ADEA/OWBPA: Severance Agreements for Older Workers
Before you draft a severance agreement for an employee 40 years and older, it’s important to understand the employment laws that are in place to protect older works. The Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA) are federal laws enforced by the Equal Employment Opportunity Commission (EEOC). These laws protect employees 40 years of age or older from discrimination based on age in terms like hiring, firing, promotions, benefits, and job assignments.
What is a severance agreement?
A severance agreement is a contract between an employer and an employee that outlines the terms of the employee's separation from the company. The agreement typically includes the amount of severance pay that the employee will receive, as well as any other benefits, such as continued health insurance coverage or outplacement assistance. The agreement may also include a release of claims, in which the employee agrees to give up the right to sue the employer for any future legal claims.
What is the Age Discrimination in Employment Act (ADEA)?
The Age Discrimination in Employment Act (ADEA) is a federal law that prohibits employment discrimination against people who are age 40 or older. It applies to employers with 20 or more employees, including federal, state, and local governments.
The ADEA prohibits discrimination in all aspects of employment, including hiring, firing, promotion, compensation, and terms and conditions of employment. It also prohibits retaliation against employees who file age discrimination complaints.
Firing an employee because of their age is one example of age discrimination and is prohibited by the ADEA. An employee who believes that they have been discriminated against because of their age can file a complaint with the Equal Employment Opportunity Commission (EEOC). The EEOC will investigate their complaint and may file a lawsuit against the employer on their behalf.
What is the ADEA Waiver?
An ADEA waiver is a provision in a severance agreement that requires an employee to give up their right to sue their employer for age discrimination. The Older Workers Benefit Protection Act (OWBPA) requires that certain requirements be met in order for an ADEA waiver to be valid.
What is the Older Workers Benefit Protection Act?
The OWBPA is an amendment to the ADEA that provides additional protections for workers who are 40 years of age or older. It was enacted in 1990 to make it more difficult for employers to use severance agreements to waive older workers' rights.
What are the OWBPA requirements for severance agreements?
In order for a severance agreement to be valid under the OWBPA, it must meet the following requirements:
The agreement must be written in a clear and understandable manner.
The agreement must specifically refer to the ADEA and the employee's right to waive their claims under the ADEA.
The agreement must advise the employee in writing to consult with an attorney before signing the agreement.
The agreement must give the employee at least 21 days (or 45 days in a group layoff) to consider the agreement before signing it.
The agreement must give the employee seven days to revoke their signature after signing the agreement.
The agreement cannot include waivers of rights that may arise after the date on which the agreement is signed.
The agreement must be supported by consideration in addition to what the employee is already entitled to.
What are the OWBPA disclosure requirements for group layoffs or reductions in force?
If an employer offers severance to two or more employees who are 40 years of age or older as part of a group layoff or reduction in force, the employer must provide the employees with an OWBPA disclosure. The OWBPA disclosure must include the following information:
The decisional unit, which is the group of employees who were considered for selection during the layoff.
The eligibility factors and selection criteria used to select employees for the layoff.
The job titles and ages of all employees who were considered for the layoff, including those who were selected and those who were not selected.
The notification date and termination date for the layoff.
What is the penalty for not complying with the OWBPA requirements?
If an employer fails to comply with the OWBPA requirements, the employee may be able to challenge the validity of the severance agreement. This could allow the employee to proceed with a lawsuit against the employer for age discrimination.
Conclusion
Employers should carefully review their severance agreements to ensure that they comply with the ADEA and OWBPA. Employers should also consider using technology such as Onwards HR to make it easy to comply with these laws. Onwards HR is a Separation Compliance Platform that automates severance agreements and OWBPA disclosures in compliance with corporate policy and employment laws. Learn more about Onwards HR
