Can a company take back severance pay?

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Most employers provide severance pay only to employees who have lost their job through no fault of their own – such as a layoff or reduction in force. Severance pay varies from employer to employer and may be pursuant to a written policy or simply discretionary. In some workplaces, employees may become eligible for severance when they retire.

Repayment upon a return to work may with the same employer depends on the terms of the severance package. Some employers might let the rehired employee keep the amount he/she has been paid if the rehiring is at a later date. Some employers might expect repayment. When enforcement of a release of employment contract claims is sought, however, traditional contract principles will be applied. Courts will look at the validity of waivers and sophistication of parties among other factors to determine whether employees entered the agreements willingly and voluntarily, and breach.

For employees over 40, EEOC regulations state that an employer cannot avoid its duties under an ADEA waiver even if you challenge it.  In short, the company cannot cut off severance payments or demand repayment of benefits because an employee filed suit challenging the validity of the waiver under the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act protects.

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