Harjeen Zibari
Dallas Employment Trail Lawyer Harjeen Zibari

After signing a severance agreement, employees are understandably eager to be paid the funds they are owed. That’s why many employees are often frustrated to hear that they will not be paid immediately signing a severance. For workers over 40, there’s a very specific legal reason for this.

The Older Workers Benefit Protection Act (OWBPA) and the Age Discrimination in Employment Act (ADEA) are two significant pieces of legislation in the United States aimed at protecting older workers from discrimination in the workplace. When it comes to severance agreements, both laws have specific requirements that employers must adhere to that mean a delay in payments:

OWBPA Requirements:

The OWBPA applies specifically to waivers of age discrimination claims in severance agreements.

When thinking of the OWBPA, it’s important to consider two magic numbers: 21 and 7. Employees over the age of 40 must be given at least 21 days to consider the agreement. These 21 days start ticking from the receipt of the original agreement and does not reset with every edit. However, you do have the option to sign before those 21 days are over.

The OWBPA also requires that the employee over 40 have an additional seven days to revoke their acceptance after signing. These seven days must lapse and cannot be waived. This means that the agreement is not effective until eight days after signing. So, if the severance says that the company has 20 days after the effective date to pay you, that means that they have 28 days from the day of signing because those seven days must first lapse to give you the option to revoke before going into effect. Still confusing? Let’s use an example.

Sally is 46 years old. Sally is presented with a severance from her former employer on January 1. The agreement says that Sally has 21 days to consider the agreement, 7 days to revoke, and that the severance will be paid 20 days from the effective date. Sally signs on January 3. The agreement becomes effective on January 11, eight days after signing. The company then has until January 31 to pay Sally. If they fail to pay her by then, she will be able to sue them for breach of contract.

Also to be valid under the OWBPA, the agreement must be written in a manner that is understandable to the average employee. Additionally, it must provide consideration (usually in the form of additional benefits or monetary compensation) beyond what the employee is already entitled to receive. At the federal level and in Texas, a very pro-employer state, employers are not legally required to give terminated employees a severance. What the employee may already be legally required to receive are unpaid wages or vested benefits.

ADEA Requirements

That brings us to the ADEA. The ADEA prohibits age discrimination against employees who are 40 years of age or older. Under the ADEA, waivers of age discrimination claims in severance agreements must comply with the requirements outlined in the OWBPA, as discussed above.

Additionally, the ADEA requires that the individual knowingly and voluntarily waives their rights to sue for age discrimination. Courts should scrutinize ADEA waivers closely to ensure that they are not overly broad and that employees understand what rights they are giving up.

Employers who fail to meet these requirements risk having the waiver declared unenforceable, meaning that the person may still sue them for age discrimination. So, you’ll often see clauses in these severance agreements affirmatively agreeing that agreement complies with the ADEA and OWBPA. But it still might not! That’s why it’s crucial to consult with an attorney before signing a severance, especially if you are over the age of 40.

Do you feel you’ve been subjected to age discrimination at your job in Texas? Contact me today to schedule a consultation to discuss your potential claim, or a document review to discuss a severance you have been offered.