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Take Caution When Terminating Older Employees

Terminating Older Employees: OWBPA Q&A

Release agreements can help prevent lawsuits when employees are terminated. But, if you want to protect against age discrimination claims, your release must meet eight specific criteria. The following question and answer transcript covers the basic issues you may run into when terminating older employees.

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Q: We are terminating an older employee and want him to sign a release of all claims, including age discrimination claims, in exchange for a severance package. Are there special requirements that release agreements must include for age discrimination claims?

A: Yes. The Older Workers’ Benefit Protection Act (OWBPA) amended the Age Discrimination in Employment Act (ADEA) to impose specific minimum conditions that must be met for an effective release of potential age discrimination claims under the ADEA. In particular, the OWBPA requires that a release of potential age discrimination claims be knowing and voluntary. The statute, in 29 U.S.C. §626(f), indicates that a release will not be knowing and voluntary unless all of the following minimum requirements are met:

(Download a free Retirement model policy including HR best practices and legal background.)

(1) the release agreement is written in a manner calculated to be understood by the average employee;

(2) the release specifically refers to rights arising under the ADEA;

(3) the employee does not waive rights or claims arising after the waiver is executed;

(4) the employee receives some consideration or benefit in addition to that to which he was already entitled;

(5) the employee is advised in writing to consult an attorney before signing the waiver agreement;

(6) the employee is given at least 21 days to consider the release, or at least 45 days if the waiver is offered in connection with an exit incentive offered to a class of employees;

(7) the agreement allows the employee to revoke the release for at least seven days after signing and it does not become effective until the revocation period expires; and

(8) where the exit incentive is being offered to a class of employees, the employer must provide a description of the class covered by the program, the eligibility requirements, applicable time limits, and a list of the eligible employees’ job titles and ages plus a list of the ages of the ineligible employees who have the same jobs. See 29 U.S.C. §626(f). EEOC regulations explain the OWBPA waiver requirements, including wording of the agreements and disclosure requirements when a class of employees are involved in 29 C.F.R. §1625.22.

As indicated in (6), above, you must provide an employee with at least 21 days to consider the release, or 45 days if a class of employees is involved.

(Download a free Retirement model policy including HR best practices and legal background.)

If the release does not meet the OWBPA’s requirements, it will not protect you from liability under the ADEA. So, for example, in Kruchowski v. Weyerhauser Co., 446 F.3d 1090 (10th Cir. 2006), inaccuracies in the information provided about the class of employees covered by a reduction in force rendered the terminated workers’ ADEA waiver invalid because it failed to comply with each and every statutory requirement of the OWBPA and, therefore, was not voluntary and knowing.

Further, as the Supreme Court determined in Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), if the release is invalid under the OWBPA, former employees are not required to give back (or “tender back”) any severance amounts paid if they then sue their employer for age discrimination. So, in these cases, employees can keep the severance and still sue their employers for age discrimination.

Because of the complexities of creating a valid release of ADEA claims and the consequences if your release is invalid, you should have your attorney review any release and severance letter before providing it to the employee.

Regards,

Robin Thomas, J.D.
Personnel Policy Service, Inc.

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