Like many firms trying to stay competitive, your company may cut costs by reducing its workforce. When "older workers" are involved, there are additional moral and legal complications.
Background: Under the Older Workers Benefit Protection Act (OWBPA), age-based differences in employee benefits may be permitted only if they are justified by significant cost considerations. The OWBPA may also affect the structure of early retirement incentives.
Typically, when an employer offers an early retirement package, it requires the employee to waive any potential employment discrimination claims. The OWBPA has established certain minimum standards for a "knowing and voluntary" waiver to be enforceable.
- The waiver agreement must be easily understood by the employee.
- The agreement must explicitly state that the employee is waiving his or her rights under the Age Discrimination in Employment Act.
- An employee cannot be required to relinquish rights that arise after the waiver is executed.
- The employee must receive something of value beyond what he or she is otherwise entitled to. In other words, your company cannot ask an employee to exchange an age discrimination claim for severance pay he or she already has earned.
- Your company must recommend in writing that the employee consult with an attorney. Merely advising the employee of his or her right to have the agreement reviewed may not be sufficient.
- The company must give the employee at least 21 days to evaluate the terms of the agreement; 45 days when the employer seeks waivers in connection with an "exit incentive" or other termination program offered to a group or class of employees. Once the waiver is signed, the employee has seven days in which to change his or her mind. The release does not become enforceable until this "cooling-off period" expires.
Another provision of the law relates to exit incentives or other programs for a group or class of workers. To obtain a waiver, an employee must be given detailed written information about the program and all persons affected--including their job titles and ages. In effect, the company is forced to supply data that could be used to determine if an age discrimination claim exists.
Possible alternative: Your company may decide to forgo waivers from terminated employees and focus instead on a fair severance package. This approach assumes that an employee who feels he or she has been treated fairly is not likely to press a claim in court.
In summary: Although the recent trend in the courts appears to favor employers (see box inside), there are no guarantees. Try to head off potential claims beforehand.