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Compliance with the ADEA/OWBPA

The Age Discrimination in Employment Act of 1967 (ADEA) was enacted to prohibit discrimination against older workers (ages 40 and over) relative to employee benefits. The ADEA applies to employers with 20 or more employees and includes governmental employers and labor unions. The ADEA bans discrimination against older workers based on any term, condition, or privilege of employment.

After the United States Supreme Court decided Ohio v. Betts in 1989, Congress amended the ADEA by passing The Older Workers Benefit Protection Act of 1990 (OWBPA). The OWBPA further clarifies Congress's original intent relative to age-based discrimination in the area of employee benefits. Under the OWBPA, an employee may reduce benefits for older workers only when the cost of providing reduced benefits is the same as it is for younger workers. An employer cannot prevent an older employee's pension from accumulating or accruing if the employee works past normal retirement age. The practice of forcing older workers to take early retirement is also addressed.

The ADEA, as amended by the OWBPA, also targets the practice of focusing on older workers when work force reductions occur. When an older worker is terminated from his or her job, an employer may request the older worker to execute a waiver of rights under the ADEA if the waiver meets certain minimum requirements, as follows: (1) the waiver must be in writing and understandable to the reader(s); (2) the waiver must explain the employee's rights and claims under the ADEA; (3) the waiver must be executed in exchange for "valuable consideration" over and above anything of value that the employee is already entitled to receive; (4) the employee must be advised to consult with an attorney before executing the waiver; (5) generally, the employee must be advised that he or she has the right to consider the waiver for 21 days and, if the waiver involves early retirement or "exit" incentive programs offered to a group of employees, the employee must have at least 45 days to consider the waiver agreement; (6) the employee must have the right to revoke the waiver within 7 days after signing the waiver; and (7) the employee cannot be asked to waive future claims or rights that may arise after the waiver is executed.

Additional information is required depending on the specific circumstance of the termination. For example, additional requirements are necessary in the event of a massive layoff or when early retirement programs are implemented. When a retirement or exit incentive program is proposed to a group of employees, the waiver must advise of the group covered by the proposed program, the eligibility requirements for the program, the job titles and ages of the employees who are and are not eligible for the program, and any time limits for participation in the program.

If the procedural requirements are not met, it is of no consequence that the employee later accepts severance pay. The acceptance of additional consideration or failure to tender back that consideration before mounting a challenge to the waiver does not ratify an otherwise defective waiver. By federal regulation, an employee has the right to challenge any executed waiver in court to determine whether the waiver was executed knowingly and voluntarily. Courts addressing the issue have either concluded that the failure to comply with the OWBPA waiver requirements voids the waiver or renders it merely voidable.