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Guard Against Age-Bias Suits When Downsizing


While a bad economy may be one of the biggest reasons companies downsize, there are other reasons, including mergers and acquisitions, changes in management, and outsourcing.

Problems can arise, however, if laid-off employees believe they are victims of discrimination. Employees who have been with the company for a long time may feel they are victims under the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA). Others may believe they have legal claims under Title VII, the Americans with Disabilities Act (ADA) or the Equal Pay Act (EPA). 

To minimize the risks of potential litigation, many employers offer severance packages that include money, benefits, or both, in exchange for a signed release, or waiver, from all future claims. But without careful consideration, a severance deal can backfire.

Waivers are generally valid only when employees knowingly and voluntarily consent to them, according to the Equal Employment Opportunity Commission (EEOC). Whether a waiver is knowing and voluntary is often determined by case law, but when it comes to age issues, the rules are strictly defined by the OWBPA.

To meet the requirements, the OWBPA lists seven minimum factors. The waivers must:

Waivers that don't meet these requirements cannot be enforced. Moreover, an employer cannot try to fix an invalid waiver by issuing a letter with the omitted, but required, information after the waiver has been signed.

Bottom Line: If your company is contemplating a workforce reduction, consult with your legal advisers to develop a severance package that can pass muster under all applicable federal and state laws. This ounce of prevention is often worth a pound of cure.

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