What Is the OWBPA? Severance Waivers and Protections for Workers Age 40 and Older

An employee age 40 or older generally cannot waive federal age-discrimination claims in a severance agreement unless the waiver meets the Older Workers Benefit Protection Act (OWBPA) requirements. Those requirements are designed to make the decision knowing and voluntary: the agreement must explain the rights being waived, provide consideration beyond what the employee is already owed, and allow time to review and revoke the waiver. For an individual agreement, the employee generally has at least 21 days to consider it and seven days after signing to revoke it. A group layoff or exit incentive program generally brings a 45-day review period and additional disclosures. The OWBPA also addresses age-based reductions in employee benefits, so it matters beyond severance negotiations.

What Does the OWBPA Cover?

The OWBPA is part of the federal Age Discrimination in Employment Act (ADEA). It strengthens protections for workers age 40 and older in two main areas: employee benefit plans and waivers of age-discrimination claims. The benefit-plan provisions address how employers structure benefits such as health coverage, life insurance, and retirement plans so age alone does not justify reduced benefits.

The waiver provisions apply when an employer asks an employee age 40 or older to release claims under the ADEA, often in exchange for severance or other benefits. The waiver must be knowing and voluntary under specific legal requirements. The EEOC guidance on severance waivers explains these requirements and the additional disclosures that may apply when an offer is made to a group.

The OWBPA does not prohibit severance agreements or make every such offer improper. It sets standards an employer must meet for an ADEA waiver to be enforceable. A signature by itself does not establish that a waiver meets those standards.

How Does the OWBPA Apply to Severance Agreements?

A severance agreement is commonly offered when employment ends. It may provide severance pay, continued benefits, or another benefit the employer is not otherwise required to provide. In return, the agreement may ask the employee to release certain legal claims.

When the employee is age 40 or older and the agreement releases ADEA claims, the waiver must be clear and give the employee a meaningful opportunity to decide. It cannot waive claims that arise after the employee signs. The agreement must also provide something of value beyond pay or benefits the employee is already entitled to receive.

An agreement may address many subjects, but the age-related waiver has its own requirements. If that waiver fails to satisfy the OWBPA, the ADEA waiver may be unenforceable. That does not necessarily invalidate every other part of the agreement. The effect on severance pay, continued benefits, and other provisions depends on the agreement and applicable law.

What Makes an ADEA Waiver Knowing and Voluntary?

For a waiver to meet the OWBPA requirements, it generally must:

• Be written in language the employee can understand.
• Specifically refer to rights or claims under the ADEA.
• Exclude claims that arise after the agreement is signed.
• Provide value beyond anything the employee is already owed.
• Advise the employee in writing to consult an attorney.
• Allow an appropriate period to consider the agreement.
• Allow time to revoke the waiver after signing.

For an individual separation agreement, the employee generally must receive at least 21 days to consider the offer. After signing, the employee generally has seven days to revoke the waiver. The waiver does not become effective until that revocation period ends.

The 21-day period is a minimum review period, not a requirement to sign. The agreement should explain the applicable deadline and how to revoke it. Employees should distinguish the time to consider an offer from the separate time to revoke after signing.

What Additional Rules Apply to Group Layoffs?

When an employer offers waivers as part of an exit incentive program or a reduction in force, the process generally requires more time and information than an individual offer. Eligible employees generally must receive at least 45 days to consider the agreement, followed by the same seven-day revocation period.

Employees must also receive written information about the group covered by the program and the eligibility requirements or selection criteria. The disclosures generally include job titles and ages of employees selected and not selected within the relevant group. This information is intended to help employees assess the decisions behind the program, including whether age may have played a role. Incomplete or unclear disclosures can make that assessment difficult.

What Should Employees Review Before Signing?

A severance offer can be difficult to evaluate during a stressful transition. Employees age 40 or older can use these questions to check the agreement and identify information they may need to clarify:

1. Does the agreement specifically identify ADEA or age-discrimination claims? A general release of “all claims” may not satisfy the specific requirements for an ADEA waiver.
2. Does it advise the employee in writing to consult an attorney? The agreement should state that the employee may seek legal advice.
3. How long is the review period? Check the number of days available and the deadline for accepting the offer.
4. Does it explain the right to revoke? The employee should be able to identify how and when to revoke after signing.
5. What is offered in exchange for the waiver? The benefit should be additional to what the employee is already entitled to receive.
6. Is the offer part of a group program? If so, check for the longer consideration period and the required group disclosures.

Keeping a copy of the agreement, related emails, and any group disclosures can help preserve a record of the offer and its terms. The employee should also note any deadlines stated in the documents.

What Should Employers Do to Meet OWBPA Requirements?

Employers should build OWBPA compliance into separation planning rather than address it at the last minute, particularly during restructuring or layoffs. The process should identify whether affected employees are age 40 or older and whether the offer is individual or part of a group program. Employers should then use understandable language, provide the required review and revocation periods, and confirm that the offered consideration is additional to existing obligations.

For group programs, employers should prepare complete and accurate disclosures about the covered group and selection process. Keeping documentation of the decision-making process can also help explain how employees were selected. State laws, contracts, benefit plans, and other federal requirements may create additional obligations beyond the OWBPA.

*This article is for general informational purposes only and is not legal advice.