Yesterday, we looked at Coryell v. Bank One Trust, which found that the offering of a severance package could constitute evidence of a constructive discharge. Even though the employee was losing his job as part of a corporate reorganization, the court believed a question existed as to whether he had any meaningful choice but to accept the severance package.
As I mentioned yesterday, the lawsuit could have been avoided if the company required Coryell to sign a severance agreement that included a valid release of claims as a condition to receive the severance package. In fact, I'd go so far as to say that it would take a very rare case for me to feel comfortable with an employee receiving severance of any kind without signing a release in return.
Severance agreements for employees age 40 or over present their own set of problems. The Older Workers Benefit Protection Act (OWBPA), which amended the federal Age Discrimination in Employment Act, requires that any releases and waivers of federal age discrimination claims be "knowing and voluntary." Simple enough, right?. What release is not entered into knowingly and voluntarily? Not so fast. The OWBPA specifically defines what a "knowing and voluntary" waiver means, and it is not as simple as it might sound:
- The waiver must be part of an agreement between the employee and the employer.
- The waiver must be written in a manner calculated to be understood by the employee.
- The waiver must specifically refer to rights or claims arising under the ADEA.
- The employee cannot be waiving any rights or claims that arise after the date he or she signs the agreement.
- In exchange for the release, the employee must receive consideration in addition to that which he or she is already entitled.
- The employee must be advised, in writing, to consult with any attorney before signing the agreement.
- The employee must be given 21 days to consider whether to sign the agreement.
- The agreement must provide for a period of at least 7 days following its execution for the employee to revoke the agreement, and the agreement cannot become effective or enforceable until that revocation period has expired.
If the release and waiver is provided as part of some severance program offered to a group of employees (such as a reduction in force), these requirements change. The 21 day period within which to consider the agreement is extended to 45 days. Moreover, at the start of that 45 day period (i.e., at the same time the employer gives the severance agreement to the employees), the employer must also disclose, in writing:
- The eligibility criteria for inclusion in the group.
- The job titles and ages of all individuals eligible or selected for the program.
- The ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.
Meeting these criteria is vitally important. The absence of even one of these factors invalidates the entire release as to the employee's federal age discrimination claim. Thus, even if an employee signs a severance agreement, the employee is free to bring a federal age discrimination claim if one of the above eight elements is missing from the agreement. To make matters worse, under Oubre v. Entergy Operations and current EEOC regulations, an employee is not required to tender back the severance pay as a condition to bringing an age discrimination claim under an invalid waiver. As Dan Schwartz points out in his Connecticut Employment Law Blog: "Employers are advised to seek legal counsel before using a model agreement."
Tomorrow, we'll examine the disclosures required in a group separation, and look at some cases from Ohio and elsewhere that talk about how to define the scope of the job classification for purposes of making these disclosures.