Labor: Managing a down economy—The Older Worker Benefit Protection Act

How to avoid litigation when firing employees who are 40 or older

Given the general demographic of today’s workforce, any effort to reduce labor costs through layoffs or other means will likely impact at least one or two individuals age 40 or older. The Older Worker Benefit Protection Act (OWBPA), an amendment to the Age Discrimination in Employment Act (ADEA), sets up a detailed scheme that governs whether a release or waiver of an age discrimination claim is valid.

The OWBPA ensures that releases or waivers of ADEA claims, such as those commonly found in severance packages, are “knowing and voluntary.” To ensure waivers are knowing and voluntary, the OWBPA requires a number of provisions in a release/waiver agreement. Three of the main provisions are outlined below.

Although companies must provide all employees with the seven-day revocation period, whether they receive 21- or 45-day consideration periods depends on whether they are part of a termination program. In addition, whether they receive the extra information in an attachment to the severance agreement depends on whether they are part of a termination program.

A termination program requires that there be a group or class of employees, meaning that there must be two or more employees to constitute a program. The regulations also provide that a typical involuntary termination program is a standardized formula or package of benefits that is available to two or more employees. Therefore, it is reasonable to assume that most standardized, formulaic severance packages (such as one week of severance for every year of employment) offered to two or more employees likely constitute a program for the purposes of the OWBPA.

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Tom O'Day

Tom O’Day joined the Milwaukee office of Godfrey & Kahn, S.C. in January 2006 as a member of the Labor and Employment Practice Group. Tom’s...

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