The severance agreement for a departing employee 40 years of age or older is subject to special requirements.
The former employer must ensure that the agreement meets those requirements, and the recipient should request help from an attorney in reviewing it.
Why a severance agreement
A severance agreement is a contract between an employer and a departing employee. The contract provides for some form of compensation to the former employee in return for his or her promise to abide by certain post-employment limitations. For example, the employer may wish to ensure that the former employee will not spread confidential information or bring suit against the company on certain grounds.
In a severance contract for a departing employee aged 40 or older, the Equal Employment Opportunity Commission (EEOC) requires language that is not “overly broad or misleading.” In accordance with the Age Discrimination in Employment Act (ADEA), the language must be plain and avoid legal jargon so that the reader can readily understand what rights are being waived. If this kind of severance agreement is not drafted well, it will not stand up in court. The EEOC goes on to state that the terms of the contract must not infringe on the recipient’s right to file a charge of discrimination against the former employer nor to cooperate with such an investigation.
Under the ADEA, the recipient of a severance agreement for an older employee must have 21 days for review and a further 7 days after signing in which to reconsider. The agreement must also contain a reference to the ADEA and a recommendation for the departing employee to seek legal guidance before signing.