Thursday, July 16, 2009

EEOC enters the fray on proper waivers of discrimination claims

As unemployment heads towards 10%, layoffs have unfortunately become the norm for many employers. As predicted, the EEOC has seen both a spike in age discrimination charges and requests by employers for laid-off employees to sign waivers in exchange for severance packages. I’ve previously provided guidance to employers to help navigate the tricky waters of lawful age discrimination waivers under the Older Workers Benefit Protection Act: Refresher on age discrimination waivers and Defining the proper "decisional unit" is key in legitimacy of RIFs. This week, the EEOC entered the fray by publishing a short Q&A to help employers and employees understand waivers of discrimination claims in severance agreements.

While this EEOC guidance is more geared to employees, it offers some good nuggets of information for employers considering offering severance packages to terminated employees:

  1. Severance is not mandatory. No law requires a company to offer a laid-off or otherwise terminated employee severance. Nevertheless, in all but the most egregious of terminations, employers should consider severance pay in exchange for a signed release if for no other reason than the peace of mind that a comprehensive waiver provides. I can reasonably assure employers the that total cost of severance paid out to all employees in a year will be less than the cost of defending one discrimination lawsuit.

  2. Any waiver must be “knowing and voluntary.” Is the agreement clearly written in a manner understandable to the employee? Was the employee given enough time to think about whether to accept the severance offer and sign the agreement? Was the employee encouraged to talk to a lawyer before signing? Was the employee given the chance to negotiate terms? Was the employee offered something above and beyond that which is already owed to him or her?

  3. Agreements cannot bar EEOC charges. No severance agreement can prohibit an employee from filing a charge with the EEOC, or limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC. Any provision in a waiver that attempts to waive these rights is invalid and unenforceable. An agreement can, however, waive an employee’s right to any monetary remuneration from a successful EEOC proceeding.

Most importantly, employers act at their own peril by offering severance agreements to employees without having them prepared, or at a minimum reviewed, by an attorney before presentation to the employee. The EEOC has done employers a disservice by giving some form language for severance agreements, which may or may not fit an employer’s specific need. It may save a few dollars to use a form found on the Internet without first consulting an attorney. It will cost exponentially more to hire a lawyer to fix a mistake after the fact, especially if the mistake does not come up until an ex-employee files a lawsuit because of a loophole or error in a severance agreement.

Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or