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Older Workers Benefit Protection Act: Compliance tips

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in Employment Law,Human Resources

The Older Workers Benefit Protection Act forbids discrimination by employers based on age when providing employee benefits, like severance. The OWBPA also ensures that no employee is coerced or pressured into signing legal waivers of rights under the Age Discrimination in Employment Act (ADEA).

In 1990, Congress enacted the OWBPA to protect older workers from discrimination by employers based on age, when providing employee benefits, including severance benefits.  The Act, which amends the Age Discrimination in Employment Act (ADEA), ensures that older workers are not compelled or pressured into waiving their rights under the ADEA.

The ADEA prohibits employers from discriminating against employees 40 years of age or older, in any conditions or terms of employment. 

Under the OWBPA, employees eligible for early retirement incentive plans must be provided with complete and accurate information concerning what benefits are available under the plan.  If certain conditions of the OWBPA are met, employees may legally sign waivers of their ADEA rights to sue for age discrimination.

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Key Definitions

Older workers are employees who are 40 years of age or older as defined under the ADEA.

Waivers involve voluntary relinquishment of a known right.  A waiver is sometimes referred to as a release.

Conditions Required for Waiver

There are eight main conditions an employer must provide in its retirement waiver in order to comply with the OWBPA.

  1. The waiver must be part of an agreement between the employer and the employee and must be written in clear and unambiguous language, absent of any jargon or legalese, and “calculated to be understood” by the employee.

  2. The waiver must specifically refer to rights or claims arising under the ADEA, i.e., discrimination because of age in employment or employment benefits.

  3. An employee may not waive rights or claims which may arise after the date the waiver is executed.

  4. In return for signing the waiver, the employee must be given something more than what he/she is already entitled to by right.  If an employer provides a severance package to all employees as a matter of right, then older employees must be given something of value in excess of the severance pay in exchange for their waiver of ADEA rights.

  5. The employee must be advised in writing to consult with a lawyer before signing the agreement.

  6. The employer must provide employees with sufficient time to consider the waiver.  Before signing the agreement, an employee negotiating a waiver must be given 21 days to consider the matter.  If the employee is part of a group of employees being offered an early retirement incentive program or other employment termination program, he/she must be provided 45 days to consider the matter before signing the agreement.

  7. After signing the agreement, the employee has seven days to revoke it, and the agreement is not effective until the end of the seven days.

  8. Prior to the execution of any waiver in connection with an incentive or other employee retirement termination program offered to a group of employees, the employees must be informed in writing about the class, unit, or group covered by the program, any eligibility factors for the program, and any applicable time limits.  The employer also must make clear to employees the job titles and ages of all individuals eligible for the program, and the ages of all individuals in the same job classification, or organizational unit who are not eligible or selected for the program.

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