“Companies have to be especially cautious when conducting workforce reductions involving employees older than 40,” says attorney Lloyd Aubry. Waivers can help, but they bring their own legal challenges.
The Equal Employment Opportunity Commission (EEOC) has recently issued a Technical Assistance Document covering waivers, say Aubry and Armilla Staley-Ngomo, both with the San Francisco office of Morrison & Foerster. The document also covers the Older Workers Benefit Protection Act (OWBPA), which amends the Age Discrimination and Employment Act (ADEA) to clarify prohibitions against discrimination on the basis of age for employees age 40 and over.
Here’s Aubry’s and Staley-Ngomo’s take on waivers in light of the new EEOC guidance:
Severance Agreements
To minimize the potential of litigation that employers may face from employees who believe that they were discriminated against based on their age, race, sex, national origin, religion, or disability, many employers now offer departing employees severance packages or continued benefits in exchange for a release of liability or ‘waiver’ for all claims related to the employment relationship.
Typically this would include discrimination claims under the civil rights acts enforced by the EEOC, such as the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA).
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Employees are typically offered severance agreements and asked to sign a waiver at the time of their termination, unless severance provisions were previously discussed and negotiated when the employee was initially hired, which is often the case for senior-level executives and other high-level employees, Aubry notes.
Most signed waivers will likely be enforceable if they meet both contract principles and statutory requirements, but an employer cannot lawfully limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC, or prevent an employee from filing a charge or lawsuit alleging discrimination with the EEOC.
If an ex-employee does file a charge or sue, however, an employer will argue that the court should dismiss the lawsuit because the employee waived his or her right to sue. An employee’s signature generally indicates acceptance of the terms of the severance agreement, Aubry notes.
Remember, he adds, that an employer cannot lawfully require an employee to return money or benefits received in exchange for signing the waiver if the employee later elects to file a charge against the employer.
Consideration
As with any other contract, says Aubry, a severance agreement must be supported by “consideration,” which is something of value to which a person is not already entitled that is given in exchange for an agreement to do, or refrain from doing, something.
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Consideration cannot simply be a pension benefit or payment for vacation or sick leave that has already been earned by the employee, or that the employee is already entitled to, but rather should be something of value that is in addition to the employee’s existing entitlements. Examples are a lump sum payment of a percentage of the employee’s annual salary or continued payments of the employee’s salary or benefits for a specified period of time after the termination.
In tomorrow’s Advisor, we’ll get Aubry and Staley-Ngomo’s take on the tricky “knowing and voluntary” requirement, and we’ll be introduced to a unique management tool for those in small, or even one-person, HR departments.
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