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Severance agreement requirements for over-40 employees

On Behalf of | Mar 19, 2019 | Employment Law |

An employment agreement for a senior manager or top executive often includes severance terms. Each severance agreement is unique, and those for employees aged 40 and up have additional requirements you must not ignore, according to the EEOC.

The severance agreement defined

A severance agreement is a contract between a departing employee and his or her employer that states the compensation the employee will receive upon leaving the company. This kind of agreement is not necessary for an “at-will” employee, where resignation or termination can happen at any time. The employer does not have to provide an at-will employee with severance pay. However, the employer may wish to do so, the main reasons being to exercise some measure of post-employment control over the person and to curb his or her participation in any possible future litigation.

Protecting the rights of employees

The Equal Employment Opportunity Commission requires specific language in an employee release agreement, stating that the language should not be “overly broad and misleading.” Otherwise, the court can strike the agreement down as unenforceable. For example, the language should protect the right of a departing employee to cooperate with a forthcoming investigation at the company.

Agreement requirements for an over-40 employee

The severance agreement requirements for an employee aged 40 or older must be followed precisely. The first requirement concerns a timeframe. The Older Workers Benefit Protection Plan and the Discrimination in Employment Act state that the older employee must have 21 days in which to consider a severance agreement. Once the employee signs, he or she must have seven days in which to revoke the agreement. However, the most important aspect of a severance agreement for the over-40 employee is the language, which must be absolutely clear. This means no legal jargon and no complex sentences.

Additional requirements

The severance agreement for an over-40 employee must be in writing, and it must not misinform or mislead in any way. It cannot exaggerate any limitations imposed nor benefits offered. The agreement must also contain a reference to the ADEA and a recommendation that the departing employee contact an attorney for guidance.