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Drafting Separation Agreements: How to “Take Off” with OWBPA and ADEA

Posted in Human Resources (HR) Compliance, Laws and Regulations

For employers, providing employees with a separation agreement may be one of the best ways for a company to minimize their risk of litigation from the termination of that employee.  But an agreement, it is often said, is only worth the paper it is written on, if it meets certain legal requirements. 

Just like pilots review their checklists for takeoffs and landings, it is worth checking your model agreement for each major layoff or termination, to see if it meets with basic laws and regulations.  So, how can employer be sure that their agreements "take off" and get returned safely with a signature from the departed employee?

One key is to memorize the Older Workers Benefit Protection Act (OWBPA); it is part of the federal Age Discrimination in Employment Act (ADEA).  The OWBPA applies to any separation agreement with employees who are over 40 years old.  With reductions in force becoming more common, the OWBPA again becomes important.  Once an employer is familar with the checklist of items to comply with the OWPBA and prepares a "model" agreement, it is worth a legal review to ensure that it will be enforceable later on. 

So what sorts of things does the OWBPA require?

  1. The waiver (in other words, the separation agreement) must be written in plain English so that the employee can understand the agreement;
  2. The waiver must specifically mention that the employee is giving up his or her claims under ADEA;
  3. The waiver cannot waive rights that arise after date release is signed;
  4. The employee must receive consideration of value (typically money) above anything to which employee is already entitled;
  5. The employee must be advised to consult with an attorney;
  6. The employee must have at least 21 days to consider agreement;
  7. The employee must have 7 days to revoke their acceptance of the agreement;
  8. If the termination is part of a reduction in force or voluntary program that affects two or more employees, employee must be given at least 45 days to consider agreement and given a “release attachment” that has a list of those selected for the program (or termination) and those who are not. 
  9. Is this a settlement of existing charge or lawsuit? If so, employee need only be given a “reasonable amount of time” to consider agreement.

Obviously, each element of this could be worth a separate post and employers are advised to seek legal counsel before using a model agreement. In upcoming posts, I’ll discuss some of these elements and other provisions that separation agreements can include.

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