If your employer terminates you, or if you’re settling a lawsuit with your employer, then your employer will present you with a severance or settlement agreement. Often, these agreements will contain provisions that say you have 21 days to consider the offer and you can revoke your signature within 7 days of signing.
These provisions are required if you’re age 40 or over, and if the employer is asking you to waive age discrimination claims. Almost any severance or settlement agreement will include a general release of all legal claims, so age discrimination will almost always be included.
In 1990, Congress passed the Older Workers Benefit Protection Act (“OWBPA”), which added this requirement to the Age Discrimination in Employment Act (“ADEA”). The OWBPA actually has seven requirements that must be satisfied to show that a waiver of age discrimination claims is “knowing and voluntary.” Here they are:
- The agreement is written in a way “calculated to be understood” by the employee;
- The waiver refers to rights or claims arising under the ADEA;
- The waiver doesn’t include rights or claims that might arise after signing it;
- The waiver is signed in exchange for something of value (“consideration”), which is more than what the employee is already entitled to;
- The agreement advises the employee to consult with an attorney before signing the waiver;
- The agreement gives the employee at least 21 days to consider the agreement (or 45 days if it involves a layoff of a group of employees); and
- The agreement allows the employee 7 days to revoke the agreement after signing.
Note that because you have 7 days to revoke the agreement, it doesn’t become effective until those 7 days expire. Also, an agreement cannot prevent you from reporting the employer’s conduct to the EEOC. In other words, you can always file a complaint with the EEOC or NERC; however, if you sign a waiver of claims you won’t be able to recover any damages if the EEOC takes action to enforce the law against the employer.
The purpose of these requirements is to give employees an opportunity to make an informed choice about whether to sign a waiver of legal claims. In most cases, the employee won’t need the full 21 days to consider the agreement and won’t use the 7-day revocation period, but those protections are in place if needed.