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Because every situation is unique, an employer should tailor a severance agreement to the particular employee leaving the company. 

The employer should be especially mindful of following the requirements for a departing employee who is 40 or older, or risk facing a lawsuit. 

The severance agreement 

A severance agreement is a contract between an employer and a departing employee that compensates the latter for the limitations placed on his or her conduct after leaving the company. Often, the employer seeks to avoid litigation and does not want the former employee to participate in a lawsuit against the company. 

The “over-40” requirements 

The severance agreement for a departing employee who is 40 or older must comply with the requirements established through the Equal Employment Opportunity Commission, the Discrimination in Employment Act and the Older Workers Benefit Protection Plan. For example, the language must be easily understood. The writer should avoid using complex sentences and legal jargon, and the content must not mislead the reader in any way. For example, the departing employee must clearly understand any benefits offered in the agreement as well as any post-employment limitations imposed. 

The time limits and more 

According to the requirements of the ADEA and OWBP, an over-40 severance agreement recipient must have 21 days to review the document. Even after execution, the older departing employee must have another seven days to revoke the agreement if he or she has a change of heart. The content must also reference the ADEA specifically and advise the recipient to seek legal counsel before signing the agreement. 

The potential for liability 

It is not uncommon for employers to seek assistance in preparing this kind of contract. Employers must scrupulously follow the requirements for drafting a severance agreement for a departing employee aged 40 or older. Otherwise, it will not stand up in court, and the company behind the agreement could find itself in violation of employment law.