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EEOC Issues Final Regulations Governing Waivers Of Rights And Claims Under ADEA


After six years of regulatory activity, the U.S. Equal Employment Opportunity Commission (EEOC) has issued final regulations governing waivers of rights and claims under the federal Age Discrimination in Employment Act (ADEA). In 1990, Congress amended the ADEA by adding the Older Workers Benefit Protection Act (OWBPA) which established certain minimum standards for valid waivers under the ADEA. While the new regulations clarify certain previously ambiguous provisions in the law including time limits, the scope of waivers, and their effect on filing EEOC charges, crucial ambiguities persist. The essential facts remain that drafting a valid release of ADEA rights and claims should remain an individualized, waiver-by-waiver process and reliance on a boilerplate waiver form avoided. The regulations, which appeared in the Federal Register on Friday, June 5, 1998, become effective July 6, 1998.


Introduction. The ADEA requires that all waivers of claims under that law be "knowing and voluntary." The regulations serve to establish the minimum standards for what is "knowing and voluntary." Those standards apply to all ADEA waivers, including waivers by employees in both the public and private sectors.

Wording of Waiver Agreements. The regulations provide that waivers must be in writing and drafted in "plain language geared to the level of understanding of the individual party to the agreement or individuals eligible to participate." The waiver must not be misleading and must be conveyed without exaggerating the benefits or minimizing the limitations of accepting the waiver agreement. The regulations further provide that waivers must refer to the Age Discrimination in Employment Act by name, and individuals must be advised in writing to consult with an attorney prior to executing a waiver.

Waiver of Future Rights. The ADEA provides that a waiver will not be considered knowing and voluntary if it includes the waiver of rights and claims arising after the execution of the waiver. The regulations explain that this provision in the law does not bar agreements to perform acts in the future, such as to retire from employment.

Consideration. Consideration (usually money) for a waiver must be in addition to anything of value to which the individual is already entitled. For example, payment of severance benefits to which a former employee is entitled under company policy will not serve as adequate consideration for an ADEA waiver. The regulations make clear, however, that an employer need not give a greater amount of consideration to an employee age 40 or over than to a younger employee solely because of the older employee's membership in the protected class under the ADEA. One issue not addressed in the regulations is whether an individual receiving consideration for a waiver must tender back the consideration prior to challenging the validity of the waiver. The United States Supreme Court recently decided, in Oubre v. Entergy Operations, Inc., that consideration need not be tendered back in these circumstances.

Time Periods. One of the most vexing issues pertaining to waivers under the ADEA involves the mandatory time period for consideration of the waiver set forth in the OWBPA. The law requires that an individual have 21 days to consider a waiver agreement, that individuals in a group or class of employees (consisting of as few as two individuals) offered an "exit incentive or other employment termination program" be given 45 days to consider the offer, and that all employees accepting the waiver agreement have a period of 7 days to revoke the agreement. The regulations provide that the 21 or 45 day consideration period runs from the date of the employer's final offer. Material changes to the final offer cause the 21 or 45 day period to restart. The regulations do not define what is a "material" change, referring instead to what the EEOC believes to be "well-established law regarding materiality . . . ." The regulations provide some relief from this uncertainty by allowing the parties to include a provision stating that changes, whether material or immaterial, do not restart the 21 or 45 day period. The regulations permit the employee to accept and sign a waiver prior to the expiration of the 21 or 45 day period, provided the individual's acceptance of a shorter time period is "knowing and voluntary," and not induced by fraud, misrepresentation, threat of withdrawal or alteration of the offer prior to the expiration of the 21 or 45 day period. The waiver also may not offer different terms to individuals who sign the waiver before the applicable time period expires. The 7 day revocation period may not be shortened or waived. The regulations further provide that the 21 and 45 day time periods do not apply to settlement of an EEOC charge or lawsuit, and in those cases the time period for consideration need only be "reasonable."

Information Requirements. The ADEA requires that where an exit incentive or other employment termination program is offered to a group or class of employees (consisting of two or more employees), and where the employer seeks a waiver of rights and claims under the ADEA as part of that offer, the employer must provide the individuals in the group or class with certain information about the offer in order for the waiver to be valid. This applies to both voluntary programs, such as early retirement programs, and to involuntary programs, such as reductions in force. The purpose of the information is to allow affected employees to make an informed choice whether or not to sign a waiver agreement. A significant portion of the new regulations pertains to this information requirement, setting forth what information is to be conveyed, how it is to be conveyed, and who is to receive it. Basically, the employer must provide to the employees offered the program a list, by age and job classification, of all employees who are being offered the program as well as all employees in the "decisional unit" who are not being offered the program. The "decisional unit" is that portion of the employer's organizational structure from which the employer selected employees for the offer or program. A decisional unit can be a facility, a division, a department, a job class, or some subpart of any of them. A decisional unit may include multiple locations. The regulations provide numerous examples of various decisional units and how information pertaining to each should be conveyed. As with the waiver language itself, all information provided under this section must be in writing and written in a manner calculated to be understood by the average recipient.

Burden of Proof. The regulations provide that the party asserting the validity of a waiver (usually the employer) has the burden of proving in court that the waiver was "knowing and voluntary."

EEOC Enforcement Power. The regulations provide that no waiver agreement may prohibit an individual from filing a charge or complaint with the EEOC or from participating in an EEOC investigation.


The new EEOC regulations provide some guidance in connection with waivers of ADEA claims, but the requirements for establishing a valid and enforceable waiver remain murky. For example, the criterion that waivers be drafted in language that is calculated to be understood by the employee considering the waiver raises difficult issues of individual literacy, experience and intelligence. The provisions concerning time periods and "material changes" could easily create confusion in ascertaining the employer's obligations. Perhaps most difficult is the section dealing with "decisional units." Each of these areas provides opportunities for plaintiffs' counsel or the EEOC to attack the validity of the waiver, particularly since it will be the employer's burden to prove that a waiver meets all of the requirements for a "knowing and voluntary" waiver. Extreme care must be taken in drafting any document containing a waiver of rights and claims under the ADEA, and each such document must be drafted in light of specific underlying facts. Otherwise, the employer might find that the money tendered as consideration to avoid litigation is being used to fund the ADEA lawsuit it now must defend.

ASAPTM is published by Littler Mendelson in order to review the latest developments in employment law. ASAPTM is designed to provide accurate and informative information and should not be considered legal advice. ©1998-1999 Littler Mendelson, P.C. All Rights Reserved.

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