Dec 30

How a Golden Handshake Can Crush an Age Discrimination Claim

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The joke's on you. Look out for that ADEA waiver in your severance agreement.

The joke’s on you. Look out for that ADEA waiver in your severance agreement.

Fifty is the new 65. Unfortunately, many employees over 50 haven’t wised up to reality that their employers consider them “old.” Consequently, many  50-something employees who face layoffs take the golden handshake without realizing that it comes with strings: a waiver of all age discrimination claims. Of course, age discrimination is often the reason their employers are letting them go. Fortunately, the Older Workers Benefit Protection Act (OWBPA) renders such a waiver invalid unless it’s “knowing and voluntary.” Even better, an employee might be able to have his severance pay and keep it too – at least temporarily.

The Seven Requirements of a Knowing and Voluntary Waiver of an Age Discrimination Claim

Under the OWBPA, a waiver isn’t “knowing and voluntary” unless: (1) it’s part of a written agreement and calculated to be intelligible to the employee; (2) it refers to the Age Discrimination in Employment Act (ADEA); (3) it doesn’t apply to claims that might arise after the employee signs the waiver; (4) it’s only in return for something he isn’t already entitled to; (5) the employer advises him in writing to consult with an attorney before he signs; (6) he has at least 21 days to consider the agreement; and (7) the agreement states that he has seven days to revoke the waiver and that it won’t become effective until the revocation period expires.1

The requirements for a knowing and voluntary waiver are slightly different when it’s part of an exit incentive or other employment termination program (ETO) to two or more employees. The employer must give each employee at least 45 days to consider the agreement.2 Furthermore, the employer must inform each employee about: (1) any class, unit, or group that the ETO covers, any eligibility factors for the ETO, and any time limits for the ETO; and (2) the job titles and ages of all those in or eligible for the ETO and the ages of all those in the same job classification or organizational unit who aren’t in or eligible for the ETO.3

Some of these requirements need elaboration. The 21-day/45-day consideration period runs from the employer’s final offer. That means the clock restarts every time the employer makes material changes to the offer, though the parties can agree that any changes, whether material or immaterial, don’t restart the clock.4 Similarly, the employee can sign the agreement at any time before the 21-day/45-day time period expires, so long as his decision to do so is knowing and voluntary.5 In contrast, the seven-day period revocation period is set in stone.6 The employee can’t agree to shorten it even in exchange for more severance pay.

Have Your Severance Pay and Keep It Too – Temporarily

Sometimes, you can have your cake and eat it, too – at least temporarily. If an employee who executes an ADEA waiver later realizes he’s the victim of age discrimination, he doesn’t have to tender back his severance pay before he files a lawsuit or a charge with either the Equal Employment Opportunity Commission (EEOC) or any state or “local fair employment practices agency acting as an EEOC referral agency” (e.g., California’s Department of Fair Employment & Housing) for purposes of filing the charge with EEOC.7 His retention of the funds neither forecloses a challenge to a waiver nor constitutes a ratification of the waiver.8

Similarly, the ADEA prohibits a waiver from including any provision that imposes a condition precedent, penalty, or other limitation that adversely affects an employee’s right to challenge the waiver in court.9 Provisions that fun afoul of this prohibition include provisions that require employees to tender back their severance pay or that allow employers to recover attorneys’ fees and/or damages as a result of the employee’s filing of an ADEA suit.10 Thus, an employee who waives his right to sue under the ADEA can still challenge the ADEA waiver without fear that his employer will come after him.

But an employee who both successfully challenges a waiver and prevails on the merits of an ADEA claim might eventually have to cough up the severance pay. Courts have the discretion to determine whether an employer is entitled to a reduction, whether by way of restitution, recoupment, or setoff, against the employee’s monetary award.11 The reduction can’t exceed the lesser of the employee’s recovery or severance pay.12 In a case involving more than one plaintiff, the court must apply the reduction on a plaintiff-by-plaintiff basis.13 The court can’t reduce an employee’s award based on any other person’s severance pay.14

  1. 29 U.S.C. 626(f). 

  2. 29 U.S.C. 626(f)(1)(F)(ii). 

  3. 29 U.S.C. 626(f)(1)(H). 

  4. 29 C.F.R. §1625.22(e)(4). 

  5. 29 C.F.R. §1625.22(e)(6). 

  6. 29 C.F.R. §1625.22(e)(5). 

  7. 29 C.F.R. §1625.23(a). 

  8. Id

  9. 29 C.F.R. §1625.23(b). 

  10. Id

  11. 29 C.F.R. §1625.23(c)(1). 

  12. Id

  13. 29 C.F.R. §1625.23(c)(2). 

  14. Id

Ben Rothman, Esq.

Ben Rothman is a Los Angeles-based attorney practicing in the areas of personal injury, employment, and workers' compensation on a "no recovery, no fee" basis. Call him at (424) 465-2948 for a free, no-obligation consultation.