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 Severance Pay and Releases of
Claims
Severance pay is
generally defined as pay and benefits an employee receives
when they leave employment at a company. In addition to the
employee's remaining regular pay, it may include some of the
following: An additional payment based on months of service.
Payment for unused vacation time or sick leave.
Severance pay is not required by law. However, some
employers guaranty their employees a certain amount of
severance pay depending on how long they have been employed.
 Many employers attempt to persuade an employee it wishes to
fire or lay off to sign a "release" agreement. A release
agreement is a contract by which an employee gives up his
right to sue the employer for any and all claims the
employee may have - whether known or unknown. This may
include claims for discrimination.
Most employers seek a general release from employees in
connection with voluntary or involuntary severance
payments or
early retirement benefits to limit their exposure to
lawsuits by employees challenging the company's selection
decisions. Older workers are often presented with severance
agreements and claim release forms (releases) by which the
employer intends for the older work to give up what may be a
valid claim for age discrimination in exchange for some
benefit like severance pay (which the law does not require
employers to pay). Under the
California Labor Code Section 206.5,
if an employer already has a policy or
contract with the employee that guaranties some form of
severance pay or benefit, the employer cannot force the
employee to sign a release to obtain the severance since the
employee has already earned it by virtue of her past work
with the employer or by contract.
 Whenever employers seek a release of federal age
discrimination claims, they must comply with the
Older Workers Benefit Protection Act
(OWBPA).
Under the OWBPA,
employers must allow employees over 40 years of age at least
21 days to consider waivers not to sue offered by an
employer in exchange for early retirement benefits. It
is important to note that the OWBPA's requirements apply
only to the release of age discrimination claims under the
ADEA. The release of all other claims, such as state
law claims,
are not affected by compliance with the OWBPA.
For a waiver of an age discrimination claim to comply with
the OWBPA, it must meet the following criteria:
- be in writing and be
understandable;
- specifically refer to ADEA rights
or claims;
- not waive rights or
claims that may arise in the future;
- be in exchange for
valuable consideration;
- advise the individual
in writing to consult an attorney before signing the
waiver; and
- provide the individual
at least 21 days to consider the agreement and at least
7 days to revoke the agreement after signing it.
If an employer requests an ADEA waiver
in connection with an exit incentive program or other
employment termination program, the minimum requirements for
a valid waiver are more extensive.
Please do not hesitate to contact us to discuss these age
severance and releases further. We can be reached toll free
at (877) 876-5744 for a free consultation or by email at
help@FightAgeDiscrimination.com.
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