Age Discrimination & Retirement Benefits Under the OWBPA
The Age Discrimination Employment Act of 1967 (ADEA), along with other federal and state law, prohibits specified employers, labor organizations, and employment agencies from discriminating against an individual because of age in various facets of employment and hiring. The ADEA protects those aged 40 and over.
The ADEA provided for exceptions and exemptions to its coverage, i.e., there are times when disparate treatment based on age is allowable under the ADEA. One such exception was for observance of the terms of any “bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes” of the ADEA. Forced, involuntary retirement because of age, however, was prohibited.
Ohio Public Employees Retirement System v. Betts
June Betts was hired by an Ohio County agency in 1978 and later covered by the Public Employees Retirement System of Ohio (PERS). Due to medical problems, she became unable to work in 1985 and, when given the choice between retirement (she was 61) and further medical testing, she chose to retire. She was denied disability retirement benefits as she was over 60. PERS had been amended in 1976 to provide that disability retirement benefits could not be less than 30% of final average salary, whereas there was no such “floor” for regular retirement benefits. She therefore received retirement benefits of $158.50 per month, instead of the $355 she would have received as disability retirement benefits.
Betts filed an age discrimination charge with the U.S. Equal Employment Opportunity Commission (EEOC), which is charged with enforcing the ADEA, and then filed her own lawsuit in federal district court, claiming violation of the ADEA as she received lesser benefits because she was over 60. The lower court and federal court of appeals agreed, but the U.S. Supreme Court held that, under the exemption language quoted above, the ADEA prohibited only benefit plan provisions that were shown to “serve the purpose” of age discrimination and were a “subterfuge” to evade ADEA requirements. As PERS had been established in 1933, the Court reasoned that its intent could not have been to evade the ADEA of 1967.
In finding for Betts, the lower courts had relied on an EEOC regulation that the ADEA exemption in question could only protect discriminatory plan provisions when they were justified by the increased costs of benefits for older workers. The Supreme Court decision rejected this interpretation of the ADEA, reversed the lower court ruling, and sent the case back to the lower court for reconsideration.
The Older Workers Benefit Protection Act of 1990
In direct response to the decision in Betts, Congress passed the Older Workers Benefit Protection Act of 1990 (OWBPA) to overrule the decision (passing subsequent legislation is one of the few ways a U.S. Supreme Court decision may be overturned). The OWBPA amended the ADEA to provide, among other things:
- A prohibition on discrimination against older workers in all employment benefits, unless reductions in benefits are justified by “significant cost considerations.”
- The actual amount of payments or costs incurred on behalf of an older worker for each benefit or benefit package cannot be less than that made on behalf of a younger worker.
- Allowance of a minimum age as a condition for retirement, or early retirement benefits, but a prohibition on forced early retirement because of age.
- For reduction of long-term disability benefits under a bona fide benefit plan by the amount of any pension benefits, other than those attributable to employee contributions.
- That employee benefit plans must comply with the ADEA regardless of when such plans were adopted.
Waivers of ADEA Rights under the OWBPA
Individuals may waive, i.e., give up, ADEA rights. One significant amendment by the OWBPA adds a new subsection stating that individuals cannot waive any right under the ADEA unless the waiver is “knowing and voluntary.” To be considered as such, “at a minimum” the waiver must:
- Be part of an agreement between the employer and individual calculated to be understood by that individual, or an average individual eligible to participate.
- Specifically refer to rights and claims arising under the ADEA.
- State the individual is not waiving claims that arise in the future, after signing.
- State that rights and claims are being waived only in exchange for additional consideration, over and above what the individual is already entitled to.
- Advise the individual in writing to consult a lawyer before signing.
- Give the individual at least 21 days to consider signing, but, if it is part of an exit or termination program offered to a group or class of employees, all must have at least 45 days to consider before signing.
- Provide that the individual has seven days to revoke after signing.
- If the waiver applies to a group or class of employees, it must clearly state and explain any eligibility factors and also list the job titles and ages of those who are not eligible.
For the waiver to be legally enforced, courts look to the language of the waiver, the circumstances surrounding the waiver, and the employee's educational and business experience. A waiver that does not comply with the foregoing requirements may be considered defective and courts have refused to enforce them. This may mean that the victim may receive the benefits offered, sign the waiver, and still sue for damages arising out of the discrimination.