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Advisories & Insights

EEOC Issues Advisory on Age Discrimination and Severance Agreements

July, 2009

On Wednesday, July 15, 2009, the members of the federal Equal Employment Opportunity Commission held a hearing where the commissioners discussed the "devastating impact" of age discrimination. The commissioners heard from a panel of experts on age discrimination and its effects, and from a number of plaintiffs involved with recent federal age-discrimination cases. The commission expressed concern that, in the current economic and employment environment, older workers might find that they are discriminated against based on "unlawful age-based stereotypes." The acting EEOC Chairman, Stuart Ishimaru, summed up the EEOC's concern: "Employers' conscious or unconscious stereotypes about older workers may cause them to underestimate the contributions of these workers to their organizations. As a result, older workers may be disproportionately selected for layoffs during reductions-in-force. To then make matters worse, evidence suggests that older workers who lose their jobs may have more difficulty finding another job than their younger counterparts, due to age discrimination." The EEOC clearly seems to be focusing on age discrimination as an area to which it might devote more of its resources.

Of interest to employers facing workforce reductions, at the hearing the EEOC issued an advisory statement on severance agreements and waivers of age-discrimination claims. Federal laws, including the Age Discrimination in Employment Act (ADEA) and the Older Workers' Benefit Protection Act (OWBPA) protect workers who are 40 years old or older. When employers select employees for termination, employers will often offer an employee severance in exchange for a release and promise that the employee will not bring employment-related claims against the employer. Special requirements apply when an employee is asked to waive age-related claims under the ADEA and OWBPA. The EEOC's guidance reiterates and clarifies what those requirements are. Namely, a waiver of age-related claims under the ADEA or OWBPA must meet the following requirements:

  • The waiver must be written in a manner that can be clearly understood (knowing and voluntary).
  • The waiver must specifically refer to rights or claims arising under the ADEA.
  • The waiver must advise the employee in writing to consult an attorney before accepting the agreement.
  • The waiver must provide the employee with at least 21 days to consider the offer.
  • The waiver must give the employee 7 days to revoke his or her acceptance of the offer.
  • The waiver must not include rights and claims that may arise after the date on which the waiver is executed.
  • The waiver must be supported by consideration in addition to anything the employee is already entitled to.
  • The employer must not use fraud, undue influence, or other improper conduct to coerce the employee to sign the waiver.
  • The waiver may not contain a material mistake, omission, or misstatement.

If an employer reduces its workforce by laying off a group of employees (which is 2 or more employees), then the employer must provide the employee with 45 days (not 21) to consider the offer, and must provide the employees with additional information:

  1. A description of the "decisional unit," or the class, unit, or group of employees from which the employer chose whom to eliminate or to whom to offer severance.
  2. A description of the eligibility factors of the program.
  3. The time limits applicable to the program.
  4. The job titles and ages of all workers who are eligible for the program or who were selected for the program.
  5. The ages of all individuals in the same job classifications or organizational unit who were not eligible for the program or selected for the program.

The EEOC's hearing on age discrimination and its decision to issue this advisory statement should serve as a reminder to employers to be aware of the possibility of age discrimination in decisions to terminate a worker's employment. Employers should consult legal counsel on the following: (1) to determine whether to offer a terminated employee a severance package: and if they choose to do so (2) to ensure that any severance and release they propose complies with these and other employment laws. Bullivant's employment lawyers have vast experience with individual and group layoffs and reductions in force, and can assist all employers in navigating this area.