Do arbitration agreements have to comply with the OWBPA?

I can't imagine why they would.

In 2014, I blogged that IBM Corporation had made a conscious decision in its separation agreements to quit including the disclosures required by the Older Workers Benefit Protection Act.

The OWBPA is the federal law that requires waivers of federal age discrimination claims to be "knowing and voluntary." For the waiver to be "knowing and voluntary," the employer has to tell employees who are 40 and older

  • That they have 21 days to consider the agreement (or 45 days in the case of a "group termination"),
  • That they are being advised to consult with an attorney,
  • That they are waiving claims under the Age Discrimination in Employment Act,
  • That they are not waiving any ADEA claims that arise after they sign the agreement, and
  • That they have seven days after they sign the agreement to revoke their signature (with instructions on how to communicate the revocation).

If there is a group termination, like a reduction in force, the OWBPA also requires the employer to disclose

  • What the "decisional unit" was (that is, what subset of the company was considered in making the decisions about whom to terminate), and
  • The "eligibility criteria" for a separation package, including the reason for the job eliminations (for example, relative seniority, relative performance rankings, who wasn't the boss's son-in-law, etc.), and any time limits that apply.

In addition to that, the employer has to list everybody in the "decisional unit" who is being terminated (offered a separation package) and everybody who is not being terminated. (No names -- just job titles and ages at the time the decisions were made.)

A bold move

IBM decided in 2014 that they didn't want to bother with the OWBPA disclosures any more. That's a gutsy move on their part, but it's perfectly legal. It just means that, since then, IBM has not been getting valid releases of claims under the Age Discrimination in Employment Act.

Which means that if a 40-or-older IBM employee is caught up in a RIF, the employee can take the severance pay and still pursue a federal age discrimination claim against IBM.

Yikes! Is IBM crazy? you might ask.

Gutsy, but not crazy. What IBM did was put in its separation agreements that the employee will arbitrate any age discrimination claim against IBM. The employee can pursue an ADEA claim, but in arbitration, which is usually less expensive and more private than a lawsuit, and the awards to employees who win are generally a little less stratospheric than they might be in a lawsuit.

In addition to that, employees who accept the separation agreements also waive their right to bring class claims against IBM in arbitration. They can pursue age claims individually (in arbitration), but not collectively.

That was 2014. What's happening now? 

Which brings me to the developments of this past week. On Wednesday, four employees of IBM who were terminated in a RIF sued the company in federal court in New York. They say that their agreements to arbitrate and to waive class-based age claims are invalid because the separation agreements did not include the OWBPA disclosures.

I think the plaintiffs are wrong.

As we all know by now, the Federal Arbitration Act applies to almost all arbitration agreements, and the FAA is extremely pro-arbitration. (As long as you aren't in the transportation industry.) Just last May, the Supreme Court said that arbitration agreements with class waivers aren't prohibited by the National Labor Relations Act.

In 1991, the Supreme Court ruled that agreements to arbitrate age discrimination claims under the ADEA were enforceable. (Full Disclosure: As a very junior associate with a different law firm, I was one of the attorneys for the plaintiff.)

This, in my opinion, was IBM's greatest invention. Do you know what it is?


IBM's decision to forgo OWBPA compliance should have no impact on whether the parties can agree to pursue their age discrimination claims in "an arbitral forum" and as individual cases. The employees still have the right to pursue their age claims -- just not in the courts, and not as a collective. The OWBPA has nothing to do with that.

At least, I don't think it does. This is an interesting case, so I'll continue to follow it. 

Image Credits: From flickr, Creative Commons license. IBM logo by Patrick, Selectric typewriter ball by Ralf St.

Robin Shea has 30 years' experience in employment litigation, including Title VII and the Age Discrimination in Employment Act, the Americans with Disabilities Act (including the Amendments Act). 
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