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Older-Worker Protections Affect Release of Claims

November 5, 2019
Any employer considering adopting a release of claims to manage employee reduction or resolve employment litigation needs to consider many different issues. One of the key ones has to do with the impact of the Older Workers Benefit Protection Act (OWBPA), a federal law designed to protect the interest of older workers.
A release of claims is a contract between an employer and an employee that specifies the terms of an employment termination. Like any contract, it must have consideration - something of value to which a person is not already entitled given in exchange for an agreement to do, or refrain from doing, something.
For example, an additional lump-sum payment of a percentage of the employee’s annual salary or periodic payments of the employee’s salary for a specified period of time after termination would constitute consideration.  
A key issue in any release of claims will be whether the employee’s agreement to sign the release was “knowing and voluntary.” 
In addition to being knowingly and voluntarily signed, an agreement must: 
  • offer some sort of consideration, such as additional compensation, in exchange for the employee’s waiver of the right to sue; 
  • not require the employee to waive future rights; and 
  • comply with applicable state and federal laws. 
How do the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act, impact the content of a release? 
OWBPA lists seven factors that must be satisfied for a waiver (ceding of rights) of age-discrimination claims to be considered “knowing and voluntary.”  They are: 
  1. A waiver must be written in a manner that can be clearly understood.
  2. A waiver must specifically refer to rights or claims arising under the ADEA.  
  3. A waiver must advise the employee in writing to consult an attorney before accepting the agreement.
  4. A waiver must provide the employee with at least 21 days to consider the offer.  
  5. A waiver must give an employee seven days to revoke his or her signature.   
  6. A waiver must not include rights and claims that may arise after the date on which the waiver is executed.   
  7. A waiver must be supported by consideration in addition to that to which the employee already is entitled.
The law also makes it clear that the release will be unenforceable and invalid if an employer used fraud, undue influence, or other improper conduct to coerce the employee to sign it, or if it contains a material mistake, omission, or misstatement. An example of a mistake here would be providing an employee a release of claims and insisting employee sign it that day.
Group layoffs of older employees 
A group of employees for the purposes of this law means two or more. An employer as part of the termination process must give its all employees in the group written notice of the layoff and up to 45 days to consider the waiver before signing it.  Specifically, the employer must inform employees in writing of:
  • the class unit, or group of employees from which the employer chose the employees who were, and who were not, selected for the program;
  • eligibility factors for the program; 
  • the time limits applicable to the program;
  • the job titles and ages of all individuals who are eligible or who were selected for the program (the use of age bands broader than one year, such as "age 40-50" does not satisfy this requirement) and 
  • the ages of all individuals in the same job classifications or organizational unit who are not eligible or who were not selected.
Finally, while most signed waivers are enforceable if they meet certain contract principles and statutory requirements, an employer may not limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the Equal Employment Opportunity Commission (EEOC) or prevent an employee from filing a charge of discrimination with the EEOC or the state anti-discrimination agency.  
Anytime an employer seeks to use a release, the process will be a complicated and complex one. An employer considering a release should consult with outside legal counsel to make sure that it is drafted it correctly, is up-to-date with new changes in the law, and follows all the terms of the different laws involved.
AIM members with questions about this or any other HR-related issue may call the AIM Employer Hotline at 1-800-470-6277.
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