Facelift for age discrimination.
The new rules are rigorous.
The Older Workers Benefit Protection Act (OWBPA), effective Oct. 16, 1990, significantly changes the law on benefits and age discrimination waivers. Association employers should review their plans now.
Age-Based Differences Must be Cost Justified
OWBPA amends the Age Discrimination in Employment Act (ADEA) and declares that ADEA prohibits discrimination against older workers in all employee benefits except when age-based reductions in employee benefit plans are justified by significant cost considerations. The principle of ADEA is "equal benefits or equal cost."
New language both clarifies and changes the way employers may come within that exception. The amendment
* makes explicit that ADEA applies to all employee benefit plans; * makes clear that the only justification for age discrimination in an employee benefit is the increased cost in providing the particular benefit to older individuals, even for plans passed before ADEA (1967); * at the same time, permits employers to incur greater costs for benefits on behalf of older workers; * permits differences in benefits (including voluntary early retirement incentive plans) so long as benefit costs incurred for older employers are "no less than" benefit costs incurred for younger workers; * puts the burden of proof on the employer to prove that it complied with the law; * provides a safe harbor for three practices in defined benefit pension plans (minimum age requirement for early or normal retirement, provision for payments that constitute the subsidized portion of an early retirement benefit, and authorization for social security "bridge payments"); * permits certain forms of age-based benefit coordination, but reaffirms that pension benefits may not be coordinated with severance payments (Employers may deduct the value of retirement health benefits from their obligation to pay severance to retirement-eligible employees if retirement is unrelated to age, such as in a plant closing.); and * prohibits an early retirement incentive plan from requiring or permitting the involuntary retirement of any individual protected by ADEA (those 40 and older) and requires such plans to "further the purposes of ADEA." (ADEA has three purposes: promote employment of older people; prohibit arbitrary age discrimination; and help find solutions to age-related employment problems.)
ADEA Waiver Requirements
OWBPA also addresses the practice of requiring employees to sign waivers of their ADEA rights either in settlement of individual claims or in the context of voluntary retirement plans and reductions in force. Now, an individual may not waive any right or claim under ADEA unless the waiver is knowing and voluntary. A waiver is not knowing and voluntary unless it satisfies at least these eight conditions:
1. The waiver is part of a written agreement between the individual and the employer. 2. The waiver specifically refers to rights or claims arising under ADEA. 3. The individual does not waive rights or claims that may arise after the date the waiver is signed. 4. The individual waives rights or claims only in exchange for consideration in addition to anything of value to which the individual already is entitled. 5. The individual is advised in writing to consult with an attorney before signing the agreement. 6. The individual is given time to consider the agreement. Normally, 21 days but 45 days if a waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees (such as voluntary retirement or a reduction in force). 7. The waiver, even after it is signed, may be revoked for a period of at least seven days after signing, and the agreement does not become effective before that seven-day period. 8. In the case of exit incentive or other termination programs, the employer must provide each employee with three pieces of information, in writing:
a. the class, unit, or group of employees covered by the program, the eligibility requirements for the program, and any time limits; b. the job titles and ages of all individuals eligible or selected for the program; and c. the job titles and ages of all individuals in the same plant or unit who are not eligible or selected for the program.
The first five of these conditions are already familiar and being applied by the courts. The remaining three are new and potentially quite burdensome--so much so, in fact, that a skeptic must wonder whether the real purpose of this OWBPA section is to outlaw waivers of ADEA claims under any circumstances.
Another section defines knowing and voluntary in the context of ADEA charges that have been filed with the Equal Employment Opportunity Commission (EEOC) or in court. In these cases, to be knowing and voluntary the waiver must meet the first five conditions listed above. In addition, the individual must be given a "reasonable" time to consider the agreement (no period is set); and the burden of proving the waiver, if that becomes an issue, is on the employer. In no case, however, may any waiver agreement affect EEOC's right to enforce ADEA or an individual's right to file a charge or participate in an investigation.
This last provision may seem innocuous, but it is not. Suppose, for example, an employee terminated as part of a reduction in force signs a waiver that is perfectly valid. That individual may still file a charge on behalf of others in the group and be a witness or otherwise involved in the case, even though his or her own waiver of rights may preclude a personal recovery.
The ADEA waiver section of OWBPA is intended to address three concerns described as "unfair and abusive waiver practices" in the legislative report accompanying the bill.
* Manipulation of older workers. For example, you are offered a superior deal in a reduction in force and told that if you do not take it, there is a 99 percent chance you will be laid off anyway. But to get it, you must waive your ADEA rights. * Lack of information or expertise. An example is being forced to sign a waiver without knowing or understanding the facts of any claim you might have. * Coercion of older workers. Extreme pressure to waive ADEA rights--such as being demoted if you don't take early retirement, being given the agreement on Friday and told to have it signed by Monday, or being fired if you do not--amounts to coercion.
George D. Webster is general counsel to ASAE and a partner in Webster, Chamberlain & Bean, a Washington, D.C., law firm.
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|Author:||Websterm, George D.|
|Date:||Feb 1, 1991|
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