The EEOC recently issued guidance directed at helping employees understand waivers of discrimination claims included in employee severance agreements. Although the information provided in the guidance is not new, it is timely as U.S. employers continue to face layoff decisions in the current economic climate.
The guidance provides employees answers, and illustrative case law examples, to frequently asked questions regarding the content, validity, and limitations of severance agreement waivers:
- What does a severance agreement look like?
- What determines whether a waiver of rights under Title VII, the ADA, the ADEA, or the EPA was "knowing and voluntary"?
- What rights are still available to the employee even if the employer obtains a signed waiver?
- What are the additional requirements for group layoffs of employees age 40 and over?
- What should an employee do when offered a severance agreement?
The EEOC guidance informs employees that "provisions in severance agreements that attempt to prevent employees from filing a charge with the EEOC or participating in an EEOC investigation, hearing, or proceeding are unenforceable." Additionally, the guidance details the statutory requirements for individual and group waivers of age discrimination claims under the Age Discrimination in Employment Act (ADEA), as amended by the Older Workers Benefit Protection Act (OWBPA).
It is important that employers be familiar with all of the requirements of a valid waiver, especially where ADEA claims are involved, since it is likely that savvy employees will familiarize themselves with these requirements. The failure to comply with the OWBPA's requirements can be costly, as illustrated by the case of Ferruggia v. Sharp Elecs. Corp., (June 18, 2009) (reconsideration denied August 25, 2009). In that case, a federal court in New Jersey permitted a former employee to proceed with his ADEA claims even though he signed a severance agreement and general release of claims, which he discussed with his attorney and modified before signing. Under the terms of the severance agreement, Ferruggia received over $98,000 in exchange for the release of all claims he might have arising out of his employment. However, because Ferruggia's discharge arose in the context of a reduction in force, the court found that the waiver was not enforceable because it did not comply with the OWBPA's requirements.
Among other things, the OWBPA requires an employer to provide "the job titles and ages of all individuals eligible or selected for the program [that is, the RIF], and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program." The court rejected the employer's argument that Ferruggia's waiver was knowing and voluntary as demonstrated by the fact that he consulted with counsel (the law firm that filed the discrimination lawsuit), which negotiated on his behalf for more favorable terms in the severance agreement. The court held that the OWBPA's statutory requirements are prerequisites to any other consideration of whether a release or waiver is knowing and voluntary. Accordingly, the court found that the release did not bar Ferruggia's ADEA claims.
Employers should ensure that any severance agreements and waivers meet the requirements of all applicable laws. While the EEOC guidance is mainly directed toward employees, it serves as a helpful compliance tool for any employer offering its departing employees severance benefits in exchange for employment-related liability waivers. Moreover, the EEOC and courts are likely to refer to the guidance when reviewing severance agreements.
The EEOC guidance can be found at: http://www.eeoc.gov/policy/docs/qanda_severance-agreements.html.
This article was written by Isabella Lee, email@example.com, 404-888-3856, an attorney in our Atlanta office.