Age discrimination is against the law and employers have often tried to get around age discrimination claims by holding severance pay as a hostage to signing an age discrimination waiver. The Equal Employment Opportunity Commission (“EEOC”) has issued regulations regarding severance agreements that are signed by people who could file an age discrimination claim.  The employee now has an easier time collecting offered severance pay from the employer while at the same time challenging age discrimination releases and waivers in the severance agreement.

The Age Discrimination in Employment Act of 1967 (“ADEA”) applies to employers with 20 or more employees and prohibits age discrimination against employees 40 years of age or older. 

ADEA waivers

In some cases, an employer might offer a severance agreement that includes a waiver of a right to file an age discrimination claim.  Such a waiver under ADEA is a legal agreement in which the employee gives up the right to file an age discrimination claim against the employer in exchange for something of value like early retirement benefits or a severance package.

Congress was concerned that an exiting employee might be duped or coerced into signing this agreement, and passed  the Older Workers Benefit Protection Act (“OWBPA”) as an amendment to the ADEA. 

Provisions of OWBPA

The OWBPA established certain minimum requirements that must be met in order for an ADEA waiver to be valid. Those minimum requirements, among other things, require waivers be written in plain English and give employees a twenty-one day consideration period.  It must also encourage employees to consult legal counsel and provide a seven-day period which they can back out of the agreement.

During the 1990”s, legal disputes arose concerning whether an employee could challenge an ADEA waiver in court without first having to return the severance money the employee received from the employer for the waiver. 

In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the United States Supreme Court resolved this matter, holding that older workers are not required to give back severance money to their employers before filing ADEA lawsuits. 

The reason for the Court’s decision was the an older worker often needs the severance money to make bills and that forcing the worker to give back the money in order to make a claim would be tantamount to financial blackmail to avoid a legitimate claim being filed.

In December 2000, the EEOC issued new regulations reaffirming and expanding the U.S. Supreme Court”s decision. The regulations, entitled “Waivers of Rights and Claims: Tender Back of Consideration”, became effective January 10, 2001 and in summary, provide:

An older worker does not have to “tender back” (give back) severance pay or other benefits before filing a lawsuit to challenge an ADEA waiver;

• An employer cannot avoid the “no tender back” rule by contractually requiring an employee to pay damages, costs or attorneys” fees for having filed suit 
• An employer may only recover severance monies paid if the employee successfully challenges the validity of his waiver and wins on his age discrimination claim.  But.the employer is, at the court’s discretion, limited to recovering the lesser of: (a) the amount the company paid for the ADEA waiver; or (b) the amount of the employee’s ADEA award;  In other words, the employee would probably not be able to keep both the settlement amount or award AND the severance pay, but would be allowed to keep the larger of the two. 
• An employee’s lawsuit does not stop the employer’s commitments under the severance agreement (i.e. the employer must continue making severance payments it agreed to provide to the employee); and Waiver is an affirmative defense to an ADEA lawsuit so a case will only be dismissed if the employer can prove the employee’s waiver was valid under the OWBPA.

What does all this mean to seniors who are being terminated or laid off?  

Essentially, you must give due consideration to any documents that you sign when you leave.  And of course, you are entitled to have an attorney review these documents before you sign them and even after you sign them.

You also have rights regarding the waivers including that you must understand what it is that you are signing.  Nobody can say that you must sign them now or forget it, and even if you do sign them, you have a solid week to reconsider and undo your agreement.

It also means that if you have signed such a waiver, it does not necessarily mean that you cannot pursue an age discrimination claim against the employer and that if you make that claim, you cannot be compelled to give back the severance payments or the employer cannot suddenly stop making them to you.

What it does not mean:  If the employer has fulfilled all of their duties under ADEA and OWBPA, you cannot just sign the agreement and sometime later hope that you are going to get both your severance pay and successfully file an age discrimination claim.  

You are given a window of opportunity here, but at some time, that window does close and you don’t have unlimited recourse against your old employer.  At some time (and you don’t have for ever), you must make a decision as to whether you will accept the terms of the severance agreement and the associated terms, or if you will pursue legal recourse.

Seek legal counsel early 

It is recommended that you seek professional legal counsel in making this determination.  There is the opportunity to have someone who has experience in these matters take a look at your situation and help you determine first, whether age discrimination has likely occurred, and if so, if it is reasonable that it can be proven.

If you think that you have been discriminated against because of your age, you should make an appointment with an attorney early.  This kind of decision potentially can involve a great deal of money and there are often very few hard facts.  It can take time to pull together all of the circumstantial evidence to determine if there is a reasonable case for age discrimination. 

You owe it to yourself to have the most time possible to determine as many facts as you can and have the most time to consider all of your options.