Holiday Layoffs – Knowing Your Severance Rights

The end of the year means holidays and special time with family, but unfortunately it can also means layoffs and terminations.   The shock of losing one’s job during the holidays can create unexpected stress and panic, but workers need to be aware of their rights when deciding whether to accept a severance agreement.

A severance agreement is a contract between a worker and an employer, whereby the employer agrees to provide some type of benefit (usually payment of money), in exchange for the worker signing a release agreeing not to bring any legal claims.   An employer is not legally required to offer a severance, but doing so can be a mutual benefit to both sides if done properly.

In 1990, the Age Discrimination in Employment Act (ADEA) was amended by adding the Older Worker Benefit Protection Act (OWBPA).   Under the OWBPA, minimum requirements were set out for severance agreements involving workers age 40 and above.   Among other things, this law requires that settlement agreements be written in plain language easily understood by the average worker;  specifically refer to rights or claims under the ADEA;  provide the worker some benefit he or she is not already entitled to; advise the worker to consult with an attorney before signing;  allow 21 days to consider the agreement (45 days if a group of employees have been laid off);   and allow a 7 day revocation period whereby a worker can change his or her mind after signing the document.     If all the requirements set out in the OWBPA are not met, the settlement agreement is invalid and the worker can pursue an age discrimination lawsuit and not be required to return the severance payment.

The most common questions workers have are whether these agreements are legal and/or fair.   While the 21 day consideration period is helpful, it is often difficult for workers to know in this short time frame if discrimination or other unlawful factors were involved in their termination or layoff.   If a group of employees were laid off, the OWBPA requires the employer to provide certain information in writing.  Specifically, the employer must disclose the job title and ages of person selected and not selected for layoff.    This information may reveal that persons of a certain group were either given seemingly preferential or un-preferential treatment.    Another consideration in deciding if discrimination may have been a factor is whether the employer had an objective decision-making process.  In other words, did the employer evaluate and rank employees’ based on factors such as seniority, experience, performance and disciplinary history prior to making their decision.   Failing to do so can be evidence of a discriminatory layoff.    Finally, if a worker was subjected to discriminatory acts prior to the layoff, there may be evidence that the layoff was a pretext, or false reason for the termination.

While signing a release will prevent you from pursuing most legal claims against your former employer, a settlement agreement cannot force workers to waive, or give up their right to file unemployment claims, workers comp claims, overtime claims, claims involving certain retirement plans, or claims for events that occur after signing the release (such as a non-selection for a future job opening).    It also cannot prevent a worker from filing a discrimination complaint with the EEOC, although a signed release will be a bar to the filing of a discrimination lawsuit.

A severance can provide some needed financial security in a difficult and uncertain time.   However, the benefits of signing a settlement agreement should be carefully weighed against any potential legal claims a worker may have.   If there are any doubts, a consultation with an experienced employment law attorney is warranted.

“People are difficult to govern because they have too much knowledge.”

–         Lao-Tzu

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John Wenke is an Employment Law Attorney practicing in the area of employment discrimination, wrongful termination, retaliation, and sexual harassment. Mr. Wenke represents employees in Texas and New Mexico, including but not limited to El Paso,  Las Cruces, Alamogordo, Pecos, Marfa, Alpine, Presidio, and Del Rio.