By Monica Maple, Esq.
Consultant to this Program
When managing employees over the age of 40, most employers think only of the Age Discrimination in Employment Act (“ADEA”). However, the Older Workers’ Benefit Protection Act (“OWBPA”) also comes into play. The OWBPA does not grant an employee additional claims, but is intended to ensure that older workers are fully and accurately informed of their rights.
When terminating an employee in a protected class, many times employers wish to offer that employee a small severance in order to avoid any potential legal claims in the future. Employers conducting a reduction in force also occasionally offer employees severance packages to avoid possible claims. In both situations, if the employee(s) is over 40, the OWBPA contains specific requirements that must be met in order for the severance agreement to be valid.
If only one employee is being terminated, you must give the employee 21 days to review the severance agreement and seek the advice of counsel. You must also advise the employee he or she has seven days to revoke the severance agreement after it is executed. Therefore, it is a good idea to make payment to the employee on the eighth day after the release is signed.
The OWBPA requires that the employee’s waiver must be “knowing” and “voluntary.” A “knowing and voluntary” waiver requires the following. There must be additional consideration given for the severance agreement, i.e., monies to which the employee would not otherwise be entitled. For example, if the employee is owed paid time off (PTO time) pursuant to the employer’s policies—that is not sufficient consideration for a severance agreement. There must be additional monies paid over and above the PTO time. The severance agreement must be easy to understand and contain a specific reference to the ADEA and OWBPA. Additionally, there can be no waiver of “after-acquired”, i.e., future rights. Therefore, do not provide the severance agreement to the employee until he is actually terminated.
If there are several individuals over the age of 40 being terminated at the same time or there is a reduction in force, the OWBPA has additional requirements, which must be met. The employees must be given “class information” about all the individuals in their class who are being terminated. Making the determination of what constitutes a class and what information should be provided can be a challenge. An employer should consult an attorney to assist in making these determinations. In addition to the class information, the employees must be given 45 days to review the severance agreement, rather than 21 days.
Employers should be aware that if these requirements are not met, they could pay an employee a severance and still be open to a potential age claim. Therefore, it is very important that all the requirements set forth in the OWBPA be satisfied. In that regard, it is probably in an employer’s best interests to consult an attorney anytime it is attempting to offer a severance to an employee over the age of 40.