New EEOC Regulations Prohibit "Tender Back" Provisions and Limit Usefulness of Covenants Not to Sue in ADEA Waiver

Over the past several years, waivers have become a common tool in preventing future disputes between employers and their employees. Employers often require employees to sign releases or waivers of any employment-related claims as a condition of receiving severance or other benefits in either individual or group employment terminations, such as reductions-in-force. These waivers, if drafted correctly, provide employers with protection against further liability to the releasing employee.

On December 11, 2000, the Equal Employment Opportunity Commission (“EEOC”) issued new Regulations that prohibit certain types of provisions in agreements providing for the waiver of age discrimination claims under the federal Age Discrimination in Employment Act (“ADEA”). These Regulations interpret the Older Workers Benefit Protection Act (“OWBPA”), which imposes certain minimum standards that must be satisfied for a waiver of an ADEA claim to be enforceable. The Regulations, which evidence the EEOC’s hostility toward waiver agreements, particularly covenants not to sue, provide that the EEOC will consider an ADEA waiver agreement to be invalid if it discourages employees from contesting the validity of a waiver, or if it purports to penalize an employee for asserting such a claim.

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