If your employer decides to terminate your job, you may be given a severance agreement that requires you to waive your right to sue for wrongful termination based on age, race, sex, disability, and other types of discrimination.
But should you sign it? And if you do, how long does it take to get your severance pay?
Consideration Period for Severance Agreements
A severance agreement is a contract or letter that an employer offers an employee when she has been terminated, laid off, or her job has been eliminated. The purpose of a severance agreement is to compensate that terminated employee in exchange for a global release of all potential claims and a promise not to sue the company for anything related to their employment or discharge.* While many employees may feel pressure to sign this severance agreement right away, they actually have time to think about it—this is called the consideration period.
The exact of amount time varies. For instance, a man over 40 in New York may have more time to think about the severance agreement than a 25-year-old in Texas. Of course, how long it takes to sign the agreement will likely delay how long it takes to get the severance pay, but employees should make sure the agreement is truly in their best interest. The easiest way to do this is by having a qualified lawyer review the document.
Employees Under 40
Employers must offer employees under 40 years of age a reasonable consideration period for severance agreements. There is no hard-and-fast rule for a time limit if an employee is under 40 years of age. The time period should be enough time for the employee to review and understand the terms of the agreement, which means the time period can range from one day to one month, or possibly even longer. How long it takes to get the severance pay will depend on your employer and the size of your severance package. Some employers will issue a lump sum shortly after finalizing the agreement; others may offer a series of payments over time.
Employees Over 40
Employees over the age of 40 must be given at least 21 days to review and sign and 7 days to reconsider or revoke the signature. The Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act protect the civil rights of older employees who are subject to discrimination since employers have been known to use severance agreements to terminate older employees. Again, how long it takes to get severance pay will depend on the employer, but employees will have options in the meantime. Employees over 40 in New York, for example, may be eligible for unemployment benefits even if they haven’t received their last severance payment yet.
When more than one employee is being terminated at the same time, the time period to review and sign must be at least 45 days. The additional 7 days to reconsider and revoke the agreement also applies.
The 45-day consideration period for the severance agreement runs from the date of the employer’s final offer, and the 7-day revocation period cannot be changed or waived by either party for any reason. After signing the severance agreement, you can be paid in a taxable lump sum or in smaller sums over time. Ultimately, how long it takes to get severance pay depends on the agreement you strike with your employer.
Advice on Severance Agreements
So, what does this mean for you? If you have been offered a severance agreement, make sure you understand the consideration period and act promptly. If you either want to renegotiate or you have questions about your rights, contact our office.
*While most severance waivers can be enforced in most circumstances, your employer is not able to prevent you from testifying or participating in ongoing investigations conducted by the EEOC or to prevent you from filing charges of discrimination.