OWBPA: Everything You Need to Know
The Older Workers Benefit Protection Act (OWBPA) is designed to protect the benefits of older workers. 8 min read
2. Benefits Protections
3. Waiver Rules
4. General Rules for Employees Over 40
5. Additional Regulations for Workers Over 40
7. Employer Mistakes With OWBPA
8. Layoffs and OWBA
9. Severance Rules for Workers Over 40
10. Release of Claims for Workers Over 40
11. Benefit Protection Act (OWBPA)
Updated October 28, 2020:
What Is the OWBPA?
The Older Workers Benefit Protection Act (OWBPA) is designed to protect the benefits of older workers. OWBPA is actually an amendment to the Age Discrimination in Employment Act (ADEA). The act was passed into law in 1990 by Congress.
Employers who have older employees may see differences based upon age in employee benefit plans within life insurance, retirement, pension, and insurance plans. Sometimes these costs are justified, which is why the OWBPA makes a provision for the higher costs.
Despite these higher costs, the employer cannot pay any less for an older worker's benefits than they do for someone who is younger. The OWBPA prohibits age discrimination when certain working benefits are included. These benefits cover life and health insurance, disability and retirement benefits, and pensions. The benefits must also be equal for all workers regardless of age. Exceptions to this rule apply if the older worker receives other benefits from the government or the employer that make up the difference in coverage. There are also rules that vary on the type of benefit. These rules are quite complex.
The OWBPA includes a mandate for employers. This mandate compels employers to use specific words and safeguards intended to protect older workers. Giving up the right to sue a company is a significant request for an older worker because they may not be aware of what they are signing. OWBPA includes requirements to make sure that older workers are not convinced to sign a waiver without fully understanding.
Once a waiver is signed, an employee has legally agreed to give up their right to serve a lawsuit to their employer-based on age discrimination or any perceived wrongdoing. In exchange for signing this waiver, an employer will often provide some sort of benefit to the employee that isn't usually offered, like increased severance pay.
An employer's offer of an incentive might be a red flag that the company wants you gone and is worried that you might file a lawsuit for wrongful discharge. When addressing anything related to employment, it is recommended that discussions and other matters be submitted to all parties in writing. Copies of each written communication and all documents provided by an employer should be kept in the event that they are needed for a claim of some type.
General Rules for Employees Over 40
The OWBPA mandates that an older employee sign a release from age discrimination claims. The release is put in place to prevent employees from unknowingly signing away their right to sue or bring age discrimination claims to the company. The act specifies very specific requirements for this waiver because the older employee must be aware of what they are signing and willingly sign it. The requirements are as follows:
- The release of age discrimination claims has to be written down.
- The release of age discrimination claims must be written so that the employee can easily understand what they are agreeing to.
- It cannot contain any complex language or jargon.
- It must be a straight-forward release that does not mislead or confuse the employee.
- All benefits listed that are being provided to the employee in exchange for signing the waiver must be truthful.
- Waivers cannot state more than will actually be offered. Any limits that will apply to the employee must also be disclosed.
- The release must specifically include the Age Discrimination in Employment Act (ADEA).
- An employee must be made aware of their right to speak with a lawyer prior to signing the release.
- The release cannot require the employee to waive any rights or claims prior to the date it was signed.
- In order to sign the release, the employer must offer the employee additional consideration, plus any benefits that the employee is entitled to.
- An employer cannot use the release as an inducement to receive a final check or payment.
- OWBPA requires the release to include a specified time period to decide whether or not to sign the release.
- This is usually 21 days for an individual employee. The clock on this time period begins on the date that the final offer is made from employer to employee.
- Any material changes to the agreement will reset this time period. However, the employer and employee are allowed to agree to not reset it.
- The employee has 7 days from the time that the agreement is signed, after the consideration period, to change their mind or revoke the release.
- The release cannot be enforced if the 21-day consideration period and the 7-day reconsideration period is not included in the release.
Additional Regulations for Workers Over 40
Additional protection must be extended to a group of workers over 40 if releases are signed. This applies to groups of two or more people.
- Releases extended to the group or class are given a consideration period of 45 days instead of 21 days.
- An employer is required to give all group members details of their agreements.
- The employer has to tell the members of the group or class about the coverage provided by the exit program.
- They must also inform them of the eligibility requirements for the program.
- The employees must also be told of all the time limits involved in the exit program.
- Employers have to inform all members of a voluntary program, the names, ages, and titles of all eligible employees of the program. If involuntary, just the names and ages.
- Individuals in a certain job type, classification, or organization must be told by the employer who was not eligible for the program and include their ages.
By providing this information, employees will know what process the employer used to select the involuntary employees. Voluntary employees will also know who will be eligible next. Employers are advised to seek the counsel of a lawyer about drafting the releases, all of the requirements that apply to them including the time periods, and any additional inducements that are going to be added.
The Equal Employment Opportunity Commission (EEOC) can enforce the ADEA and any other applicable laws even though a release has been signed. A release may not include any language that would prevent or prohibit an employee from filing a complaint with the EEOC. It also will not stop an investigation into the matter by the EEOC.
With the economic recovery, many employers "are out of practice" with the Worker Adjustment and Retraining Notification (WARN) Act and Older Workers Benefit Protection Act (OWBPA).
Employers count to see whether they have 100 or more employees working 20 hours or more a week for at least six months. Under the WARN Act, notice is required to be given to employees if at least 50 employees are fired within a 30-day period. These 50 people must compose 33 percent of the workforce in the department or area where the layoffs are made. Notice is also given automatically once 500 employees are laid off. Frequent layoffs related to one another are counted together if they happen within 90 days.
Although the WARN Act is commonly associated with manufacturing plants, it could apply to a grocery store, retail, office, or law firm; it could be any business. The WARN Act also requires notice to state dislocated worker units and the chief elected officials of local governments.
A faltering company exemption requires that the business be looking for financing when it would have been giving notice, and courts have been strict about that requirement.
Employer Mistakes With OWBPA
Occasionally, employers have met with stumbling blocks with OWBPA severances. In one example, the severance offers only provided 21 days to consider the offer, despite being offered during a reduction in force when multiple employees were being terminated. Another severance offer failed to include the list of employees who were losing their employment and those who were not.
The OWBPA rules and requirements are very detailed. Employers must know the law and proceed accordingly in any situation dealing with older workers.
Layoffs and OWBA
Regarding restructuring and layoff programs and early retirement plans, the OWBPA requires employers to provide information about the ages of both terminated and retained employees to those who are considering releasing their age claims.
Deciding which employees comprise the group or organizational unit for the OWBPA's disclosure requirements can be a logistical nightmare for an employer. The EEOC regulations offer some assistance in defining the scope of the group or organizational unit. The EEOC's stance is that employers should examine their organizational structure and decision-making process.
Case law interpreting the OWBPA's requirements is somewhat limited on how to define a group or organizational unit. In order to avoid waivers being invalidated, an employer should look at how groups and organizational units are defined under the OWBPA. Based on this information, the layoffs should be structured based on how units are organized. Finally, determine which people would be laid off and those who would not.
Severance Rules for Workers Over 40
For an employee who is 40 years old or older, the detailed, employee-friendly provisions contained in the Older Workers Benefit Protection Act (OWBPA) apply. The Older Workers Benefit Protection Act, which is part of the Age Discrimination in Employment Act ("ADEA"), requires employers to follow a strict timeline to get a valid release of any age discrimination claims.
The Older Workers Benefit Protection Act also requires employers to provide additional, detailed information when two or more employees are terminated at or around the same time.
Although the OWBPA most commonly applies in the context of involuntary terminations and reductions-in-force, its strict rules apply equally to early retirement plans, exit incentive plans, and other voluntary departures where an employee is asked to sign a release.
Selecting which employees to lay off is tricky enough, but Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and OWBPA make it that much more difficult. A layoff may not discriminate based on race, sex, disability, or age for employees who are 40 years or older.
Before selecting who goes, it's a good idea to develop objective criteria for what makes someone good enough to keep. Criteria might range from seniority to attendance to performance review ratings, or some combination of these factors. While employers can't get a release of wage and hour claims, they can get an admission that the employees are not aware of any overtime owed to them, which can help challenge their credibility if they sue.
Release of Claims for Workers Over 40
When it comes to issuing severance payments, voluntary or involuntary, or giving early retirement, employers like to reduce their risk as much as possible. The most common way to do this is to draft a release form for employees to sign. A release reduces the chance that an employee will sue over who the company decides to let go of.
Whenever employers seek a release of federal age discrimination claims, they must comply with the Older Workers Benefit Protection Act.
Benefit Protection Act (OWBPA)
It is important to note that the Older Workers Benefit Protection Act's requirements apply only to the release of age discrimination claims under the Age Discrimination in Employment Act (ADEA). The release of all other claims, such as state law claims, is not affected by compliance with the OWBPA. OWBPA allows for several different release situations. They are:
- An involuntarily released employee who hasn't charged the employer through the EEOC or sued the company.
- Employees who were terminated as a group and have yet to file a lawsuit or age discrimination claim.
- Terminations that are disputed with an EEOC claim or lawsuit.
- Employees who volunteered to end their employment due to some type of incentive.
If you believe that an employer has violated your rights under the Older Workers Benefit Protection Act, you can file a complaint with the EEOC just as you would against any other workplace discrimination. If the EEOC does not resolve your complaint to your satisfaction, you may decide to pursue your complaint through a lawsuit.
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