If an employee is terminated or laid off, an employer may offer them a severance package (or separation agreement) in exchange for a waiver of claims.
Severance agreements ask an employee to waive, or release claims they may have had against their employer up until the date of signing the agreement. In exchange the employer agrees to give the employee some sort of consideration, generally a payment, other than compensation that the employee is already entitled to.
There is no federal or Wisconsin law requiring employers to offer a severance agreement. However, the Older Worker Benefit Protection Act requires employers to give an employee who is 40 years old or older at least 21 days to consider a severance agreement. An employee does not need to take all 21 days, meaning the employee can choose to sign the agreement early if they like. Additionally, if material changes are made to the separation agreement, the 21-day period restarts. After an employee signs an agreement, they have seven days to revoke their signature. This revocation period cannot be waived by either party, and a separation agreement cannot go into effect until the seven-day revocation period passes. The seven-day period begins the day after the employee signs the severance agreement.
If an individual over 40 is being laid off as part of a reduction in force or downsizing that effects more than two employees, they must be given 45 days to consider the separation agreement. Additionally, their separation agreement must include a chart specifying any class, unit, or group that was part of the reduction in force, along with the job titles, and ages, or the individuals affected by the reduction in force, and whether they were terminated.
Notably, neither of these protections apply to employees under 40. Therefore, if an employee is under 40 there is no minimum amount of time their employer has to give them to consider a separation agreement. However, if an employee is pressured to sign a severance agreement immediately, an employee can argue that their waiver of claims may not be enforceable because it may not have been made knowingly and voluntarily. That is why employers often elect to give employees, including those under 40, several days to consider a separation agreement. Individuals under 40 who are part of a reduction in force are not entitled to information about other employees who were affected.
If you or someone you know has questions related to a separation agreement, reach out to a Hawks Quindel attorney.