In California, a severance agreement must meet many requirements in order to be enforceable. For example, this kind of contract between an employer and a departing employee cannot include a noncompete agreement.
Furthermore, an employer must comply with special severance agreement requirements that only pertain to employees age 40 and older.
Severance agreement basics
A contract between an employer and an employee who is leaving the company, a severance agreement provides the employee with financial compensation. If no employment contract exists, there is no obligation to provide a severance agreement. However, the employer may offer compensation in return for certain limitations the company wishes to place on the departing employee.
Decision time for employees at age 40
Both the Age Discrimination in Employment Act and the Older Workers Benefit Protection Plan specify that an employee who is 40 or older must have a minimum of 21 days in which to consider signing a severance agreement. Even if the employee signs, he or she could have a change of heart. Therefore, the employer must allow for another seven days during which the employee may revoke the severance agreement.
Clear language required
Severance agreements for those aged 40 and up must contain simple language without complex sentences. The departing employee must be able to understand what rights the employer wants to waive. The agreement must avoid legal jargon.
To be enforceable, it must also contain a reference to the ADEA. The wording must be precise; it cannot mislead or misinform the employee in any way, and it may not exaggerate either the benefits that come with signing the agreement or the limitations the employer wants to put in place. The severance agreement must be offered in writing. A verbal agreement is not enforceable.
As a further requirement, the agreement must recommend that the departing employee seek legal counsel before signing. From the employee’s perspective, the review by an attorney is critical since the separation agreement for employees aged 40 and older must be so carefully worded.