With the economic downturn, many employers are looking at reductions in the workforce as a means of survival. Employers often focus on those employees who are eligible for retirement, or nearly so, because they have generally been with the company the longest and are therefore some of the most expensive employees on the payroll. However, employers must be careful when planning and implementing any reduction in the workforce not to run afoul of statutes prohibiting age discrimination.
Age discrimination claims are common when there is a reduction in workforce, particularly of long time employees. The Older Worker Benefits Protection Act ("OWBPA"), which amended the Age Discrimination in Employment Act ("ADEA"), prohibits discrimination in employee benefits. The OWBPA also established specific requirements for a "knowing and voluntary" waiver of ADEA claims. Employers commonly request such a waiver when offering an early retirement program or when implementing a reduction in workforce, whether voluntary or involuntary.
For a release or waiver of ADEA claims to be knowing and voluntary, it must meet the following requirements:
- The waiver must be part of an agreement between the individual and the employer that is written in a manner calculated to be understood by the employee or by the average person eligible to participate.
- The waiver must specifically refer to rights or claims arising under the ADEA.
- The waiver must state that the individual does not waive rights or claims that may arise after the date the waiver is executed.
- The waiver must provide that the individual waives rights or claims only in exchange for consideration that is in addition to anything of value to which the individual is already entitled.
- The waiver must state that the individual has been advised in writing to consult an attorney prior to executing the agreement.
- a. If the program is offered to just one person, the waiver must give the individual a period of at least twenty-one (21) days within which to consider the agreement;
b. If the waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, it must give the individual a period of at least forty-five (45) days within which to consider the agreement.
- The waiver must provide that, for a period of at least seven (7) days following the execution of the agreement, the individual may revoke the agreement, and the agreement shall not become effective or enforceable until the revocation period has expired.
- If the waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, the employer must provide each employee in the group or class the following information presented so that the employee is likely to understand it:
- a. The group, class or unit of individuals covered by the program;
b. Any eligibility factors for the program;
c. Any time limits applicable to the program;
d. The job title and ages of all individuals eligible for or selected for the program; and
e. The ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.
The OWBPA applies to both voluntary and involuntary terminations. A "group or class of employees" is not defined within the OWBPA, but case law appears to interpret that phrase literally. That is, there is a "group or class of employees" anytime more than one employee is involved.
It should be emphasized that there must be sufficient consideration for the ADEA waiver to be valid. This means that the employee must receive something over and above the benefits and/or pension to which that is already entitled. Without the additional consideration, the ADEA waiver will not be valid.
Some courts have concluded that failure to follow the OWBPA requirements means that the ADEA waiver is automatically void. Other courts have concluded that failure to follow the OWBPA means the waiver is merely voidable. Nevertheless, employers should be aware that failure to follow the OWBPA requirements will very likely result in an invalid ADEA waiver.