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.
For a free consultation about age discrimination in
the workplace with an experienced employee rights attorney, contact David
Spivak:
For further information on your rights in the work
place, please visit our other websites:
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