A waiver in a severance agreement is only valid when an employee “knowingly and voluntarily” consents to the waiver, say attorneys Lloyd Aubry and Armilla Staley-Ngomo. Reaching that standard can be challenging.
The rules for waivers under the Age Discrimination and Employment Act (ADEA) are defined by the Older Workers Benefits Protection Act (OWBPA). Rules under other civil rights laws, such as Title VII, however, are derived by case law, the attorneys say.
Aubry and Staley-Ngomo are employment law attorneys associated with the San Francisco office of law firm Morrison & Foerster.
OWBPA Factors for Knowing and Voluntary
OWBPA lists seven factors that must be satisfied for a waiver of age discrimination claims to be considered “knowing and voluntary,” Aubry says. The waiver must:
- 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 with an attorney before accepting the agreement;
- Provide the employee with at least 21 days to consider the offer;
- Give an employee 7 days to revoke his or her signature;
- Not include rights and claims that may arise after the date on which the waiver is executed; and
- Be supported by consideration in addition to that to which the employee already is entitled.
In addition, if an employee aged 40 or over is part of a group termination such as reductions in force (sometimes referred to as “exit incentive programs”) or another employment termination program, the employer must provide additional information in connection with the waiver, such as details about the selection criteria and the class of employees who were (and were not) selected for the program. The employer must also give the group 45 days to consider the offer.
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Courts’ View of ‘Knowing and Voluntary’
In determining whether an employee “knowingly and voluntarily” waived his or her discrimination claims, some courts rely on traditional contract principles, focusing primarily on whether the language in the waiver is clear and unambiguous, while other courts look beyond the contract language and consider all relevant factors—the totality of the circumstances. The following are circumstances and conditions that will be considered by some courts:
- Whether the waiver was written in a manner that was clear and specific enough for the employee to understand based on his or her education and business experience;
- Whether the waiver 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 to do so;
- Whether the employee had any input in negotiating the terms of the agreement; and
- Whether the employer offered the employee consideration (e.g., severance pay, additional benefits) that exceeded what the employee already was entitled to by law or contract, and the employee accepted the offered consideration.
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