Negotiating separation agreements for employees often feels like you are negotiating through a mine field.
Deciding whether or not to present an employee with a separation agreement is a difficult decision sometimes. You don’t want it to look like an admission of guilt (most separation agreements state, “This is not an admission of any wrongdoing on behalf of the company”).
A separation agreement can be an effort to reduce liability for your company.
There are a number of considerations when you’re looking at doing a separation agreement. You need to look at:
- Your company’s policies
- Your past practices
- The possibility of setting a precedent
- The different legal protections based on age
With respect to obtaining a valid and enforceable release of an age claim, you must become familiar with the guidelines that are related to the Age Discrimination in Employment Act of 1967(ADEA), which was amended by the Older Workers’ Benefit Protection Act of 1990 (OWBPA).
One of the requirements of OWBPA is that a separation agreement must be an exchange for valuable consideration. What that means is the employer has to offer something of value.
Now it doesn’t necessarily have to be money (but most times it is). It could be an additional benefit of some kind. It just has to be something the employee isn’t already entitled to through being employed by the company.
It has to go above and beyond things like a pay-out of vacation days because if you have a vacation policy, you can’t offer the employee the same amount of money equal to the vacation pay in the separation agreement.
There’s no hard line in the sand as to what constitutes valuable consideration. It varies based on the specific facts of the situation.
If you’re interested in creating a separation agreement for your company, your first step would be to hire a competent employment attorney. Typically, he/she can give you a basic separation agreement draft that would be something to start with. In certain situations it might need to be customized further, but at least this would be a basic template.
The attorney should advise you to make sure you’ve met all the legal requirements—both federal and state.
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