Wednesday, March 25, 2020

COVID19 Downsizing/Early Retirement or Voluntary Severance Agreements and Age Discrimination

By Casey Erick

During these uncertain times, employers are confronted with difficult choices, least of which is whether they can maintain their current workforce.  When considering layoffs or "downsizing" plans in an effort to reduce labor costs, employers may use various incentive packages to induce employees to retire early or resign.


The Age Discrimination in Employment Act (ADEA) forbids age discrimination against people who are age 40 or older. It does not protect workers under the age of 40, although some states have laws that protect younger workers from age discrimination. Age discrimination concerns are especially important if an employer is considering using early retirement/voluntary severance agreements.  


If an employer uses releases from age discrimination claims in exchange for severance pay, the employer must comply with the Older Workers Benefit Protection Act (OWBPA) to effectively release claims under the Age Discrimination in Employment Act. 


The OWBPA lists seven factors that must be satisfied for a release  of age discrimination claims to be considered “knowing and voluntary.”  At a minimum, the agreement must:

 

  1. be written in a manner that can be clearly understood;
  2. specifically refer to rights or claims arising under the ADEA;
  3. advise the employee in writing to consult an attorney before accepting the agreement;
  4. provide the employee with at least 21 days to consider the offer;
  5. give an employee seven days to revoke his or her signature;
  6. not include rights and claims that may arise after the date on which the waiver is executed; and
  7. be supported by consideration in addition to that to which the employee already is entitled.

If any of these requirements is lacking, the release is invalid and unenforceable. In addition, an employer cannot “cure” a defective waiver by issuing a subsequent letter containing OWBPA-required information that was omitted from the original agreement.

See our COVID-19 Quick Reference page for additional articles.

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