As your small business grows, you will need to be mindful of your obligation to prevent unlawful discrimination in the workplace and during employment decisions. You may be familiar with anti-discrimination laws that prohibit unlawful discrimination based on race, color, religion, national origin, sex, or disability, but may be overlooking another protected class: individuals age 40 or older. In this article we’ll familiarize you with the basics of age discrimination protections at the federal and state level and the impact these laws have on severance or separation agreements.
As always, be sure to consult with your legal advisor about your company’s particular circumstances and obligations.
Federal Age Discrimination Protection
The Age Discrimination in Employment Act (ADEA) prohibits discrimination against people who are age 40 or older by companies with 20 or more employees. People under 40 are not protected against age discrimination at the federal level, but some states may have different or expanded definitions of discrimination.
Age discrimination means treating an applicant or employee less favorably becuase of their age and is forbidden during all aspects of employment, including hiring, firing, pay, job assignments, promotions, layoffs, trainings, benefits, and any other term or condition of employment. It is also unlawful to harass someone because of their age. Harassment may include offensive or derogatory comments about a person’s age. Teasing or making offhand remarks about a person’s age are generally not considered harassment, but may be unlawful if the comments become so frequent and severe that it creates a hostile work environment or when it leads to an adverse employment decision, such as firing or demoting the victim.
Employers should not ask for an applicant’s age during the hiring process unless there is a work-related reason that cannot be specifically addressed through necessary credentials. As a general best practice, employers should be wary of collecting sensitive information that is not necessary for job function or business-related needs. Avoiding unnecessary disclosure of personal information is the best way to ensure there is no argument that such information could influence employment decisions.
State and Local Age Discrimination Protection
Employers should be sure to consider state and local age discrimination laws, which may have a different scope of protection than the ADEA. Some states and localities protect people who are under 40 years of age. Additionally, some states protect against “reverse” age discrimination, which means treating older employees better because of their age.
The most common difference between state and federal age discrimination laws is that many states allow age discrimination claims against employers with fewer than 20 employees. In New York, for example, employees can bring claims against employers with as few as four employees. As another example, in New Jersey, there is no minimum number of employees.
Releasing ADEA Claims at Termination
If an employer of 20 or more employees is asking an older worker to release ADEA claims at severance or termination, the employer must comply with the The Older Workers Benefit Protection Act (OWBPA). OWBPA requires that employees waive their rights knowingly and voluntarily and lays out several requirements an employer must follow for the release to be effective. Most importantly, employers must provide employees with at least 21 days to consider a severance or separation agreement after the final agreement has been made. If any material changes are made to the offer, the 21 day period starts over. Employers must also give employees 7 days to revoke their signature. This cannot be changed or waived for any reason.
Additional factors must be satisfied to have a valid waiver of ADEA claims. The written agreement must specifically refer to rights or claims arising under the ADEA, must advise the employee to consult an attorney before signing the agreement, must not include rights and claims that arise after the waiver is executed, and must be written in a manner that can be clearly understood according to the average education level and ability of the terminated employee or employee group. Waivers must also offer some sort of consideration, like additional compensation, and must comply with additional federal and state laws.
It is also important to note that even when a waiver complies with OWBPA’s requirements, a waiver of age claims will be invalid and unenforceable if an employer used fraud, undue influence, or other improper conduct to coerce an employee to sign it.
The Equal Employment Opportunity Commission (EEOC) provides a sample waiver and general release here. Please note that separation agreements should be reviewed with legal counsel before being provided to any employees.
Additional requirements when terminating more than one person
When an employer is laying off or terminating a group of employees, there are additional requirements that must be met for a waiver of ADEA claims to be valid. Group layoffs may be “exit incentive programs,” which are voluntary, or “other employment termination programs,” which are involuntary. Under OWBPA, the requirements are the same for both types of programs.
In addition to meeting the OWBPA requirements laid out above, the employer must provide all employees who are being laid off with written notice of the layoff, which must comply with several requirements. Employees must be given 45 days to consider the agreement, as opposed to the 21-day period for individual terminations, mentioned above.
The written notice must include the decisional unit (the class, unit, or group of employees from which the employer chose the employees who were selected for the program), the eligibility factors for the program, any applicable time limits, and the job titles and ages of individuals who are eligible or were selected and the ages of all individuals in the same job classification or organizational unit who are not eligible or who were not selected for termination. The ages provided must be specific, not just an age range.
Remember, no agreement between an employer and employee can limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC under the ADEA.
Resources & Notes
- EEOC: Age Discrimination
- EEOC: Q&A-Understanding Waivers of Discrimination Claims in Employee Severance Agreements
- Mineral: An Overview of Federal Discrimination Laws | Age*
- Mineral: Workforce Reduction*
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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.