In this litigious age, employers have increasingly sought refuge in waiver agreements in an attempt to avoid costly and lengthy litigation. One area where waivers are often utilized is voluntary or involuntary programs to reduce the size or change the composition of a workforce. When these waivers involve people over 40, the protections of the Age Discrimination in Employment Act of 1967 (ADEA), as amended by the Older Workers Benefits Protection Act of 1990 (OWBPA), come into play. OWBPA specifically addresses waivers of rights and claims under the ADEA. The EEOC recently issued regulations governing such waivers. Since reductions in force often hit people over 40, employers should pay particular attention to these regulations. Employers often seek volunteers to depart in exchange for a package of benefits. In some cases, employees are selected for termination from employment. In both circumstances, employers typically want the employee to sign a waiver in which they agree not to sue the employer in exchange for the special benefits.
When Does the ADEA Apply?
The ADEA applies to any employer with more than 20 employees.
The Waiver
Keep it Simple and Use the Right Language
The ADEA and EEOC regulations provide that waivers must be in writing and written in a manner calculated to be understood by the average individual eligible to participate in the program. The key to a valid waiver is plain language and simplicity, considering such factors as the level of education and comprehension of the typical participant. Avoid the use of technical or legal jargon and shy away from complex sentences. A befuddled employee cannot knowingly waive his or her rights.
The waiver must clearly refer to the ADEA and must advise employees to consult with an attorney before signing.
Do We Have to Offer Extra Incentives in Exchange for a Waiver?
Yes. The ADEA and the EEOC regulations provide that in order for a waiver to be considered knowing and voluntary, the individual waives rights or claims in exchange for consideration (something of value) "in addition to anything of value to which the individual is already entitled." This typically means additional benefit packages or financial rewards in exchange for the waiver.
What Kind of Waivers of Statutory Claims Are Appropriate?
Many employers want to protect themselves from past, present, and future claims by the employee who accepts the incentive package and signs a waiver. Otherwise valid waivers that include past and present claims will be enforced. The ADEA and the EEOC regulations, however, make it quite clear that the individual may not waive rights or claims that arise after the waiver is signed. Hence, such waivers would not be enforceable.
However, waivers that include agreements to perform certain actions at some point in the future are enforceable. For example, an employee may agree to retire at the end of the year in exchange for a severance package.
Does it Matter How Many People Are Involved?
Yes, but not by much. The disclosure requirements noted in the next section can kick in when two or more employees are offered special incentives to secure a waiver -- regardless of whether the incentives are part of a voluntary or involuntary program.
Disclose the Right Information: Complete and Full Disclosure
The goal behind the waiver protections of OWBPA is to make sure that the employee is making a "knowing and voluntary" waiver of rights they may have under ADEA. Any employer who wants to get an employee to waive statutory rights must be sure that all the information supplied to the employee is correct and does not contain any material mistakes, omissions, or misstatements.
In order for a waiver to be made knowingly, the ADEA and the EEOC's regulations set forth two types of "programs" which require employers seeking waivers to make written disclosures. These are:
When Does the ADEA Apply?
The ADEA applies to any employer with more than 20 employees.
The Waiver
Keep it Simple and Use the Right Language
The ADEA and EEOC regulations provide that waivers must be in writing and written in a manner calculated to be understood by the average individual eligible to participate in the program. The key to a valid waiver is plain language and simplicity, considering such factors as the level of education and comprehension of the typical participant. Avoid the use of technical or legal jargon and shy away from complex sentences. A befuddled employee cannot knowingly waive his or her rights.
The waiver must clearly refer to the ADEA and must advise employees to consult with an attorney before signing.
Do We Have to Offer Extra Incentives in Exchange for a Waiver?
Yes. The ADEA and the EEOC regulations provide that in order for a waiver to be considered knowing and voluntary, the individual waives rights or claims in exchange for consideration (something of value) "in addition to anything of value to which the individual is already entitled." This typically means additional benefit packages or financial rewards in exchange for the waiver.
What Kind of Waivers of Statutory Claims Are Appropriate?
Many employers want to protect themselves from past, present, and future claims by the employee who accepts the incentive package and signs a waiver. Otherwise valid waivers that include past and present claims will be enforced. The ADEA and the EEOC regulations, however, make it quite clear that the individual may not waive rights or claims that arise after the waiver is signed. Hence, such waivers would not be enforceable.
However, waivers that include agreements to perform certain actions at some point in the future are enforceable. For example, an employee may agree to retire at the end of the year in exchange for a severance package.
Does it Matter How Many People Are Involved?
Yes, but not by much. The disclosure requirements noted in the next section can kick in when two or more employees are offered special incentives to secure a waiver -- regardless of whether the incentives are part of a voluntary or involuntary program.
Disclose the Right Information: Complete and Full Disclosure
The goal behind the waiver protections of OWBPA is to make sure that the employee is making a "knowing and voluntary" waiver of rights they may have under ADEA. Any employer who wants to get an employee to waive statutory rights must be sure that all the information supplied to the employee is correct and does not contain any material mistakes, omissions, or misstatements.
In order for a waiver to be made knowingly, the ADEA and the EEOC's regulations set forth two types of "programs" which require employers seeking waivers to make written disclosures. These are:
- Exit incentive programs: Voluntary programs offered to a group of employees, where such employees are offered something of value (consideration) in addition to that which they are already entitled in exchange for their agreement to resign voluntarily and sign a waiver.
- Other employment termination programs: Involuntary termination of a group of employees who are offered additional consideration in return for signing a waiver.
Disclose Who's In and Who's Out
Employers who request a waiver in connection with an exit incentive program or other termination program must provide employees, in writing, with the following:
- the class, unit, or group covered by the program
- eligibility factors for the program
- time limits, if any
- job titles and ages of all those eligible or selected for the program
- job titles and ages of those ineligible or not selected.
Again, keep it simple. The information must be understandable to the average eligible participant. In addition, it should be presented in a format that permits comparisons between eligible and ineligible employees within the same decisional unit. Age information should be broken down according to the age of each eligible/ineligible or selected person. The EEOC will not accept age bands broader than one year. Remember, the better informed your employees, the less likely they will challenge the enforceability of the waivers.
Provide Time for Reflection
Now that you have crafted the perfect agreement, can you make the employee sign it on the spot? No. Employees must be given sufficient time to review your offer:
- 21 days if not offered as part of an incentive or employment termination program; or
- 45 days if offered as part of an incentive or employment termination program.
If you change the conditions of the incentive or termination program in any material way, the 21-day or 45-day period restarts.
The employee may agree to sign the waiver before the review period ends, however, they may not be induced or coerced to do so. For example, an employer may not threaten to revoke or reduce the waiver benefit package if the employee fails to sign immediately. Once the employee signs the waiver, he or she has another seven days to rescind the waiver. The seven-day post-agreement review period is mandatory and cannot be eliminated, even by mutual agreement.
Waivers Settling Charges and Lawsuits
The ADEA permits waivers in exchange for the settlement of a charge filed against an employer, if the waiver was "knowing and voluntary." At a minimum, the EEOC regulations require that the waiver permit an employee a reasonable amount of time to consider the settlement offer. The EEOC regulations suggest that the 21- to 45-day review period for traditional waivers is a reasonable guideline for settlement waivers.
Burden of Proof
Advocates for employers and employees have disputed the question of who has the burden of proving that a waiver is knowing and voluntary. It is the EEOC's position that the burden is on the party asserting the validity of the waiver. If an ex-employee challenges a waiver on grounds that it was coerced, be prepared to show otherwise.
EEOC Enforcement Power
The EEOC has the authority to enforce the ADEA. Accordingly, waivers may not interfere with an employee's right to participate in an investigation conducted by the EEOC itself. In addition, signing a waiver does not abrogate an employee's right to challenge its validity in the future. Employers may also not impose any penalty upon employees who challenge waivers or participate in proceedings conducted by the EEOC.
Tender Back of Money Received
Reaffirming the recent United States Supreme Court ruling in Oubre v. Entergy Operations, Inc., 118 S.Ct. 838 (1998), the EEOC advises that an invalid release of claims under ADEA and OWBPA is not a bar to an employee's subsequent ADEA claim, even where the employee fails to return the monies received in exchange for the waiver.
The Supreme Court found that a waiver that does not meet the specific requirements of the OWBPA is void and cannot be ratified by retention of monies received for giving the invalid release. The Court concluded that any other decision would defeat Congress' purpose in enacting the OWBPA, which was to mandate satisfaction of certain minimum requirements to show that a release of age discrimination claims was indeed voluntary. The Oubre decision and the EEOC's guidance emphasize the importance of ensuring that waivers satisfy the specific requirements set out in the OWBPA.