Severance agreements must comply with certain government requirements.
For departing employees 40 years of age or older, severance agreements must conform to the rules established under the Age Discrimination in Employment Act, among others.
EEOC language rules
A severance agreement compensates a departing employee in return for adhering to certain limitations imposed by his or her former employer. The main reason for a company to offer this kind of agreement is to ensure there will be no breach of company confidentiality or to avoid potential litigation. For a severance agreement to be enforceable, the EEOC requires specific language that cannot be “overly broad and misleading.” A court will strike down an agreement that is not well drafted.
Under the Age Discrimination in Employment Act, severance agreements for departing employees aged 40 or older must adhere to strict rules. In these documents, the language must be crystal clear and easy to understand. The writer must avoid using confusing legal terminology and complex sentences. The content must also contain a reference to the ADEA and a recommendation for the departing employee to seek legal guidance before signing the agreement.
Other federal rules
The severance agreement for older departing employees must also comply with the requirements of the Older Workers Benefit Protection Plan. The OWBP specifies that the employee be given a minimum of 21 days in which to consider the terms. Once signed, the employee must also have a seven-day window during which he or she can revoke the agreement. If the departing employee is a member of a terminated group of people aged 40 and over, the time window extends to 45 days.