Severance Agreements And Older Workers – A Litigation Pitfall For Employers

legal liability

The EEOC filed a lawsuit against an employer, on behalf of a terminated employee, and alleged language in the severance agreement, referring nondisparagement and a covenant not to sue, interferes with the employee’s rights under Title VII of the Civil Rights Act of 1964 right to file a charge or cooperate with an investigation.

The court dismissed the EEOC’s, stating the employer was able to show it informed the employee on two occasions that the cited provision would not be used to prevent her from exercising her rights under the Age Discrimination in Employment Act (ADEA). Daniel R. Long, Michael S. Arnold “EEOC’s Attempt to Limit Reach of Severance Agreements Hits Roadblock…Again,” (Dec. 16, 2014).

Commentary and Checklist

The ADEA prohibits employers from discriminating against individuals age 40 and older on the basis of age. It covers all aspects of employment including hiring, firing, promotion, layoff, compensation, benefits, job assignments, and any other condition or privilege of employment.

The EEOC received more than 21,000 charges of age discrimination in its fiscal year 2013.

Terminated employees can waive their ADEA rights as part of a severance agreement, as long as the agreement satisfies the provisions of the Older Workers Benefit Protection Act (OWBPA) to make sure the employee waived the rights knowingly and voluntarily.

For compliance with the OWBPA and other reasons, employers should always have legal counsel review or draft a severance agreement.

Here are a few aspects of the OWBPA that an ADEA rights waiver should contain:

  • The waiver must be in writing and be understandable
  • The waiver must specifically refer to ADEA rights or claims.
  • The waiver cannot waive rights or claims that may arise out of future events.
  • The waiver must be given in exchange for valuable consideration; that is, something to which the individual is not already entitled.
  • It should advise the individual in writing to consult an attorney before signing the waiver. 
  • It should provide the individual up to 21 days to consider the agreement, and up to seven days to revoke the waiver after signing it.