Human Resources News & Insights

EEOC warns about legal holes in severance deals

A flurry of lawsuits over botched severance agreements has prompted the Equal Employment Opportunity Commission to issue a guide that can help keep employers out of trouble.

The document is called “Understanding Waivers of Discrimination Claims in Employee Severance Agreements.” Essentially the document covers waiver of discrimination claim when an employee knowingly and voluntarily consents to the waiver.

In recent court decisions, the deciding factor was only partly about the legal language of the severance agreement. Courts paid special attention to the “knowingly and voluntarily” clause in the law when considering whether an agreement was legally valid.

What they looked at and what the EEOC warns about:

  • Has the severance agreement been written in a clear manner for the employee to understand the agreement based on his or her education and business experience?
  • Has the employer somehow coerced the employee into signing the agreement?
  • Has the employee been given adequate time to consider the agreement?
  • Has the employee consulted with an attorney or been encouraged or discouraged by the employer from doing so?
  • Has the employee been given the opportunity to negotiate the terms of the agreement?

On top of those warning, the EEOC cautions employers from trying to recoup severance pay from employees who file complaints. According to the agency, an employee does not have to return severance pay if the employee takes the money and then files:

  • a charge of discrimination with the EEOC, or
  • a claim in court under he Age Discrimination in Employment Act.
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  • What happens if the separation agreement has a revocation clause and the employee decides he/she wants to revoke within the seven day time period. Will the employee be required to pay back the severance paid?

  • SM

    I’m curious…what kind of time window (if any) do some of you give to terms to sign who are under age 40?