Understanding the Older Workers Benefit Protection Act (OWBPA)
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Protecting the Rights of Older Employees
The Older Workers Benefit Protection Act (OWBPA) is an amendment to the Age Discrimination in Employment Act (ADEA), passed in 1990 to prevent employers from discriminating against employees aged 40 and older in benefit plans, severance agreements, and early retirement offers. The law ensures that older employees receive fair treatment and are not pressured into signing away their rights without full knowledge and consideration.
Employers sometimes offer voluntary early retirement packages as part of a workforce reduction or cost-saving measure. These packages typically provide something additional beyond what the employee would receive through normal retirement—such as a lump sum payment, extended health benefits, or pension enhancements. However, in exchange for these benefits, employees must sign a waiver giving up their right to sue for age discrimination.
A Personal Perspective: My Mother’s Experience with OWBPA
I will never forget the day my mother, who was working at Target in Miami, called me while I was living in California. She was absolutely thrilled and said, "Target offered me a package with money if I want to take retirement!" Right away, I knew exactly what she was talking about—an OWBPA-covered severance package.
She was excited about the opportunity but also had a lot of questions. She asked me, "If I take the package, can I go back later and work part-time at Target?" That was a great question, and I explained that it depends on the agreement. Many employers include a rehire restriction in these packages, meaning that employees who accept early retirement may not be eligible to return. This is why it is critical for employees to carefully review the details of the agreement before signing.
That phone call was a powerful reminder of why HR professionals must fully understand OWBPA—because these decisions impact real people and their futures.
Key OWBPA Requirements for Employers
HR professionals must be aware of several key OWBPA requirements to ensure compliance:
1️⃣ Employees Must Receive Clear and Understandable Agreements – The severance or early retirement offer must be written in plain language that the employee can easily understand. Employers cannot use complex legal jargon to confuse employees.
2️⃣ Employees Must Have Enough Time to Decide – Employees 40 and older must be given at least 21 days to consider the offer (or 45 days if it is part of a group layoff). This ensures they have time to review their options and seek legal advice.
3️⃣ Employees Have the Right to Revoke the Agreement – Even after signing, employees have 7 days to revoke their decision. This gives them a second chance to reconsider.
4️⃣ Employees Must Be Advised to Consult an Attorney – The employer must advise employees in writing to seek legal counsel before signing the agreement. This protects employees from making uninformed decisions.
5️⃣ Employers Must Provide Transparency in Group Layoffs – If the offer is part of a larger workforce reduction, the employer must provide a detailed list of job titles and ages of those selected and not selected for termination. This ensures that age discrimination is not a factor in the decision.
What Happens If an Employee Declines the Offer?
If an employee chooses not to accept the voluntary early retirement package, they can typically continue working as usual. However, declining the offer does not guarantee job security. If the company is downsizing or restructuring, they could still be subject to layoffs in the future, but those decisions must be based on legitimate business reasons, not age discrimination.
💡 Key Point: Employees should not assume that rejecting the offer means they will be laid off, but they also should not assume their job is completely safe. It depends on the company’s workforce needs and policies.
Can Employers Offer Early Retirement to Employees Under 40?
Yes! Employers can offer early retirement packages to employees under 40, but those employees do not receive the same legal protections under OWBPA. The key difference is that waivers for employees under 40 do not have to meet the strict requirements outlined in OWBPA (such as the 21-day decision period and 7-day revocation period).
When a company offers a voluntary early retirement program, it often applies to a wide range of employees, not just those 40 and older. However, when employees 40 and older are included, OWBPA protections automatically apply to their agreements.
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Important Considerations for Employees Before Signing
Employees should carefully review the terms of the agreement before signing. Some key questions they should ask include:
✅ Does this agreement prevent me from working for this company again in the future? Some agreements contain a rehire restriction, meaning that employees who accept the offer cannot return, even for part-time work.
✅ Does this agreement waive any other legal rights? The waiver only applies to age discrimination claims—not claims for unpaid wages, workplace injuries, or other legal issues. Employees should ensure they are not signing away other rights.
✅ What additional benefits am I receiving? Employees should confirm that they are receiving something extra beyond what they would normally get if they retired without the offer.
✅ Is my decision truly voluntary? If employees feel pressured or coerced, that could be a red flag and they should seek legal counsel.
Why OWBPA Matters for HR Professionals
HR professionals must ensure that severance and early retirement offers are fair, legally compliant, and clearly communicated. Failure to comply with OWBPA can lead to age discrimination lawsuits, financial penalties, and reputational damage. Regular audits of benefits policies, severance agreements, and workforce reduction plans can help organizations avoid legal risks while treating employees fairly and respectfully.
Ensuring Fair and Informed Decisions
The Older Workers Benefit Protection Act is more than just a legal requirement—it’s about protecting employees and ensuring fairness in the workplace. Whether you’re an HR leader, benefits specialist, or generalist, mastering OWBPA compliance is essential to safeguard your organization and support an aging workforce.
For employees, knowing their rights under OWBPA can make a huge difference when deciding whether to accept an early retirement offer. Understanding the details, reviewing the agreement carefully, and asking the right questions can help employees make informed career decisions that align with their long-term goals.
Elga Lejarza
Founder & CEO
LejarzaWorkforceSolutions