Special requirements guide severance agreements for those over 40

Special requirements guide severance agreements for those over 40

| May 26, 2021 | Firm News |

A termination can be an emotionally charged event for any employee. However, a severance agreement can make the parting easier for all concerned.

If the departing employee is 40 or older, the severance agreement must contain precise wording and adhere to special requirements in order to be enforceable.

About the severance agreement

Under normal circumstances, an employer is not obligated to provide severance pay to an employee the company terminates. Nevertheless, the employer may wish to provide some kind of compensation so as to control post-employment conduct to some extent; for example, to limit the former employee’s ability to share confidential information or to prevent him or her from taking legal action against the company.

The agreement for older employees

The Equal Employment Opportunity Commission requires specific language in a severance agreement for departing employees aged 40 and older. The wording must not be “overly broad and misleading.” The court will strike down any such agreement that restricts the right of the employee to file a charge of discrimination. The agreement must also adhere to timing provisions set forth in the Age Discrimination in Employment Act (ADEA) as well as the Older Workers Benefit Protection Plan (OWBP). The older employee must have a minimum of 21 days in which to consider signing a severance agreement.

Careful wording is essential

The agreement must contain clear language. The writer must avoid using complex sentences and legal jargon. In order to be enforceable, the document must include a reference to the ADEA and a recommendation for the departing employee to seek consultation with an attorney before signing. The employer could face liability if the agreement for the 40-or-older departing employee is not drafted properly.