Drafting Severance Agreement to Release Federal Age Discrimination Claims
The federal Age Discrimination in Employment Act (ADEA), among other things, makes it unlawful for an employer:
(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age;
(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age; or
(3) to reduce the wage rate of any employee in order to comply with the ADEA.
The ADEA also makes it unlawful for an employment agency to fail or refuse to refer for employment, or otherwise to discriminate against, any individual because of such individual’s age, or to classify or refer for employment any individual on the basis of such individual’s age.
MINIMUM REQUIREMENTS OF AN EFFECTIVE RELEASE OF FEDERAL AGE DISCRIMINATION CLAIMS
For a Severance or Separation Agreement to effectively release an employee’s federal age discrimination claims, the release must be “knowing and voluntary,” which means, at a minimum:
1. A waiver must be written in a manner that can be clearly understood. EEOC regulations emphasize that waivers must be drafted in plain language geared to the level of comprehension and education of the average individual(s) eligible to participate. Usually this requires the elimination of technical jargon and long, complex sentences. In addition, the waiver must not have the effect of misleading, misinforming, or failing to inform participants and must present any advantages or disadvantages without either exaggerating the benefits or minimizing the limitations.
2. A waiver must specifically refer to rights or claims arising under the ADEA. EEOC regulations specifically state that an OWBPA waiver must expressly spell out the Age Discrimination in Employment Act (ADEA) by name.
3. A waiver must advise the employee in writing to consult an attorney before accepting the agreement.
4. A waiver must provide the employee with at least 21 days to consider the offer. The regulations clarify that the 21-day consideration period runs from the date of the employer’s final offer. If material changes to the final offer are made, the 21-day period starts over.
5. A waiver must give an employee seven days to revoke his or her signature. The seven-day revocation period cannot be changed or waived by either party for any reason.
6. A waiver must not include rights and claims that may arise after the date on which the waiver is executed. This provision bars waiving rights regarding new acts of discrimination that occur after the date of signing, such as a claim that an employer retaliated against a former employee who filed a charge with the EEOC by giving an unfavorable reference to a prospective employer.
7. A waiver must be supported by consideration in addition to that to which the employee already is entitled. If a waiver of age claims fails to meet any of these seven requirements, it is invalid and unenforceable. In addition, an employer cannot attempt to “cure” a defective waiver by issuing a subsequent letter containing OWBPA-required information that was omitted from the original agreement.
ADDITIONAL REQUIREMENTS FOR GROUP LAYOFFS OF EMPLOYEES AGE 40 AND OVER
In addition, there are additional requirements for an effective waiver of age discrimination claims when an employer conducts group layoffs of employees age 40 and over. In this case, the waiver must meet the minimum the seven minimum “knowing and voluntary” requirements above. An employer must give the employee age 40 and over that is subject to the group layoff – and all other employees who are being laid off with him or her – written notice of the layoff and at least 45 days to consider the waiver before signing it. Specifically, the employer must inform such an employee in writing of:
1. The ”decisional unit” – the class , unit, or group of employees from which the employer chose the employees who were and who were not selected for the program;
2. Eligibility factors for the program;
3. The time limits applicable to the program;
4. The job titles and ages of all individuals who are eligible or who were selected for the program (the use of age bands broader than one year, such as “age 40-50″ does not satisfy this requirement); and
5. The ages of all individuals in the same job classifications or organizational unit who are not eligible or who were not selected.
For additional guidance on this issue, the following is a link to EEOC guidance for drafting an effective release of federal age discrimination claims:
http://www.eeoc.gov/policy/docs/qanda_severance-agreements.html
The following is an example of a provision of severance agreement that would be effective to release the federal age discrimination claims of an employee age 40 or older who is subject to a group layoff:
“Employee acknowledges that Employee is waiving and releasing any rights Employee may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary. Employee agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after Employee executes this Agreement. Employee acknowledges that the consideration given for this waiver and release is in addition ”to anything of value to which Employee was already entitled. Employee further acknowledges that he/she has been advised by this writing that: (a) Employee should consult with an attorney prior to executing this Agreement; (b) Employee has forty-five (45) days within which to consider this Agreement; (c) Employee has seven (7) days following his/her execution of this Agreement to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. Employee acknowledges that this layoff is part of an employment reorganization program affecting all departments of the Employer. Employees’ eligibility for this program is based on excessive staffing, lack of work, and salary level. Exhibit A, attached hereto, provides a list of the job titles and ages of all persons eligible for the layoff and selected for the layoff and the job titles and ages of all persons within the job classification or organizational unit that were not eligible for the layoff and/or not selected for the layoff. In the event Employee signs this Agreement and returns it to the Employer in less than the forty-five (45) day period identified above, Employee hereby acknowledges that Employee has freely and voluntarily chosen to waive the time period allotted for considering this Agreement.”
If you are considering conducting a layoff, there are many issues you should consider before doing so, especially if you are laying off employees who are 40 years of age or older. Also, you should retain competent counsel to draft any severance agreement you ask an employee to sign because as you can see, there are specific requirements for an effective release of all of that employee’s claims depending on the situation. The last thing you want to do is give an employee a large severance payment in exchange for a release of all claims, only to find out that the release was ineffective and the employee is suing you anyway. Contact the Law Office of Jacob I. Kiani today so that you do not find yourself in this type of situation. It can be avoided for a reasonable, flat rate fee for us to draft an effective, iron-proof release.
This blog post has been published as a legal guide on avvo.com. You can locate it at the following web address: http://www.avvo.com/legal-guides/ugc/drafting-severance-agreement-to-release-federal-age-discrimination-claims?published=true
