Employers Entitled to Revoke Retirement Offers

The Older Workers Benefit Protection Act (OWBPA), a law intended to ensure that employees voluntarily waive their rights to file age discrimination claims, does not prohibit an employer from revoking an early retirement offer while an employee is considering it.

After he received notice of his termination, Lorin Ellison, the 62-year-old chief financial officer at Premier Salons International Inc., was given a separation agreement and release of claims. Before Ellison decided to accept the offer, the company revoked it, and offered a second, less attractive severance package. After the company revoked the first offer, but prior to receiving the new offer, Ellison signed the original offer. When the company refused to honor the first offer, Ellison sued for breach of contract, arguing that an offer of a severance package is irrevocable during the 21-day review period provided by the OWBPA.

The federal district court and the U.S. Court of Appeals for the Eighth Circuit, upon appeal, rejected Ellison’s argument. The Eighth Circuit held that the OWBPA merely provides that older workers must not be forced to sign releases without having 21 days to consider them. However, it does not bar employers from revoking offers during that same time period. Ellison vs. Premier Salons International Inc., 8^th Cir., No. 98-1384, 1/6/99.

Impact:
Employers may revoke unaccepted severance packages, even during the 21-day review period provided by the OWBPA.

Source: D. Diane Hatch, Ph.D., a human resources consultant based in San Francisco, and James E. Hall, an attorney with the law firm of Barlow, Kobata & Denis, with offices in Los Angeles and Chicago.