Friday, February 3, 2017

OWBPA Basics

We have found that the Older Workers Benefit Protection Act (OWBPA) is a source of confusion and misunderstanding for some of our clients. Even experienced HR professionals and in-house counsel have questions about what it requires. Here are some basic facts about the 1991 amendment to the federal Age Discrimination in Employment Act (ADEA).
What’s it about? The OWBPA was passed to help protect workers over 40 from giving up their rights under the ADEA without fully understanding what they’re doing. It’s focused on situations in which employers ask employees to sign a release of claims in exchange for severance pay.
Who’s covered? Generally, employers with more than 20 employees.
Who’s protected? Employees over 40 who are being terminated voluntarily or involuntarily, and who are asked to release any age discrimination claims they may have in exchange for some consideration—usually, severance pay.
What does the law require? Quite a bit - and all its requirements are intended to ensure that any waiver of ADEA rights by a departing employee is “knowing and voluntary.” To accomplish that, the OWBPA insists that any release of ADEA claims:
  • Is written in plain language that can be clearly understood;
  • Specifically refers to ADEA rights or claims;
  • Advises the employee in writing to consult an attorney before signing the agreement;
  • Provides the employee with at least 21 days to consider the offer;
  • Provides the employee with at least 7 days after signing to change his or her mind (note that state law may require a longer revocation period);
  • Does not cover rights or claims that arise after the waiver is signed; and
  • Is in exchange for consideration that’s more than what the employee is already entitled to.
That’s complicated.  What else? There’s more required when a group termination occurs. If an employer carries out a reduction in force or offers a group of employees a termination incentive program, and even one of the affected employees is over 40, there are additional notice and consideration period obligations:
  • All of the requirements listed above have to be met;
  • Each employee, regardless of age, has to be given 45 days to consider the proposed release before signing it; and
  • Each employee must be given specific information about the titles and ages of both affected and unaffected members of the work group (“decisional unit”) involved in the group termination.
A “group” termination program subject to the OWBPA’s enhanced notice requirements occurs whenever more than one employee is terminated during a six-month period as part of the same decision-making process.
What’s the penalty for failure to follow OWBPA requirements? It’s an invalid, unenforceable release. If an employer neglects or fails to do what the OWBPA requires, any release signed by a protected employee is void as to ADEA claims. Non-ADEA claims are not affected, but an employer may face a federal age discrimination claim even though the employee has been paid to release such a claim. 
Is that it? Like all anti-discrimination laws, the OWBPA and the ADEA are dense, detailed statutory provisions. What we’ve included here are the basics, but you may need to know more if you’re facing a reduction in force or even the termination of a single employee over 40. It will be worth the effort to dig into the law or get expert advice, because the price of non-compliance can be very high.