Severance agreements for employees age 40 and older

What to include in an age waiver

A severance agreement often provides additional compensation in exchange for a release of employment claims. For most claims, the release depends on general contract principles and on whether the employee signed knowingly and voluntarily. For employees age 40 or older, releasing claims under the Age Discrimination in Employment Act (ADEA) requires the additional steps established by the OWBPA in 1990.

These requirements give employees the information and time to evaluate the agreement. The Supreme Court has held that an age waiver is enforceable only when the applicable OWBPA requirements are satisfied.

Before sending an agreement to an employee age 40 or older, confirm each requirement:

1. Clear language. Use wording the employee, or the average employee eligible for the offer, can understand.
2. Name the ADEA. Specifically identify rights or claims under the Age Discrimination in Employment Act.
3. Limit the waiver to existing claims. The worker can only waive claims that exist as of the signing date. The release cannot cover claims that arise afterward.
4. Provide additional consideration. The employee must receive something of value beyond what is already owed, including earned wages, owed vacation, and vested pension benefits. Severance must be additional to those amounts.
5. Attorney consultation. Advise the employee in writing to consult an attorney before signing.
6. Time to consider. Allow at least 21 days for an individual agreement or 45 days for a qualifying group program.
7. Time to revoke. Allow at least 7 days after signing. The agreement becomes effective and enforceable after that period expires.

How the consideration and revocation periods work

An age waiver has two separate periods to track: consideration before signing and revocation afterward. The consideration period depends on whether the agreement is individual or part of a qualifying group program.

Individual agreements: 21 days. Qualifying group programs: 45 days.

An employee offered an individual severance agreement must receive at least 21 days to consider it. For a qualifying exit incentive or termination program offered to a group or class of employees, the consideration period is at least 45 days. Start the consideration period when the employer makes its final offer. Material changes restart that period unless the parties agree otherwise.

Employees may voluntarily sign before the consideration period ends. Give employees the full consideration period and keep the offer terms consistent. An early signature starts the 7-day revocation period and may allow earlier payment processing.

The 7-day revocation period

After signing, the employee receives at least 7 days to revoke the agreement. The full period applies even after an early signature. The agreement becomes effective and enforceable after the revocation period expires.

For example, an employer provides a final individual severance offer on Monday, 1 June 2026. The employee receives at least 21 days to consider the agreement, through Monday, 22 June. If the employee signs on 22 June, the 7-day revocation period runs through 29 June. The agreement becomes effective on Tuesday, 30 June, the eighth day after signing. Employers commonly schedule severance payment after the agreement becomes effective. For a qualifying group program, allow at least 45 days and provide the required written disclosures.

What group severance disclosures include

A qualifying group exit incentive or termination program requires at least 45 days for consideration, along with written disclosures provided at the beginning of that period. Under EEOC regulations, a program can involve as few as two employees receiving additional consideration for a waiver as part of the same exit incentive or termination program.

Start by identifying the decisional unit: the group of employees the employer considered for selection. Depending on the circumstances, this may be a department, division, job category, or facility. Provide these three sets of information in writing, using language the average eligible worker can understand:

Selection group Employees considered for selection

Identify the class, unit, or group covered by the program, eligibility factors, and applicable time limits.

Employees selected Job titles and individual ages

List job titles and ages by individual year for employees eligible or selected for the program.

Employees not selected Ages listed by individual year

List ages by individual year for employees in the same job classifications or organizational unit who were not selected.

List ages by individual year, such as 50, 51, and 52. The disclosure must cover the entire decisional unit, including employees who were selected and those who were retained. This information helps employees see how age relates to the selection decisions. When a layoff happens in stages, the disclosures are cumulative. Later groups receive information covering everyone in the decisional unit at the start of the program and everyone selected for termination through that stage.

Before sending the disclosures, verify that the roster covers the full decisional unit, including selected and retained employees. The information lets employees assess how age relates to the selection decisions before signing an age waiver.

What employees can still do after signing

Employees retain the right to participate in EEOC proceedings and challenge the validity of an age waiver after signing.

Employees may still file an EEOC charge, provide information, testify, or participate in an agency investigation or proceeding. Those rights remain available after signing, and a provision that tries to waive them is invalid. A valid release may limit individual relief for released claims, subject to applicable law.

In Oubre v. Entergy Operations, the Supreme Court held that a release failing to meet OWBPA requirements did not bar an ADEA claim. An employee may challenge the validity of an age waiver while retaining the severance payment. The waiver cannot require repayment or impose a penalty as a condition of challenging its validity.

Settlements of existing EEOC age discrimination charges or lawsuits follow different timing requirements. The core written waiver requirements still apply, but a reasonable consideration period replaces the standard 21-day or 45-day consideration period and 7-day revocation period. Ask employment counsel to review agreements settling existing claims.

Five checks before sending the agreement

• Name the ADEA. Identify the Age Discrimination in Employment Act in the release.
• Determine whether group program requirements apply. A waiver offered for extra pay to two or more employees in the same exit incentive or reduction is a group program. Use the 45-day period and provide the required disclosures.
• Allow the full revocation period. Give employees at least 7 days after signing.
• Set the effective date. The agreement takes effect after the revocation period expires.
• Review group age disclosures. List ages by individual year and include selected and retained employees from the full decisional unit.