How Long Do You Have Before You Must Decide to Sign or Decline a Severance Agreement Offer?

Severance Agreement
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So, your employer has offered you a severance agreement. That is good news! Or, if not exactly good news, it is at least a silver lining to a bad situation. A severance agreement offer means that your former employer is willing to ease your period of unemployment while you search for a new position.

A crucial question when deciding whether to accept the agreement, reject the agreement, or attempt to negotiate the agreement is, “How long do I have to decide what to do?” (See our post on severance agreement options for more information on how to actually make your decision.) Most companies will tell you that you must answer within a set period of time or they will withdraw the offer. This time period could range from a single day to over a month, but there are laws governing the minimum amount of time your employer must give you. This blog post will review the rules that your employer should be following when it assigns you that deadline.

The Older Workers Benefit Protection Act for Employees Over 40

If you are over 40 years old when you are extended a settlement offer, the rules are very straightforward. You have rights under the Older Workers Benefit Protection Act (OWBPA), which Congress passed in 1990. Under this law, any terminated employee over 40 years of age who is offered a severance agreement must be given at least 21 days to review that offer.

If an over-40 employee is terminated in connection with a larger group or class of terminations (think a reduction in force, often called a RIF, or the elimination of an entire branch or division of a company), then that employee has 45 days to consider a severance agreement offer.

Additionally, if an employee over 40 decides to accept an agreement and signs or otherwise agrees to it, the OWBPA still gives the employee seven days after agreeing to the severance agreement in which the employee can revoke that decision and be released from its terms.

The goal of this law is to protect the rights of older employees, preventing employers from using the attractive lure of a severance agreement to bully terminated employees into signing away their rights. Unfortunately, Congress has passed no such law to protect terminated employees under the age of 40.

Employees Under 40 Have Only Very Limited Protection

Terminated employees under 40 who have been offered settlement agreements are protected only by the scant safeties guaranteed by the courts. Unfortunately, when it comes to how much time those employees have to consider severance agreement offers, the court gives very little safe harbor. When a court considers the validity of a severance offer, it will assess whether the employee was given sufficient time to thoroughly review and understand the offer.

The court will take into consideration the knowledge and legal sophistication of the former employee: what the court finds to be sufficient time for a terminated contract lawyer to review an agreement will obviously be less than what a fry cook needs. In one example, when considering the validity of a high-level executive’s severance agreement, a federal court found that the terminated employee needed as little as one day to consider the offer. For a low-level manager in a cigarette manufacturing plant, a court decided that the five days allotted to the employee to consider the severance offer was sufficient. Unfortunately, as long as your employer gave you a few days, or in some cases even a single day, to consider the severance offer, it is likely operating within the law as it exists for employees under 40 years old.

Summing It Up

When deciding whether a severance agreement is binding on a former employee, the courts have been fairly unforgiving in assessing how much time an employer must give an employee to consider his or her severance offer.

Remember, if you are over 40, your employer must allow you:

  • at least 21 days to review an offer if you were terminated individually, or
  • at least 45 days to review an offer if you were terminated as part of a larger layoff.

Either way, you have seven days to revoke your agreement to the settlement offer even after you have signed it.

If you’re under 40, the rules are much less helpful. The amount of time you are granted to review an offer:

  • depends on your level of knowledge and legal sophistication and
  • as little as one day—and likely never more than five days—is considered sufficient.

So, what does this mean for you? If you have been offered a severance agreement and you either want to renegotiate it or you have questions about your rights, you should contact a lawyer as soon as possible to discuss your options. Time is not on your side. You need the best advice you can get before you decide to accept, reject, or renegotiate the offered agreement.

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