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Severance agreements, older employees and OWBP requirements

by | Apr 28, 2020 | Firm News |

If the company you are leaving offers you a severance agreement as a departing employee aged 40 or older, the agreement must meet certain requirements.

For example, severance agreements offered to older employees have to comply with the Older Workers Benefit Protection Plan, or they will not be enforceable in court.

Severance agreements 

Severance agreements are contracts between departing employees and their employers. Unless an employment contract exists, the employer is under no obligation to provide a severance agreement in an “at-will” situation. However, the employer may find a severance agreement desirable; it provides compensation to the departing employee in return for some sort of post-employment control the employer wishes to exert, such as ensuring that the employee will not sue the company.

Severance for 40-and-older employees

When the departing employee is age 40 or older, the severance agreement must contain precise language in line not only with EEOC requirements but also with OWBP requirements. As to language, the agreement must not contain anything the reader will not understand. The agreement must not mislead or exaggerate. The writer must avoid using complex sentences along with legal jargon. The language must be clear; if the agreement is not well-drafted, the court will strike it down.

Timing provisions

Along with the OWBP requirements, the Age Discrimination in Employment Act requires that the older departing employee have 21 days in which to consider the terms of the severance agreement. Following the signing, the former employee must have another seven days during which he or she can revoke the agreement.

Content requirements

If, as a departing employee aged 40 or over, your former employer offers you a severance agreement, keep in mind that in addition to various other requirements, it must contain a reference to the ADEA. Furthermore, the agreement must provide a recommendation for you to seek legal guidance before you sign.