On June 5, 1998, the U.S. Equal Employment Opportunity Commission ("EEOC") issued regulations that provide guidance on the requirements of the Older Workers' Benefit Protection Act of 1990 ("OWBPA"). The OWBPA established mandatory minimum standards employers must meet to obtain valid waivers of age discrimination claims.
Waiving Age Claims
Waivers of age claims are sought in various contexts, including when an employee age 40 or older is involved in a reduction in force. In exchange for the receipt of a severance package, protected-age employees are often required to sign a release agreement waiving all work-related legal claims, including claims of age discrimination.
Employers proposing that employees waive age claims have to comply with eight requirements set out in the OWBPA to ensure that the waivers are "knowing and voluntary." Compliance with the OWBPA is crucial for employers to get the "benefit of the bargain" in severance packages. For example, in Oubre v. Entergy Operations, Inc., the U. S. Supreme Court ruled earlier this year that an employer's failure to meet all of the OWBPA requirements resulted in a release being void. According to the Court, because the release was invalid, the employee could keep the severance benefits received in exchange for signing the release, and still sue the employer for age discrimination.
The best way for employers to make sure employees who receive severance packages cannot later bring age discrimination lawsuits is to comply with the OWBPA, and the new EEOC regulations that elaborate on the statute, when proposing release agreements. Under the OWBPA and the new EEOC regulations, a release must meet the following standards before it can be considered knowing and voluntary:
- The release agreement must be written in plain and clear language so that it can be understood by the employee.
- The release must specifically refer to a release of age claims and the Age Discrimination in Employment Act.
- The release cannot waive claims which may arise after the date of signing. However, the regulations acknowledge that the OWBPA does not bar agreements to perform future employment-related actions; for example, an agreement to retire or otherwise terminate employment at a future date is enforceable.
- In exchange for the release, the employee must be offered something of value which is greater than anything he or she is already entitled to. According to the regulations, however, a person age 40 or older is not necessarily entitled to a greater amount of consideration than is given to a younger person. Also, an employer may not unlawfully eliminate something of value, such as an existing severance benefit, and then offer that same benefit in exchange for a waiver.
- The employee must be advised in writing to consult with an attorney before signing.
- The employee must be given at least 21 days to consider the agreement (or at least 45 days if the agreement is in connection with an exit incentive or other group termination program). The regulations provide that a "material change" to the terms of a waiver offer may restart the running of the 21 or 45-day period. Also, the regulations make clear that an employee may sign a release before the end of the 21 or 45-day period, but only if the employee's acceptance of such shortening of time is knowing and voluntary and not induced by the employer through fraud, misrepresentation, or a threat to withdraw the offer before the end of the time period.
- The employee must be notified that he or she has seven days in which to revoke the agreement after it is signed. According to the regulations, this seven-day period cannot be shortened by the parties, by agreement or otherwise.
- If the release is part of an exit incentive or other group termination program, the employee must be informed of:
- eligibility factors to participate and time limits of the program,
- job titles and ages of all employees eligible or selected for the program, and
- ages of all employees in the same job classification or organizational unit not eligible or selected for the program.
The regulations make clear that the information disclosure requirements apply to both involuntary and voluntary group termination programs. According to the regulations, the required information must be given to each person in the "decisional unit" who is asked to sign a waiver agreement. The decisional unit is the group from which the employer chooses the persons who will be offered the exit incentive. In a reduction in force in a manufacturing setting, the decisional unit will normally be department-wide or plant-wide.
Finally, the regulations state that the party asserting the validity of a waiver, typically the employer, bears the burden of proving in court that the waiver was knowing and voluntary.
While the OWBPA is binding law, the EEOC regulations are not. Nonetheless, courts generally defer to EEOC regulations providing guidance on statutes like the OWBPA unless the regulations are in direct conflict with the statutory language. Accordingly, employers that want to make sure that they get what they bargain for in severance packages should make sure their releases comply with the OWBPA and the EEOC regulations. Failing to comply risks the very thing employers seek to avoid by offering severance arrangements--litigation.