U.S. Supreme Court Enforces Strict Compliance with OWBPA Requirements

On January 26, 1998, the U.S. Supreme Court ruled that an employee could sue her employer for age discrimination under the Age Discrimination in Employment Act (ADEA) despite having signed a release because the release did not comply with the requirements of the Older Workers Benefit Protection Act (OWBPA). Oubre v Entergy Operations, Inc.

In October 1990, Congress enacted the OWBPA which amended the ADEA, in part, to establish requirements for obtaining a waiver or release of an individual's ADEA claim.

The requirements include:

  1. The waiver must be part of an agreement written in a manner calculated to be understood by the individual from whom the waiver is sought;
  2. The waiver must refer specifically to rights or claims arising under the ADEA;
  3. The waiver must not include claims arising after the date the waiver is signed;
  4. The waiver must provide the individual with benefits to which the individual is not otherwise entitled;
  5. The individual must be advised in writing to consult with an attorney before signing the waiver;
  6. The individual must be given 21 days to consider signing the waiver (45 days if the waiver is sought from a group of employees, i.e., as part of an early retirement incentive program);
  7. The individual must be given seven days to revoke the waiver after signing it; and
  8. If the waiver is sought from a group of employees, each employee must be provided with information regarding those eligible to participate in the program, the eligibility factors of the program, the time limits applicable to the program, and the job titles and ages of all employees in the same job classification or organizational unit not eligible to participate in the program.

In Oubre, an individual employee with performance problems was given the option of improving her performance or accepting an enhanced severance package in exchange for a release. The employee selected the severance package and signed a release. The release did not give the employee 21 days to consider signing it or seven days to revoke it after signing and did not specifically refer to the ADEA.

After the employee received the severance benefits, she filed suit claiming her termination was illegally motivated by her age. She made no effort to return the severance benefits she had received. The employer sought dismissal based on the release and the employee's retention of the severance benefits.

The Supreme Court ruled the release and retention of severance benefits did not bar the employee's claims of age discrimination under the ADEA because the release did not comply with all of OWBPA's requirements. "The statutory command is clear: An employee 'may not waive' an ADEA claim unless the waiver or release satisfies the OWBPA's requirements." The court further ruled, "the employer cannot invoke the employee's failure to tender back as a way of excusing its own failure to comply."

This case highlights the importance of making sure releases that are intended to cover an employee's potential ADEA claims comply strictly with OWBPA's requirements. Employers seeking a release from an individual that is not part of a group exit incentive program also should review whether any other individual employees have signed or will be asked to sign a similar release at or near the same time as the proximity of time between the individual releases may be short enough that the individual releases will be viewed as a "group" program, triggering the additional notice requirements and longer consideration period.