When an employer offers a severance package to an older employee, they often wrap the agreement in dense and intimidating legal language. Fortunately, the law does not permit those agreements to strip workers of their rights without adhering to strict safeguards. The federal Older Workers Benefit Protection Act (OWBPA) outlines clear conditions regulating these agreements, and if a document fails to meet them, courts will not uphold a waiver of age discrimination claims. Understanding the OWBPA in settlement agreements helps employees determine whether their employer has complied with the law.
At Smithey Law Group LLC, every attorney focuses exclusively on employment and labor law. Recognized with honors from Best Lawyers, Super Lawyers, Chambers Band 1 Rankings, and America’s Top 100 High Stakes Litigators, we bring unmatched experience to employees navigating complex agreements, equipping clients with the insight and leverage they need when deciding whether to sign.
What Are the Core Requirements Under the OWBPA?
Congress enacted the OWBPA in 1990 to strengthen protections under the Age Discrimination in Employment Act (ADEA). Lawmakers recognized that older workers often felt pressure to accept severance offers without fully understanding what they were signing away in return for benefits.
The OWBPA aimed to remove some of the guesswork employees felt around rights waivers in severance agreements. The law modified Section 626(f) of the ADEA, outlining the specific requirements that must appear in every valid waiver. The most important of these requirements include:
- Plain language. Employers must write the document in terms that the average employee can understand. Legal jargon or technical phrasing cannot obscure the meaning.
- Reference to ADEA rights. The waiver must specifically mention rights under the ADEA.
- Encouragement to seek counsel. The employer must advise the employee, in writing, to consult with an attorney before signing any documents.
- Time to consider. Employers must give employees at least 21 days to review the agreement. If the waiver is part of a group reduction-in-force, the review period extends to 45 days.
- Right to revoke. Even after signing, the employee retains seven days to rescind the waiver. No employer can shorten or waive this right.
- No future claims. The agreement can only waive past claims; it cannot eliminate the right to bring an action for conduct that occurs after the employee signs the agreement.
- Disclosure in group exits. In reductions involving two or more employees, the employer must provide details about the job titles and ages of those selected and not selected for termination, helping promote transparency.
Together, these requirements prevent employers from using speed, pressure, or confusing language to force older workers into surrendering valuable rights. Each provision has teeth: If one is missing, the waiver fails to take effect.
These rules may look straightforward, but in practice, agreements often fall into gray areas. That is why experienced legal review is crucial.
How Do Employers Comply with the OWBPA in Settlement Agreements?
Employers that follow the regulations established by the OWBPA usually take several steps to create enforceable documents:
- They draft agreements with simplified language rather than dense legalese;
- They clearly highlight the review and revocation periods, often in bold type;
- They provide charts or lists showing the ages and job categories of affected employees in group terminations; and
- They include a section that explicitly references the ADEA and advises consultation with an attorney.
These practices reduce litigation risk for companies and help demonstrate that the company did not mislead its employees. Yet, many agreements still lack required elements, whether due to oversight or design. Ultimately, employers have the burden of proving a waiver was valid. That is where detailed documentation becomes essential.
After reviewing these provisions, employees should ask themselves: Does my agreement check all of these boxes? If not, it may not be enforceable.
What Are OWBPA Red Flags in Settlement Agreements?
For employees, recognizing potential violations is key. Watch for warning signs such as:
- Language so technical that it is difficult to follow;
- A document that refers broadly to “all claims” without mentioning the ADEA;
- A demand to sign within a short window that falls below the statutory 21-day or 45-day minimum;
- No written notice of the right to consult a lawyer; and
- Failure to provide group exit disclosures when multiple employees are let go.
Each of these red flags may indicate employer noncompliance. Workers who encounter them should not assume the agreement is valid. Understanding the checklist of requirements empowers employees to push back and ask questions before signing.
How Should I Approach Settlement Agreements in Light of the OWBPA?
For older employees evaluating a severance package, the path forward is not about rushing to a signature. It’s about making deliberate choices. Start by reviewing the agreement line by line and comparing it against the OWBPA checklist. Every required element must be present, from plain-language explanations to the 21- or 45-day review periods.
Next, identify potential gaps. Look for missing disclosures in group layoffs, vague wording that obscures your rights, or pressure to sign before the statutory window closes. Finally, seek experienced legal review. An employment lawyer can review the agreement against federal law, negotiate stronger protections, or challenge waivers that fail to meet OWBPA standards.
Remember: The OWBPA does not block employers from offering severance packages or settlement agreements. Instead, it sets the ground rules so that older workers can make decisions based on fairness and knowledge, rather than fear or haste.
Protect Your Rights with Smithey Law Group
Smithey Law Group LLC is an unmatched authority on Maryland employment law. Joyce Smithey, founder of Smithey Law, has authored numerous legal publications and teaches employment law at seminars and in law school classrooms. Our team focuses exclusively on labor and employment law and has been awarded accolades such as Best Lawyers, Lawdragon, Super Lawyers, and Chambers Band 1 Rankings. Our team’s leadership roles in the Maryland State Bar Association and national employment law circles underscore that focus.
Employers recognize which lawyers command respect in negotiations and the courtroom. When employees bring agreements to a firm like Smithey Law Group, they benefit not only from technical precision but from reputational weight. You deserve an advocate who can thoroughly review every clause and work to confirm that your decision is truly voluntary. Contact us today for a consultation and let us explain how we can help you take charge of your future.
