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Employee Releases

Employee Releases Under the Older Workers Benefit Protection Act

The federal Age Discrimination in Employment Act of 1967 (ADEA) prohibits discrimination against employees 40 years or older because of their age. In 1990, Congress amended the ADEA through the Older Workers Benefit Protection Act (OWBPA). The OWBPA includes specific requirements that employers must meet if they want to obtain enforceable employee releases of ADEA claims.

Employers most often seek releases from employees at the end of employment. They typically offer severance pay or other benefits in exchange for a waiver of claims. But if the release doesn’t meet the OWBPA requirements, then the employee may still be able to claim age discrimination.

(Related: 5 Tips for Firing Problem Employees)

OWBPA Requirements for Employee Releases

  1. The waiver of claims must be part of a written agreement between the employee and the employer. The agreement must be written in a manner “calculated to be understood by such individual, or the average individual eligible to participate.”
  2. The release must specifically refer to rights or claims arising under the ADEA.
  3. The employee cannot waive rights or claims that may arise after the release is signed.
  4. The employee must receive something of value in exchange for the waiver of rights. It must be something that the employee did not already have the right to receive.
  5. The employer must advise the employee in writing to consult with an attorney before signing the release agreement.
  6. The employer must give the employee at least 21 days to consider the release agreement.
  7. The release agreement must give the employee at least 7 days after signing to revoke the agreement. The agreement does not become enforceable before the end of the revocation period.

Additional Requirements for Group Programs

The OWBPA contains additional requirements for waivers connected to an “exit incentive or other employment termination programs offered to a group or class of employees.” This includes both voluntary and involuntary programs. Thus, it applies both to voluntary resignation programs and involuntary reductions in force. Most likely, it applies to any situation where you ask more than one employee to sign a release related to the same decisionmaking process. It does not, however, necessarily apply when an employer fires two employees around the same time, but for unrelated reasons

For group programs, the employer must allow employees least 45 days to consider the release agreement, rather than 21.

In addition, the employer must give the following information to employees at the beginning of the 45-day consideration period:

  • A description of any class, unit or group of employees covered by the program, any eligibility factors, and any applicable time limits.
  • A list of job titles and ages of all employees eligible or selected for the program, and the ages of all employees in the same job classification or organizational unit who are not eligible or selected for the program.

Many employers especially hesitate to provide the age lists required in group programs. However, failing to do so would render the waiver of ADEA claims unenforceable.

Use of OWBPA as a Guideline

The OWBPA only applies to waiver of ADEA claims. Accordingly, many employers choose not to follow all of its requirements for releases by employees under the age of 40. However, an employee could challenge any waiver as unenforceable on basic legal principles. Essentially, an employee could claim that they did not understand what they were signing. Using the OWBPA requirements for all employment releases promotes greater enforceability. If it is good enough for Congress and its federal age discrimination law, shouldn’t it be good enough for all employee waivers?

To reiterate, many employee releases should still be enforceable even if they don’t satisfy some aspects of the OWBPA. But it’s usually not worth taking that risk.

Of course, employers should not try to obtain a waiver of legal claims without the assistance of an experienced lawyer. Each situation may be different and necessitate different approaches.