OWBPA: Severance Agreements for Older Workers

Age is but a number — except when it comes to employee severance agreements. Written agreements can protect employers from future claims, including those related to age discrimination. If you’re parting with employees 40 years and older, it’s important to understand the provisions required by the Older Workers Benefit Protection Act (OWBPA), a part of the Age Discrimination in Employment Act (ADEA).

The ADEA protects workers at least 40 years old by eliminating age discrimination and providing equal employment opportunities. In particular, the present-day ADEA prohibits discrimination in hiring, promotions, layoffs, terminations, wages, compensation, and benefits. The ADEA was signed into law in 1967.

In 1990, Congress amended the ADEA by adding the OWBPA, which serves as an extra layer of protection for workers 40 and older. The OWBPA safeguards older workers in many ways, including mandatory requirements when asking parting employees to “knowingly and voluntarily” waive their rights under the ADEA. The Equal Employment Opportunity Commission (EEOC) pinpointed seven criteria that must be met to ensure a waiver of rights is known and voluntary under the OWBPA. The waiver of rights is most often included in the employee’s severance agreement.

OWBPA Requirements for Individual Separations

OWBPA applies to employers with 20 or more employees and requires that any waiver of ADEA rights meet the following seven requirements:

• Voluntariness: The waiver must be made voluntarily, without coercion or undue influence.
• Knowingness: The employee must have a full and complete understanding of the rights being waived.
• Written Form: The waiver must be in writing and in plain language that the employee can understand.
• Adequate Consideration: The employee must receive something of value in exchange for waiving their rights, such as severance pay or other benefits.
• Waiver-Specific Information: The waiver must include specific information about the ADEA, including the employee’s right to file an age discrimination claim with the Equal Employment Opportunity Commission (EEOC).
• Waiver Period: The employee must be given at least 21 days to consider the waiver agreement. In the case of a group layoff, the employee must be given at least 45 days to consider the agreement.
• Right to Counsel: The employee must be advised in writing of their right to consult with an attorney before signing the waiver agreement.

In addition to the seven general OWBPA requirements, there are a few additional requirements that apply specifically to severance agreements. These include:

• The waiver must be specific to the ADEA. This means that the employee cannot be asked to waive their rights under other laws, such as Title VII of the Civil Rights Act of 1964.
• The waiver must not waive future rights. This means that the employee cannot be asked to waive their right to file an age discrimination claim in the future, even if they are not aware of any specific instances of discrimination at the time they sign the waiver.
• The waiver must be accompanied by a written explanation of the ADEA’s anti-waiver provisions. This explanation must be written in plain language that the employee can understand.

OWBPA Requirements during a Layoff

The Older Workers Benefit Protection Act (OWBPA) has additional requirements for severance agreements in the case of a layoff that affects two or more employees who are 40 years of age or older. Most employers provide this additional information in an OWBPA Disclosure, often Exhibit A of the severance agreement. Employers must provide, in writing:

• The decisional unit, which is the group of employees who were considered for selection during a layoff.
  • For example, if an employer needs to reduce the overall headcount by ten employees, the decisional unit is likely “all employees.” If, on the other hand, the employer needs to eliminate five accountants, the decisional unit might be the “accounting team.”
  • Eligibility factors often correlate with the decisional unit; for example “All employees on the accounting team.” However, there has been some controversy about this.

  In Summary

  If an employer fails to meet any of the OWBPA requirements or provide the required disclosure, the waiver of ADEA rights may be void. This means that the employee may still be able to file an age discrimination claim with the EEOC, even if they have signed a waiver agreement. Here are some tips for employers who are drafting a severance agreement for older workers:

  • Make sure your severance agreement includes a waiver and disclosure and includes all of the required information.
  • Use clear and concise language.
  • Make sure that the waiver is specific to the ADEA and does not waive future rights.
  • Provide the employee with a copy of the severance agreement to review before they sign it.
  • Give the employee enough time to consider the agreement before signing it.
  • Explore workforce compliance solutions that automate the severance process to save time, reduce admin costs, and ensure you consistently apply OWBPA requirements each time.

  Following these tips can help organizations ensure that severance agreements are compliant with the law, protecting the employer as well as the employee. But staying abreast of regulatory changes – especially on the state level – can be very challenging. Onwards HR helps employers ensure compliant employee separations, including mitigating the risk of age discrimination actions.