The Equitable Life Assurance Society yesterday signed what lawyers said is the largest age-discrimination settlement, agreeing to pay $12.5 million to 363 employes who charged that they were laid off as part of a company policy discriminating against older workers.

The former employes, who ranged from company vice presidents to secretaries, were among 500 people let go by Equitable in 1978 in what the New York-based insurance company described as a cost-cutting move. But the employes -- many of whom were in their late forties and fifties -- charged in a lawsuit that the staff cuts were part of a deliberate company policy to discriminate on the basis of age in firings, promotions and compensation.

"Our opinion is they Equitable selected people by determining who was older and who was making fairly substantial salaries," said James Lee, a senior trial lawyer for the federal Equal Employment Opportunity Commission, which joined the case on behalf of the plaintiffs. "They wanted to lay off older people because they felt they were blocking the paths for younger employes, who the company didn't want to lose to other competing firms . . . . It's not unique among businesses , but it's illegal."

Equitable spokesman Allison Kellogg said yesterday that the EEOC's charges were "absolutely untrue," noting that the settlement approved by U.S. District Court Judge Morris E. Lasker in New York contains no finding of wrongdoing against the company.

"Equitable has always denied and continues to deny that it violated the law," Kellogg said. "But we believed that to continue to litigate the case would have taken a lot of our management time and would be very expensive for all the parties involved."

The settlement reflects the dramatic growth in age-discrimination complaints and litigation in recent years -- an increase spurred by changes in the law and a new awareness of ageism in the workplace, according to EEOC officials. Between fiscal years 1981 and 1983, for example, the number of age-related complaints filed with the EEOC more than doubled, to 18,087.

The federal Age Discrmination in Employment Act first outlawed age discrimination in the workplace in 1967. The act was amended by Congress in 1978 to cover persons between age 40 and 70 -- effectively raising the mandatory retirement age from 65 -- although it included a provision that allows companies to enforce mandatory retirement for its highest level executives.

Lee said yesterday that the federal agency had charged Equitable with timing its layoffs to take place a few months before the Jan. 1, 1979, effective date of the 1978 amendments. Kellogg called this charge "absurd" and "ridiculous."

Under terms of the settlement, Equitable is to pay $12.5 million into an escrow fund to be divided among plaintiffs according to the monetary losses they sustained. In exchange, all claims against Equitable will be dropped.

Richard Ben-Veniste, a Washington lawyer who represented plaintiffs in the case, said the figure represents the largest monetary settlement of any age-bias case.