The Equal Employment Opportunity Commission ("EEOC") recently issued final regulations to explain the procedures employers must follow when they offer older employees release agreements waiving age discrimination claims. The regulations are intended to clarify the waiver requirements implemented by the Older Workers’ Benefit Protection Act ("OWBPA"), which amended the Age Discrimination in Employment Act ("ADEA"), and are the first formal EEOC guidance on the Act. The regulations, effective July 6, 1998, provide guidance on several issues concerning ADEA waivers, including wording of the agreements and disclosure requirements when a class of employees is involved.

Agreement Must Be in Plain Language

According to the OWBPA, waiver agreements must be "written in a manner calculated to be understood by such individual, or by the average individual eligible to participate." The regulations clarify that the agreement must be written in plain language that is geared to the level of understanding and comprehension of the individual signing the agreement. In drafting the agreement, therefore, the regulations suggest that consideration of these factors "usually will require the limitation or elimination of technical jargon and of long, complex sentences" from the agreement. In addition, the regulations specify that the waiver agreement must refer to the ADEA by name to ensure that the waiver of age discrimination claims is knowing and voluntary.

Waivers to Groups of Employees Explained

The regulations provide the most guidance regarding the employer’s obligations when ADEA waivers are offered to a group or class of employees in connection with "an exit incentive or other employment termination program." According to the OWBPA, employers must disclose certain information about the group or class to all individuals asked to sign the waiver, including the class, unit, or group covered by the program; the eligibility factors for the program; time limits for the program; the job titles and ages of eligible participants; and ages of all employees in the same job classification or organizational unit who are not eligible for the program. According to the regulations, a program exists and the disclosure requirements are triggered if two or more employees are offered additional consideration for signing an ADEA waiver. The regulations also clarify that the term "exit incentive program" refers to a program providing incentives to encourage employees to resign voluntarily, and "employment termination program" refers to an involuntary termination program such as a reduction in force. With regard to providing the ages of eligible and ineligible employees, the regulations specify that age bands used cannot be broader than one year.

The regulations indicate that information on the program must be given to each person in the "decisional unit" who is asked to sign a waiver agreement. Which employees are included in the "decisional unit" depends on the nature of the employer’s operations and is defined broadly to include "that portion of the employer’s organizational structure from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of a waiver." The regulations provide examples of possible decisional units, including facilities, divisions, departments, and job categories.

Special rules apply when an involuntary termination program takes place in successive increments over a period of time, such as when a reduction in force occurs in stages over a six-month period. In particular, the regulations require that the disclosure information be cumulative so that employees are provided with the ages and job titles or job categories for all persons in the decisional unit from the beginning of the program to the date the program is offered to the latest group.

Regulations Do Not Address "Tender Back"

The EEOC declined to address the question of whether employees can be required to "tender back" or return any money received under a waiver agreement when challenging the waiver in court. The EEOC deferred to the Supreme Court’s recent decision in Oubre v. Entergy Operations Inc., 118 S. Ct. 838 (1998), which held that a release that does not comply with the OWBPA requirements is not valid, and that an employee who challenges the validity of an ADEA waiver is not required to return any money to the employer before bringing legal action. The EEOC also indicated that it is considering issuing guidance to discuss the Oubre decision. The EEOC further stated in its comments on the regulations that any requirement in a waiver agreement that an employee return money received before filing a charge or complaint of discrimination with the EEOC will be void.