UNDERSTANDING WAIVERS OF DISCRIMINATION CLAIMS IN EMPLOYEE SEVERANCE AGREEMENTS

U.S. Equal Employment Opportunity Commission
UNDERSTANDING WAIVERS OF DISCRIMINATION CLAIMS IN EMPLOYEE SEVERANCE AGREEMENTS

EEOC issued information on waivers of discrimination claims. This is particularly relevant during this time of economic downturn and layoffs. Such terminations often lead to litigation under a number of the civil rights laws including the Age Discrimination in Employment Act. The following is a copy of the introduction. To view the entire guidance, go to: http://www.eeoc.gov/policy/docs/qanda_severance-agreements.html


I. INTRODUCTION
Employee reductions and terminations have been an unfortunate result of the current economic downturn. Even in good economic times, however, businesses of every size carefully assess their operational structures and may sometimes decide to reduce their workforce. Often, employers terminate older employees who are eligible for retirement, or nearly so, because they generally have been with the company the longest and are paid the highest salaries. Other employers evaluate individual employees on criteria such as performance or experience, or decide to lay off all employees in a particular position, division, or department.[1] An employer’s decision to terminate or lay off certain employees, while retaining others, may lead discharged workers to believe that they were discriminated against based on their age, race, sex, national origin, religion, or disability.
To minimize the risk of potential litigation, many employers offer departing employees money or benefits in exchange for a release (or “waiver”) of liability for all claims connected with the employment relationship, including discrimination claims under the civil rights laws enforced by the Equal Employment Opportunity Commission (EEOC) -- the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA).[2] While it is common for senior-level executives to negotiate severance provisions when initially hired, other employees typically are offered severance agreements and asked to sign a waiver at the time of termination. When presented with a severance agreement, many employees wonder: Is this legal? Should I sign it?
This document answers questions that you may have if you are offered a severance agreement in exchange for a waiver of your actual or potential discrimination claims. Part II provides basic information about severance agreements; Part III explains when a waiver is valid; and Part IV specifically addresses waivers of age discrimination claims that must comply with provisions of the Older Workers Benefit Protection Act (OWBPA). Finally, this document includes a checklist with tips on what you should do before signing a waiver in a severance agreement and a sample of an agreement offered to a group of employees giving them the opportunity to resign in exchange for severance benefits.

What You Need to Know About Lawful Waivers of Age Discrimination Claims

Workforce Management
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. By Bradley T. Adler

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.

Full Story: http://www.workforce.com/section/03/feature/26/21/52/index.html