Mark worked for the same company since the day he left college at 22 years old. He worked there for over 20 years. On a Friday afternoon, Mark’s team manager walked in to tell him the company was downsizing, and Mark’s position was part of that downsizing.

At first, Mark was flummoxed. How could this happen? What did he do wrong? Mark’s manager assured him it was not his fault. Mark was an exemplary employee, but the company was simply changing. The company offered to provide him with good references, a couple weeks to finish up his current projects, and a severance package with several months of pay.

Still shaken by the coming abrupt change after twenty years, Mark still wasn’t sure what to do. His manager handed him a severance agreement and told him to review it with his family.

Mark began reviewing the agreement but he was a bit confused by the provisions concerning a 21 day notice and a 7 day revocation period. What did those things mean? Why were they in the agreement?

Why Were These Rules in the Severance Agreement?

The 21 days to consider the offer and ability to revoke signature within 7 days of signing are required in all severance agreements if:

1. An employee is 40 year or older; and
2. The employer is asking the employee to waive potential age discrimination claims.

Any severance agreement that does not include a general release of all legal claims, is not worth the paper it is written on. This means a waiver of age discrimination claims will assuredly be included in a severance agreement. That is unless the employer is completely without the benefit of legal counsel.

The Law Requiring the Special Rules

The Older Workers Benefit Protection Act (“OWBPA”) added these special requirements concerning waiver of the age discrimination claims. The act was passed by Congress in 1990 and signed by President George H.W. Bush. Age discrimination is outlawed under the Age Discrimination in Employment Act (“ADEA”). The law requires employee waiver of age discrimination claims are “knowing and voluntary.” To be “knowing and voluntary,” waiver in an agreement between an employer and employee must meet these requirements:

1. The agreement is written in a way the employee can understand;
2. The waiver concerns claims under the ADEA;
3. The waiver doesn’t include claims accruing after the employee signs;
4. The waiver included an exchange of consideration (money, payment or something else of value);
5. The agreement informs the employee that he can consult with an attorney before signing;
6. The employee is given at least 21 days to consider the agreement; and
7. The employee is given 7 days to revoke his signature after signing.

These agreements waive claims but they cannot prevent an employee from reporting ADEA violations to the Equal Employment Opportunity Commission or the state level counterpart. In Nevada, our state level counterpart to the EEOC is the Nevada Equal Rights Commission (“NERC”). Though an employee can file a charge with the EEOC or NERC, if the employee signed a waiver of claims, the employee cannot recover under their filed claim.

What is the Purpose of These Rules?

Congress wanted these rules to give employees an opportunity to review severance agreements and fully consider their options. Prior to this law, employers could simply hand an employee a severance agreement and require signature at that moment. If the employee didn’t sign at that moment, the severance proposal would be forever lost. You can see the serious issues with this practice.

Obtaining Advice on Severance Agreements

The only way for an employee to obtain advice on signing of a severance agreement is by retaining a licensed attorney. While most employees will not need the 21 days to evaluate the agreement, it is important to obtain advice early. By obtaining advice early, an employee can fully consider her options.

The original version of this article and additional posts on employment and labor law can be found at the Nevada Labor Law Blog.