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What you should know about ADEA waivers in severance agreements

On Behalf of | Jun 9, 2023 | Discrimination

The Age Discrimination in Employment Act of 1967 (ADEA) prohibits age discrimination against employees who are at least 40 years old. The federal law applies to employers with at least 20 employees. This includes hiring, promotion, termination or any other type of discrimination.

That doesn’t mean employers won’t try to get around the law if they are determined to weed out older employees in favor of younger, often lower-salaried ones. They may offer these older employees attractive severance agreements that include a lump-sum payout or continued paychecks and benefits over time. 

However, to avoid multiple age discrimination lawsuits (or a class-action suit), employers started including ADEA waivers in the agreements. These waivers require employees to sign away their right to sue for age discrimination in exchange for a severance package.

How does the OWBPA protect older employees?

Lawmakers took note of this practice and amended the ADEA with the Older Workers Benefit Protection Act (OWBPA) in 1990. It places restrictions on ADEA waivers. These include the following:

  • The waiver must be written in easy-to-understand language.
  • The employee must be given 21 days to consider whether to sign the agreement.
  • The employee has 7 days to change their mind after signing the agreement.

Further, employees should be encouraged by their employers to consult an attorney before signing the severance agreement. This is good advice when signing any kind of employment agreement.

Improvements to the OWBPA over time

When the OWBPA was first enacted, employees who opted to challenge the validity of their ADEA waiver, they were often required to “tender back” the money they’d received as part of their severance agreement before taking their former employer to court. Naturally, this kept a lot of people from pursuing legal action because they needed that money for living expenses.

Both the U.S. Supreme Court and the Equal Employment Opportunity Commission (EEOC) determined that employees didn’t have to give up any benefits included in their agreement to challenge their waiver, nor could they be required to pay the employer for damages or attorney’s fees because they took legal action.

Employees who are presented with a severance agreement, whether it includes an ADEA waiver or not, should take advantage of the time they’re allowed to review it, take time to consider and seek experienced legal guidance as they do.