Does Your Severance Agreement Comply With Age Requirements?

Posted by Manfred P. MueckeJan 11, 20210 Comments

Severance agreements must meet certain requirements for departing employees aged 40 and over. 

There are additional requirements for older employees terminated as a group. Are the severance agreements for you and your colleagues in compliance? 

Understanding severance for older employees

To be enforceable in court, a severance agreement for a departing employee aged 40 or older must conform to the requirements set forth under the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA). For example, the wording of the agreement must be perfectly clear so as to avoid any misinterpretation. 

Timing concerns

A terminated older individual must have 21 days in which to review the severance agreement and a further seven days in which to revoke his or her signing decision. If the company terminates a group of older employees, the timeframe increases to 45 days. Another stipulation is that the severance agreement must reference the ADEA and contain a recommendation for the departing employees to seek legal counsel before signing. 

Preventing legal action

One of the main reasons for offering an employee a severance agreement is to limit, in some respect,  his or her post-termination behavior in return for compensation. A common motive behind providing such an agreement is to limit the possibility of a lawsuit, especially a class-action suit. That said, employers must be especially mindful of severance agreement contents for departing employees aged 40 or older. The company may face litigation if the agreements for older workers terminated as a group do not comply with the appropriate government requirements.