Guard Against Age-Bias Suits When Downsizing
Kirsch CPA Group
Nov 12, 2020

Historically, companies have downsized for many reasons, including mergers and acquisitions, changes in management philosophy and strategy, and increased use of outsourcing. Economic downturns have also spurred layoffs, such as the one triggered by the COVID-19 pandemic. Problems can arise, however, if laid-off employees believe they’re victims of discrimination. Employees who have been with the company for a long time may feel their rights under the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA) have been violated. Others may believe they have legal claims under Title VII of the Civil Rights Act, 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 and/or benefits 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 known and voluntary is often determined by case law, but when it comes to age issues, the rules are strictly defined by the OWBPA.
7 Minimum Factors
To meet the requirements, the OWBPA lists seven minimum factors. The waivers must:
1. Be written clearly and be specific enough for employees to understand based on their education and business experience. The EEOC’s guidance on waivers cites a situation where an employee asked his supervisor whether certain language in the agreement meant that he could still sue the company if he made claims only under the ADEA. The employer declined to provide legal advice. When the employee sued, the court found that, even though he’d accepted the severance pay, the age discrimination suit was valid because the waiver wasn’t written in a manner that could be understood.
2. Refer to rights or claims arising under the ADEA. In fact, the EEOC maintains that waivers must spell out the Age Discrimination in Employment Act by name.
3. Actively advise employees in writing to consult an attorney. In one instance noted by the EEOC, a waiver was rejected because the language didn’t proactively advise an employee to consult with an attorney. It merely asked the employee to agree that he had time to do so.
4. Provide employees at least 21 days to consider the waiver. If significant changes are made to the final offer, the 21-day clock restarts. This applies to employees aged 40 or older. That time period extends to 45 days if the employees are part of a group termination. For younger employees, there’s no specified time limit, but the number of days your business allows may be a factor in determining whether an employee knowingly and voluntarily agreed to a waiver under other laws. To be on the safe side, your company may choose to match the time requirements for older workers.
5. Give employees seven days to revoke their signatures. Employees cannot waive this right.
6. Not require giving up the right to sue for discriminatory acts that may occur after a waiver is signed.
7. Offer employees some form of consideration, such as severance pay, to which employees weren’t already entitled to by law or contract.
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 looking at a workforce reduction and older workers are heavily impacted, consult with your legal advisers. A severance package can be developed to pass muster under all applicable federal and state laws.
If you are considering downsizing contact Kirsch CPA Group 513.858.6040 We will help you develop a plan to take care of your employees and your business.

About The Author
Kirsch CPA Group is a full service CPA and business advisory firm helping businesses and organizations with accounting,…
Tags
Sign Up for Email Updates
Related Articles












Does your Business Deduct Research & Development Expenses? Major Changes Impact 2022 Taxes…
- 11-09-22
- Elizabeth Michalak






Why Have Your Financial Statements Reviewed (Even When Not Required)
- 10-17-22
- Kirsch CPA Group















Case Study: Strategic Accounting Support from Acquisition to Sale
- 09-20-22
- Kirsch CPA Group



























Prevent a Poorly Structured Chart of Accounts from Hiding Your Profitability
- 01-06-22
- Nick Roell















Entrepreneurial Mindset: Kirsch CPA Group Sets a Framework for Growth
- 10-28-21
- Kirsch CPA Group






























What Your Numbers Are Saying: Are You Listening?
Part 2: How Attractive Is Your Balance Sheet?
- 07-19-21
- Kirsch CPA Group












What Your Numbers Are Saying: Are You Listening?
Part 1: Do You Know Your Profitability?
- 06-09-21
- Kirsch CPA Group




































Using Cash Flow Forecasting to Avoid Problems & Grow Your Business
- 04-07-21
- Kirsch CPA Group









Selecting the Right Payroll System for Your Construction Business
- 04-01-21
- Kirsch CPA Group















Self-Employed May Be Eligible for COVID-Related Tax Breaks for 2020
- 03-17-21
- Kirsch CPA Group






COVID-19 Relief: Overview of the New American Rescue Plan Act for Individuals
- 03-17-21
- Kirsch CPA Group



COVID-19 Relief: Business Overview of the New American Rescue Plan Act
- 03-17-21
- Kirsch CPA Group



























Opportunity Zone Investments: A Tax Deferral Opportunity You May Have Overlooked
- 02-17-21
- Kirsch CPA Group




































The Status of Temporary COVID Tax Relief Measures After the New Law
- 01-21-21
- Kirsch CPA Group















8 Accounting Practices for a Financially Healthy Construction Business
- 01-07-21
- Kirsch CPA Group









Appropriations Law Adds Some Business Tax Breaks and Extends Others
- 01-07-21
- Kirsch CPA Group



























Contending With the Patchwork of State Requirements for Nonprofits
- 12-17-20
- Kirsch CPA Group

































Employee or Independent Contractor? The Rules May Be Getting Simpler
- 11-12-20
- Kirsch CPA Group









Do the COVID-19 Extended Deadlines for Health Plans Still Apply?
- 11-12-20
- Kirsch CPA Group












Using Remote Workers? Protect Sensitive Company Data from Exposure
- 10-28-20
- Kirsch CPA Group













































What You Need to Know About the Deferral of Payroll Tax Obligations
- 09-15-20
- Kirsch CPA Group









Hobby or Business? How to Treat COVID-19 Sideline Activities for Taxes
- 09-15-20
- Kirsch CPA Group















Monitor These 3 Things as COVID-19 Changes Your Nonprofit’s Priorities
- 08-11-20
- Kirsch CPA Group












FASB Offers Reprieve from Updated Lease and Revenue Recognition Rules
- 07-23-20
- Kirsch CPA Group






COVID-19 Crisis May Affect Tax Angles for Rental Property Losses
- 07-10-20
- Kirsch CPA Group









Last-Minute Strategies for Businesses that Deferred Filing Tax Returns
- 07-01-20
- Kirsch CPA Group









Can Your Business Survive and Even Thrive in These Trying Times?
- 06-18-20
- Kirsch CPA Group






Five COVID-19 Obstacles a Construction Company Needs to Navigate
- 06-12-20
- Kirsch CPA Group












Cash Flow Tip: Postpone Payment of Certain Federal Employer Payroll Taxes
- 04-20-20
- Sue Schloemer


















Tax Filing Deadline Remains April 15 – Payment Due Extended to July 15
- 03-19-20
- John Kirsch










































8 strategies to help you adapt to economic down turn without layoffs
- 02-24-18
- Diane Glover





















Which Research Activities Qualify for the Qualified Small Business Tax Credits
- 07-17-17
- Diane Glover





































