Six severance agreement templates for small business: a standard agreement, a layoff and RIF version, a dedicated over-40 OWBPA-compliant version, a group-termination version, an ADEA compliance checklist, and an Exhibit A disclosure builder. The 21-day, 45-day, and 7-day revocation rules built in. Fill-in-the-blank DOCX. No signup.
A severance agreement is the contract that closes out an employee's departure: the employer provides severance pay, and sometimes benefits, and in exchange the employee releases legal claims against the company. For a small business it is the tool that turns a separation into a clean, final ending, but it comes with a trap. When the employee is 40 or older, federal law imposes strict extra requirements on the release, and getting them wrong means the employee can keep the money and still sue. That over-40 layer is exactly where generic templates fall short and where these templates are built to protect you.
There are six templates here: a standard agreement, a layoff and RIF version, a dedicated over-40 OWBPA-compliant version, a group-termination version, a plain-English ADEA compliance checklist, and an Exhibit A disclosure builder for group layoffs. Each downloads as an editable Word document, with no email and no signup, and the over-40 versions build in the 21-day, 45-day, and 7-day rules that most free templates leave out. Because a separation touches pay and offboarding, this pairs with your severance letter and termination letter.
TL;DR
A severance agreement gives a departing employee severance pay in exchange for a release of legal claims. Download six templates as DOCX: standard, RIF, over-40, group over-40, an ADEA checklist, and an Exhibit A disclosure. The rule that matters most: for an employee 40 or older, a valid ADEA waiver requires plain language, an ADEA reference, written attorney advisement, 21 days to consider (45 for a group) and a non-waivable 7-day revocation, or the employee can keep the money and still sue. This is general information, not legal advice.
What a Severance Agreement Is
A severance agreement is a contract in which an employer provides severance pay, and sometimes continued benefits, to a departing employee in exchange for the employee releasing legal claims against the company. The heart of it is consideration for a release: the employee receives something they are not otherwise owed, and the employer gains certainty against a lawsuit.
It is an employer-side document used at the end of employment, and it sits alongside the severance letter that announces the offer and the termination policy that governs how separations happen. Its terms, especially the over-40 requirements, are what make the release actually hold.
For the pay side of a separation, the severance package guide covers how severance is typically structured and calculated.
The Over-40 Trap: Keep the Money, Still Sue
If an employee is 40 or older and the release does not meet the OWBPA requirements, it does not validly waive age claims, and the employee can bring an ADEA claim even after keeping the severance pay. The Supreme Court held exactly this in Oubre v. Entergy. This is why the over-40 version exists and why counsel review matters. This is general information, not legal advice.
Which Template Should You Use?
Match the template to the situation and, crucially, the employee's age. Under 40, individual: the standard agreement. A position elimination: the RIF version. 40 or older, individual: the over-40 OWBPA version. A group layoff with anyone 40 or older: the group over-40 version plus Exhibit A. And use the checklist to verify any over-40 release.
Standard Severance Agreement
The default
A general severance and release for an individual separation, with severance pay as consideration, a release of claims, return of property, an at-will statement, and signatures. The right starting point when the employee is under 40.
Layoff / RIF Version
Position eliminated
A reduction-in-force version that states the separation is not performance-based, with severance framed around weeks per year of service, and a flag for WARN Act and, for anyone 40 or older, the OWBPA group rules.
Over-40 (OWBPA-Compliant)
Age 40 or older
The individual over-40 version built for a valid ADEA waiver: explicit ADEA reference, written attorney advisement, a 21-day consideration period, and a non-waivable 7-day revocation period, with an effective date on the eighth day.
Group Over-40 (45-Day)
Group termination
The group-termination over-40 version, which extends consideration to 45 days and requires the written OWBPA disclosure attached as Exhibit A, for exit incentive or layoff programs affecting a group that includes anyone 40 or older.
ADEA / OWBPA Checklist
Plain-English guide
A fill-in checklist covering every requirement for a valid over-40 waiver: plain language, ADEA reference, attorney advisement, consideration, the 21 or 45 days, the 7-day revocation, the material-change rule, and state overlays.
Exhibit A Disclosure
Group disclosure builder
The OWBPA group-disclosure template: the decisional unit, eligibility factors and time limits, and the job titles and ages of those selected and not selected, which must accompany a group over-40 release.
Start With the Employee's Age
The first question is not the reason for the separation but the employee's age. If the employee is 40 or older, you must use an over-40 version, individual or group, because a standard release will not validly waive age claims. If the employee is under 40, the standard or RIF version is appropriate. When in doubt, or for any group layoff, treat it as over-40 and have counsel review it, since the cost of an invalid waiver is far higher than the cost of a review. This is general information, not legal advice.
6 Severance Agreement Templates
Download all six together or grab the version you need. The standard and RIF versions cover separations of employees under 40, the over-40 and group over-40 versions build in the ADEA and OWBPA requirements, the checklist verifies compliance, and the Exhibit A template handles the group disclosure. Fill in the consideration, dates, and specifics, and keep the over-40 acknowledgment language intact.
Download All 6 Severance Agreement Templates
A standard, RIF, individual over-40, and group over-40 agreement, plus an ADEA compliance checklist and an Exhibit A disclosure. All as DOCX files in one download.
Template 1: Standard Severance Agreement
A general severance and release for an individual separation, with severance pay as consideration, a release of claims, return of property, an at-will statement, and signatures. The right starting point when the employee is under 40.
Standard Severance Agreement
SEVERANCE AGREEMENT AND RELEASE
This Severance Agreement and Release ("Agreement") is entered into between
[Company Name] ("the Company") and [Employee Name] ("the Employee").
Separation date: [Date]
1. SEVERANCE PAY AND BENEFITS
In exchange for the Employee signing this Agreement, the Company will provide the
following, which the Employee is not otherwise entitled to receive:
•Severance payment: [amount] dollars, gross, paid as [lump sum / installments],
subject to standard tax withholding.
•[Optional: continuation of group health coverage or a contribution toward COBRA
premiums for [number] months.]
•[Optional: other consideration.]
The Employee's final wages and any accrued, unused paid time off owed by law will
be paid regardless of whether the Employee signs this Agreement.
2. RELEASE OF CLAIMS
In exchange for the consideration above, the Employee releases the Company from
all claims arising on or before the date the Employee signs this Agreement,
except any claims that cannot be waived by law. This release does not waive any
right to file a charge with, or participate in an investigation by, a government
agency, and does not waive any claim that arises after the date of signing.
3. RETURN OF PROPERTY
The Employee will return all Company property, including [devices, keys, access
cards, documents, and confidential information], by the separation date.
4. CONFIDENTIALITY AND NON-DISPARAGEMENT
[Optional, and subject to state limits: The parties agree to keep the terms of
this Agreement confidential except as required by law, and not to make
disparaging statements about one another. Note: some states restrict
confidentiality and non-disparagement clauses in separation agreements.]
5. NO ADMISSION
This Agreement is not an admission of any wrongdoing by either party.
6. AT-WILL AND ENTIRE AGREEMENT
The Employee's employment was at-will. This Agreement is the entire agreement
between the parties on this subject and replaces any prior understanding.
7. SIGNATURES
Employee: __ Date: ___
Company (by): __ Title: ___ Date: ___
DISCLAIMER: This is a sample template for general information only and is not
legal advice. If the employee is age 40 or older, additional requirements apply
under the ADEA and OWBPA; use the over-40 version. Confirm your state and local
requirements and consider counsel review before use.
Template 2: Layoff / RIF Severance Agreement
A reduction-in-force version that states the separation is not performance-based, with severance framed around service, and a flag for the WARN Act and, for anyone 40 or older, the OWBPA group rules.
Layoff / RIF Severance Agreement
SEVERANCE AGREEMENT AND RELEASE (REDUCTION IN FORCE)
This Severance Agreement and Release ("Agreement") is entered into between
[Company Name] ("the Company") and [Employee Name] ("the Employee") in
connection with a reduction in force.
Separation date: [Date]
1. REASON FOR SEPARATION
The Employee's position is being eliminated as part of a reduction in force. The
separation is not based on performance or misconduct.
2. SEVERANCE PAY AND BENEFITS
In exchange for the Employee signing this Agreement, the Company will provide,
which the Employee is not otherwise entitled to receive:
•Severance payment: [amount] dollars, gross, paid as [lump sum / installments],
subject to standard tax withholding. [For example, based on [number] weeks of
pay per year of service.]
•[Optional: a contribution toward COBRA premiums for [number] months.]
•[Optional: outplacement or other assistance.]
Final wages and any legally owed accrued paid time off will be paid regardless of
whether the Employee signs.
3. RELEASE OF CLAIMS
In exchange for the consideration above, the Employee releases the Company from
all claims arising on or before the signing date, except claims that cannot be
waived by law, and except the right to file a charge with or participate in an
investigation by a government agency.
4. RETURN OF PROPERTY; NO ADMISSION
The Employee will return all Company property by the separation date. This
Agreement is not an admission of wrongdoing.
5. SIGNATURES
Employee: __ Date: ___
Company (by): __ Title: ___ Date: ___
DISCLAIMER: This is a sample template for general information only and is not
legal advice. A reduction in force may trigger the federal WARN Act or a state
equivalent, and if any affected employee is 40 or older the OWBPA group-layoff
rules apply, including a 45-day consideration period and a disclosure of ages and
job titles. Use the over-40 group version and consult counsel before use.
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The individual over-40 version built for a valid ADEA waiver: explicit ADEA reference, written attorney advisement, a 21-day consideration period, and a non-waivable 7-day revocation period, with the effective date on the eighth day.
Over-40 Severance Agreement (OWBPA-Compliant)
SEVERANCE AGREEMENT AND RELEASE (EMPLOYEE AGE 40 OR OLDER)
This Severance Agreement and Release ("Agreement") is entered into between
[Company Name] ("the Company") and [Employee Name] ("the Employee"). Because the
Employee is 40 years of age or older, this Agreement is written to meet the
requirements of the Age Discrimination in Employment Act (ADEA), as amended by
the Older Workers Benefit Protection Act (OWBPA).
Separation date: [Date]
1. SEVERANCE PAY (CONSIDERATION)
In exchange for signing this Agreement, the Company will provide the following,
which the Employee is not otherwise entitled to receive:
•Severance payment: [amount] dollars, gross, subject to standard tax
withholding, paid as [lump sum / installments].
•[Optional: additional consideration.]
2. RELEASE OF CLAIMS, INCLUDING ADEA CLAIMS
In exchange for the consideration above, the Employee releases the Company from
all claims arising on or before the date the Employee signs this Agreement,
including claims of age discrimination under the Age Discrimination in Employment
Act (ADEA). This release does not apply to any right to file a charge with or
participate in an investigation by the Equal Employment Opportunity Commission,
and does not waive any claim that arises after the date of signing.
3. ADEA / OWBPA ACKNOWLEDGMENTS
The Employee acknowledges that:
(a) This Agreement is written in plain language the Employee understands.
(b) This Agreement specifically refers to rights and claims under the ADEA, as
stated in Section 2.
(c) The Company advises the Employee in writing to consult an attorney before
signing this Agreement.
(d) The Employee has been given at least twenty-one (21) days to consider this
Agreement before signing. The Employee may sign before the end of the 21
days if the Employee chooses.
(e) After signing, the Employee has seven (7) days to revoke this Agreement. The
Agreement does not become effective or enforceable until the 7-day revocation
period has expired. To revoke, the Employee must deliver written notice to
[name, title, address or email] before the 7 days end.
(f) The Employee is signing this Agreement knowingly and voluntarily.
4. EFFECTIVE DATE
This Agreement becomes effective on the eighth (8th) day after the Employee signs
it, provided the Employee has not revoked it.
5. RETURN OF PROPERTY; NO ADMISSION
The Employee will return all Company property by the separation date. This
Agreement is not an admission of wrongdoing.
6. SIGNATURES
Employee: __ Date signed: ___
Company (by): __ Title: ___ Date: ___
DISCLAIMER: This is a sample template for general information only and is not
legal advice. OWBPA requirements are strict, and a defective waiver can be
unenforceable as to age claims even if the employee keeps the severance pay.
Confirm your state overlays and have counsel review this Agreement before use.
Template 4: Group Layoff Over-40 Agreement (45-Day / OWBPA)
The group-termination over-40 version, which extends consideration to 45 days and requires the written OWBPA disclosure attached as Exhibit A, for exit-incentive or layoff programs affecting a group that includes anyone 40 or older.
Group Layoff Over-40 Agreement (45-Day / OWBPA)
SEVERANCE AGREEMENT AND RELEASE (GROUP TERMINATION, AGE 40 OR OLDER)
This Agreement is used when a severance and release is offered to a group or
class of employees as part of an exit incentive or other termination program,
and one or more of them is 40 or older. It follows the OWBPA group-termination
rules, which differ from the individual over-40 rules in two ways: a 45-day
consideration period, and a required written disclosure (attached as Exhibit A).
Separation date: [Date]
1. SEVERANCE PAY (CONSIDERATION)
•Severance payment: [amount] dollars, gross, subject to standard withholding.
•[Optional: COBRA contribution or other consideration.]
2. RELEASE OF CLAIMS, INCLUDING ADEA CLAIMS
Same release language as the individual over-40 version, expressly including
ADEA claims and preserving the right to file a charge with or participate in an
EEOC investigation.
3. ADEA / OWBPA GROUP ACKNOWLEDGMENTS
The Employee acknowledges that:
(a) The Agreement is in plain language and specifically refers to ADEA rights.
(b) The Company advises the Employee in writing to consult an attorney.
(c) The Employee has at least forty-five (45) days to consider this Agreement,
because it is offered as part of a group termination program.
(d) After signing, the Employee has seven (7) days to revoke, and the Agreement
is not effective or enforceable until that period expires.
(e) The Employee has received the written disclosure attached as Exhibit A,
describing the decisional unit, the eligibility factors, and the job titles
and ages of individuals selected and not selected for the program.
4. EXHIBIT A (OWBPA DISCLOSURE) IS ATTACHED
See the separate OWBPA Disclosure (Exhibit A) template on this page. It must be
provided with this Agreement.
5. SIGNATURES
Employee: __ Date signed: ___
Company (by): __ Title: ___ Date: ___
DISCLAIMER: This is a sample template for general information only and is not
legal advice. Group terminations also raise WARN Act and complex OWBPA
disclosure questions. Have counsel prepare or review the group program and
Exhibit A before use.
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A fill-in checklist covering every requirement for a valid over-40 waiver: plain language, the ADEA reference, attorney advisement, consideration, the 21 or 45 days, the 7-day revocation, the material-change rule, and state overlays.
ADEA / OWBPA Compliance Checklist
ADEA / OWBPA SEVERANCE COMPLIANCE CHECKLIST
Use this checklist when offering a severance agreement with a release of claims
to an employee who is 40 years of age or older. All items must be met for the
age-claim waiver to be "knowing and voluntary." This is a plain-language guide,
not legal advice.
EVERY OVER-40 AGREEMENT
[ ] The agreement is in writing and in plain language the employee understands.
[ ] The agreement specifically refers to the ADEA by name.
[ ] The agreement advises the employee, in writing, to consult an attorney
before signing.
[ ] The consideration is something the employee is not already entitled to.
[ ] The release does not waive rights or claims that arise after the signing
date, and does not bar filing a charge with or assisting the EEOC.
INDIVIDUAL TERMINATION
[ ] The employee is given at least 21 days to consider the agreement.
[ ] The employee is given at least 7 days after signing to revoke, and the
agreement is not effective until that period ends.
GROUP TERMINATION (EXIT INCENTIVE OR PROGRAM)
[ ] The employee is given at least 45 days to consider the agreement.
[ ] The 7-day revocation period still applies.
[ ] A written OWBPA disclosure (Exhibit A) is provided, listing the decisional
unit, the eligibility factors and time limits, and the job titles and ages of
those selected and not selected.
IF YOU CHANGE THE OFFER
[ ] A material change to the final offer restarts the 21-day or 45-day period.
(The parties may agree in advance on how changes are treated; the safer
course is to restart on a material change.)
STATE OVERLAYS TO CHECK
[ ] Any state-specific separation-agreement rule (for example, a required
attorney-consultation notice or minimum review period).
[ ] Any state limit on confidentiality or non-disparagement clauses.
DISCLAIMER: This is a plain-language checklist for general information only and
is not legal advice. Federal and state rules are detailed and change. Confirm the
current requirements and have counsel review any over-40 or group release.
Template 6: Exhibit A OWBPA Group Disclosure
The OWBPA group-disclosure template: the decisional unit, eligibility factors and time limits, and the job titles and ages of those selected and not selected, which must accompany a group over-40 release.
Exhibit A: OWBPA Group Disclosure
EXHIBIT A: OWBPA DISCLOSURE (GROUP TERMINATION)
This disclosure must accompany a severance and release offered to employees age
40 or older as part of a group termination or exit incentive program. It gives
affected employees the information the OWBPA requires so they can evaluate the
offer.
1. THE PROGRAM AND DECISIONAL UNIT
Program name / description: __
Decisional unit (the class, unit, or group of employees covered by the program,
for example a department, location, or job function): __
2. ELIGIBILITY AND TIME LIMITS
Eligibility factors for the program: __
Any time limits applicable to the program: __
3. JOB TITLES AND AGES: SELECTED
The following job titles and ages within the decisional unit were selected for
the program (list each individual by job title and age, without names):
Job title | Age
------------------------------|------
[Title] | [Age]
[Title] | [Age]
[Add rows as needed] |
4. JOB TITLES AND AGES: NOT SELECTED
The following job titles and ages within the same decisional unit were NOT
selected for the program:
Job title | Age
------------------------------|------
[Title] | [Age]
[Title] | [Age]
[Add rows as needed] |
DISCLAIMER: This is a sample template for general information only and is not
legal advice. Defining the decisional unit correctly is legally significant and
fact-specific. Have counsel prepare or review the Exhibit A disclosure before
use.
What a Severance Agreement Includes
A complete severance agreement covers four groups: the consideration, the release, the standard terms, and, for an employee 40 or older, the over-40 additions. The groups below are the consensus set that strong severance agreements share.
Consideration
Severance pay, stated as gross
Anything beyond what is already owed
Optional COBRA or other benefits
The release
Claims released, with exceptions
EEOC charge right preserved
No waiver of post-signing claims
Terms
Return of company property
No admission of wrongdoing
At-will and entire-agreement clauses
Over-40 additions
Explicit ADEA reference
Attorney advisement in writing
21 or 45 days, plus 7-day revocation
The single most consequential part is the release, and, when the employee is 40 or older, the ADEA and OWBPA language that makes the release of age claims valid. A release missing that language may still bind younger claims but fail entirely as to age, which is the trap the over-40 templates are built to avoid.
The Over-40 Rules (ADEA and OWBPA)
When an employee is 40 or older, a release only waives age-discrimination claims if it is knowing and voluntary under the Older Workers Benefit Protection Act, which amended the ADEA. These federal rules apply to employers with 20 or more employees, and they are strict. Four requirements sit at the center, and the over-40 templates build in all of them.
Name the ADEA and advise counsel
For a release to waive age-discrimination claims by an employee 40 or older, it must be in plain language, specifically reference the Age Discrimination in Employment Act by name, and advise the employee in writing to consult an attorney before signing. A general release that never mentions the ADEA, or that only suggests consulting a financial advisor, does not meet the standard. The over-40 templates here build in the ADEA reference and the written attorney advisement. This is general information, not legal advice.
21 days to consider, or 45 for a group
The employee must be given at least 21 days to consider an individual over-40 agreement before signing, and at least 45 days when the release is offered as part of a group or class exit-incentive or termination program. The employee may sign earlier if they choose, but the employer must offer the full period. A shorter deadline written into the agreement does not shorten the legal minimum. The templates state the correct period for each situation. This is general information, not legal advice.
7 days to revoke, and it cannot be shortened
After signing, the employee has 7 days to revoke the agreement, and this revocation period cannot be shortened by agreement or otherwise. The agreement does not become effective or enforceable until the 7 days pass without a revocation, so severance should not be paid until then. The over-40 templates set the effective date on the eighth day after signing and include revocation instructions. This is general information, not legal advice.
Group layoffs need the Exhibit A disclosure
A group termination or exit-incentive program adds a written disclosure requirement, commonly attached as Exhibit A: the employer must identify the decisional unit, the eligibility factors and any time limits, and the job titles and ages of the individuals selected and not selected for the program. This information lets older workers evaluate whether the selection may have been age-based. The Exhibit A template on this page provides the structure. This is general information, not legal advice.
Why the Details Are Not Optional
In Oubre v. Entergy Operations, the Supreme Court held that a release failing the OWBPA requirements could not bar the employee's ADEA claim, and that keeping the severance money did not fix the defective release. An employer can pay for a release and still face the age claim it tried to settle. ADEA remedies can include back pay, front pay, liquidated damages, and attorney's fees. This is general information, not legal advice.
Two more rules round out the federal picture. A material change to the final offer restarts the 21-day or 45-day consideration period. And the release can never bar an employee from filing a charge with or assisting the EEOC, even if it waives the right to personal monetary recovery. For the broader separation context, the at-will employment guide explains the default these agreements sit on top of.
Group Layoffs and Exhibit A
A group termination changes the rules in two ways beyond the individual over-40 requirements. The consideration period extends from 21 to 45 days, and the employer must provide a written OWBPA disclosure, commonly attached as Exhibit A. This applies when a severance and release is offered to a group or class of employees as part of an exit incentive or other termination program, and one or more of them is 40 or older.
Individual over-40
Group over-40
Consideration period
At least 21 days
At least 45 days
Revocation period
7 days, non-waivable
7 days, non-waivable
ADEA reference
Required
Required
Attorney advisement
Required, in writing
Required, in writing
Exhibit A disclosure
Not required
Required
The Exhibit A disclosure must identify the decisional unit, the eligibility factors and time limits, and the job titles and ages of those selected and not selected for the program. Defining the decisional unit correctly is legally significant and fact-specific, which, together with possible reduction-in-force and WARN Act issues, makes a group layoff the situation where counsel involvement matters most. The Exhibit A template gives you the structure to fill in.
State Overlays
Federal ADEA and OWBPA rules are the floor, not the whole picture. State law layers additional separation-agreement requirements on top, and where a state gives the employee more protection, that rule controls. A few examples show the range, and the compliance checklist prompts you to check your own state.
California
Under Cal. Gov. Code Section 12964.5, an employer offering a separation agreement must tell the employee they have the right to consult an attorney and give them at least 5 business days to do so. The employee may sign sooner if the decision is knowing and voluntary and not induced.
New York
The New York State Human Rights Law covers all employers regardless of size. New York also has its own review-and-revocation practice for certain agreements. Confirm the current state and, for New York City, local rules.
Confidentiality limits
Several states restrict confidentiality and non-disparagement clauses in separation agreements, especially around harassment or discrimination claims. Check whether your state limits these clauses before including them.
Everywhere
State law layers on top of the federal ADEA and OWBPA rules; it does not replace them. When state and federal rules both apply, follow the one that gives the employee more protection, and confirm the specifics for your state.
Because these state rules vary widely and change, the templates flag them rather than resolve them for you. For state-specific detail, the California and New York compliance guides cover those states, and the checklist includes a state-overlay section to work through before you finalize any agreement.
Offer, Sign, and Store
A downloaded agreement is the starting point, and these templates work on their own. The strain shows up when the review period is miscounted, when severance is paid before the revocation window closes, when the Exhibit A data is assembled by hand under deadline, and when the signed agreement is filed somewhere no one can find it later.
Pick the right version
Choose standard, RIF, individual over-40, or group over-40 based on the situation and the employee's age, then fill it in.
Give the full review period
For an employee 40 or older, provide the full 21 or 45 days and the written attorney advisement, and do not shorten them.
Sign, then wait out revocation
Collect signatures, and for an over-40 release wait the 7-day revocation period before the agreement takes effect or you pay.
Store the signed agreement
Keep the executed agreement and any Exhibit A with the employee's records for the retention period, in a retrievable place.
When that point arrives, FirstHR keeps the severance agreement against the employee's profile, captures signatures with e-signature, and stores the executed agreement and any Exhibit A with the employee's other offboarding records in one retrievable place for the retention period. FirstHR is an onboarding and HR platform, not a law firm: it does not draft your release, decide whether the over-40 or group rules apply, calculate the review deadlines, or provide legal advice, so it documents and stores the agreement while you confirm the ADEA, OWBPA, and state requirements with a qualified attorney. Applicant tracking is coming soon to FirstHR.
Key Takeaways
A severance agreement gives a departing employee severance pay in exchange for a release of legal claims against the employer.
For an employee 40 or older, a valid ADEA waiver must name the ADEA, advise consulting an attorney, and use plain language.
Individual over-40 agreements need at least 21 days to consider and a non-waivable 7-day revocation; group programs need 45 days.
A group termination also requires the Exhibit A disclosure of the decisional unit and the job titles and ages selected and not selected.
If the OWBPA rules are not met, the employee can pursue an age claim even after keeping the severance money, per Oubre v. Entergy.
State rules, such as California's 5-business-day attorney-consultation notice, layer on top of the federal requirements. This is general information, not legal advice.
Frequently Asked Questions
What is a severance agreement?
A severance agreement is a contract between an employer and a departing employee in which the employer provides something of value, usually severance pay and sometimes continued benefits, in exchange for the employee agreeing to release legal claims against the employer. The core of the deal is consideration for a release: the employee gets money or benefits they would not otherwise be entitled to, and the employer gets certainty that the employee will not sue over the employment or separation. A well-drafted agreement also covers return of company property, confidentiality where allowed, a statement that it is not an admission of wrongdoing, and signatures. When the employee is 40 or older, the agreement must meet extra federal requirements to validly waive age-discrimination claims. A severance agreement is optional, not something the law generally requires, but it is a common tool for a clean, final separation. This is general information, not legal advice.
What is required in a severance agreement for an employee over 40?
When an employee is 40 or older, a release of age-discrimination claims is only valid if it is knowing and voluntary under the Older Workers Benefit Protection Act, which amended the ADEA. At a minimum, the agreement must be in plain language, specifically reference the ADEA by name, advise the employee in writing to consult an attorney, and be supported by consideration the employee is not already owed. For an individual separation, the employee must be given at least 21 days to consider the agreement and 7 days after signing to revoke it, and the agreement cannot take effect until that revocation period passes. For a group termination program, the consideration period is 45 days and the employer must also provide a written disclosure of the decisional unit and the job titles and ages of those selected and not selected. The over-40 templates on this page build in each of these elements. This is general information, not legal advice.
What is the difference between the 21-day and 45-day period?
Both are minimum consideration periods for an over-40 waiver, and which one applies depends on whether the separation is individual or part of a group. For an individual termination, the employee 40 or older must be given at least 21 days to consider the severance agreement before signing. When the severance and release is offered to a group or class of employees as part of an exit incentive or other termination program, the period extends to at least 45 days, because group layoffs carry a higher risk of age-based selection and the law gives older workers more time to evaluate the offer. In both cases the separate 7-day revocation period after signing stays the same. A group termination also triggers the additional written disclosure requirement. If you are unsure whether your situation counts as a group program, that determination has legal consequences, so confirm it with counsel. This is general information, not legal advice.
Can the 7-day revocation period be waived or shortened?
No. For an employee 40 or older, the 7-day revocation period after signing is required and cannot be shortened by the parties, by agreement, or otherwise. During those seven days the employee may change their mind and revoke the agreement, typically by delivering written notice, and the agreement does not become effective or enforceable until the period expires without a revocation. A practical consequence is that the employer should not pay the severance until the revocation window has closed, and the agreement should set its effective date on the eighth day after signing. This 7-day rule is separate from, and in addition to, the 21-day or 45-day consideration period before signing. Trying to waive or shorten the revocation period can invalidate the age-claim waiver. The over-40 templates here handle this correctly. This is general information, not legal advice.
What happens if a severance agreement does not comply with the OWBPA?
If a release does not meet the OWBPA requirements, it does not validly waive the employee's age-discrimination claims, which means the employee can still bring an ADEA claim, even if they already accepted and kept the severance money. The Supreme Court established this in Oubre v. Entergy Operations, holding that a release failing the OWBPA standard could not bar the employee's ADEA claim and that merely keeping the payment did not ratify a defective release. In practice this means the employer can pay for a release and still face the very age claim it tried to settle. ADEA remedies can include back pay, front pay, liquidated damages in willful cases, and attorney's fees. This is exactly why the over-40 details, the ADEA reference, the attorney advisement, the full consideration period, and the unshortened revocation window, are worth getting right, and why counsel review is wise for any over-40 release. This is general information, not legal advice.
Does a small business have to comply with the over-40 rules?
It depends on size. The ADEA, and the OWBPA that amends it, apply to employers with 20 or more employees, so a business below that threshold is generally not covered by the federal age-discrimination waiver rules. However, several important cautions apply. First, many states have their own age-discrimination laws that reach smaller employers, sometimes down to just a few employees, so a small business may still face state age-claim exposure and state separation-agreement rules. Second, even if the federal over-40 rules do not apply, using a clear, well-structured agreement and giving the employee reasonable time and an attorney-consultation suggestion is good practice. The safe approach is to confirm both your federal coverage based on headcount and your state's rules before relying on any release, rather than assuming being small means the rules do not apply. This is general information, not legal advice.
Is an employer required to offer severance?
Generally no. Federal law does not require employers to provide severance pay, and most states do not either, so severance is usually a voluntary benefit an employer offers, often in exchange for a release of claims. There are exceptions and nuances: an employer may be contractually bound to pay severance if it promised to in an employment agreement, an offer letter, a severance plan, or a policy or handbook, and a large layoff can trigger notice obligations under the federal WARN Act or a state equivalent. But absent a contract or policy, offering severance is a business decision, typically made to secure a release, ensure a smooth exit, or support a departing employee. Because the value of severance is that it buys a valid release, the agreement's terms, especially the over-40 requirements, are what make it worth offering. This is general information, not legal advice.
What is Exhibit A in a group severance agreement?
Exhibit A is the written disclosure the OWBPA requires when a severance and release is offered to a group of employees, one or more of whom is 40 or older, as part of an exit incentive or termination program. It gives affected older workers the information they need to judge whether the selection for layoff may have been age-based. Specifically, it must identify the decisional unit, meaning the class, unit, or group of employees the program covered, the eligibility factors and any time limits that applied, and the job titles and ages of all individuals in the decisional unit who were selected and who were not selected for the program. It is provided together with the agreement, and the 45-day consideration period gives the employee time to review it. Defining the decisional unit correctly is legally significant and fact-specific, so this is a part of a group layoff where counsel involvement is especially important. This is general information, not legal advice.
