Some Thoughts on Employee Release Agreements (Part III)

By Jonathan K. Driggs, Attorney at Law

 

In our final segment about employee release agreements, let’s discuss the particular requirements for waiving claims under the Age Discrimination in Employment Act (ADEA).  The ADEA was passed in 1967 in response to concerns that older workers (deemed at that time to be employees forty years of age or older) were being discriminated against in the workplace.  Ok, it’s time for a random musing: if the ADEA were to be passed today, would they still set the age threshold at forty?  Is forty “old”? I confess, forty doesn’t seem very old to me, but then again, I have a vested interest in making it sound as young as possible! It is interesting to note that in 1967 the average life expectancy for an American male was 67.  Now, in 2014, it’s 76.  Oh well, enough going off on tangents for now.

 

In 1986, the ADEA was amended by the Older Workers Benefit Protection Act (OWBPA).  It was the OWBPA that required certain conditions to be met in order for a waiver of ADEA rights to be valid.  In other words, the intent of the OWBPA is to put safeguards in place so employees don’t inadvertently or get tricked into waiving their ADEA rights.  It is worth noting that these conditions only apply to ADEA claims.  When an employer is not seeking a waiver of ADEA claims (e.g., in the case of an employee under the age of forty), the following requirements do not necessarily have to be met.  However, following OWBPA requirements makes it a lot harder for employees to argue that they were tricked into signing an agreement.  So, even when not required, OWBPA requirements can provide a useful standard to consider.

 

While an exhaustive review of the OWBPA is beyond the scope of this article (see link below for more information), the basic premise is that any release of ADEA claims by employees must be “knowing and voluntary.”  In order to get a “knowing and voluntary” release, the OWBPA requires the following:

 

  • Readability: The release agreement must be written “in a manner calculated to be understood by … the average individual eligible” for the severance program.  If the release agreement is intended for unskilled, entry-level employees, it needs to be written for such an audience.  By the way, I often see agreements that are way too legalistic and very difficult for the average person to understand.  If your agreement contains long, hard to read paragraphs with never ending sentences that use lots of archaic legal language like, “said Releasor shall release said Releasee from said claims,” your document, well to put it simply, just ain’t no good (how’s that for non-legalistic language?).

 

  • Reference ADEA: The release needs to specifically refer to the ADEA.  The employee has to be specifically informed that they are waiving ADEA claims.  This is best done in a separate provision in the agreement.

 

  • No Future Claims: The employee cannot be required to release claims that arise after the date the agreement is executed (and the agreement should confirm this point).

 

  • Consideration: Just like for other releases, the employee must receive valid “consideration” for waiving ADEA claims (see last month’s article).  However, the employee doesn’t have to receive additional consideration just for waiving the ADEA claim (consideration for releasing all of the various claims should suffice).

 

  • Advised to Consult with Attorney: The employee must be advised in writing to consult with an attorney prior to signing the agreement. Yes, I know, this is the one that can make us a little nervous, but it is required.  The employer, however, is not required to pay for the attorney nor must the employee actually consult with an attorney (it is at their option).

 

  • Review Period: The employee must be given up to 21 calendar days to review the agreement (45 days if it is part of a layoff involving other employees—see the last bullet below).  This is an “up to 21 days” requirement, not a mandated “you must wait out the entire 21 days” requirement.  However, if I have an employee who is ready and willing to sign the agreement right when I give it to him or her, in order to avoid any appearance of coercion I make them take it home at least over night before being willing to accept it.

 

  • Revocation Period: The employee must be given a 7 calendar day “revocation period” following the date he or she signed the agreement.  This allows the employee to consider any second thoughts or misgivings and revoke his or her signature within the revocation period.  Tip: your agreement should state that no payments will be made until after the revocation period has expired.

 

  • Special Requirements For Group Layoffs: If a group or class of employees is offered a severance program in a layoff situation, the employer must inform employees in writing about the class, unit, or group of individuals covered by the program, any eligibility factors for the program, and any time limits applicable to the program.  The employer must also provide employees with the job titles and ages of all individuals eligible or selected for the program, and the job titles and ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.  In other words, you have to provide the job titles/ages of all the employees who are being let go, and all titles/ages of all the employees who aren’t being let go.  This gives employees the opportunities to see if older workers are being targeted.  A couple thoughts on this requirement:

 

  • A “group or class of employees” is simply two or more people—so, if you have a layoff involving a small number of people, you need to follow these requirements (something which, in my experience, is often overlooked);
  • As mentioned in a previous bullet, you need to give these employees up to 45 days to review the agreement (not 21);
  • The data about which employees stay or go is obviously sensitive.  If the employee does consult with an attorney, the attorney will certainly scrutinize it.  It is a good idea to review this data with your employment law counsel before releasing it (as well as to review your general compliance with OWBPA requirements).

 

The above is just a quick review of the main requirements of the OWBPA.   For more information about release agreements generally, as well as specific OWBPA/ADEA requirements, the following document from the EEOC can be helpful: http://www.eeoc.gov/policy/docs/qanda_severance-agreements.html.

While no release agreement is bullet proof, I find that in the vast majority of situations, these agreements bring about a peaceful and respectful resolution to employment relationships.

 

This article should not be construed as legal advice.  Copyright ©2014 by Jonathan K. Driggs, Attorney at Law, P.C.  All rights reserved.  Jonathan K. Driggs is an employment law attorney with over 21 years of experience, including 3 years with the Utah Labor Commission.  www.jkdlawpc.com

 

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