What You Need to Know About Lawful Waivers of Age Discrimination Claims

Workforce Management
By Bradley T. Adler
March 2009

To have a valid release of claims under the Age Discrimination in Employment Act, employers must comply with several technical requirements. Courts consistently have stated that these requirements are ‘strict and unqualified,’ and if an employer fails to meet any of the statutory requirements, the waiver is ‘ineffective as a matter of law.’ Here is an outline of what companies must do to comply. By Bradley T. Adler

In today’s difficult economic times, many employers are carefully assessing their operational structures, particularly the efficiency and expense of their workforce. When revenues are down and expenses remain the same or go up, something has to change. That something has typically has been a dramatic reduction in the workforce.
However, many employers are surprised to learn that layoffs can result in significant legal claims by affected employees. A reduction in force is a situation that often serves as the basis for discrimination claims—particularly involving age discrimination—even though the cause of the reductions may be a loss of business, a merger or a consolidation of business operations.
When terminating an employee because of a reduction in force, many employers offer severance packages to employees to obtain a waiver of claims. In short, as a part of the layoff, the employer offers an employee some benefit—typically compensation—that the employee otherwise is not entitled to receive. In exchange, the employee is asked to sign a release agreement that waives any claims against the company arising out of his or her employment.
Typically there are no specific requirements for such waivers of federal claims. But there is one major exception: claims for age discrimination under the Age Discrimination in Employment Act. To have a valid release of claims under the act, employers must comply with several technical requirements. Courts consistently have stated that these requirements are "strict and unqualified," and if an employer fails to meet any of the statutory requirements, the waiver is "ineffective as a matter of law." The technical requirements are:
1. A written and understandable agreement: The waiver must be part of a written agreement between the individual and the employer that is written in a manner calculated to be understood by the average individual eligible to participate.
2. Reference to the Age Discrimination in Employment Act: The waiver specifically refers to rights or claims arising under the act.

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