A Release From A Worker Over 40 Only Holds If It Follows The Older Workers Benefit Protection Act.
Employers often offer severance in exchange for a release of claims. When the departing worker is 40 or older and the release covers age claims, federal law sets the timing, wording and disclosure rules. A group program has stricter rules than a single separation.
What A Valid Waiver Of Age Claims Needs.
General information only. It is not legal advice, and rules shift, so verify the current text.
Plain-Language Agreement
A valid waiver is written so the employee can understand it, mentions rights under the ADEA by name and reaches only claims that arose before signing.
45 Days To Consider, 7 To Revoke
In an exit incentive or other group program, the employee must have at least 45 days to consider the offer and 7 days after signing to revoke. A single separation requires 21 days to consider.
Written Age Disclosure
For a group program the employer must tell each employee in writing the class or unit covered, the eligibility factors, the time limits and the job titles and ages of everyone selected and not selected in the same unit.
How The Release Process Works.
The release has to give the employee something of value beyond what they already receive. Severance pay, a bonus or employer-paid continuation premiums can serve as that consideration, but final wages and vested benefits cannot. The employee must also be advised in writing to consult an attorney before signing.
The disclosure is where group programs most often go wrong. The employer must define the decisional unit, which is the group of employees considered for the program, and then list the ages and job titles of those selected and those not selected. A disclosure that is incomplete or late can make the age waiver unenforceable, even if the other claims are validly released.
An employee who signs a release does not lose the right to challenge the validity of the age waiver itself, and a release cannot stop the employee from filing a charge with the EEOC. The release also does not waive claims that arise after it is signed.
Where this shows up in your plan.
Severance Paid As Consideration
Cash severance or a premium subsidy is the usual consideration for the release. How it is paid and documented affects plan treatment.
Employer-Paid COBRA Premiums
Paying part of the COBRA premium is common consideration. The plan and any insurer or stop-loss carrier should confirm the arrangement before it is promised.
Vested Benefits Are Not Consideration
Accrued, vested plan benefits belong to the employee already. A release should be drafted so it does not appear to trade them away.
Setting it up.
Define the decisional unit and list every employee considered for the program, with title and age.
Write the release in plain language and cite the ADEA expressly.
Give the written disclosure and release at the start of the 45-day window and record the date delivered.
Advise the employee in writing to consult an attorney and describe the 7-day revocation right.
Do not pay the consideration or change benefits until the revocation period has ended.
Mistakes to avoid.
Using the standard individual release, with its 21-day period, for a group program.
Listing ages and titles for the employees selected but not those in the same unit who were not selected.
Shortening the review period at the employee request without legal advice on whether that is allowed.
Treating final pay or vested benefits as the payment for the release.
Other rules employers work with.
Layoff Planning Hub: Notices, Releases and Coverage
Start here for the sequence from announcement to final paycheck.
Michigan Employer COBRA Guide
Deadlines, notices and common errors.
Offer Letters and Benefit Promises
Which benefit promises belong in writing before day one.
Laws and Rules Referenced
OWBPA waiver rule, 29 U.S.C. 626(f) — Statutory requirements for a knowing and voluntary waiver of age claims.
Waivers of rights and claims, 29 CFR 1625.22 — EEOC regulation on the waiver standards, the decisional unit and disclosure.
COBRA, 29 U.S.C. 1161, on continuation coverage — COBRA continuation coverage rules that interact with severance offers.
Quick answers.
What employers ask most about releases, in brief, with a link to the whole guide.
How long must an employee have to review a group release?
At least 45 days to consider it and 7 days after signing to revoke it, when the release is requested in connection with an exit incentive or other employment termination program offered to a group.
What must the age disclosure include?
The class or unit covered, eligibility factors, time limits, and the job titles and ages of all selected and not selected in the same job classification or unit.
Can a release stop an employee from filing an EEOC charge?
No. A release can give up an employee’s right to personal recovery, yet it cannot stop a charge with the EEOC or participation in an agency investigation.
Does the release have to cover benefits?
It should not take away vested plan benefits, and any employer-paid premium or severance offered as consideration should be confirmed with the plan first.
More guides in this series.
WARN Act Notice Requirements for Michigan Employers
A companion guide in the same series.
Why Michigan Has No State WARN Law and What Applies Instead
A companion guide in the same series.
Stop-Loss and Claims Run-Out After a Reduction in Force
A companion guide in the same series.
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