Digest of EEO Law, Volume XI, No. 6

WAIVERS AND CLAIMS UNDER THE ADEA
29 C.F.R. §1625.22

[Editor's Note: The text of the new regulation is reprinted on the following pages. EEOC published the following final regulation on agreements waiving rights and claims under the Age Discrimination in Employment Act, in order to set forth procedures for complying with the Older Workers Benefit Protection Act of 1990. The regulation was developed using negotiated rulemaking, under procedures set out in the Negotiated Rulemaking Act, 5 U.S.C. §561 et seq., Pub.L. 101-648. The regulation was effective on July 6, 1998.

At 63 Fed. Reg. 30624 (June 5, 1998), the final regulation is published along with supplementary information regarding the history of the regulation, background information on the negotiated rulemaking process, and a discussion of the comments that were received from the public on the regulation as proposed.]

Chapter XIV of title 29 of the Code of Federal Regulations is amended as
follows: 

PART 1625--AGE DISCRIMINATION IN EMPLOYMENT ACT

     1.  The authority citation for part 1625 continues to read as follows:

          Authority:  81 Stat. 602; 29 U.S.C. 621, 5 U.S.C. 301,
Secretary's Order No.  10-68; Secretary's Order No. 11-68; sec 12, 29
U.S.C. 631, Pub. L. 99-592, 100 Stat. 3342;  sec. 2, Reorg. Plan No. 1 of
1978, 43 FR 19807. 

     2.  In part 1625, section 1625.22 is added to subpart B--Substantive
Regulations to read as follows: 

Section 1625.22  Waivers of rights and claims under the ADEA.

(a)  Introduction.  (1)  Congress amended the ADEA in 1990 to clarify the
prohibitions against discrimination on the basis of age.  In Title II of
OWBPA, Congress addressed waivers of rights and claims under the ADEA,
amending section 7 of the ADEA by adding a new subsection (f). 

     (2)  Section 7(f)(1) of the ADEA expressly provides that waivers may
be valid and enforceable under the ADEA only if the waiver is "knowing and
voluntary".  Sections 7(f)(1)  and 7(f)(2) of the ADEA set out the minimum
requirements for determining whether a waiver is knowing and voluntary. 

     (3)  Other facts and circumstances may bear on the question of
whether the waiver is knowing and voluntary, as, for example, if there is
a material mistake, omission, or misstatement in the information furnished
by the employer to an employee in connection with the waiver. 

     (4)  The rules in this section apply to all waivers of ADEA rights
and claims, regardless of whether the employee is employed in the private
or public sector, including employment by the United States Government.

(b)  Wording of Waiver Agreements.  (1)  Section 7(f)(1)(A) of the ADEA

provides, as part of the minimum requirements for a knowing and voluntary
waiver, that: 

          The waiver is part of an agreement between the individual and
          the employer that is written in a manner calculated to be
          understood by such individual, or by the average individual
          eligible to participate. 

     (2)  The entire waiver agreement must be in writing. 

     (3)  Waiver agreements must be drafted in plain language geared to
the level of understanding of the individual party to the agreement or
individuals eligible to participate. Employers should take into account
such factors as the level of comprehension and education of typical
participants.  Consideration of these factors usually will require the
limitation or elimination of technical jargon and of long, complex
sentences. 

     (4)  The waiver agreement must not have the effect of misleading,
misinforming, or failing to inform participants and affected individuals. 
Any advantages or disadvantages described shall be presented without
either exaggerating the benefits or minimizing the limitations. 

     (5)  Section 7(f)(1)(H) of the ADEA, relating to exit incentive or
other employment termination programs offered to a group or class of
employees, also contains a requirement that information be conveyed "in
writing in a manner calculated to be understood by the average
participant."  The same standards applicable to the similar language in
section 7(f)(1)(A) of the ADEA apply here as well. 

     (6)  Section 7(f)(1)(B) of the ADEA provides, as part of the minimum
requirements for a knowing and voluntary waiver, that "the waiver
specifically refers to rights or claims under this Act."  Pursuant to this
subsection, the waiver agreement must refer to the Age Discrimination in
Employment Act (ADEA) by name in connection with the waiver. 

     (7)  Section 7(f)(1)(E) of the ADEA requires that an individual must
be "advised in writing to consult with an attorney prior to executing the
agreement." 


(c)  Waiver of future rights.  (1)  Section 7(f)(1)(C) of the ADEA

provides that: 

          A waiver may not be considered knowing and voluntary unless
          at a minimum . . . the individual does not waive rights or
          claims that may arise after the date the waiver is executed.

     (2)  The waiver of rights or claims that arise following the
execution of a waiver is prohibited.  However, section 7(f)(1)(C) of the
ADEA does not bar, in a waiver that otherwise is consistent with statutory
requirements, the enforcement of agreements to perform future
employment-related actions such as the employee's agreement to retire or
otherwise terminate employment at a future date. 

(d)  Consideration.  (1)  Section 7(f)(1)(D)  of the ADEA states that: 

          A waiver may not be considered knowing and voluntary unless
          at a minimum . . . the individual waives rights or claims only in
          exchange for consideration in addition to anything of value to
          which the individual already is entitled. 

     (2)  "Consideration in addition" means anything of value in addition
to that to which the individual is already entitled in the absence of a
waiver. 

     (3)  If a benefit or other thing of value was eliminated in
contravention of law or contract, express or implied, the subsequent offer
of such benefit or thing of value in connection with a waiver will not
constitute "consideration" for purposes of section 7(f)(1) of the ADEA. 
Whether such elimination as to one employee or group of employees is in
contravention of law or contract as to other employees, or to that
individual employee at some later time, may vary depending on the facts
and circumstances of each case. 

     (4)  An employer is not required to give a person age 40 or older a
greater amount of consideration than is given to a person under the age of
40, solely because of that person's membership in the protected class
under the ADEA. 

(e)  Time periods.  (1)  Section 7(f)(1)(F) of the ADEA states that:

          A waiver may not be considered knowing and voluntary unless
          at a minimum . . . 
          (i) The individual is given a period of at least 21 days within
          which to consider the agreement; or 
          (ii) If a waiver is requested in connection with an exit incentive
          or other employment termination program offered to a group or
          class of employees, the individual is given a period of at least 45
          days within which to consider the agreement.

     (2)  Section 7(f)(1)(G) of the ADEA states:

          A waiver may not be considered knowing and voluntary unless
          at a minimum . . . the agreement provides that for a period of at
          least 7 days following the execution of such agreement, the
          individual may revoke the agreement, and the agreement shall
          not become effective or enforceable until the revocation period
          has expired.

     (3)  The term "exit incentive or other employment termination
program" includes both voluntary and involuntary programs. 

     (4)  The 21 or 45 day period runs from the date of the employer's
final offer.  Material changes to the final offer restart the running of
the 21 or 45 day period;  changes made to the final offer that are not
material do not restart the running of the 21 or 45 day period.  The
parties may agree that changes, whether material or immaterial, do not
restart the running of the 21 or 45 day period. 

     (5)  The 7 day revocation period cannot be shortened by the parties,
by agreement or otherwise. 

     (6)  An employee may sign a release prior to the end of the 21 or 45
day time period, thereby commencing the mandatory 7 day revocation period. 
This is permissible as long as the employee's decision to accept such
shortening of time is knowing and voluntary and is not induced by the
employer through fraud, misrepresentation, a threat to withdraw or alter
the offer prior to the expiration of the 21 or 45 day time period, or by
providing different terms to employees who sign the release prior to the
expiration of such time period. However, if an employee signs a release
before the expiration of the 21 or 45 day time period, the employer may
expedite the processing of the consideration provided in exchange for the
waiver. 

(f)  Informational requirements. (1) Introduction.  (i)  Section
7(f)(1)(H) of the ADEA provides that: 

          A waiver may not be considered knowing and voluntary   unless
          at a minimum . . . if a waiver is requested in connection with an
          exit incentive or other employment termination program offered
          to a group or class of employees, the employer (at the
          commencement of the period specified in subparagraph (F))
          [which provides time periods for employees to consider the
          waiver] informs the individual in writing in a manner calculated
          to be understood by the average individual eligible to participate,
          as to--

               (i) Any class, unit, or group of individuals covered
               by such program, any eligibility factors for such
               program, and any time limits applicable to such
               program; and

               (ii) The job titles and ages of all individuals
               eligible or selected for the program, and the ages
               of all individuals in the same job classification or
               organizational unit who are not eligible or selected
               for the program.

     (ii)  Section 7(f)(1)(H) of the ADEA addresses two principal issues: 
to whom must information be provided, and what information must be
disclosed to such individuals. 

     (iii)(A)  Section 7(f)(1)(H) of the ADEA references two types of
"programs" under which employers seeking waivers must make written
disclosures:  "exit incentive programs"  and "other employment termination
programs."  Usually an "exit incentive program" is a voluntary program
offered to a group or class of employees where such employees are offered
consideration in addition to anything of value to which the individuals
are already entitled (hereinafter in this section, "additional
consideration") in exchange for their decision to resign voluntarily and
sign a waiver.  Usually "other employment termination program" refers to a
group or class of employees who were involuntarily terminated and who are
offered additional consideration in return for their decision to sign a
waiver. 
          (B)  The question of the existence of a "program" will be
decided based upon the facts and circumstances of each case.  A "program"
exists when an employer offers additional consideration for the signing of
a waiver pursuant to an exit incentive or other employment termination
(e.g., a reduction in force) to two or more employees.  Typically, an
involuntary termination program is a standardized formula or package of
benefits that is available to two or more employees, while an exit
incentive program typically is a standardized formula or package of
benefits designed to induce employees to sever their employment
voluntarily.  In both cases, the terms of the programs generally are not
subject to negotiation between the parties. 
          (C)  Regardless of the type of program, the scope of the terms
"class," "unit,"  "group," "job classification," and "organizational unit"
is determined by examining the "decisional unit" at issue.  (See Paragraph
(f)(3) of this section, "The Decisional Unit"). 
          (D)  A "program" for purposes of the ADEA need not constitute an
"employee benefit plan" for purposes of the Employee Retirement Income
Security Act of 1974 (ERISA).  An employer may or may not have an ERISA

severance plan in connection with its OWBPA program. 

     (iv)  The purpose of the informational requirements is to provide an
employee with enough information regarding the program to allow the
employee to make an informed choice whether or not to sign a waiver
agreement. 

     (2)  To whom must the information be given.  The required information
must be given to each person in the decisional unit who is asked to sign a
waiver agreement. 

     (3)  The decisional unit.  (i)(A)  The terms "class," "unit," or
"group" in section 7(f)(1)(H)(i) of the ADEA and "job classification or
organizational unit" in section 7(f)(1)(H)(ii) of the ADEA refer to
examples of categories or groupings of employees affected by a program
within an employer's particular organizational structure.  The terms are
not meant to be an exclusive list of characterizations of an employer's
organization. 
          (B)  When identifying the scope of the "class, unit, or group,"
and "job classification or organizational unit," an employer should
consider its organizational structure and decision-making process.  A
"decisional unit" is 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 term "decisional
unit" has been developed to reflect the process by which an employer chose
certain employees for a program and ruled out others from that program. 

     (ii)(A)  The variety of terms used in section 7(f)(1)(H) of the ADEA
demonstrates that employers often use differing terminology to describe
their organizational structures.  When identifying the population of the
decisional unit, the employer acts on a case-by-case basis, and thus the
determination of the appropriate class, unit, or group, and job
classification or organizational unit for purposes of section 7(f)(1)(H)
of the ADEA also must be made on a case-by-case basis. 
          (B)  The examples in paragraph (f)(3)(iii) of this section
demonstrate that in appropriate cases some subgroup of a facility's work
force may be the decisional unit.  In other situations, it may be
appropriate for the decisional unit to comprise several facilities.
However, as the decisional unit is typically no broader than the facility,
in general the disclosure need be no broader than the facility. 
"Facility" as it is used throughout this section generally refers to place
or location.  However, in some circumstances terms such as "school," 
"plant," or "complex" may be more appropriate. 
          (C)  Often, when utilizing a program an employer is attempting
to reduce its workforce at a particular facility in an effort to eliminate
what it deems to be excessive overhead, expenses, or costs from its
organization at that facility.  If the employer's goal is the reduction of
its workforce at a particular facility and that employer undertakes a
decision- making process by which certain employees of the facility are
selected for a program, and others are not selected for a program, then
that facility generally will be the decisional unit for purposes of
section 7(f)(1)(H) of the ADEA. 
          (D)  However, if an employer seeks to terminate employees by
exclusively considering a particular portion or subgroup of its operations
at a specific facility, then that subgroup or portion of the workforce at
that facility will be considered the decisional unit. 
          (E)  Likewise, if the employer analyzes its operations at
several facilities, specifically considers and compares ages, seniority
rosters, or similar factors at differing facilities, and determines to
focus its workforce reduction at a particular facility, then by the nature
of that employer's decision-making process the decisional unit would
include all considered facilities and not just the facility selected for
the reductions. 
          
     (iii)  The following examples are not all-inclusive and are meant
only to assist employers and employees in determining the appropriate
decisional unit.  Involuntary reductions in force typically are structured
along one or more of the following lines: 

          (A)  Facility-wide:  Ten percent of the employees in the
Springfield facility will be terminated within the next ten days; 
          (B)  Division-wide:  Fifteen of the employees in the Computer
Division will be terminated in December; 
          (C)  Department-wide:  One-half of the workers in the Keyboard
Department of the Computer Division will be terminated in December; 
          (D)  Reporting:  Ten percent of the employees who report to the
Vice President for Sales, wherever the employees are located, will be
terminated immediately; 
          (E)  Job Category:  Ten percent of all accountants, wherever the
employees are located, will be terminated next week. 

     (iv)  In the examples in paragraph (f)(3)(iii) of this section, the
decisional units are, respectively:  (A) The Springfield facility; (B) The
Computer Division; (C) The Keyboard Department; (D) All employees
reporting to the Vice President for Sales; and (E) All accountants. 

     (v)  While the particular circumstances of each termination program
will determine the decisional unit, the following examples also may assist
in determining when the decisional unit is other than the entire facility: 

          (A)  A number of small facilities with interrelated functions
and employees in a specific geographic area may comprise a single
decisional unit; 
          (B)  If a company utilizes personnel for a common function at
more than one facility, the decisional unit for that function (i.e.,
accounting) may be broader than the one facility; 
          (C)  A large facility with several distinct functions may
comprise a number of decisional units; for example, if a single facility
has distinct internal functions with no employee overlap (i.e.,
manufacturing, accounting, human resources), and the program is confined
to a distinct function, a smaller decisional unit may be appropriate. 

     (vi)(A)  For purposes of this section, higher level review of
termination decisions generally will not change the size of the decisional
unit unless the reviewing process alters its scope.  For example, review
by the Human Resources Department to monitor compliance with
discrimination laws does not affect the decisional unit.  Similarly, when
a regional manager in charge of more than one facility reviews the
termination decisions regarding one of those facilities, the review does
not alter the decisional unit, which remains the one facility under
consideration. 
          (B)  However, if the regional manager in the course of review
determines that persons in other facilities should also be considered for
termination, the decisional unit becomes the population of all facilities
considered.  Further, if, for example, the regional manager and his three
immediate subordinates jointly review the termination decisions, taking
into account more than one facility, the decisional unit becomes the
populations of all facilities considered. 

     (vii)  This regulatory section is limited to the requirements of
section 7(f)(1)(H) and is not intended to affect the scope of discovery or
of substantive proceedings in the processing of charges of violation of
the ADEA or in litigation involving such charges. 

     (4)  Presentation of Information.  (i)  The information provided must
be in writing and must be written in a manner calculated to be understood
by the average individual eligible to participate. 

     (ii)  Information regarding ages should be broken down according to
the age of each person eligible or selected for the program and each
person not eligible or selected for the program.  The use of age bands
broader than one year (such as "age 20-30") does not satisfy this
requirement. 

     (iii)  In a termination of persons in several established grade
levels and/or other established subcategories within a job category or job
title, the information shall be broken down by grade level or other
subcategory. 

     (iv)  If an employer in its disclosure combines information
concerning both voluntary and involuntary terminations, the employer shall
present the information in a manner that distinguishes between voluntary
and involuntary terminations. 

     (v)  If the terminees are selected from a subset of a decisional
unit, the employer must still disclose information for the entire
population of the decisional unit.  For example, if the employer decides
that a 10% RIF in the Accounting Department will come from the accountants
whose performance is in the bottom one-third of the Division, the employer
still must disclose information for all employees in the Accounting
Department, even those who are the highest rated. 

     (vi)  An involuntary termination program in a decisional unit may
take place in successive increments over a period of time.  Special rules
apply to this situation.  Specifically, information supplied with regard
to the involuntary termination program should be cumulative, so that later
terminees are provided ages and job titles or job categories, as
appropriate, for all persons in the decisional unit at the beginning of
the program and all persons terminated to date.  There is no duty to
supplement the information given to earlier terminees so long as the
disclosure, at the time it is given, conforms to the requirements of this
section. 

     (vii)  The following example demonstrates one way in which the
required information could be presented to the employees.  (This example
is not presented as a prototype notification agreement that automatically
will comply with the ADEA.  Each information disclosure must be structured
based upon the individual case, taking into account the corporate
structure, the population of the decisional unit, and the requirements of
section 7(f)(1)(H) of the ADEA):  Example:  Y Corporation lost a major
construction contract and determined that it must terminate 10% of the
employees in the Construction Division.  Y decided to offer all terminees
$20,000 in severance pay in exchange for a waiver of all rights. The
waiver provides the section 7(f)(1)(H) of the ADEA information as follows: 

          (A)  The decisional unit is the Construction Division. 
          (B)  All persons in the Construction Division are eligible for
the program.  All persons who are being terminated in our November RIF are
selected for the program. 
          (C)  All persons who are being offered consideration under a
waiver agreement must sign the agreement and return it to the Personnel
Office within 45 days after receiving the waiver.  Once the signed waiver
is returned to the Personnel Office, the employee has 7 days to revoke the
waiver agreement. 
          (D)  The following is a listing of the ages and job titles of
persons in the Construction Division who were and were not selected for
termination and the offer of consideration for signing a waiver: 

     Job Title                  Age         # Selected      # Not Selected

(1)  Mechanical Engineers, I    25                  21                  48
                                26                  11                  73
                                63                   4                  18
                                64                   3                  11 
(2)  Mechanical Engineers, II   28                   3                  10
                                29                  11                  17  
                                Etc., for all ages
(3)  Structural Engineers, I    21                   5                   8
                                Etc., for all ages
(4)  Structural Engineers, II   23                   2                   4
                                Etc., for all ages 
(5)  Purchasing Agents          26                  10                  11
                                Etc., for all ages

(g)  Waivers settling charges and lawsuits.  (1)  Section 7(f)(2) of the

ADEA provides that: 

          A waiver in settlement of a charge filed with the Equal Employment
          Opportunity Commission, or an action filed in court by the
          individual or the individual's representative, alleging age
          discrimination of a kind prohibited under section 4 or 15 may
          not be considered knowing and voluntary unless at a minimum--

          (A) Subparagraphs (A) through (E) of paragraph (1) have been
          met; and
          (B) The individual is given a reasonable period of time within
          which to consider the settlement agreement.

     (2)  The language in section 7(f)(2) of the ADEA, "discrimination of
a kind prohibited under section 4 or 15" refers to allegations of age
discrimination of the type prohibited by the ADEA. 

     (3)  The standards set out in paragraph (f) of this section for
complying with the provisions of section 7(f)(1)(A)-(E) of the ADEA also
will apply for purposes of complying with the provisions of section
7(f)(2)(A) of the ADEA. 

     (4)  The term "reasonable time within which to consider the
settlement agreement"  means reasonable under all the circumstances,
including whether the individual is represented by counsel or has the
assistance of counsel. 

     (5)  However, while the time periods under section 7(f)(1) of the
ADEA do not apply to subsection 7(f)(2) of the ADEA, a waiver agreement
under this subsection that provides an employee the time periods specified
in section 7(f)(1) of the ADEA will be considered "reasonable" for
purposes of section 7(f)(2)(B) of the ADEA. 

     (6)  A waiver agreement in compliance with this section that is in
settlement of an EEOC charge does not require the participation or
supervision of EEOC. 

(h)  Burden of proof.  In any dispute that may arise over whether any of
the requirements, conditions, and circumstances set forth in section 7(f)
of the ADEA, subparagraph (A), (B), (C), (D), (E), (F), (G), or (H) of
paragraph (1), or subparagraph (A) or (B) of paragraph (2), have been met,
the party asserting the validity of a waiver shall have the burden of
proving in a court of competent jurisdiction that a waiver was knowing and
voluntary pursuant to paragraph (1) or (2) of section 7(f) of the ADEA.

(i)  EEOC's enforcement powers.  (1)  Section 7(f)(4) of the ADEA states:
          No waiver agreement may affect the Commission's rights and
          responsibilities to enforce [the ADEA].  No waiver may be used
          to justify interfering with the protected right of an employee to
          file a charge or participate in an investigation or proceeding
          conducted by the Commission.

     (2)  No waiver agreement may include any provision prohibiting any
individual from: 
          (i) Filing a charge or complaint, including a challenge to the
validity of the waiver agreement, with EEOC, or
          (ii) Participating in any investigation or proceeding conducted
by EEOC. 

     (3)  No waiver agreement may include any provision imposing any
condition precedent, any penalty, or any other limitation adversely
affecting any individual's right to: 
          (i) File a charge or complaint, including a challenge to the
validity of the waiver agreement, with EEOC, or
          (ii) Participate in any investigation or proceeding conducted by

EEOC. 

(j)  Effective date of this section.  (1)  This section is effective July
6, 1998. 

     (2)  This section applies to waivers offered by employers on or after
the effective date specified in paragraph (j)(1) of this section. 

     (3)  No inference is to be drawn from this section regarding the
validity of waivers offered prior to the effective date. 

(k)  Statutory authority.  The regulations in this section are legislative
regulations issued pursuant to section 9 of the ADEA and Title II of
OWBPA.