EEOC Focuses on Age Discrimination

Over the last twelve months, the number of age discrimination claims filed with the Equal Employment Opportunity Commission (EEOC) as well as state administrative agencies has sharply risen. It comes as no surprise that the current economic downturn has resulted in reductions in force that have often included older workers. These employees, who are often near retirement and are among the highest paid employees, sometimes feel that the employer’s decision to terminate may have been the result of age discrimination. Many employers seek to minimize the risk of potential litigation by offering the departing employees money or benefits in exchange for a release or waiver of liability of any claims connected with the employment relationship, including discrimination claims under civil rights laws enforced by the EEOC. These facts have not been lost on the EEOC, which has reacted by recently issuing a technical assistance document entitled “Understanding Waivers Of Discrimination Claims In Employee Severance Agreements”.

The document is directed at employees and answers many questions they may have in the event they are offered a severance benefit in exchange for a waiver of actual or potential discrimination claims. While the Age Discrimination in Employment Act (ADEA) is the primary focus of the document, it also addresses issues under the Americans with Disabilities Act, Title VII and the Equal Pay Act. The document generally describes what a severance agreement looks like and when a waiver is valid and, perhaps more importantly, when it is not.

Some highlights include emphasizing that a severance agreement is valid only when an employee knowingly and voluntarily consents to the waiver. Factors used to determine if an employee knowingly and voluntarily waived his or her discrimination claims include:

• Whether the severance agreement was written in a manner that is clear and specific enough for the employee to understand based on his or her education and business experience;
• Whether it was induced by fraud, duress, undue influence or other improper conduct by the employer;
• Whether the employee had enough time to read and think about the advantages and disadvantages of the agreement before signing it;
• Whether the employee consulted with an attorney or was encouraged or discouraged by the employer from doing so;
• Whether the employee had any input in negotiating the terms of the agreement; and
• Whether the employer offered the employee consideration, such as severance pay or additional benefits that exceeded what the employee already was entitled to by law or contract.

No single factor is determinative. Rather, courts will look at the totality of the circumstances to determine whether the employee knowingly and voluntarily waived their right to sue.

The document also confirms that, despite broad language in some
severance agreements to the contrary, employees are still free to file a charge with the EEOC if they believe they were subjected to discrimination or were otherwise wrongfully terminated. In other words, no agreement between the employee and the employer can limit an employee’s right to testify, assist or participate in an investigation, hearing or proceeding conducted by the EEOC. Any provision that attempts to waive these rights is invalid and unenforceable.

Additional requirements for an enforceable severance agreement must be met in connection with a release of an age discrimination claim under the ADEA. Specifically, ADEA, and its 1990 Amendment, the Older Workers Benefit Protection Act, requires that any waiver be written in a manner that can be clearly understood; specifically refer to rights or claims arising under the ADEA; advise the employee in writing to consult an attorney before accepting the agreement; provide the employee with at least twenty-one days to consider the offer (additional time is required for a group lay-off ); provide the employee seven days to revoke his or her signature; must not include any rights or claims that arise after the date on which the waiver is executed; and must be supported by consideration in addition to that which the employee is already entitled. Further, in connection with a group lay-off, the employer must provide specific information regarding the class, unit or group of employees from which the employer chose the employees who were selected for the lay-off, the eligibility factors for the program, the time limits applicable to the program, and the job titles and ages of all individuals who are eligible as well as those who are not eligible or were not otherwise selected.

The technical assistance document does not provide new information nor does it clarify existing law. Rather, it serves as a “how to” guide for employees who are curious about their rights in connection with a severance agreement. Indeed, the document even includes a handy checklist for employees to use when confronted with a severance agreement. For employers, the document serves as a reminder that a severance agreement, while an important tool for avoiding litigation and minimizing the impact of an unpleasant termination, must be used properly to be effective.