The Older Workers Benefit Protection Act (OWBPA) amended the Age Discrimination in Employment Act (ADEA) in 1990 to require that any waiver or release of rights under the ADEA satisfy certain detailed requirements in order to be valid.1/ The Equal Employment Opportunity Commission (EEOC) has now issued regulations interpreting what the OWBPA requires employers to do to ensure that waivers of age discrimination claims will be enforceable and valid under federal law. The regulations go into effect on July 6, 1998.
The regulations were developed as a consensus proposal by a 20-member committee consisting of management, employee and EEOC representatives. They address, among other issues, the wording of waiver agreements, consideration provided in exchange for a waiver, time periods for employees to consider whether to execute a waiver or to revoke it, and the information that employers must provide to employees affected by a voluntary or involuntary group termination program.
The new EEOC regulations address a number of issues relating to the interpretation of the OWBPA that had caused uncertainty.
APPLICATION
Different requirements and time periods apply depending upon whether the waiver is in connection with:
- Settlement of an EEOC charge or ADEA suit in court - employees must be given "a reasonable time" within which to consider the settlement agreement.
- An individual termination - employees must be given 21 days to consider the agreement.
- An exit incentive program (voluntary program involving two or more employees) or other employment termination program (involuntary reduction in force involving two or more employees) - employees must be given 45 days to consider the agreement.
TIME PERIODS
If a material modification is made to the waiver agreement or final offer (e.g., a change in the amount of the settlement or in the number of employees affected) during the 21- or 45-day consideration period, then the period is restarted; however, the parties may agree that changes, whether material or nonmaterial, do not restart the running of the 21- or 45-day period.
An employee may sign a release prior to the end of the 21- or 45-day time period, thereby commencing the mandatory seven-day revocation period, provided that the employee's decision is knowing and voluntary and the employee is not given additional consideration for doing so.
The seven-day revocation period may not be shortened, even if the employee agrees.
CONSIDERATION
The regulations state that consideration means anything of value in addition to that to which the individual is already entitled in the absence of a waiver. The regulations, however, clarify that an employer may not eliminate, in contravention of law or contract, a benefit or other thing of value and then claim that the subsequent offer of the same constitutes the required consideration.
An employer is not required to a give an employee 40 or older a greater amount of consideration than is given to a person younger than 40.
WAIVER OF FUTURE RIGHTS
The regulations state that a waiver agreement cannot provide for the waiver of rights regarding acts of discrimination that occur after the execution of the agreement; however, the regulations do not bar the enforcement of agreements to perform certain actions in the future (e.g., the employee may agree to retire or otherwise terminate employment at a future date).
WORDING OF AGREEMENTS
The regulations emphasize that the entire waiver must be in writing. The waiver must be drafted in plain language geared to the level of understanding of the participating employees. Employers should take into account such factors as the level of comprehension and education of the participants. This usually will require avoiding the use of technical jargon and long, complex sentences.
INFORMATIONAL REQUIREMENTS
Perhaps the most difficult issue facing employers under the OWBPA and the new regulations is the determination of what information must be provided to employees in connection with a waiver requested in a group termination. Under the OWBPA, in a voluntary or involuntary group termination certain written information must be provided to each person in the "decisional unit" who is asked to sign a waiver.
The new regulations define the term "decisional unit" as the portion of the employer's organization from which the employer has selected persons to whom it will offer the group termination program and to whom it will not. The regulations provide examples concerning what information must be provided, depending upon whether the reduction in force is structured, for example, along the lines of the facility, division, department, reporting relationship, or job category.
Determining the appropriate "decisional unit" is a critical decision that must be made in connection with each termination.
- An employer must carefully analyze the manner in which the persons selected for the reduction in force were chosen in order to determine the scope of information required to be provided to affected employees, as well as the method of presenting such information.
- The regulations require that employees' ages must be presented utilizing age bands that are no broader than one year.
- Where the employer combines information concerning voluntary and involuntary terminations, the employer is required to present the information in a manner that distinguishes between the two categories.
- Where the employer terminates different groups in successive increments over a period of time, affected employees must be given information about all employees previously affected by the termination program in the decisional unit.
- Failure to comply fully with all of the informational requirements, including the determination of the proper decisional unit, may render the waiver unenforceable.
In light of these new EEOC regulations, employers should carefully review all waivers and releases, particularly those utilized in connection with a group termination program, to ensure compliance with the provisions of the OWBPA and the regulations. The importance of compliance is underscored by the Supreme Court's recent decision in Oubre v. Entergy Operations, Inc., 1998 WL 23157 (January 26, 1998), where the Court held that a release that does not comply with all of the requirements of the OWBPA cannot bar an employee's ADEA claim and that an employee is not required to tender back the consideration prior to bringing an ADEA claim. Thus, an employer that does not comply fully with the OWBPA, as interpreted by the EEOC's new regulations, runs the substantial risk that an employee will be able to sue the employer for age discrimination while retaining the severance pay and other consideration received for signing the release.
The OWBPA requires
- (1) the waiver must be written in a way that the average eligible individual can understand it;
- (2) it must specifically refer to ADEA rights and claims;
- (3) it cannot apply to claims that arise after the waiver is executed;
- (4) it must be in exchange for additional consideration beyond that to which the individual is already entitled;
- (5) the individual must be advised to consult an attorney before signing the waiver;
- (6) the individual must be given at least 21 days to consider the agreement; and (7) the waiver must be revocable by the individual for a period of at least seven days after execution.
The OWBPA further provides that if a waiver is requested in connection with an exit incentive or other employment termination program offered to a group of employees, then each employee must be given at least 45 days to consider the waiver agreement. In addition, at the commencement of that 45-day period, the individual must be provided written information as to
- (1) any class, unit, or group of individuals covered by such program, any eligibility factors for such program, and any time limits applicable to such program; and
- (2) the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.
This White Paper is published to inform clients and friends of Morgan Lewis and should not be construed as providing legal advice on any specific matter.