Employees over 40 Need to Understand How the Older Workers Benefit Protection Act Affects Severance Agreements

Under the Older Workers Benefit Protection Act ("OWBPA"), employees aged 40 or older must be given a minimum of 21 days to consider a severance agreement before signing it. However, if the severance agreement is offered as part of an exit incentive or other employment termination program involving a group or class of employees, the consideration period must be extended to at least 45 days. Additionally, the agreement must allow the employee a minimum of 7 days to revoke their acceptance after signing, and the agreement does not become effective or enforceable until this revocation period has expired. These requirements ensure that the waiver of rights under the Age Discrimination in Employment Act ("ADEA") is knowing and voluntary, as mandated by the OWBPA. 

Regarding "knowing and voluntary," the Fifth Circuit explained:

The OWBPA amended the Age Discrimination in Employment Act ("ADEA") to enable an employer to enforce a waiver of age discrimination claims. See 29 U.S.C. § 626(f)(1). Section 626(f)(1) provides that an individual may not waive rights under the statute unless the waiver is "knowing and voluntary." To constitute a knowing and voluntary waiver, the release must meet specific statutory requirements such as specifically referring to the ADEA, advising the individual to consult with an attorney, and providing a grace period to consider signing the agreement. See 29 U.S.C. §§ 626(f)(1)(B), (E), (F).

Blakeney v. Lomas Info. Sys., 65 F.3d 482, 484 (5th Cir. 1995). The court further explained that failure to meet the statutory requirements does not create a void contract, but merely a voidable one. However, if the employee keeps the severance payment after learning that the contract is voidable, the employee has ratified the defective release. Ultimately, it is important to have an attorney review any proffered severance agreement as soon as practicable.

If you have been offered a severance agreement by your employer, before signing it please schedule a consultation today. Consultations are completely confidential. Do not rely on this post as legal advice. This post does not create an attorney-client relationship between the firm and the reader. Do not act in reliance on the contents of this post without seeking the advice of counsel.