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What you should know about ADEA waivers in severance agreements

On Behalf of | Apr 13, 2023 | Workplace Discrimination |

Most employers understand that age discrimination is illegal under the federal Age Discrimination in Employment Act of 1967 (“ADEA”). That law applies to organizations with at least 20 employees and to employees who are at least 40 years old. 

Businesses have still found ways to weed out an aging workforce and bring in younger people. One of these is offering severance packages. This might not be a bad deal for an employee who has plenty of savings and is ready to start a new chapter, depending on the amount of money they’re offered. Some older employees, however, may not want or be able to afford to retire. Further, no one wants to think they were pushed out simply because they were considered too old.

To avoid the threat of age discrimination lawsuits under the ADEA, many employers started including a clause in their severance agreements that required employees to waive their right to file an age discrimination claim in the future. 

What does the Older Workers Benefit Protect Act do?

Therefore, Congress amended the ADEA with the Older Workers Benefit Protection Act (OWBPA) in 1990. This law doesn’t prohibit “ADEA waivers.” However, it does place restrictions on them. For example:

  • The waivers must be in understandable language.
  • Employees must be provided at least 21 days to consider whether or not to sign the agreement.
  • There must be a 7-day “look-back” period in which employees can change their minds after signing the agreement.

The Equal Employment Opportunity Commission (EEOC) added new regulations a decade later that if someone does challenge an ADEA waiver in court, they don’t have to “tender back” their severance pay or any other money they got as part of their severance agreement before taking legal action. 

They may, however, be required to pay damages and other costs if they don’t prevail in the suit. If they win the suit, they can keep either their severance payout or the amount they’re awarded in the suit (whichever is larger), but not both.

If you’re presented with a severance agreement, it’s wise to have legal guidance in reviewing it. In fact, your employer is supposed to inform you of that right. If you’ve already signed an agreement with an ADEA waiver but believe you have an age discrimination claim, your best bet is to seek legal guidance as soon as possible to determine what your options are.