Over 40 and Recently Laid Off? Age Discrimination and Severance Agreement Requirements for Employees Over 40

Today, I was contacted by a client who was recently laid off. This individual, who was over 50 years old, sent me the Severance Agreement presented to him by his employer in connection with his termination of employment, along with a few other documents.  The employer indicated that the reason for the layoff was a company restructuring. But before a company can terminate the employment of an individual 40 years of age or older, they must carefully review certain laws that are meant to protect these individuals, otherwise the company could be faced with paying for both a severance package and a lawsuit. For instance, the Older Workers Benefits Protections Act (OWBPA) and Age Discrimination in Employment Act (ADEA) may apply in this case.

The Age Discrimination in Employment Act (ADEA)

The ADEA is a federal law that protects employees and job applicants age 40 and over from age-based discrimination in all aspects of employment. The ADEA does not apply to elected officials, independent contractors, or military personnel, however. The law does apply to:

• Employers with at least 20 employees;

• Employment agencies;

• The federal government;

• State and local government (though remedies are often limited); and

• Labor organizations with at least 25 members.

The ADEA prohibits age discrimination in decisions about hiring, firing, layoffs, pay, benefits, promotions, demotions, performance reviews or any other condition of employment.

Under the ADEA, employers can’t:

• Mention age or say that a certain age is preferred in job ads and recruiting materials; it is questionable but not automatically illegal to ask for date of birth or graduation on a job application;

• Set age limits for training programs;

• Retaliate against you if you file charges of age discrimination or help the government investigate charges; or

• Force you to retire at a certain age (except for a few narrow exceptions).

The law also prohibits policies and practices that have a “disparate impact” on older workers. These are policies that appear to be age-neutral but fall more harshly on older workers. An example is a school district that announces it won’t hire teachers with more than 20 years of experience. Policies or practices that have a disproportionately adverse impact on older workers are unlawful unless the employer can prove they are based on a reasonable factor other than age.

Under the ADEA, you can’t be denied the opportunity to participate in your employer’s benefit plans because of your age. Employers also can’t reduce benefits based on age, unless the cost of providing the benefit increases with age. In these instances, the employer must incur the same cost for providing the benefits to older workers as it does for younger workers in order to comply with the ADEA.

For example, the cost of providing life insurance increases with age. An employer does not violate the ADEA if it spends the same amount to buy life insurance for younger and older workers, even though the younger workers receive greater coverage for the same premium.

The Older Workers Benefits Protections Act (OWBPA)

The OWBPA was passed to help protect workers aged 40 years old and older from giving up their rights under the ADEA without fully understanding what they’re doing. It’s focused on situations in which employers ask employees to sign a release of claims in exchange for severance pay. Thus, where employees aged 40 years old and over are being terminated voluntarily or involuntarily, and are asked to release any age discrimination claims they may have in exchange for some consideration—usually, severance pay, employers must comply with the OWBPA.

All release agreements that waive an employee's federal age discrimination claims under the ADEA must comply with the OWBPA. Specifically, the OWBPA requires that older workers provide a “knowing and voluntary” waiver of their age discrimination claims. In order to comply with this requirement, a release must, at a minimum:

• Be in writing;

• Be written in a manner reasonably calculated to be understood by the employee;

• Specifically refer to the ADEA;

• Not require the worker to waive claims that may arise after the date of execution;

• Be in exchange for something of value in addition to which the employee is already entitled;

• Advise the worker to consult an attorney before executing the release;

• Allow the worker 21 days to consider the offer; and

• Allow the worker 7 days to revoke the agreement after execution.

The OWBPA imposes additional requirements on employers when the release is sought in connection with a Reduction In Force (RIF) of two or more employees over the age of 40. First, the time period that a worker must be given to consider the agreement increases from 21 to 45 days. Second, the employer must provide the over-40 employee with detailed information about the RIF. Specifically, an employer must disclose, in writing:

• The class, unit or group of individuals covered by the exit program;

• The eligibility factors for the exit program;

• The job titles and ages of all individuals eligible for or selected for the program; and

• The ages of all employees in the same class who were not eligible or selected for the program.

The OWBPA equally applies to early retirement plans, exit incentive programs, involuntary terminations and RIFs, but it is important to note that the law applies only to the waiver of federal age discrimination claims under the ADEA – it does not apply, for example, to state law age discrimination claims. Further, it is important to remember that the EEOC can always enforce the protections of the ADEA, so a release cannot prohibit an employee from filing a charge with the EEOC or participating in an EEOC investigation.

A “group” termination program subject to the OWBPA’s enhanced notice requirements occurs whenever more than one employee is terminated during a six-month period as part of the same decision-making process.

If an employer neglects or fails to do what the OWBPA requires, any release in the severance agreement signed by a protected employee will be void as to ADEA claims. Non-ADEA claims are not affected, but an employer may face a federal age discrimination claim even though the employee has been paid to release such a claim. 

Pursuing a Claim

You have the right to pursue a claim if you feel you are a victim of age discrimination. Judging older workers on the basis of age rather than abilities is wrong, and age discrimination can have devastating effects on the financial security of workers at the time and into retirement.

If you decide to move forward, it’s important to have a strong case. Make sure to document remarks by your managers and others that you perceive as discriminatory. Keep emails and any other documentation that helps your case. After that, you will want to file a charge with the federal Equal Employment Opportunity Commission (EEOC).

This step comes before you can file a lawsuit. Call the EEOC at 800-669-4000 or visit the EEOC website for details on how to file a charge. If at all possible, file a charge within 180 days of the discriminatory action or when you first became aware of the discriminatory action, whichever occurred first. In some states, the time limit for filing a charge is extended to 300 days. However, filing within 180 days is recommended, to be on the safe side.  

The EEOC will notify the employer of the charge and will investigate it. If the EEOC determines that the charge has merit, it will attempt conciliation. This means the agency will try to persuade the employer to voluntarily eliminate and remedy the discrimination. If conciliation is not successful, the EEOC will decide whether to take legal action on behalf of the charging party. It is important to note that the EEOC does so in an extremely small percentage of the charges it receives.

The EEOC website offers more information on age discrimination. 

If you feel like you were recently discriminated against on the basis of age, or if you were recently terminated and presented with a Severance Agreement that you would like to make sure adheres to the ADEA and the OWBPA, please contact Custardo Law, LLC today for a free consultation. We are here to help you.