The Older Workers Benefit Protection Act

This amendment to the Age Discrimination in Employment Act (ADEA) prohibits discrimination in benefits -- and protects employees who waive their right to sue.

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The purposes of the Older Workers Benefit Protection Act OWBPA) are to make it illegal for an employer to:

  • use an employee’s age as the basis for discrimination in benefits
  • target older workers for their staff-cutting programs, and
  • require older workers to waive their rights without observing certain safeguards.

Benefits Protection

The OWBPA prohibits age discrimination in the provision of fringe benefits, such as life insurance, health insurance, disability benefits, pensions, and retirement benefits. However, employers are allowed to reduce benefits to older workers when justified by significant cost considerations. In most situations, employers must provide equal benefits to older and younger workers. For some types of benefits, however, employers can meet this nondiscrimination requirement by spending the same amount on the benefit provided to each group, even if older workers receive lesser benefits as a result. Employers are also allowed, in some circumstances, to provide lesser benefits to older workers if the older workers receive additional benefits (from the employer or the government) that make up the difference. 

The rules are different for different types of benefits, and they can get quite complicated. You can find detailed information on the rules in the Compliance Manual compiled by the federal Equal Employment Opportunity Commission, at http://eeoc.gov/policy/docs/benefits.html.

Waiver Rules

The OWBPA also requires employers to include certain language -- and follow certain safeguards -- when asking older employees to give up their right to sue the company. By signing a waiver—often called a release or covenant not to sue—an employee agrees not to take any legal action, such as an age discrimination lawsuit, against the employer. In return for signing the waiver, the employer gives the employee an incentive to leave voluntarily, such as a severance pay package that exceeds the company’s standard policy.

This type of transaction was very popular in the early 1990s among large corporations that wanted to reduce their payroll costs. Because older workers who have been with a company for a long time typically cost more in salary and benefits than younger workers, most staff-cutting programs were directed at older workers. But cutting only older workers constitutes illegal age discrimination, so companies commonly induced the older workers to sign away their rights to sue their former employers. In colloquial parlance, these deals are often referred to as Golden Handshakes—as in Thank-You-Very-Much-for-Your-Hard-Years-of-Service-and-If-You-Retire-Right-Now-This-Grand-Bunch-of-Benefits-Will-Be-Yours. This cruel squeeze play is now somewhat limited.

Under the OWBPA, you must be given at least 21 days to decide whether or not to sign such a waiver that has been presented to you individually. If the waiver is presented to a group of employees, each of you must be given at least 45 days to decide whether or not to sign. In either case, you have seven days after agreeing to such a waiver to revoke your decision.

Restrictions on Agreements Not to Sue

There are a number of other key restrictions the Older Workers Benefit Protection Act places on agreements not to sue.

  • Your employer must make the waiver understandable to the average person eligible for the program in which the waiver is being used.
  • The waiver may not cover any rights or claims that you discover are available after you sign it, and it must specify that it covers your rights under the ADEA.
  • Your employer must offer you something of value—over and above what is already owed to you—in exchange for your signature on the waiver.
  • Your employer must advise you, in writing, that you have the right to consult an attorney before you sign the waiver.
  • If the offer is being made to a group of employees (as part of an early retirement incentive program, for example), your employer must inform you in writing how the class of employees is defined, the job titles and ages of all the individuals to whom the offer is being made, and the ages of all the employees in the same job classification or unit of the company to whom the offer is not being made.
  • You must be given a reasonable time in which to make a decision on whether or not to sign the waiver.

Employers are allowed no room to hedge on any one of these requirements; a waiver that does not comply with all the absolute requirements is the same as no waiver at all. The U.S. Supreme Court reaffirmed this in a case decision, holding that an employee who signed a deficient waiver could not only sue for age discrimination, but also did not have to return the severance pay she received from her former employer for signing the invalid waiver. (Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998).)

Negotiating a Better Deal

The OWBPA gives additional legal protections if your employer offers you the opportunity to participate in a staff reduction program. The Act indirectly puts you in a position to negotiate the terms of your departure.

The fact that your employer has offered an incentive tells you that the company wants you gone and is worried that you might file a lawsuit for wrongful discharge. This means there is nothing preventing you from making a counteroffer.

For example, after taking a week or two to think, you might go back to your employer and agree to leave voluntarily if your severance pay is doubled. There is power in numbers, so this type of negotiating is even more likely to be effective if done on behalf of a group of employees who are considering the same offer.

As in all employment transactions, it is wise to advise your employer of your decision in writing and to keep a copy of that letter—along with copies of all documents given to you by your employer as part of the staff reduction program. If you refuse to accept such an offer and are later dismissed, you may be able to allege illegal age discrimination as a basis for challenging your dismissal.

How to Take Action

If you believe that an employer has violated your rights under the Older Workers Benefit Protection Act, you can file a complaint with the EEOC just as you would against any other workplace discrimination. (See our articles on workplace discrimination and harassment for more information.) Note, however, that money damages are limited to back pay—and an additional sum equal to your back pay award for willful violations—plus attorneys’ fees and court costs.

If the EEOC does not resolve your complaint to your satisfaction, you may decide to pursue your complaint through a lawsuit. This additional avenue is not available for state workers, however.

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