Waiver of Rights and Claims Under the Age Discrimination in Employment Act (ADEA)

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

29 CFR Part 1625

Waiver of Rights and Claims Under the Age Discrimination in

Employment Act (ADEA)

AGENCY: Equal Employment Opportunity Commission.

ACTION: Final rule.

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SUMMARY: EEOC is publishing this 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.

DATES: This final regulation will be effective on July 6, 1998.

FOR FURTHER INFORMATION CONTACT: Joseph N. Cleary, Assistant Legal

Counsel, or Paul E. Boymel, Senior Attorney-Advisor, Office of Legal

Counsel, 202-663-4692 (voice), 202-663-7026 (TDD).

SUPPLEMENTARY INFORMATION:

A. History

Congress amended the ADEA by enacting the Older Workers Benefit

Protection Act of 1990 (OWBPA), Pub. L. 101-433, 104 Stat. 983 (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), 29 U.S.C. 626(f).

Section 7(f)(1) provides that ``an individual may not waive any

right or claim under the [ADEA] unless the waiver is knowing and

voluntary.'' Section 7(f) sets out the minimum criteria for determining

whether a waiver is knowing and voluntary.

In light of the OWBPA amendments, EEOC published an Advance Notice

of Proposed Rulemaking (ANPRM) in the Federal Register, 57 FR 10626

(March 27, 1992), seeking information from the public on various issues

under both titles of OWBPA. In response to the ANPRM, EEOC received

approximately 40 comments, many of which presented detailed analyses of

Title II issues, requesting EEOC to provide formal guidance on waivers

of rights and claims under the ADEA. Since the publication of the

ANPRM, EEOC also has received numerous written and telephone inquiries

requesting information on how to comply with Title II.

On August 31, 1995, EEOC announced in the Federal Register, 60

[[Page 30625]]

FR 45388 (August 31, 1995), its intent to use negotiated rulemaking to

develop a proposed Title II rule.

B. Purpose of Negotiated Rulemaking

Negotiated rulemaking, under procedures set out in the Negotiated

Rulemaking Act, 5 U.S.C. 561 et seq., Pub. L. 101-648, is a relatively

new tool used by agencies in connection with the development of

regulations. In using negotiated rulemaking, EEOC has reached out to

employers, employees, and their representatives to take into account

the concerns of all interested communities in the development and

drafting of the proposed rule. This procedure contrasts with the more

traditional ``notice and comment'' rulemaking where an agency receives

public input only after the proposed rule is published for comment. The

advantages of negotiated rulemaking include:

1. The negotiated rulemaking process allows public input from the

start, permitting the stakeholders--individuals, organizations, and

businesses actually affected by the rule--to explain their concerns and

help shape the rule;

2. The agency gains the benefit of the expertise of the

stakeholders, enabling it to draft a rule that reflects the realities

of the workplace, not just the agency's views;

3. The negotiated rulemaking process requires consensus of the

committee members. Since stakeholder representatives from all sides of

the issues to be addressed are involved, the stakeholders will be more

willing to accept the regulation without legal challenge. While no

stakeholder will be happy with every provision of a rule, each will

know that the rule represents a reasonable solution to shared problems.

C. Negotiated Rulemaking on Title II of OWBPA

The August 31, 1995, Federal Register notice set out nine issues

that EEOC suggested might be discussed during the negotiated rulemaking

process. EEOC left open the possibility that the Negotiated Rulemaking

Committee would add other issues to the proposed rule and/or choose not

to address one or more of the enumerated issues.

The notice also invited members of the public who were interested

in serving on the Committee to inform EEOC of their interest and

qualifications. EEOC received over 70 requests to participate on the

Committee, representing a wide diversity of interests and backgrounds.

EEOC chose 18 Committee participants from members of the public

representing labor, management, and employee interests, along with 2

EEOC representatives to serve on the Committee. The members of the

Committee were:

Elizabeth M. Barry, Esq., Harvard University, Cambridge, MA

William H. Brown, Esq., Schnader, Harrison, Segal & Lewis,

Philadelphia, PA

Joseph N. Cleary, Esq., Equal Employment Opportunity Commission,

Washington, DC

John C. Dempsey, Esq., AFSCME, AFL-CIO, Washington, DC

Raymond C. Fay, Esq., Bell Boyd & Lloyd, Washington, DC

Burton D. Fretz, Esq., National Senior Citizens Law Center, Washington,

DC

Peter Kilgore, Esq., National Restaurant Association, Washington, DC

Lloyd C. Loomis, Esq., Atlantic Richfield Co., Los Angeles, CA

Benton J. Mathis, Esq., Drew, Eckl & Farnham, Atlanta, GA

Thomas R. Meites, Esq., Meites, Frackman, Mulder & Burger, Chicago, IL

Niall A. Paul, Esq., Spilman, Thomas & Battle, Charleston, WV

Markus L. Penzel, Esq., Garrison, Phelan, Levin-Epstein & Penzel, and

National Employment Lawyers Assn., New Haven, CT

L. Steven Platt, Esq., Arnold and Kadjan, and National Employment

Lawyers Assn., Chicago, IL

Pamela S. Poff, Esq., Paine Webber Inc., Weehawken, NJ

Michele C. Pollak, Esq., American Association of Retired Persons,

Washington, DC

Jaime Ramon, Esq., Jackson Walker, Dallas, TX

Patrick W. Shea, Esq., Paul Hastings, Janofsky & Walker, Society for

Human Resource Management, Stamford, CT

Paul H. Tobias, Esq., Tobias Kraus & Torchia, Cincinnati, OH

Ellen J. Vargyas, Esq., Equal Employment Opportunity Commission,

Washington, DC

Robert Williams, Esq., McGuiness & Williams, Equal Employment Advisory

Council, Washington, DC

The Negotiated Rulemaking Committee began work on December 6, 1995.

Committee meetings were held on December 6-7, 1995, January 23-24,

1996, March 6-7, 1996, April 16-17, 1996, June 18-19, 1996, and July

23-24, 1996. The Committee discussed in detail the issues set out in

the August 31, 1995 Federal Register notice, as well as other issues

that the Committee considered needed to be resolved. The Committee

functioned by consensus which it defined as the absence of objection by

any Committee member.

The Committee unanimously forwarded a recommended proposed rule to

EEOC for its consideration. As a result of the recommendations received

from the Committee, and its deliberations regarding such

recommendations, EEOC published for public comment the Committee's

negotiated rule in a Notice of Proposed Rulemaking (NPRM) dated March

10, 1997, 62 FR 10787.

Comments on the NPRM

Fifteen comments were received from the public with regard to the

NPRM. Following the end of the 60 day public comment period, members of

the Negotiated Rulemaking Committee were given a period of 30 days to

provide EEOC with their written views relating to the proposed rule and

the comments received. Two Committee members submitted written

comments. Several federal agencies provided oral comments during

interagency coordination under Executive Order 12067.

EEOC has analyzed carefully the comments received. For the reasons

set out herein, EEOC has determined to make only the two changes listed

in sections (a)(4) and (b)(1), below. In taking this position, EEOC is

particularly mindful of two factors. First, in a negotiated rulemaking

involving the active participation of representatives of both employers

and employees, it was clear from the outset that compromise would be an

integral element of the formulation of the regulation.

Secondly, the fact that only fifteen comments were submitted by

members of the public reinforces EEOC's view that the compromise

reached and incorporated in this regulation sets forth appropriate

standards and strikes a reasonable balance between the various

interests. None of the comments was sufficiently persuasive, as a

substantive matter, to warrant altering the negotiated rulemaking

consensus reached by the Committee.

In analyzing the regulation and the comments, EEOC emphasizes that

no inference should be drawn on any issue, including issues discussed

in the analysis of the comments received, by reason of the regulation's

silence with respect to such issue.

EEOC responds to the principal points raised in the comments on a

section-by-section basis, as follows:

Section (a): Introduction

1. Several comments asked that section (a)(3) be amended to provide

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guidance on the definition of ``a material mistake, omission, or

misstatement.''

EEOC adopts the Committee's view that questions of whether

particular changes, mistakes, omissions, or misstatements are material

should be analyzed under the existing law regarding ``materiality.''

Additionally, EEOC does not accept the suggestion by one commentor

that a material error will invalidate a waiver agreement only if an

employee proves that the error was intentional and that he/she

reasonably relied upon the misinformation. Reliance is not an element

of proof either in the statute or the regulation, and errors need not

be intentional to be material.

2. Another commentor asked for clarification on whether the

provisions of a waiver agreement are severable (that is, whether the

invalidity of one provision of a waiver agreement would invalidate the

entire agreement). Section 7(f) of the ADEA sets out minimum standards

for the validity of a waiver agreement. An agreement that fails to meet

all of the requirements of that section will not be valid.

3. In its verbal comments during the Executive Order 12067

coordination process, one federal agency recommended that the

regulation should state explicitly that it applies to employees of the

United States Government. EEOC concurs, and has added new section

(a)(4) to the regulation.

Section (b): Wording of Waiver Agreements

1. In section (b)(5) of the NPRM, the word ``plan'' was inserted

erroneously in the quotation. The word is removed in the final rule.

2. One federal agency has pointed out correctly that, among the

factors to be considered in determining, under section 7(f)(1)(A) of

the ADEA and section (b)(3) of the regulation, whether a waiver

agreement is ``written in a manner calculated to be understood by such

individual, or by the average individual eligible to participate'' is a

person's ability to understand the language in which the waiver is

written. Because this is part of the necessary interpretation of the

existing regulatory language, there was no need to amend the

regulation.

Section (c): Waiver of Future Rights

Two employee representatives expressed concern that this section

permits the waiver of future rights. The comments misunderstand the

rule. The section only states that the waiver agreement properly may

contain agreements to perform certain actions in the future (e.g., the

employee may agree to retire at the end of a school year). Under the

statute and the regulation, the waiver agreement cannot provide for the

waiver of rights regarding new acts of discrimination that occur after

the date of signing.

Section (d): Consideration

One commentor stated that the regulation should require the payment

of ``substantial'' consideration in exchange for a waiver. Section

7(f)(1)(D) of the ADEA requires ``consideration in addition to anything

of value to which the individual already is entitled,'' not

``substantial'' consideration. The regulation does clarify, however,

that an employer may not eliminate, in contravention of a law or

contract, a benefit or other thing of value and then claim that the

subsequent offer of such benefit or thing of value constitutes the

required consideration.

Section (e): Time Periods

1. One commentor suggested that employees and employers should be

permitted to shorten the seven-day waiting period specified in section

7(f)(1)(G) of the ADEA. The legislative history of OWBPA makes it clear

that the seven-day waiting period is mandatory, giving an employee the

chance to reconsider a possibly hasty waiver of rights. Accordingly,

EEOC does not adopt the comment.

2. Section (e)(4) of the regulation states that ``[m]aterial

changes to the final offer restart the running of the 21 or 45 day

period.'' Several commentors asked for a specific definition of the

term ``material.'' As stated in #(a)(1), above, EEOC has determined

that the well-established law regarding materiality will govern such

determinations.

Section (f): Informational Requirements

1. Nine of the comments addressed the scope of the information that

must be given pursuant to section 7(f)(1)(H) of the ADEA to employees

``* * * if a waiver is requested in connection with an exit incentive

or other termination program offered to a group or class of employees *

* * `` Six of these comments requested more details covering a wide

range of specific fact patterns, relying in large part on the use of

hypothetical questions.

The regulation was not designed to address every possible situation

that might arise. Indeed, it is neither feasible nor desirable to

provide such detailed guidance in a regulatory context. However, EEOC

believes that the regulation does provide a thorough and practical

framework for determining the scope of the informational requirements.

2. Four comments asked that the term ``program'' in section

7(f)(1)(H) of the ADEA be defined in greater depth. In general, these

comments did not address the basic definition of a program, but sought

clarification on how to determine how many programs exist, especially

in the context of a reduction in force conducted over a period of

months or in more than one facility of a large employer.

The regulation already addresses these questions. Section

(f)(3)(ii) of the regulation discusses the definition of a program in

the context of a reduction in force conducted over a period of time,

and section (f)(4)(vi) addresses the question of multiple facilities.

EEOC believes that the regulation provides adequate guidance as

drafted.

3. Section 7(f)(1)(H)(ii) of the ADEA requires the employer to

provide ``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.'' One commentor suggested that the regulation

specifically require job titles, in addition to ages, for persons not

eligible or selected.

Since the statutory language varies slightly, EEOC has declined to

adopt this comment. However, the information about individuals who are

not eligible or selected for the program should be provided in a format

that compares them to individuals in the same job classification or

organizational unit who were eligible or selected.

Section (g): Waivers Settling Charges and Lawsuits

No comments were received.

Section (h): Burden of Proof

Several employer representatives suggested that the burden of

proving compliance or noncompliance with the OWPBA provisions should

rest upon the employee. However, section 7(f)(3) of the ADEA states

clearly that the party asserting the validity of a waiver has the

burden of proving that a waiver was knowing and voluntary pursuant to

section 7(f)(1) or (2) of the ADEA. Because the regulatory language is

based directly upon the statute, EEOC has determined not to change the

proposed regulation.

Section (i): EEOC's Enforcement Powers

Seven comments urged EEOC to permit employees to waive the right to

file a charge of discrimination with EEOC or another civil rights

agency. The proposed regulation prohibited such

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waivers. EEOC does not adopt the suggestion to change the proposed

regulation.

Section 7(f)(4) of the ADEA states that ``[n]o 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.'' EEOC

believes that permitting such waivers would be inconsistent with this

statutory provision. See also, EEOC's Enforcement Guidance on Non-

Waivable Employee Rights under Equal Employment Opportunity Commission

Enforced Statutes, No. 915.002 (April 10, 1997). Therefore, subsection

(i) of the NPRM is adopted as published in the NPRM.

Section (j): Effective Date

No comments were received.

Section (k): Statutory Authority

No comments were received.

Additional Comments

1. Five of the commentors urged that the regulation address the

question of whether employees can be required to tender back any

consideration received under a waiver agreement before being permitted

to challenge the waiver agreement in court. Three comments urged that a

tender back requirement be included in the regulation, while two

comments stated that the regulation should clarify that such a

requirement would violate the ADEA.

The Supreme Court decided this issue in Oubre v. Entergy

Operations, Inc., 118 S.Ct. 838 (1998), holding that a release that

does not comply with the OWBPA requirements cannot bar an employee's

ADEA claims. The Court held that retention of the consideration given

in exchange for a waiver does not amount to a ratification of the

waiver agreement, and an employee seeking to challenge the validity of

an ADEA waiver is not required to tender back the consideration to the

employer before bringing legal action. EEOC is considering the

appropriate form of guidance to issue in response to the Oubre

decision, but has decided that, in order to avoid substantial delay,

this regulation should not address the issue of tender back of

consideration.

However, with regard to the administrative process, section (i)(3)

of the regulation provides that a waiver agreement cannot impose ``any

condition precedent, any penalty, or other limitation adversely

affecting'' an individual's right to file a charge or complaint with

EEOC or assist EEOC in an investigation. Thus, a requirement in a

waiver agreement that an individual tender back the consideration

before filing a charge or complaint of discrimination with EEOC or

assisting EEOC in an investigation will be void.

2. Two commentors representing employee interests proposed a series

of additions to the regulation. For example, the commentors recommended

that the regulation: discuss in detail the various theories of

discrimination under the ADEA; adopt a particular statistical framework

for evaluating the data provided to employees; and set forth

recordkeeping requirements.

EEOC believes that these issues fall beyond the scope of this

rulemaking and should not be included in the final regulation.

Executive Order 12866, Regulatory Planning and Review:

Under section 3(f)(4) of Executive Order 12866, EEOC has determined

that this regulation would be a ``significant regulatory action.''

Therefore, EEOC has coordinated the NPRM and this final regulation with

the Office of Management and Budget. However, under section 3(f)(1) of

Executive Order 12866, EEOC has determined that the regulation will not

have an annual effect on the economy of $100 million or more or

adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State or local or tribal governments or

communities. The rule will not create a serious inconsistency or

otherwise interfere with an action taken or planned by another agency.

Therefore, EEOC has not needed to prepare a detailed cost-benefit

assessment of the regulation.

Paperwork Reduction Act

The provisions of Title II of OWBPA do require employers to provide

certain information to employees (but not to EEOC) in writing.

Accordingly, EEOC, as part of its continuing effort to reduce

paperwork and respondent burden, has, as required by the Paperwork

Reduction Act for all collections of information, solicited comments

concerning the proposed rule with regard to the paperwork requirements

contained in Title II of OWBPA. The provisions of the proposed and

final rule dealing with informational requirements have been submitted

to and approved by the Office of Management and Budget under section

3507 of the Paperwork Reduction Act, OMB Approval No. 3046-0042.

The public reporting and recordkeeping burden for this collection

of information is estimated to be 41,139 hours in order for employers

to collect the information and to determine: (1) what information must

be given to employees; (2) which employees must be given the

information; (3) how the information should be organized.

The estimated burden of collecting and distributing the information

was calculated as follows:

Collection Title: Informational requirements under Title II of the

Older Workers Benefit Protection Act of 1990 (OWBPA), 29 CFR Part 1625.

Form Number: None.

Frequency of Report: None required.

Type of Respondent: Business, state or local governments, not for

profit institutions.

Description of the Affected Public: Any employer with 20 or more

employees that seeks waiver agreements in connection with exit

incentive or other employment termination programs (hereinafter,

``Programs'').

Responses: 13,713.

Reporting Hours: 41,139.

Number of Forms: None.

Abstract: This requirement does not involve record keeping. It

consists of providing adequate information in waiver agreements offered

to a group or class of persons in connection with a Program, to satisfy

the requirements of the OWBPA.

Burden Statement: There is no reporting requirement nor additional

record keeping associated with this rule. The only paperwork burden

involved is the inclusion of the relevant data in waiver agreements.

The rule applies only to those employers who have 20 or more employees

and who offer waivers to a group or class of employees in connection

with a Program.

There are 542,000 employers who have at least 20 employees.

Programs come into play when, as a result of business activity,

employers are forced to cut their work force. Based on statistics from

EEOC's private employer survey, it is estimated that in any one year

4.6% of employers are involved in activities, such as mergers or

downsizing, which occasion the use of Programs. It is further

estimated, based on figures from a General Accounting Office study, and

the Bureau of Labor Statistics, that at most 55% of those who use

Programs require waivers and thus are affected by this rule.

Applying the above factors to the total number of employers:

[(542,000 x .046 x .55) = 13,713] yields 13,713 employers that are

affected by this requirement. The larger employers are assumed to have

computerized record keeping, and

[[Page 30628]]

thus can produce the requisite notification with a minimum of effort,

while smaller employers have far less information to process.

Therefore, it is estimated that, on the average, a notification can

be produced in approximately 3 hours. This would then produce a maximum

of (13,713 x 3) = 41,139 hours annually.

EEOC asked the public to comment on the information provisions

contained in the proposed regulation to:

Evaluate whether the proposed collection of information is

necessary for the proper performance of the functions of EEOC,

including whether the information shall have practical utility;

Evaluate the accuracy of EEOC's estimate of the burden of

the proposed collection of information;

Enhance the quality, utility, and clarity of the

information to be collected; and

Minimize the burden of collection of information on those

who are to respond, including through the use of automated collection

techniques or other forms of information technology.

The only comment received in response to the NPRM with regard to

the Paperwork Reduction Act, from the American Association of Retired

Persons, agreed with EEOC's view of the requirements imposed by that

Act. Accordingly, the Paperwork Reduction Act information herein is

unchanged from the proposed regulation.

EEOC certifies under 5 U.S.C. 605(b), enacted by the Regulatory

Flexibility Act (Pub. L. 96-354), that this regulation will not result

in a significant economic impact on a substantial number of small

entities. For this reason, a regulatory flexibility analysis is not

required. A copy of the proposed rule was furnished to the Small

Business Administration.

In addition, in accordance with Executive Order 12067, EEOC has

solicited the views of affected Federal agencies with regard to the

NPRM and the final regulation.

The final regulation appears below.

List of Subjects in 29 CFR Part 1625

Advertising, Age, Employee benefit plans, Equal employment

opportunity, Retirement.

Signed at Washington, DC this 29th day of May, 1998.

Paul M. Igasaki,

Chairman.

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, Sec. 1625.22 is added to subpart B--Substantive

Regulations to read as follows:

Sec. 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

[[Page 30629]]

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 information must 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

[[Page 30630]]

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

[[Page 30631]]

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:

----------------------------------------------------------------------------------------------------------------

No. No. not

Job Title Age Selected 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.

[FR Doc. 98-14908 Filed 6-4-98; 8:45 am]

BILLING CODE 6570-01-P