If you have a severance agreement, it probably contains a paragraph that says something like this:
You further acknowledge that you have been offered at least twenty-one (21) days to consider this Agreement, and that you have signed it voluntarily and of your own free will prior to the expiration of that 21-day period. In doing so, you now have seven (7) days from the execution to revoke this Agreement. At the expiration of this seven (7) day period, your right to cancel this agreement shall cease. This Agreement will not become effective until after the expiration of the seven (7) day revocation period.
1. What does it mean?
Employees have 21 days to consider the agreement (the “Consideration Period”) and then 7 days to revoke it (the “Revocation Period”).
Consideration Period: The 21 days are waivable by the EMPLOYEE only. Meaning, the employee gets 21 days to consider an agreement. If he/she decides to sign it on day 2, that is fine. If he/she wants to wait 21 days to sign, that is allowed too. On day 22, the agreement is technically null and void (of course, the employer can always choose to keep it on the table).
Revocation Period: The 7 day Revocation Period means that, no matter what, for 7 days after the employee signs the agreement, he/she has the right to revoke his/her signature. On day 8, it is a binding agreement. The Revocation Period is not waivable; even if the employee signs the agreement in blood and swears that he/she will not revoke the agreement, that employee still has the option to revoke for 7 days.
2. Why is it there?
Employees over 40 are protected by the Older Worker Benefit Protection Act (“OWBPA”). To ensure that employees over 40 are not unduly pressured to sign certain agreements, the OWBPA requires that such agreements contain the 21 and 7 day periods. The 21 days are to consider the agreement and the 7 days are to revoke the agreement.
While this clause is only required for employees 40 or older, it has become a fairly common occurrence in all settlement agreements. This is probably because employers use forms they download for free, instead of using a law firm to make custom-made forms on a flat fee basis.
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