When you ask an employee 40 years old or over to sign a severance agreement that includes a release of potential age discrimination claims, there’s an array of strict requirements that must be met. For many employers, figuring out how to comply with these rules has been confusing-especially in cases of downsizing through group terminations or voluntary exit incentive plans. Now, the federal Equal Employment Opportunity Commission has issued new regulations clarifying the requirements. Here’s how to make sure your agreements pass muster under these new rules which go into effect July 6.
Who’s Covered
If you have 20 or more employees, you are subject to the federal age discrimination laws that protect workers who are 40 or over. Under federal law, any release of age discrimination claims by employees in this age group must satisfy lengthy conditions designed to ensure that they fully understand they are giving up their right to sue. And different rules apply depending on whether the release is presented to an individual worker or a group of employees. Although the new regulations don’t change any of the basic rules, they provide more detail on how to comply with them.
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Group Waivers
If you ask a group of employees to sign waivers of age discrimination claims, either in connection with a voluntary exit incentive plan or an involuntary reduction in force, you must provide the workers with statistical information about who is and is not affected. The regulations discuss the sorts of statistics to include and how to present the information to employees:
- Required information. Besides informing workers about who the termination program covers and des- cribing the applicable time limits for accepting the agreement, you must list the ages and job titles of all employees who were and were not selected for the program. According to the EEOC, a simple four-column chart listing job title, age, number selected and number not selected will usually satisfy these statistical reporting obligations. The regulations also clarify that you can’t present the information on the employees’ ages by using broad categories such as “age 20-30”; instead employees should be classified in one-year age bands. You also must group employees by job title (or grade level or other subcategory if applicable).
- Scope of statistics. When providing information about employees who were not selected for termination or offered an exit incentive, exactly who must be included? According to the new regulations, you need to identify the universe of employees you looked at when deciding which workers to lay off. In some cases this will be all employees at a particular facility or in a particular division. In others it might be all employees in a particular job category.For example, if you are terminating 10% of the employees at one facility or in one department, you must provide the required statistical data on all employees at that facility or in that department. Or, if you are terminating 10% of your sales force company-wide, compile the statistics on your entire sales staff regardless of where they’re located.
Requirements Apply To Both Individual And Group Waivers
The EEOC also clarified the following requirements, which apply to all terminations, whether individual or group, where employees are asked to sign a release of age bias claims:
- Use plain language. The agreement must be written in clear language the average worker can understand. Avoid technical jargon and long, complex sentences and take into account the employee’s education level.
- Allow time to consider agreement. The basic rule is that employees must be given at least 21 days to decide whether to accept an individual severance offer, or at least 45 days for group offers. The regulations say employees may sign the release before the 21 or 45 days are up if they do so voluntarily without threats or offers of additional benefits. (Note that in such cases it’s a good practice to have the employee sign a statement acknowledging they are voluntarily signing the release before the 21 or 45 days have expired.) Also, the EEOC makes clear that any time a material change is made in the offer-for example, if you renegotiate some of its important terms-the 21-day or 45-day period starts to run again.
- Include right to revoke. Give the employee at least seven days to revoke the agreement after signing. The revocation period cannot be shortened, even if the employee agrees. Therefore, make no payments until after this period has passed.
- Refer to age claims. The release must state that the employee gives up all rights under the Age Discrimination in Employment Act and should refer to the statute by name. The agreement must also provide that the employee does not waive age-bias claims that may arise after the release is signed.
- Advise employee to consult counsel. The worker must be advised in writing to consult an attorney before signing the agreement.
- Give something extra. In exchange for the release, the employee must be given money or benefits in addition to what the person is already entitled to. This extra benefit can be anything of value, but you can’t improperly eliminate an existing benefit and then offer to reinstate it as an incentive for signing.
For More Information
The regulations are available by calling (202) 663-4900 or on the Web at www.eeoc.gov under Enforcement and Litigation.