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May 07, 2015

When should an employee sign a release agreement for severance pay?

Q&ATermination & Resignation 

Question: We are terminating an employee and would like to offer severance pay. Should we ask the employee to sign a release agreement and how long should we give the employee to consider whether to sign?

Answer: Answer: It’s a good idea to require a terminating employee to sign a release agreement any time you offer compensation they are not already entitled to receive.

The release or separation agreement does not need to be signed during the termination meeting; in fact, in some situations it will not be valid or enforceable if it’s signed at that time. If the employee is at least 40 years old, they should be given at least 21 days to consider the agreement in order for the release to validly waive an age discrimination claim. For downsizings involving two or more people, the time frame for waiving an age discrimination claim extends to 45 days.

Regardless of the employee’s age, an employee who is just finding out that they’ve been terminated is often in no state of mind to truly understand the terms of a separation agreement. Keep in mind the separation agreement has legal consequences, so you want to make sure the employee has time to review and consider whether to sign.

A good practice is to either tell the employee that you are preparing a severance package that will be provided in the next few days, or provide the release agreement at the termination meeting but don’t allow the employee to sign it for a set amount of time.

Your Vigilant employment law attorney can help you develop strategies around a specific termination and assist with drafting a release agreement. Reach out if you require assistance navigating the termination process, or wage and hour laws in California, Oregon or Washington.

This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult legal counsel.