Termination of employment is just another part of business. Harsh as it may sound, it’s sometimes necessary for employers to lay off employees in order for the business to move forward.
Thankfully, most employers and their HR departments offer generous severance packages to their outgoing employees. However, what some employers might not be aware of is that severance agreements differ for employees over 40. In order for termination of employment to be valid for employees over 40, the employee must accept and sign an age discrimination waiver.
If you’re using a one-size-fits-all template for all your severance agreements – you’re doing it wrong. There are certain things you should NOT do in severance agreements for employees over 40.
Want to quickly improve your severance agreement to make sure it's up to the job?
To help guide you through this process, we’ve prepaed a list of all the dos and don’ts when drafting an age discrimination waiver and severance agreement for employees over 40. But first things first:
What Makes Severance Agreements for Employees Over 40 so Special?
Employees over the age of 40 fall under a class of employees who are protected by a special age discrimination law known as the Older Workers Benefit Protection Act (OWBPA), which is a part of the Age Discrimination in Employment Act (ADEA).
The OWBPA serves to protect employees over 40 from discrimination in the workplace, including unfair dismissal. The OWBPA protects fragile employees by setting strict termination of employment guidelines that employers must follow. As long as employers follow these criteria in their severance agreements, they will be released from any age discrimination claims and litigation risks.
Consequently, employers are obligated to draft a version of a severance agreement that meets the standards set by the OWBPA. The OWBPA is used in the following two instances:
- Involuntary departure – when the termination of employment is against the employee’s will, usually due to reductions in force (RIF).
- Voluntary departure – when the employee leaves employment on their own accord for reasons such as early retirement or exit incentive plans.
Only once the terms of the severance package matches the standards set by the OWBPA will the termination of employment be valid. In regards to the validity of the separation agreement, there are certain things that employers should not do when negotiating severance agreements with outgoing employees.
Severance Agreements Over 40
Employees Over 40 are covered by the Older Workers Benefit Protection Act. When creating a severance agreement for someone over the age of 40, a company must comply with the laws created to protect this class.
Here are the main things you should avoid in your severance agreements for employees over 40:
Don’t Mislead the Employee
When negotiating a severance agreement, make sure the age discrimination waiver is written in an easy-to-understand manner. The severance agreement should be straightforward and easy to understand without using any obscure or advanced legal terminology.
Employees should be able to comprehend the reason for their termination of employment as well as their rights entitled by the Age Discrimination in Employment Act.
If you decide to mislead the employee for the purpose of them accepting a severance agreement, then you can and most probably will be held legally accountable So be wary of how you draft your severance agreement and consult a professional if you have any uncertainties.
Don’t Avoid Referencing the ADEA
All severance agreements for employees over 40 must specifically refer to the Age Discrimination in Employment Act rights.
This means directly citing the ADEA to the employee.
Failure to reference the ADEA to employees may result in a lawsuit. Therefore, you shouldn’t suppress any key information from the ADEA and present a completely transparent severance package to employees.
Don’t Use Technical Jargon
All sentences inside the severance agreement must be written in plain language, void of any technical jargon. If the employee cannot understand the terms of the severance agreement they can refuse to sign it.
This can also be construed as a way to mislead the employee. You want to use the simplest language you can to make sure that the employee truly agrees with the agreement, making sure that you are in the legal right.
Don’t Pressure the Employee Into Signing
In many cases employees are pressured into signing the severance agreement without a proper notice period.
Under the protection of the ADEA, employees have a time period of at least 21 days to consider whether or not they should accept the severance package and at least 7 more days to revoke the agreement. It’s important that the employee signs the severance agreement without any pressure from the employer or third party influences.
Don’t Expect Immediate Feedback
You can’t expect the employee to sign and return the severance agreement immediately. Given that the employee has a 21-day consideration period to look over the terms of the severance package, you shouldn’t expect to receive a signature immediately.
Nevertheless, the employee can accept and sign the termination of employment agreement before the end of this time frame if they want to but under no external pressure whatsoever.
Don’t Forget to Suggest an Attorney
Under the Age Discrimination in Employment Act employees have a right to legal advice when negotiating a severance agreement.
As a result, employers are legally obligated to tell employees about their rights to an attorney. Employers must advise, caution, and recommend that employees consult an attorney before signing the age discrimination waiver. This ensures that the person is signing something they truly understand.
Don’t Exaggerate Severance Package Benefits
You should leave out all the fluff and exaggerations when presenting termination of employment agreements to employees.
This means you shouldn’t exaggerate the severance package benefits for the purpose of obtaining an age discrimination waiver.
What Happens When Two or More Employees Are Laid Off?
In a situation where there is a group termination of employment, there is a slight increase in the level of protection. While individuals have a 21-day consideration period, groups have an extended 45 days to take in all the information.
On top of this, the employer must individually provide employees with the following information:
- The group of employees who are covered by the severance agreement
- The ages of all individuals who are in the same job classification and eligible to receive the severance package
- The ages of all individuals who are in the same job classification and are not eligible to receive the severance package
- Factors affecting the eligibility for a severance agreement
- Time limits affecting the eligibility severance agreement
This information is necessary because it reveals how the employer goes about the termination process. Consequently, it will help employees make an educated decision about whether or not they should sign the age discrimination waiver.
What SHOULD You do in Your Severance Agreements With Employees Over 40?
What you should do is pay attention to all the points highlighted in the Age Discrimination in Employment Act and prepare a valid severance agreement that is tailored to your employee’s circumstances.
Keep in mind that your severance agreement with employees over 40 is not something that you should improvise. It takes time and effort to put a good severance package together and consultation with an experienced HR firm is advisable.