October 1998

Workplace Labor Update - Waivers for Older Workers – October 1998

4 min

On June 5, 1998, eight years following the enactment of the Older Workers Benefit Protection Act (OWBPA), the EEOC issued a final rule governing waivers of rights and claims under the Age Discrimination in Employment Act. Under the OWBPA, an individual may not waive any ADEA right or claim unless the waiver is "knowing and voluntary," and the OWBPA establishes minimum statutory requirements for determining whether a waiver meets that standard. The EEOC's final rule provides much needed guidance to assist employees and employers in understanding their respective rights and obligations under the OWBPA's waiver provisions.

The new rule requires that waivers be in writing and be drafted in plain language geared to the level of understanding of the individual signing it. Accordingly, employers should take into account factors such as the employee's level of comprehension and education and should eliminate as much legalese from the agreement as possible. The final rule also requires that a waiver specifically refer to the ADEA and advise the employee to consult with an attorney before signing it.

A waiver agreement cannot provide for the waiver of rights regarding new acts of discrimination that occur after the date the agreement is signed. However, the rule does not prohibit promises to perform employment-related actions in the future, such as an employee's agreement to retire or resign at a future date. The final rule also clarifies that a release is effective only if it is supported by consideration beyond the compensation or benefits to which the individual is already entitled. An employer is not required to give a person age 40 or older a greater amount of consideration than employees under age 40 simply because of that person's age.

Among the most significant aspects of the new rule are the provisions explaining what is necessary for a decision to sign a release to be considered knowing and voluntary. The new rule clearly states that unless the agreement provides the employee with a specified time to consider the agreement before signing it, and to revoke the agreement after signing it, the agreement will not be considered knowing and voluntary, and hence will be unenforceable. In this regard, the rule provides that employees over age 40 must be given 21 days to consider signing the agreement or, in the event of an exit incentive or other employment termination program such as a mass layoff, 45 days to consider the agreement. This period runs from the date of the employer's final offer; material changes to the offer will restart the running of the 21- or 45-day period unless the parties expressly agree otherwise. The agreement also must allow a mandatory period of seven days for the individual to revoke the agreement after signing. During the seven-day period, the agreement is not effective or enforceable. Unlike the consideration period, the seven-day revocation period may not be shortened by agreement of the parties.

In connection with an exit incentive or other termination program, detailed information must be provided to employees who are asked to sign a release in order to provide them with enough information to make an informed decision. This information includes any eligibility factors and time limits applicable to the program, the job titles and ages of all individuals selected, and the ages of all individuals in the same job classification or organizational unit who are not selected to participate. According to the EEOC rule, any standardized formula or package of benefits available to two or more employees is likely to constitute a program requiring disclosures to employees.

Finally, the rule states that a release may not include a provision barring the individual from filing a charge with the EEOC. Ultimately, if a dispute arises over the validity of the agreement, the party asserting its validity will have the burden of proving that the waiver was knowing and voluntary.

The EEOC's new rule on waivers could have a significant impact on employers. At a minimum, the rule requires that employers contemplating layoffs carefully consider whether to seek waivers, and if waivers are sought from employees over age 40, employers must ensure that they comply with the detailed obligations of the OWBPA. For employers who routinely request releases, the rule dictates that the model release, if any, be reviewed and updated to ensure compliance with the new EEOC rule.