Employment & Labor Insider

Years ago, I used to whine about the federal Older Workers Benefit Protection Act, which imposes specific requirements on employers seeking releases of claims under the Age Discrimination in Employment Act.

The ADEA prohibits discrimination based on age if the individual is 40 years old or older.

My opinion back then was that the OWBPA was almost insulting to older workers . . . like they didn’t know enough to consult with a lawyer, or read an agreement before signing it? If anything, I thought young workers were more likely to be naïve about such things because of their relative lack of experience.

But I eventually got over my bad attitude. About the time I turned 40. Jk!

Seriously, compliance with OWBPA requirements hasn’t been that hard.

"Forgive me, OWBPA?" (ED'S NOTE: Woman is not actually Robin. Man is not actually OWBPA.)

And now -- probably not for the first time -- the OWBPA has saved an employer who got sued in a case that had absolutely nothing to do with age discrimination.

OWBPA saves the day!

Our plaintiff (we’ll call her “Nancy”) was let go as part of a restructuring. Her employer gave her a release agreement, which she signed pretty soon afterward (either on the day of termination, or about two weeks after – the evidence wasn’t clear).

After Nancy signed the agreement, and presumably got her severance, she sued the employer for race and sex discrimination, harassment, and retaliation.

The employer, reasonably enough, asked the court to dismiss Nancy's lawsuit on the ground that she had released all of her claims by signing the agreement.

Nancy admitted that she had signed the agreement but said that she didn’t understand what she was signing and did not intend to waive her right to sue. Put more legalistically, she claimed that her waiver of the right to sue was not “knowing and voluntary.”

A federal judge in Michigan dismissed her lawsuit based on the release, and she appealed to the U.S. Court of Appeals for the Sixth Circuit. This week, the Sixth Circuit affirmed.

Was that release “knowing and voluntary”?

The Sixth Circuit looks at the following in determining whether a release of claims was given “knowingly and voluntarily” by the employee (this is quoted from the decision, with minor edits and asides by me):

• The employee’s “experience, background, and education.”
• The amount of time that the employee had to consider the agreement, and whether she had the opportunity to consult with a lawyer.
• The clarity of the release language.
• The consideration for the release (in other words, what the employee got in exchange for signing the release – such as severance pay).
• “The totality of the circumstances” (a catchall).

Nancy lost on point 1 because she had a master’s degree and several years of work experience, and she hadn’t alleged any special circumstances. I'll skip point 2 for the moment. The court also found that the release language was unambiguous. Nancy got severance pay and continuation of her health insurance in exchange for signing the release, so the employer won on the “consideration” point, too. On the catchall point, the court found that Nancy didn’t claim to have been a victim of fraud or duress, or that the parties had made a mistake. Nancy claimed that the “totality of circumstances” was in her favor in large part because the employer didn’t give her the agreement until her termination meeting. But the court said there was nothing wrong with that.

This was all good news for the employer, but what seems to have really been the deciding factor was the OWBPA language that was in the agreement.

"OWBPA, how could I ever have doubted you?"

Because Nancy was let go as part of a “group termination,” she was given 45 days to consider the agreement.* 

*The court’s decision doesn’t say how old Nancy was, but I did a little DuckDuckGo-ing, and it looks like she may have been in her 40s.

The Sixth Circuit had already decided in a prior case that even the 21-day consideration period that applies to single terminations was plenty of time, so the 45-day period was spectacular. The agreement also specifically advised Nancy in writing that she had the right to consult with an attorney. (Another OWBPA requirement.) And the agreement gave Nancy seven days to revoke her signature if she chose to sign the agreement. (Yet another OWBPA requirement.)

Nancy chose not to take the full 45 days, apparently did not consult with an attorney, and did not revoke her signature after she signed. According to the court, that was her problem – not the employer’s.

The employer may have won dismissal anyway, but all of these OWBPA terms helped significantly in showing that Nancy’s agreement was “knowing and voluntary.”

The OWBPA applies only to waivers of claims under the federal Age Discrimination in Employment Act. An employer whose agreement doesn’t contain the required language could still claim in court that a release was valid as to other claims (such as race discrimination under state or federal law, or age discrimination under state law) – it just couldn’t use the agreement to bar ADEA claims.

But Nancy's case shows how the OWBPA language can be a huge help to employers in barring all types of claims. It’s pretty hard to plausibly allege that you didn’t have an opportunity to “knowingly and voluntarily” enter into an agreement when the other party gave you 45 days to think it over and told you to consult with a lawyer. Not to mention letting you revoke seven days after you signed, assuming you signed.

Duh.

OWBPA review

To obtain a valid waiver of age discrimination claims under the federal ADEA, the release agreement must state the following:

• That the employee is being advised to consult with an attorney.
• That the employee has 21 days (single termination) or 45 days (“group” termination) to consider the agreement.
• That the employee is waiving claims under the ADEA, among other claims.
• That, if the employee signs the agreement, he or she has seven full calendar days to revoke. (The agreement should include instructions on how to revoke, such as the person to notify and their contact information, and when the revocation must be received.)
• That the employee is not waiving any claims that arise after the employee signs the agreement.

In the event of a “group” termination, employers must also provide written disclosures of the job titles (not names) and ages (not birthdates) of all the employees in the “decisional unit” who were offered severance, as well as those who are not being offered severance – that is, those who are being retained. This is situation-specific and can be complicated, so employers should consult with counsel if disclosures are required, even if they have the correct boilerplate language to paste into the agreement. 

One final note: Although the OWBPA language is not necessary for under-40 employees, some employers include a modified version of it in all of their releases just to make it clear that the employee's agreement was – you guessed it – “knowing and voluntary.”

Can’t hurt. Might help.

"You sure are, Robin!"

OWBPA, I misjudged you!