Correcting the Name: Understanding the Older Workers Benefit Protection Act (OWBPA)
While many search for the "Older Person Benefit Protection Act," the correct legal term is the Older Workers Benefit Protection Act (OWBPA). Enacted in 1990, the OWBPA is not a standalone law but a significant amendment to the Age Discrimination in Employment Act (ADEA) of 1967. The ADEA broadly prohibits employment discrimination against individuals aged 40 and over. The OWBPA was created to clarify and reinforce these protections, specifically concerning employee benefit plans and waivers of claims.
Its primary goal is to ensure that older workers are not pressured or misled into surrendering their rights under the ADEA, particularly when offered early retirement packages or severance agreements. The law recognizes the vulnerability employees face in these situations and establishes a clear set of rules that employers must follow.
Core Protections Provided by the OWBPA
The OWBPA addresses two main areas: employee benefits and waivers of legal claims.
1. Employee Benefit Plans: The law mandates that employers must provide older workers with benefits equal to those offered to younger workers. It makes it illegal to use an employee's age as a basis for discrimination in benefits like life insurance, health insurance, disability benefits, and retirement plans. However, the law does allow for some flexibility under the "equal cost or equal benefit" principle. This means an employer can provide a lesser benefit to an older worker only if the cost of providing that reduced benefit is the same as the cost of providing the full benefit to a younger worker.
2. Waivers of ADEA Rights: This is the most detailed and impactful part of the OWBPA. Before this act, employers could present departing employees with complex legal documents to sign in exchange for a severance package. These documents often included a waiver of the employee's right to sue for age discrimination. The OWBPA establishes that for a waiver to be legally enforceable, it must be "knowing and voluntary." To meet this standard, the waiver must adhere to a strict list of requirements.
The 7 Essential Requirements for a Valid Waiver
For a severance or settlement agreement that waives your ADEA rights to be valid, it MUST meet the following seven criteria:
- Be in Writing: The waiver must be part of a written agreement that is clear and easy to understand, avoiding complex legal jargon.
- Specifically Reference the ADEA: The agreement must explicitly mention that the employee is waiving rights or claims arising under the Age Discrimination in Employment Act.
- Advise the Employee to Consult an Attorney: The waiver must clearly state, in writing, that the employee is advised to consult with an attorney before signing the agreement.
- Provide a Consideration Period: The employee must be given a specific amount of time to consider the agreement.
- For individual terminations, the employee must be given at least 21 days.
- For group terminations (e.g., layoffs involving multiple employees), the period is extended to at least 45 days.
- Include a Revocation Period: After signing the agreement, the employee must be given a 7-day period during which they can revoke their signature. The agreement does not become effective until this period expires.
- Not Waive Future Rights: The waiver cannot cover rights or claims that may arise after the date the agreement is signed.
- Offer Valuable Consideration: The employee must receive something of value (consideration), such as severance pay, that they were not already entitled to receive.
Special Rules for Group Layoffs
When an employer offers an exit incentive or termination program to a group of employees, the OWBPA imposes additional disclosure requirements to ensure transparency. In this scenario, at the start of the 45-day consideration period, the employer must provide each affected employee with the following information in writing:
- The class, unit, or group of individuals covered by the program.
- The eligibility factors for the program.
- Any time limits applicable to the program.
- The job titles and ages of all individuals eligible or selected for the program.
- The ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.
This information allows employees and their legal counsel to assess whether the layoff has a disproportionate impact on older workers, which could be evidence of age discrimination.
Comparison: Valid vs. Invalid Waiver
| Feature | Valid Waiver (Complies with OWBPA) | Potentially Invalid Waiver |
|---|---|---|
| Clarity | Written in plain language that an average person can understand. | Filled with confusing legal jargon and ambiguous terms. |
| ADEA Mention | Explicitly states that the employee is waiving ADEA rights. | Fails to mention the ADEA by name. |
| Legal Counsel | Clearly advises the employee in writing to consult an attorney. | Does not mention consulting an attorney, or discourages it. |
| Time to Consider | Provides at least 21 days (individual) or 45 days (group). | Offers less than the legally required time period (e.g., "sign by 5 PM today"). |
| Revocation | Includes a 7-day period to revoke the signature after signing. | States the agreement is final upon signature with no revocation period. |
| Future Claims | Only covers claims that exist up to the date of signing. | Attempts to waive the employee's right to file future claims. |
| Group Info | In group layoffs, provides detailed age data of affected and unaffected staff. | In group layoffs, withholds information about who was and was not selected. |
Conclusion: Empowering Older Workers
The Older Workers Benefit Protection Act is a vital shield against age-based discrimination in the modern workplace. It ensures that decisions related to benefits and the waiver of legal rights are made with full information and without undue pressure. By understanding these protections, especially the strict requirements for a valid waiver, workers over 40 can better protect their financial future and legal standing during career transitions. If you are ever presented with a severance or retirement agreement, reviewing it against the OWBPA checklist is a critical first step. For more detailed information, consult the resources provided by the U.S. Equal Employment Opportunity Commission (EEOC).
