Waivers Of Rights And Claims Under The ADEA

In today’s litigious times, many employers opt to offer employees they are discharging a severance agreement that provides compensation or additional benefits in exchange for a release of any and all claims the employee may have against the employer. In most circumstances, a release is worth the time and effort it takes to amicably separate from the employee. However, employers who are not aware of the requirements of the Older Workers Benefit Protection Act (OWBPA) can run afoul with the law and invalidate a release as it relates to Age Discrimination in Employment Act (ADEA) claims. A release that does not comply with OWBPA cannot bar ADEA claims. The ADEA prohibits discrimination on the basis of age and protects persons who are 40 or older.

OWBPA amended the ADEA to provide that an individual may not waive any right or claim under ADEA unless the waiver is knowing and voluntary. To be knowing and voluntary, the waiver must be part of a written agreement between the individual and the employer in language calculated to be understood by an individual and specifically refers to right or claims arising under ADEA. The wording of waiver agreements cannot mislead, misinform, or fail to inform participants, nor can it exaggerate advantages or minimize disadvantages if they are described. The waiver must specifically refer to rights or claims under ADEA and must refer to ADEA by name in connection with the waiver.

Other requirements of OWBPA are to give consideration above and beyond anything of value to which the individual is already entitled, however, the Employer does not have to give employees 40 or older greater compensation than that which is given to a person under 40 solely because of their protected age. In addition, the waiver must advise the individual in writing to consult with an attorney prior to executing.

To be valid, a consideration period must be given to the employee. This consideration period must be at least 21 days or can be 45 days in certain circumstances. There is a mandatory 7-day revocation period after execution. The 21- or 45-day period runs from the date of the employer’s final offer. Material changes to the final offer restart the period, while non-material changes do not restart the period. The parties may agree that changes, material or not, do not restart the running of the period. The 7-day revocation period cannot be shortened by the parties, however, the employee may sign the release before the expiration of the 21 or 45 day period as long as the decision to execute before the expiration of the consideration period is knowing and voluntary and not induced by the employer through fraud, misrepresentation, threat to withdraw or alter the offer, or by providing different terms to employees who sign prior to the expiration of the consideration period.

To determine if the longer 45-day period is required, the employer must determine if the separation is in connection with an exit incentive or other termination program offered to a group or class of employees. An "exit incentive program" is usually a voluntary program offered to a group or class of employees where employees are offered consideration, in addition to that which they are already entitled, to resign and sign a waiver. A "other termination program" usually refers to a group or class of employees involuntarily terminated and offered additional consideration in return for the waiver. In these instances, there are informational requirements imposed by OWBPA. Specific information must be provided at the commencement of the consideration period in writing, in a manner calculated to be understood by average individuals eligible to participate. The information must include any class, unit, or group of individuals covered by such program, any eligibility factors for the program, time limits applicable to the program, the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same classification or organizational unit who are not eligible or selected for the program.

An employee’s retention of a severance received in exchange for the execution of a release does not amount to ratification of the release and will not bar suit under the ADEA. Further, the waiver of rights or claims will not go to claims arising after the date of execution. The party asserting the validity of the waiver has the burden of proving that the waiver was knowing and voluntary pursuant to ADEA/OWBPA. Finally, the waiver agreement may not affect EEOC’s rights and responsibilities to enforce ADEA and may not interfere with the protected right of the individual to file a charge or participate in an investigation conducted by the EEOC.

Severance agreements are very valuable to most employers, because virtually every employee can make some type of claim against their employer. Employers who regularly use severance agreements can render them useless, however, if they are not carefully drafted and tailored to the specific circumstance and employee. A simple phone call to the Company attorney can help avoid these pitfalls.