Offering Voluntary Severance Packages to Employees Over Age 40 Can Violate Age Discrimination Laws
Many companies try to avoid a mandatory Reduction in Force at all costs. They may attempt to rearrange positions or move employees to other locations. Sometimes, they offer a voluntary severance agreement to anyone who chooses to leave their position during these times.
The voluntary severance agreement allows employees to volunteer to leave a company. As a result, they receive benefits. These benefits include extended salary payments and continued insurance coverage for a contracted time frame. In return, the employee cannot file a lawsuit against the employer for a reduction in force, discrimination, or other employment-related actions.
However, sometimes offering a voluntary severance agreement can cross the line into discrimination. Some employers may offer employees over a certain age the right to partake in a voluntary severance agreement. However, they will not offer this agreement to younger employees. If the severance targets older employees, it may be discriminatory.
What Is a Severance Agreement?
The words “severance agreement” or “severance package” are often heard in today’s business environment. These agreements offer employees an opportunity to leave a job with benefits for a period of time.
Severance agreements are legal contracts terminating employment between an individual and a company. The document lays out a package (severance package). This package provides employees with a salary and benefits for a specified period. In exchange, employees waive their right to sue for wrongful termination.
Severance agreements can be issued for voluntary departures. These agreements help avoid a mandatory reduction in force by allowing employees to quit their job with extended pay and health, life, and disability insurance benefits. They also extend goodwill to the employees as a sign of loyalty.
Why Are Voluntary Separation Agreements Helpful to Employers and Employees?
Sometimes business slows to the point of no return. The company must make a tough decision: either lay off a slew of employees or close business altogether.
Instead, an employer may offer employees the opportunity to resign voluntarily. In exchange, they will offer a severance package. The package will allow these employees to receive their salary for a specified period. They will also receive health benefits and other benefits options during this period.
As with any severance agreement, the employee will waive any right to sue for wrongful termination or retaliation.
Offering a voluntary severance agreement will provide an employer with guidance. It provides employers the opportunity to keep employees that want to work. At the same time, it helps employers allow those who want to leave that opportunity.
It also eliminates the need for an employer to institute a Reduction in Force (RIF) throughout the company. A RIF comes with its own set of challenges. Companies must comply with the details of the WARN Act by giving advance notice to employees regarding the mass layoff.
As a result, they must provide at least 60 days’ notice to employees that a RIF will occur. Such notice, while helpful to employees, can spark panic for many.
A voluntary separation agreement option can eliminate this problem. It allows employees willing to work the opportunity to do so.
How Can a Severance Agreement Lead to Age Discrimination in the Workplace?
While the intent of a voluntary severance agreement may be wonderful, it can sometimes violate the law. Some employers look for a way to weed out unqualified employees from accepting the severance agreement. Other times they try to target employees they think will be interested in the benefits of a severance package.
Companies could try insisting only employees who have worked with the firm for 5 to 10 years or longer can apply. Instead, they try to target older employees who they think would be looking to retire soon. Therefore, they may institute restrictions relating to age. They may extend the offer of the plan to anyone over age 50.
Therefore, employees over age 50 must determine if they want to work still. They must determine if they think they can find another job before their severance runs out.
Targeting employees over 50 is a form of age discrimination. It puts these employees at a disadvantage by forcing them to make a tough decision. Their younger coworkers are not forced to make this decision.
What Laws Protect Employees When Dealing with Age Discrimination Due to Voluntary Severance Agreements?
Federal and state laws protect employees from any form of age discrimination. They even protect employees from age discrimination resulting in severance agreement offers.
The Age Discrimination in Employment Act (ADEA) is the federal law prohibiting any negative employment actions based on age (over 40). Offering the severance agreement to employees only over the age of 40 violates the ADEA. The law applies to employers with 20 or more employees.
The Older Workers Benefit Protection Act (OWBPA) also protects employees over 40 from losing their benefits due to age.
Each state has its own law as well. Pennsylvania, New York, Florida, and California laws apply to employees over age 40. However, the New Jersey law applies to employees between the ages of 18 and 70.
Most employees offered voluntary severance agreements will not be replaced with younger candidates as a result. However, the courts have determined that offering severance packages to employees based on age only puts them in a tough position to make difficult decisions. This decision is not forced upon younger employees. Therefore, it is discriminatory.
Can Employers Choose to Target People Over Age 40 for a Large Reduction in Force with or without Severance Agreements?
Any time a group of employees is targeted for a reduction in force based on age, the employer violates the law. Whether a severance agreement is offered is not the deciding factor. Employers cannot target any employees based on age for any negative employment action.
A reduction in force is considered a negative employment action. Employers may not target any protected class for any layoffs or RIFs.
Can an Employee Sue an Employer After Signing a Severance Agreement?
When an employee signs a severance agreement, he is signing away his right to sue. The main goal for an employer to offer a severance agreement is to avoid a lawsuit. Therefore, it is highly unlikely an employee can sue an employer if they sign a severance agreement.
However, before throwing in the towel, discuss your case with a qualified employment lawyer. An employment lawyer can review your severance agreement and your situation and advise you on the rights.
How Can Employees Protect Their Rights When Signing a Severance Agreement?
The best thing you can do to protect your rights is by asking an attorney to review your severance agreement before you sign. An attorney can help you determine if anything does not help you or is detrimental to you.
You should also inform the attorney if there are any issues leading to you receiving a severance agreement. For instance, an employer should not terminate an employee because of his protected class status. If these actions occur, discuss them with an attorney before signing any severance agreement.
The same rule applies if you are offered a voluntary severance agreement due to age, race, gender, or any other protected class status by a company.
Ask for Guidance Before Sighing Any Voluntary Severance Agreement.
Never agree to a severance package before receiving legal guidance. Employers offer severance agreements to help protect themselves from litigation. Signing it may affect your rights against employment discrimination and sexual harassment.
The experienced employment attorneys at the Derek Smith Law Group can review your severance package and provide any guidance you may need. If you think your employer offered the severance package in violation of the law, our team of discrimination attorneys can help you seek justice. Call 800.807.2209 for a free consultation today!
