Older Worker Benefit Protection Act (OWBPA)

Severance agreements: departing employees 40 years of age and older receive special legal protections when it comes to severance agreements under the Older Worker Benefit Protection Act (OWBPA). The severance document must contain certain language advising the employee of their rights under federal law, and must advise them to take the document to a lawyer to have it reviewed.

The OWBPA requires a mandatory waiting period of at least seven days between the time you originally enter into the agreement and the time when the agreement can be countersigned and the severance paid. This cooling-off period could be used for the employee to go to a lawyer, who might advise them of their opportunity to file a legal claim or threaten a lawsuit instead. The OWBPA also ensures that no employee is coerced or pressured into signing legal waivers of rights under the Age Discrimination in Employment Act (ADEA).

Under the OWBPA, employees eligible for early retirement incentive plans must be provided with complete and accurate information concerning what benefits are available under the plan. If certain conditions of the OWBPA are met, employees may legally sign waivers of their ADEA rights to sue for age discrimination.

There are nine main conditions an employer must provide to employee's in their retirement waiver to comply with the OWBPA:

1. In return for signing the waiver, the employee must be given something more than what he/she is already entitled to by right. If an employer provides a severance package to all employees as a matter of right, then older employees must be given something of value in excess of the severance pay in exchange for their waiver of ADEA rights.
2. The waiver must be part of an agreement between the employer and the employee and must be written in clear and unambiguous language, absent of any jargon or legalese, and “calculated to be understood” by the employee.
3. Prior to the execution of any waiver in connection with an incentive or other employee retirement termination program offered to a group of employees, the employees must be informed in writing about the class, unit, or group covered by the program, any eligibility factors for the program, and any applicable time limits.
4. The employer also must make clear to employees the job titles and ages of all individuals eligible 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.
5. The waiver must specifically refer to rights or claims arising under the ADEA (discrimination because of age in employment or employment benefits).
6. After signing the agreement, the employee has seven days to revoke it, and the agreement is not effective until the end of the seven days.
7. The employee must be advised in writing to consult with a lawyer before signing the agreement.
8. The employer must provide employees with sufficient time to consider the waiver. Before signing the agreement, an employee negotiating a waiver must be given 21 days to consider the matter. If the employee is part of a group of employees being offered an early retirement incentive program or other employment termination program, he/she must be provided 45 days to consider the matter before signing the agreement.
9. An employee may not waive rights or claims which may arise after the date the waiver is executed.

If a waiver becomes invalid, must an employee return the money he originally received in exchange for signing it before he can challenge it in court?  The U.S. Supreme Court in 1998 made a ruling that employers must draft valid waivers. They ruled that if a signed waiver is later found invalid, the employee: 1) can file a discrimination lawsuit; and 2) does not have to give back the money he already received in exchange for signing the waiver. Oubre v. Entergy Operations, 522 U.S. 422.

What does the court consider in determining the validity of a waiver? Courts consider the totality of circumstances based on some of the following but they can look at other factors too: the employee's education and business experience; respective roles of the employer and the employee in deciding the provisions of the waiver; clarity of the agreement; amount of time in which the employee had to study the agreement; whether the employee  was able to consult with legal counsel; and the consideration the employee received for signing the waiver, such as severance.

Age discrimination claims are common when there is a reduction in workforce, particularly of long time employees. The OWBPA also established specific requirements for a "knowing and voluntary" waiver of ADEA claims.