30624 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations

be elected after benefit commencement)

commence at a time during the period

that begins on or after January 1 of the

calendar year in which an employee

attains age 701⁄2 and ends April 1 of the

immediately following calendar year.

(d) Examples. The provisions of this

Q&A–10 are illustrated by the following

examples:

Example 1. Plan A, a defined benefit plan,

provides each participant with a qualified

joint and survivor annuity (QJSA) that is

available at any time after the later of age 65

or retirement. However, in accordance with

section 401(a)(9) as in effect prior to January

1, 1997, Plan A provides that if an employee

does not retire by the end of the calendar

year in which the employee attains age 701⁄2,

then the QJSA commences on the following

April 1. On October 1, 1998, Plan A is

amended to provide that, for an employee

who is not a 5-percent owner and who attains

age 701⁄2 after 1998, benefits may not

commence before the employee retires but

must commence no later than the April 1

following the later of the calendar year in

which the employee retires or the calendar

year in which the employee attains age 701⁄2.

This amendment satisfies this Q&A–10 and

does not violate section 411(d)(6).

Example 2. Plan B, a money purchase

pension plan, provides each participant with

a choice of a QJSA or a single sum

distribution commencing at any time after

the later of age 65 or retirement. In addition,

in accordance with section 401(a)(9) as in

effect prior to January 1, 1997, Plan B

provides that benefits will commence in the

form of a QJSA on April 1 following the

calendar year in which the employee attains

age 701⁄2, except that, with spousal consent,

a participant may elect to receive annual

installment payments equal to the minimum

amount necessary to satisfy section 401(a)(9)

(calculated in accordance with a method

specified in the plan) until retirement, at

which time a participant may choose

between a QJSA and a single sum

distribution (with spousal consent). On June

30, 1998, Plan B is amended to provide that,

for an employee who is not a 5-percent

owner and who attains age 701⁄2 after 1998,

benefits may not commence prior to

retirement but benefits must commence no

later than April 1 after the later of the

calendar year in which the employee retires

or the calendar year in which the employee

attains age 701⁄2. The amendment further

provides that the option described above to

receive annual installment payments prior to

retirement will not be available under the

plan to an employee who is not a 5-percent

owner and who attains age 701⁄2 after 1998.

This amendment satisfies this Q&A–10 and

does not violate section 411(d)(6).

Example 3. Plan C, a profit-sharing plan,

contains two distribution provisions. Under

the first provision, in any year after an

employee attains age 591⁄2, the employee may

elect a distribution of any specified amount

not exceeding the balance of the employee’s

account. In addition, the plan provides a

section 401(a)(9) override provision under

which, if, during any year following the year

that the employee attains age 701⁄2, the

employee does not elect an amount at least

equal to the minimum amount necessary to

satisfy section 401(a)(9) (calculated in

accordance with a method specified in the

plan), Plan C will distribute the difference by

December 31 of that year (or for the year the

employee attains age 701⁄2, by April 1 of the

following year). On December 31, 1996, Plan

C is amended to provide that, for an

employee other than an employee who is a

5-percent owner in the year the employee

attains age 701⁄2, in applying the section

401(a)(9) override provision, the later of the

year of retirement or year of attainment of age

701⁄2, is substituted for the year of attainment

of age 701⁄2. After the amendment, Plan C still

permits each employee to elect to receive the

same amount as was available before the

amendment. Because this amendment does

not eliminate an optional form of benefit, the

amendment does not violate section

411(d)(6). Accordingly, the amendment is not

required to satisfy the conditions of

paragraph (b) of this Q&A–10.

(e) Effective date. This Q&A–10

applies to amendments adopted and

effective after June 5, 1998.

PART 602—OMB CONTROL NUMBERS

UNDER THE PAPERWORK

REDUCTION ACT

Par. 3. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 4. In § 602.101, paragraph (c) is

amended by adding an entry in

numerical order to the table to read as

follows:

§ 602.101 OMB control numbers.

* * * * *

(c) * * *

CFR part or section where

identified and described

Current

OMB control No.

* * * * *

1.411(d)–4 ................................. 1545–1545

* * * * *

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

Approved: May 11, 1998.

Donald C. Lubick,

Assistant Secretary of the Treasury.

[FR Doc. 98–14875 Filed 6–4–98; 8:45 am]

BILLING CODE 4830–01–U

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.

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
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations 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-bysection basis, as follows:

Section (a): Introduction

1. Several comments asked that

section (a)(3) be amended to provide
30626 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations

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
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations 30627

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 NonWaivable 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 × .046

× .55) = 13,713] yields 13,713 employers

that are affected by this requirement.

The larger employers are assumed to

have computerized record keeping, and
30628 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations

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 ×

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, § 1625.22 is added to

subpart B—Substantive Regulations to

read as follows:

§ 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
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations 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 decisionmaking 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
30630 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations

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 decisionmaking 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
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 /Rules and Regulations 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:

Job Title Age No. Selected

No. 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.

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

BILLING CODE 6570–01–P