Workforce Week
By Bradley T. Adler
March 2009
To have a valid release of claims under the Age Discrimination in Employment Act, employers must comply with several technical requirements. Courts consistently have stated that these requirements are ‘strict and unqualified,’ and if an employer fails to meet any of the statutory requirements, the waiver is ‘ineffective as a matter of law.’ Here is an outline of what companies must do to comply.
In today’s difficult economic times, many employers are carefully assessing their operational structures, particularly the efficiency and expense of their workforce. When revenues are down and expenses remain the same or go up, something has to change. That something has typically has been a dramatic reduction in the workforce.
However, many employers are surprised to learn that layoffs can result in significant legal claims by affected employees. A reduction in force is a situation that often serves as the basis for discrimination claims—particularly involving age discrimination—even though the cause of the reductions may be a loss of business, a merger or a consolidation of business operations.
When terminating an employee because of a reduction in force, many employers offer severance packages to employees to obtain a waiver of claims. In short, as a part of the layoff, the employer offers an employee some benefit—typically compensation—that the employee otherwise is not entitled to receive. In exchange, the employee is asked to sign a release agreement that waives any claims against the company arising out of his or her employment.
Typically there are no specific requirements for such waivers of federal claims. But there is one major exception: claims for age discrimination under the Age Discrimination in Employment Act. To have a valid release of claims under the act, employers must comply with several technical requirements. Courts consistently have stated that these requirements are "strict and unqualified," and if an employer fails to meet any of the statutory requirements, the waiver is "ineffective as a matter of law." The technical requirements are:
1. A written and understandable agreement: The waiver must be part of a written agreement between the individual and the employer that is written in a manner calculated to be understood by the average individual eligible to participate.
2. Reference to the Age Discrimination in Employment Act: The waiver specifically refers to rights or claims arising under the act.
3. Prohibition against releasing future rights or claims: The agreement reflects that the individual is not waiving rights or claims for actions that occur after the date the waiver is executed.
4. Consideration required: The individual waives rights or claims only in exchange for consideration, in addition to anything of value to which the individual already is entitled.
5. Attorney consultation: The individual is advised in writing to consult with an attorney prior to executing the agreement.
6. Consideration period: In instances of single-employee terminations, the individual must be given a period of at least 21 days within which to consider the agreement. In instances where a waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, the individual must be given a period of at least 45 days within which to consider the agreement. In this case, "program" is defined to include voluntary and involuntary terminations affecting two or more employees.
7. Revocation period: The agreement provides that, for a period of at least seven days following the execution of such agreement, the individual may revoke the agreement and the agreement shall not become effective or enforceable until the renovation period has expired.
With respect to the specified time periods, employers should be aware that, if the waiver is sought as a part of a settlement for a claim of age discrimination that has been filed with a court or the Equal Opportunity Employment Commission, the employee is not entitled to either the 21-day consideration or the seven-day revocation period. Also, even when such time limits are applicable, an employee may sign a release prior to the end of the 21-day (or 45-day) time period, although the seven-day revocation period cannot be shortened by the parties.
Full Article: http://www.workforce.com/archive/feature/26/21/52/index.php
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