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.
A severance agreement is a contract or letter that an employer offers an employee when an employee is being terminated, laid off, or when her job is being 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.* In short, the employee is promising to hold his/her company harmless from any legal claims arising from her job termination or while she was employed. The employee must for something of value, usually additional compensation.
Severance agreements are meant to protect the interests of both parties, the employer and the employee, and thus the employee must be given a reasonable amount of time to decide if the terms of the agreement are acceptable. The time given to accept and sign the agreement depends on the terminated employee’s age and whether other employees are being laid off at the same time.
Employees under 40: Employers must give employees under 40 years of age a reasonable amount of time. 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.
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 protects the civil rights of older employees who are subject to discrimination – since employers have been known to use severance agreements to terminate older employees.
Multiple terminations: 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 21-day consideration period 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.
So, what does this mean for you? If you have been offered a severance agreement, make sure you understand the agreement and check for deadlines and act promptly. If you either want to renegotiate it 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 prevent you from filing charges of discrimination.