With the economic uncertainty caused by COVID-19, many companies will be faced with the difficult decision to impose layoffs, and older employees could be included among those who unfortunately lose their jobs. Employers seeking a release of age discrimination claims from laid-off employees should be aware of the special requirements imposed by the federal Age Discrimination in Employment Act (“ADEA”), as amended by the Older Workers Benefit Protection Act (“OWBPA”).
The ADEA apples to employers of 20 or more employees and protects employees age 40 or older (“ADEA Employees”). Among other requirements, if employers ask ADEA employees for a release of age-based employment claims, they must provide a “consideration period,” an additional benefit to the employee, and a revocation period after acceptance. There are additional requirements when instituting group layoffs (generally, when 2 or more employees are being terminated) under either an “exit incentive program” or an “other employment termination program” (e.g., a reduction in force) (in each case, a “Group Program”). These requirements, as well as the differences between an individual termination and a group termination, are described below. Note that other requirements exist, including that the employer must advise the employee to consult with an attorney, the waiver must be written in a manner geared to be clearly understood by the employee and specifically address ADEA claims, and future claims may not be waived.
1. Individual Terminations
When a termination is of a single employee, the following criteria must be met in order to obtain a valid release of age-based claims under the ADEA:
1. Employee must be provided 21 days to consider the release before the offer terminates or is revoked;
2. Employer must provide a benefit the employee is not already entitled to (e.g., a severance payment); and
3. Employer must permit the ADEA Employee a 7-day period to revoke acceptance once the release has been signed (this is why severance agreements typically state that severance pay will not commence until expiration of this 7-day period).
If the employer fails to comply with these requirements, the release of age-based claims is rendered invalid.
2. Group Layoffs
The ADEA and OWBPA impose more extensive requirements for terminations under a Group Program.
What is a group layoff?
To determine whether a layoff is a group layoff “program,” courts will look at the facts and circumstances of each case. Generally, a group layoff program exists if the employer offers additional consideration in exchange for signing the waiver to more than one employee. For example, a few cross-departmental layoffs over a period of time based on poor performance is not likely considered a group layoff program, but a severance package offered to multiple employees in exchange for a release, in a reduction of force context, would be considered a group layoff program.
Where the termination is in connection with a group layoff program:
1. Employee must be provided 45 days to consider the release before the offer is revoked (note, this is different than the 21 days for the termination of a single employee);
2. Employer must provide a benefit the employee is not already entitled to (e.g., a severance payment); and
3. Employers must permit the ADEA Employee a 7 day period to revoke acceptance once the release has been signed.
Employers must also provide the following information in writing to any laid-off employees in connection with a group layoff:
1. The “decisional unit” – i.e., details on who was considered for the group layoff program, who was selected, and who was not selected;
2. The factors used to determine which employees are subject to the group layoff program – e.g., all persons in a particular division, job performance, experience, seniority (jurisdictions differ on interpreting the specificity required);
3. Any time limits applicable to the group layoff program; and
4. Job titles and ages of all eligible or selected individuals, and ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.
Failure to comply with these requirements renders the employee’s release of age-based claims invalid. These required disclosures can be tricky and are commonly misunderstood. In particular, determining the appropriate “decisional unit” requires thoughtful consideration.
Employers must carefully follow the requirements under the ADEA and OWBPA in order to obtain effective releases from terminated employees. As with all personnel issues surrounding COVID-19, when in doubt, consult experienced employment counsel.
The Hirschler Recovery Team: It may soon be a rare business enterprise that is able to insulate itself from the negative economic effects of the COVID-19 pandemic. While we hope the economy will rebound once the pandemic begins to abate, until then, the Hirschler Restructuring and Creditors Rights Group stands ready to assist clients in addressing the financial challenges of these economically unsettled times. Whether you are facing the loss or interruption of business, challenging financing relationships, the need to downsize or restructure, or other creditors’ rights issues, the Hirschler team will work with you toward a successful outcome. Contact us to understand your options and devise a recovery strategy that protects your business and financial health.
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Luis F. Ruiz
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