination claims. Generally, the company must give the employee 21 days to consider the agreement and a 7-day period to revoke after signing. In a group layoff, the Older Workers Benefit Protection Act extends the consideration period to 45 days and requires the company to provide detailed information about the job titles and ages of those selected and not selected. These are not optional formalities. A studio that skips them can find the age-claim waiver unenforceable even though it paid full severance, which is one of the more common and avoidable mistakes in a layoff.

The Practical Takeaway

It is easy to treat severance agreements purely as risk management, but a well-handled one does more than close out legal exposure. Offered with some measure of respect and clarity, it shapes whether a departing employee signs quickly and moves on or digs in and pushes back. None of that shows up as a line item, but it has a real effect on how cleanly a studio can close out a difficult process.

Many of these documents are negotiated, signed, and forgotten within a few weeks. That may even be the goal. But at the scale of layoffs the games industry has seen in recent years, a studio may need to issue many of these agreements at once, on a short timeline, and small drafting problems get multiplied across every employee who receives the same template.

For a studio drafting or issuing these agreements, the principle is straightforward: know what each provision is actually doing, know where the legal limits are, and do not assume that boilerplate language is the same thing as correct language. Getting the template right before a layoff, rather than fixing it afterward, is where a conversation with counsel tends to pay for itself.