Severance Packages and the Age Discrimination in Employment Act

Many severance agreements contain “waiver” language that releases or purports to release the employer from age discrimination claims under the Age Discrimination in Employment Act (the “ADEA”).

  • For employees 40 years of age and older and their employers, the validity of that waiver is vital.  For many employers such a waiver is the prime reason that severance is offered.  Conversely, an employee who has unthinkingly signed such a waiver to get an immediate severance payment has lost a valuable potential right if the waiver is later invoked against him.
  • The Equal Employment Opportunity Commission has provided, by regulation, requirements that need to be met for an ADEA waiver to be valid:
  • The waiver must specify that the employee is waiving his right under the ADEA – a blanket waiver of discrimination claims is not sufficient.
  • The waiver language must advise the employee to consult with an attorney; saying simply that the employee has had the opportunity to consult with an attorney before signing is not sufficient.
  • The waiver must provide the employee with 21 days to consider the offer; this  requirement must be stated clearly in the waiver.
  • After the waiver is signed, the employee must be given a 7-day rescission period in which the employee can rescind the agreement; this also must be clearly stated.
  • A waiver cannot purport to waive discrimination claims that arise after signing.
  • The waiver must be supported by consideration (i.e., some sort of financial benefit that the employee would not otherwise be entitled to).
  • Finally, or perhaps first and foremost, the waiver must be written in a clearly understandable manner.  In writing such a waiver, the employer must tailor the language to the average person the waiver is intended to apply to.

One final note, a valid ADEA waiver protects an employer only against a private lawsuit by the affected employee or employees.  Nothing can stop an employee from filing discrimination charges with the EEOC.

— Rod Fluck

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