Most separation agreements say that in exchange for receiving severance pay or some other benefit, the departing employee will agree not to sue the employer. The employee is not allowed to bring a lawsuit claiming the employee was fired because of his or her race, gender, sexual orientation, age, etc.
As I recently discussed on our podcast, there has been an uptick in lawsuits filed under the Age Discrimination in Employment Act (ADEA), and in order for an employer to protect itself from a lawsuit brought under that Act, it must comply with the Older Workers’ Benefit Protection Act (29 U.S.C. § 626).
The Older Workers’ Benefit Protection Act is the federal law that requires waivers of federal age discrimination claims (i.e. lawsuits brought under the ADEA) to be “knowing and voluntary.” For the waiver to be “knowing and voluntary,” the employer must tell employees who are 40 and older that:
- They have 21 days to consider the agreement (or 45 days in the case of a “group termination”),
- They have the right to consult with an attorney,
- They are waiving claims under the ADEA;
- That they are not waiving any ADEA claims that arise after they sign the agreement; and
- They have seven days after they sign the agreement to revoke their signature.
- What the “decisional unit” was (i.e. who made the decision to decide who to layoff); and
- The “eligibility criteria” for a separation package, including the reason for the job eliminations (for example, seniority, performance rankings, etc.), and any time limits that apply.
Furthermore, the employer must list the job titles and ages of the group who is being laid off, and the job titles and ages of the all the individuals in the group who were not laid off.
Most employers and many HR professionals have probably never even heard of the Older Workers’ Benefit Protection Act, which is why they should consult with an attorney prior to offering separation agreements. There are other somewhat obscure laws like this that affect separation agreements, and it is worth investing a little bit of money in having an attorney review your separation agreement to avoid being hit with a lawsuit down the road.