Considering Employee Layoffs? Keep These Key Provisions in Mind
As concerns about the economic downturn persist, many businesses are belt-tightening and making difficult decisions when it comes to their employees. Hours reductions, salary cuts, furloughs, and layoffs are some of the many ways that businesses have responded to forced closures and the general slowdown of business.
Employers considering layoffs should keep in mind some of the statutory provisions that could be triggered by their actions. In our two-part series on layoffs, we first addressed the Worker Adjustment and Retraining Notification Act (“WARN Act”). In this second summary, we explain key provisions of the Older Workers Benefit Protection Act (“OWBPA”).
The OWBPA: What Is It and Who Has to Comply With It?
The OWBPA is a federal law that protects employees who are 40 years or older by placing various requirements on severance and release agreements.
Are you an employer who must comply with the OWBPA? You must comply with the OWBPA if:
- • you have at least 20 employees;
• you are laying off one or more employees who are 40 or older;
• you are asking the laid-off employee(s) to sign a severance agreement and release of claims that waives their right to bring a claim under the Age Discrimination in Employment Act (“ADEA”).
In most cases, that means employers with 20 or more employees will need to consider the OWBPA any time they draft a severance agreement and release for an employee who is 40 or older. However, there are some circumstances where an employer who values quick resolution of a claim might decide to forego the OWBPA requirements, particularly when they are reasonably confident that the employee is unlikely to raise a potential age discrimination claim. In other instances, it might make sense for an employer with fewer than 20 employees to comply with certain provisions of the OWBPA to strengthen the voluntary nature of the agreement, and thus its likelihood of enforceability if challenged.
What are the requirements for severance and release agreements under the OWBPA? A severance and release agreement that is offered to one employee has different requirements than a severance and release agreement offered to multiple employees. In either scenario, however, an employee’s waiver of their rights under the ADEA must be “knowing and voluntary.”
In general, an agreement is “knowing and voluntary” when:
• the agreement is in writing;
• the agreement is written in plain language so that the employee can understand its terms (i.e., omitting technical jargon and long, complex sentences);
• the agreement specifically refers to rights/claims provided for under the ADEA;
• the agreement waives the employee’s rights/claims that arise before or on the date the waiver is executed (the waiver may not be for rights/claims that could arise after the waiver’s execution date);
• the agreement advises the employee to consult with an attorney before executing the agreement; and
• the employee(s) get at least 7 days to revoke the agreement after signing it and the agreement states the 7-day revocation period.
There are additional requirements for severance and release agreements offered to two or more employees. These employees must be given 45 days to consider signing the agreement. In addition, these employees must be provided with a tally of the employees (e.g., job titles or position categories) who were terminated, a tally of the employees who were not terminated, the ages of the employees who were terminated, and the ages of the employees who were retained.
For questions about layoffs or assistance navigating the OWBPA, please contact a member of the Stokes Lawrence Employment Group.