When offering a terminated employee a severance payment, it is prudent to provide some amount of time for the employee to consider whether to accept. After all, the employee is generally giving up important rights (such as the right to sue the company) in exchange for the severance payments. Giving the individual time to consider the offer helps the company prove that any agreement was not forced or coerced, should that become necessary. But how much consideration time should be provided?
The answer is a very lawyerly “that depends.” And, in this case, it depends on the employee’s age.
Under the federal Older Worker’s Benefit Protection Act, Congress sought to protect older workers who were being offered severance packages to leave their jobs. That law requires that older workers (those over age 40) be given at least 21 days to consider severance agreements, and then another 7 days to revoke them. In other words, they can change their minds.
When groups of older workers are terminated for the same reason (e.g., when they are all being laid off), those over age 40 need to be given 45 days to consider their severance packages. A “group” is two or more. These time frames should be used in any situation where severance is offered.
Employees do not need to use their whole 21 or 45 days to consider the agreement, and can sign it sooner (but should not sign before they leave the termination meeting; they should leave taking the document with them). The balance of any consideration period not used is considered waived.
Individuals under age 40 need to be given a “reasonable” amount of time to consider severance agreements—again, so that the agreement’s execution does not appear to be coerced. This applies to those under age 40 whether it is an individual termination or a group lay off. What is “reasonable” depends on the situation, but usually two weeks suffices.
Severance pay should not commence before agreements are signed and returned—and any applicable revocation periods pass.
If you are unsure as to how much time to provide for consideration of a severance package you would like to offer a terminated employee, feel free to contact any of our employment attorneys and we will be happy to help.