New Regulations on Age Bias Waivers Go into Effect
The EEOC has published new rules on the waiver of discrimination claims under the Age Discrimination in Employment Act ("ADEA"). These new regulations went into effect on July 5, 1998. Because employers may wish to obtain waivers as part of an employee's severance pay package (see Releases), these new rules much be taken into consideration.
Wording of Waiver Agreements
The regulations provide that the waiver agreement must be in writing and drafted in plain language, and they include guidance on the meaning of "plain language." Many of the waiver agreement requirements contained in the ADEA are repeated in the regulations. These requirements include:
exit incentive programs offered to a class of employees must be "conveyed in writing in a manner calculated to be understood by the average participant."
waiver agreements must specifically refer to rights or claims under the ADEA.
an individual who is asked to sign a waiver must be "advised in writing to consult with an attorney prior to executing the agreement."
Waiver of Future Rights
The regulations restate the ADEA requirement that a waiver is not valid if the individual is waiving "rights or claims that may arise after the date the waiver is executed." The regulations make it clear, however, that an employee's agreement to retire or otherwise terminate employment at a future date is valid.
Consideration
The ADEA requires that for a waiver to be "knowing and voluntary," an individual's waiver of his or her rights or claims must be in exchange for consideration in addition to anything of value to which the individual already is entitled." The regulations provide that such "consideration" may not include a benefit or other thing of value that was eliminated in contravention of law or contract. The employer is not required to give a person age 40 or older a greater amount of consideration than is given to a person under the age of 40 solely because of that person's membership in the protected class under the ADEA.
Time Periods
The ADEA requires that an individual be given at least 21 days to consider the agreement; if the waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, the individual must given at least 45 days to consider the agreement. In addition, the individual must be able to revoke the agreement within 7 days after signing it.
The regulations specify that "exit incentive or other employment termination programs" include both voluntary and involuntary programs. The regulations also specify that the 21 or 45 day period runs from the date of the employer's final offer, and that material changes to the offer restart the time period the individual must be allowed to consider the agreement. Under the regulations, when a change is made to the employer's offer, the parties may agree that changes, whether material or not, do not restart the running of the 21 or 45 day period. By contrast, the 7 day revocation period cannot be shortened by agreement.
An employee may accept and sign a waiver agreement prior to the expiration of the 21 or 45 day period, and the 7 day revocation period begins to run on the date the agreement is signed. The employer may not mislead the individual into believing that the offer will be withdrawn if he or she does not sign the agreement by some time prior to the expiration of the 21 or 45 day period. The employer is, however, allowed to expedite the processing of the consideration provided in exchange for the waiver without invalidating the agreement.
Informational Requirements
When a waiver is offered to a group or class of employees in connection with an exit incentive or other employment termination program, the ADEA requires that the employer provide certain information regarding the class, unit or group of individuals covered by the program, eligibility factors for the program, and time limits applicable to such a program. In addition, the employer must give the job titles and ages of all individuals eligible or selected 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. The regulations provide that a "program" exists when an employer offers additional consideration for the signing of a waiver pursuant to an exit incentive program (usually voluntary) or other employment termination program (usually involuntary; e.g., a reduction in force) to two or more employees. The "program" need not be an ERISA severance plan.
The regulations clarify to whom the information must be provided-- a new group called the "decisional unit." The "decisional unit" is defined in the regulations as "that portion of the employer's organizational structure from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not."
The regulations provide that the decisional unit is typically no broader than the "facility," so that the disclosure usually need not be broader than to all employees in the facility. The regulations provide the following examples of decisional units that are different from the entire facility:
A. A number of small facilities with interrelated functions and employees in a specific geographic area may comprise a single decision unit;
B. If a company utilizes personnel for a common function at more than one facility, the decisional unit for that functions (i.e., accounting) may be broader than the one facility;
C. A large facility with several distinct functions may comprise a number of decisional units; for example, if a single facility has distinct internal functions with no employee overlap (i.e., manufacturing, accounting, human resources), and the program is confined to a distinct function, a small decisional unit may be appropriate.
The information presented to the individuals in the decisional unit must be in writing. The age of each individual must be provided; the use of age bands broader than one year (e.g., " age 40-45") does not satisfy this requirement. Breakdowns must be provided for all established grade levels and/ or subcategories within each job category in the decisional unit. If an employer combines information in its disclosure concerning both voluntary and involuntary terminations, the information about the voluntary program must be distinguished from the information about the involuntary program.
When the employer selects terminees from a subset of a decisional unit, the employer must still provide the information for the entire decisional unit. For example, if the employer decides that a 10% reduction in force is required in the accounting department, and that the terminees will come from the accountants performing at the bottom 1/3 of the department, the employer must disclose information for all employees in the accounting department.
Special rules apply when an employer implements an involuntary termination program in a decisional unit in successive increments over a period of time. In this case, the information supplied should be cumulative, so that later terminees are provided ages and job categories for all persons in the decisional unit at the beginning of the program and all persons terminated to date. The employer has no duty to supplement the information given to earlier terminees.
Waivers Settling Lawsuits and Charges
A waiver in settlement of a lawsuit or a charge filed with the EEOC alleging age discrimination prohibited by the ADEA may not be considered "knowing and voluntary" unless the individual is given a "reasonable period of time within which to consider the settlement agreement." The reasonableness of the time period is determined by in light of all of the circumstances, including whether the individual is represented by or has the assistance of counsel.
While the 21 day and 45 day time periods discussed previously are not required in the case of a waiver offered to settle a lawsuit or charge, if the individual is given the same amount of time as is required for waivers offered during a voluntary or involuntary termination program, the time period will be considered "reasonable."
The EEOC is not required to participate or to supervise a waiver agreement in settlement of an EEOC charge.
Burden of Proof
If a dispute arises over the validity of a waiver, the party asserting the validity of the waiver bears the burden of proving that the waiver was knowing and voluntary pursuant to ADEA § 7(f)(1) or (2).
EEOC'S Enforcement Powers
The EEOC's rights and responsibilities to enforce the ADEA may not be affected by a waiver agreement. No waiver may be used to justify interfering with the protected right of an employee to file a charge or participate in an investigation or proceeding conducted by the EEOC.
The regulations expressly prohibit the inclusion in waiver agreements of provisions prohibiting an individual from: (i) filing a charge or complaint, including a challenge to the validity of the waiver agreement, with the EEOC, or (ii) participating in any investigation or proceeding conducted by the EEOC.
The regulations also prohibit the inclusion in a waiver agreement of any provision imposing any condition precedent,
any penalty, or any other limitation adversely affecting any individual's right to: (i) file a charge or complaint,
including a challenge to the validity of the waiver agreement, with the EEOC, or (ii) participate in any investigation
or proceeding conducted by the EEOC.
Kollman & Saucier, P.A., The Business Law Building, 1823 York Road, Timonium, MD 21093 Phone: 410-727-4300
Fax: 410-727-4391 © 2008 Kollman & Saucier, P.A. All rights reserved.
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