Older Workers Benefit Protection Act: Everything You Need to Know
The Older Workers Benefit Protection Act (OWBPA) was passed by Congress in 1990.8 min read
What Is the Older Workers Benefit Protection Act?
The Older Workers Benefit Protection Act (OWBPA) was passed by Congress in 1990. This act amended the Age Discrimination in Employment Act (ADEA) and was meant to defend the benefits of older employees from age discrimination.
Despite the amendments made by the OWBPA, employers are still allowed to observe "bona fide employee benefit plans" that have distinctions for age as long as those distinctions are determined by cost. Plans that fall into this category include retirement plans, insurance plans, or pensions. Employers are required to give older workers the same amount of benefit payments as younger workers. However, the OWBPA does allow employers to adjust for benefits that cost more for older workers, such as life insurance.
Several practices are made illegal by the OWBPA. The OWBPA prevents employers from discriminating in benefits based on age, firing only older workers when cutting staff, or demanding that older workers waive rights and without taking safeguards into consideration. Intricate and employee-friendly provisions in the OWBPA apply when an employer needs to draft a release agreement or severance package for employees over the age of 40.
When two or more employees are terminated at the same time, the OWBPA requires employers to provide detailed information about the termination. If a release doesn't comply with OWBPA rules, it cannot be enforced. Employees that believe they have been discriminated against unlawfully due to their age should consider hiring an attorney.
Release of Claims Under OWBPA
Employers will commonly seek to reduce their risk of a lawsuit by seeking a general release for employees that are eligible for early retirement benefits or severance payments. If an employee requests a federal age discrimination claims release, employers are required to comply with the OWBPA.
Only age discrimination claims listed in the ADEA are beholden to OWBPA requirements. State law claims, and other types of claims, do not need to comply with the OWBPA.
Four release scenarios are addressed under the OWBPA:
- An employee who was terminated involuntarily and has not filed a lawsuit with the Equal Employment Opportunity Commission.
- Involuntarily terminated employee groups that have not filed a lawsuit based on age discrimination.
- Disputed claim settlements, whether in civil court or with the EEOC.
- Employees who have ended their employment as part of an incentive program.
Employee rights granted by the ADEA and OWBPA can be waived under certain circumstances. When waiving rights to possible age discrimination claims, it is crucial that the "knowing and voluntary" requirement be met.
Layoffs and the OWBPA
When releasing an age claim is considered, employers are required by the OWBPA to disclose the age of employees who have been terminated, as well as the age of the employees that were retained. Employers need to closely monitor which employees fit the OWBPA disclosure requirements for groups or organizational units.
EEOC regulations provide some basis for determining the scope of organizational units and groups. The EEOC holds that it is the responsibility of employers to examine the structure of their organization and their process for making decisions. Previous legal cases have shown the OWBPA requirements are limited in their ability to determine organizational units and groups. Several court decisions have found a group can include employees who are located at different facilities.
Examining how their company is organized and how they selected employees for layoffs will help employees define groups and units under the OWBPA, and will decrease the risk that their waiver will be invalidated.
Provisioning fringe benefits is also protected from age discrimination by the OWBPA. These benefits include disability benefits, health insurance, life insurance, pensions, and retirement. Benefits for older employees may be reduced if the reductions can be justified by cost considerations.
If an older worker is paid less benefits than other workers, it is not considered discrimination if their employer paid each group the same benefit amount. It is also possible for older workers to receive less benefits if this difference is made up by additional benefits provided by the government or their employer.
Each type of fringe benefit has different rules. Employers can find full information about provisioning fringe benefits in the federal Equal Opportunity Employment Commission manual, which can be found on the EEOC website.
When an older worker waives their rights to sue an employer, they must use the correct language and follow required safeguards that have been outlined by the Older Workers Benefit Protection Act. Failure to follow these guidelines may result in the waiver being rejected. Once the waiver has been signed, it means that the older employee is agreeing to not take any legal action against their employer. This includes filing an age discrimination lawsuit. In exchange for the waiver, the employer will generally give their employee an incentive for voluntarily leaving the company.
Traditionally, staff-cutting programs have targeted older workers over other employee groups. The reason that older workers were more frequently terminated in these programs is because they usually received more benefits and were paid more than younger workers.
When an older worker has been given the option to sign a waiver of their rights for an incentive, the OWBPA allows them to take 21 days to decide if they will accept. However, this only applies to waivers that have been offered individually. When a group waiver is offered, each employee in the group is granted a 45-day period to decide if they will sign. Also, if an employee is unsure about their decision to sign the waiver of their rights, the OWBPA allows them seven days to revoke their acceptance.
Restrictions on Agreements Not to Sue
In order to protect employees, there are several restrictions on agreements not to sue that are outlined by the Older Workers Benefit Protection Act. Both employers and employees need to understand these restrictions to ensure that waiver agreements are legal.
One of the main restrictions involves the language used in agreements not to sue. An employer must use language that can be easily understood. Also, the waiver is not allowed to include any claims or rights that the employee could possibly discover after the waiver has been signed. The waiver must also make it clear that it covers all the rights the employee is granted under the ADEA. Something of value must be offered by the employer to the employee in exchange for their signature.
There are also key restrictions for when an employer offers a group of employees a waiver. First and foremost, the employer must detail in writing how they are determining the class of employee being offered the waiver. Employers must also provide information about the age of the individuals in the waiver group, as well as their job titles. Finally, the waiver group must be notified if there are any employees with the same age and title that are not being offered a waiver.
A reasonable amount of time must be given to employees to decide if they will sign the waiver agreement. It's also important to understand that employers cannot attempt to circumvent these requirements in any way. Any waiver that does not comply with these OWBPA restrictions is not legal, and would have the same effect as not sending a waiver at all.
In a case decision, the United States Supreme Court reaffirmed that employees who sign a noncompliant waiver retain their right to bring an age discrimination lawsuit and are not required to return any severance pay resulting from the signed waiver.
Negotiating a Better Deal
If an employee is presented the opportunity to join a staff reduction program, the OWBPA provides the employee additional legal protections.
How to Take Action
When an employee's OWBPA rights have been violated, they may be able to file a charge through the EEOC. Generally, any monetary damages will be restricted to back pay, a sum that is equivalent to a willful violation back pay award, and court costs plus attorney's fees. Should the EEOC determine that the employer willfully violated the OWBPA, the employee may be awarded an additional award that equals their back pay.
When an employee is not satisfied with the EEOC's decision, they have the option of filing a civil lawsuit against their employer.
General Rules for Employees Over 40
For an age discrimination claim to be valid under the OWBPA, the employee's release must have been knowing and voluntary. In addition, the release must have been supplied to the employee in writing. If an employee is over the age of 40, an implied release is not legally allowed.
An employer should not expect to be allowed to hold an employee over 40 to an oral agreement to not file a discrimination claim, even if there was a promise of money or benefits. To avoid an age discrimination claim, employers must write a release in clear language that is free from legalese and can be easily understood by the employee.
If a release is legally complex, the employee may claim they did not understand what they were signing. For instance, if an employee needs to hire a lawyer to help them understand the agreement, the agreement may not be enforceable. Releases cannot be used to mislead the employee in any way, meaning it cannot overstate the benefits the employee will receive or the potential limitations.
There are certain items that cannot be requested in a release. Employment release agreements that require employees to relinquish their ability to file a state or EEOC charge are not allowed. In addition, releases cannot prevent an employee from testifying before a government agency or participating in an investigation. Any prohibitions along these lines aren't legally binding, and including them in a release constitutes an effort to mislead the employee.
A valid release requires the employee to knowingly and voluntarily waive ADEA claims. If a release does not contain a reference to the ADEA, then the ADEA claim cannot be waived.
When an employee signs a release, the release cannot require them to waive any rights after the signing date. Any claims that are caused by facts discovered after the release has been signed are not subject to the terms outlined in the release. A release should direct the employee to seek advice from an attorney before signing. Finally, the employer must give the employee the legally required 21-day deciding period. Any release that does not follow these detailed rules will be legally invalid and unenforceable.
Additional Requirements for Two or More Employees Over 40
If an employer wishes to release two or more employees over the age of 40, there are additional requirements that they must follow.
First, any employee that the employer is seeking to release must be given information about other employees who have been presented the same offer. Also, terminations can be considered multiple terminations under the OWBPA even if they do not occur on the same day. If staggered terminations take place during the decision-making process, they are subject to the OWBPA requirements for multiple terminations.
Employers must provide employees with the following information:
- Program eligibility factors
- Which class, group, or unit was included in the release program, and whether the releases were voluntarily or involuntary
- Applicable time limits
- Ages and job titles of people in the release program
- Detailed information about anyone in the same age group who was not selected for release
Providing employees with this information allows them to make an informed decision about whether they should sign the release form. Releasing this information also provides transparency for the process of how employer's selected employees for termination or inclusion in a voluntary incentive exit program.
When developing a release program and writing a release waiver, employers should work with legal counsel to be sure they are following the correct steps. Despite the existence of a signed release form, the EEOC is still duty-bound to enforce ADEA regulations. Anytime an employee over 40 is offered a release or severance package, OWBPA rules apply. Employees should retain legal counsel to make sure their rights are protected before signing a release.
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