New EEOC Guidance on Waivers of Discrimination Claims
August 2009
In mid-July, the Equal Employment
Opportunity Commission (EEOC) issued a Guidance,
"Understanding Waivers of Discrimination Claims in Employee Severance
Agreements." The Guidance is in an easy to understand
question-and-answer format and is in part intended to help employees
determine whether their employers are providing them with enforceable
waivers.
by Paul
J. Siegel, Esq.
Jackson Lewis
LLP
The Guidance is likely to spur litigation as separated employees review
this public document and discover actual or perceived deficiencies with
their release agreements. The issues covered are not limited to waivers of
age claims by employees age 40 and over.
Below, we summarize key points of the Guidance applicable to all waivers,
as well as specific issues applicable to waivers involving group termination
of employees age 40 and over.
Key Points
The Guidance reiterates that a waiver of discrimination claim of any kind
is only valid if it is knowing and voluntary. Accordingly, release language
must be clear and understandable to the particular employee to whom the
waiver is provided.1 In this regard, the Guidance
further notes that if the employee signs the waiver based on improper
information (e.g., being told it is a position elimination when it is not),
there is a viable argument that waiver is invalid based on fraud.2
Regardless of whether the Older Worker Benefits Protection Act (OWBPA)
applies (i.e., if the employee is age 40 or over), the waiver must be clear,
easily understood, and not obtained through subterfuge.
The Guidance
reiterates that an employee always retains the right to file a charge with
the EEOC without being obligated to return any consideration, but can waive
the right to an individual-specific remedy.3 The
Commission's position is consistent with the U.S. Supreme Court's decision
in Waffle House v. Travelers, 114 S.W.3d 601 (Tex. App. 2003),
holding that an arbitration agreement signed by a worker does not divest the
EEOC of jurisdiction to investigate a claim of discrimination.
The Guidance
reiterates that express or implied tender back (i.e., return of
consideration or payment of attorney fees incurred by an employer) is
prohibited in regard to federal age discrimination claims filed in court by
employees age 40 and over, but may be permissible in regard to other claims.
The Guidance also notes that if an Age Discrimination in Employment Act
(ADEA) suit is filed, the employer cannot refuse to fulfill its obligations
under the agreement. The Guidance also reiterates that any recovery on an
ADEA claim that survives a purported waiver is subject to offset by the
severance paid.4
The Guidance reiterates that, as to waivers of claims involving employees
age 40 and older in an individual
release situation, the agreement must,
inter alia:
- Provide the employee with a read and
study period of at least 21 days;
- Specifically list the ADEA as a
claim being waived;
- Provide a 7-day revocation period that cannot be
reduced; and
- Include language advising the employee of the right to
consult with counsel.5
Specific Issues Applicable to
Group Terminations
Unfortunately, the Guidance does not contain any
helpful information relevant to such vexing questions as whether there are
differences in application of OWBPA requirements to voluntary and
involuntary programs; and whether 45 days must be provided as a read and
study period to choose to participate in a voluntary reduction-in-force
program if 45 days is provided to consider the release agreement
subsequently provided to volunteers. However, the following information is
provided.
The Guidance reiterates that for waivers of claims involving
employees age 40 and over in a group termination
situation, the agreement must,
inter alia:
- Provide the employee with a read and study period of at least
45 days;
- Specifically list the ADEA as a claim being waived;
- Provide a nonwaiveable 7-day revocation period;
- Include language
advising the employee of the right to consult with counsel; and
- Provide information regarding eligibility factors, time limits, and the job
titles and ages of eligible and ineligible employees.6
The Guidance reiterates that separation of as little as two employees is a
group termination that triggers the 45-day study period and the employer's
obligation to provide comparative data.7
The Guidance does not mandate that specific selection criteria must be
provided, but specifically notes that some courts have held that eligibility
factors include selection criteria. Accordingly, in an involuntary
termination situation, we recommend that the agreement list both eligibility
factors (e.g., all employees in headquarters) and selection criteria (e.g.,
the basis for selection of headquarters employees for separation as part of
a group reduction program). If selection criteria are not included, the
Guidance provides some support for arguing that waiver is valid despite the
absence of selection criteria.8
For years, employers have struggled with an inconsistency between the
statute and the regulations. The statute indicates that the release must
contain the job titles and ages of everyone selected for the “program” and
the ages of all individuals in the job classification or organizational unit
who are not selected. This implies that the second list need not mirror the
first list (e.g., in a headquarters (HQ) reduction, list A can include
everyone who will be separated from HQ, but if each business unit within HQ
was analyzed separately, a member of the Accounting business unit selected
for termination is entitled solely to information regarding Accounting
business unit employees who are retained). The regulations, however,
indicate that the lists should mirror each other. This position is
reiterated in the Guidance (e.g., as to the HQ example, list B should not be
limited to just employees in the Accounting business unit). We suggest using
the coextensive approach to avoid creating a release that the EEOC will
consider invalid.9
The Guidance reiterates the concept of time limits, but provides little
guidance as to its application in an involuntary termination situation. It
appears that in an involuntary discharge situation (as compared with a
voluntary reduction in force program), this is merely the 45-day
consideration period. Nonetheless, based on the example provided in the
Guidance, we recommend providing a time frame title to the program such as
July 2009 Restructuring Program and clarifying the program title and
termination dates of selected employees in rolling reductions in force in
which aggregated lists are used.10
The Guidance reiterates that OWBPA violations cannot be cured by a
follow-up letter or reaffirmation. Thus, in the first instance, a release
signed by an employee must be fully compliant with the OWBPA.11
Finally, the Guidance cites to caselaw supporting the conclusion that
there is no cause of action for violation of the OWBPA.12
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