What Older Workers Should Know About Severance Agreements and the Older Workers Benefit Protection Act (OWBPA)
The Age Discrimination in Employment Act (ADEA) is a federal law that prohibits employment discrimination against people who are age 40 or older. In 1990, the ADEA was amended to include the Older Workers Benefit Protection Act (OWBPA). The OWBPA provides additional protection for workers aged 40 and older. It sets requirements for employers who offer a laid-off worker severance in exchange for an agreement that the employee will waive their rights under the ADEA.
ADEA Basics
The ADEA is a federal law designed to protect employees over the age of 40 from workplace discrimination based on age. This law applies to businesses with 20 or more employees, including federal, state, and local governments. The ADEA prohibits age discrimination in any employment action, such as hiring, promotions, wages, and terminations.
The Role of the OWBPA
The OWBPA amended the ADEA to specifically address severance agreements. The OWBPA sets strict requirements for employers who want a laid-off worker over age 40 or over to waive any potential age discrimination claims against the company. Under the OWBPA, severance agreements must meet certain criteria to be considered legally enforceable.
Key Severance Agreement Provisions for Employees Over 40
The OWBPA requires that severance agreements for workers 40 years old and older must include the following elements:
- The severance agreement must be in writing and clearly state its terms.
- It must be drafted in clear and understandable language that the employee can easily comprehend.
- The agreement must explicitly state that the employee is waiving their rights under the ADEA.
- Employers must inform employees in writing that they should seek legal counsel before signing the agreement.
- The OWBPA also mandates that employees over 40 must be given sufficient time to review severance agreements before signing:
- Employees must have at least 21 days to consider the severance agreement.
- If part of a group layoff (reduction-in-force or RIF), employees must be given 45 days to review the agreement; and
- After signing a severance agreement, employees have 7 days to revoke their acceptance if they change their minds.
Requirements if the Lay-Off is Part of a Reduction in Force (RIF)
When an employer claims the termination is part of an RIF, the OWBPA requires the employer to also provide the terminated employees with the following information:
- The decisional unit, which is the group of employees who were considered for layoff.
- The eligibility factors and selection criteria used to select employees for the layoff.
- The job titles and ages of all employees who were considered for the layoff, including those who were selected and those who were not selected.
- The notification date and termination date for the layoff.
If you are over 40 and have taken early retirement, been laid off, or been terminated as part of a RIF, and have been offered a severance agreement, it is a good idea to consult with a lawyer before you sign any severance offer and to make sure you understand your ADEA and OWBPA rights. The attorneys at Freking Myers & Reul are here to help.
For more information about the ADEA and OWBPA see: