June 2013

By: Nancy E. Joerg, Esq.

It is common for employers to terminate employees and pay money to these departing employees in exchange for a release or waiver of claims. Such release agreements can give employers a measure of comfort and certainty while at the same time offering departing employees money (to tide them over during what can sometimes be a difficult transitional period to other employment).

When a departing employee is 40 years of age or older and release language is intended to include potential claims under the Age Discrimination in Employment Act of 1967 (ADEA), the release agreement must meet all of the legal requirements of the Older Workers Benefit Protection Act (OWBPA) of 1990.

The OWBPA was enacted to make sure that employees are not coerced by employers into waiving their rights to seek legal relief under the Age Discrimination in Employment Act (ADEA) of 1967. By incorporating the OWBPA requirements into a release agreement, the employer helps reduce the possibility of facing ADEA litigation or having an unenforceable settlement agreement.

When release agreements are offered to two or more departing employees (for example, as part of a reduction in force), this creates a group termination situation and there are further curve balls for the employer. The employer will have to treat the release agreement as a very special kind of ” group release.”

Many employers incorrectly believe that the usual release agreement they may have used frequently for situations where they have terminated one employee who is 40 years of age or older will also be sufficient for the group release situation – it isn’t.

Let us compare the strict legal requirements of the two kinds of releases:

REQUIREMENTS WHEN ONLY ONE EMPLOYEE IS BEING TERMINATED: Below are the OWBPA requirements for the single employee being terminated (i.e., not part of a group):

• the waiver is part of a release agreement between the individual and the employer that is written in a manner calculated to be clearly understood by such individual, or by the average individual eligible to participate;
• the waiver specifically refers to rights or claims arising under the ADEA;
• the individual does not waive rights or claims that may arise after the date the waiver is executed;
• the individual waives rights or claims only in exchange for “consideration” in addition to anything of value to which the individual already is entitled;
• the individual is advised in writing to consult with an attorney prior to executing the agreement;
• the individual is given a period of at least 21 days within which to consider the agreement; or
• the release agreement provides that for a period of at least 7 days following the execution of such release agreement, the individual may revoke the agreement, and the release agreement shall not become effective or enforceable until the revocation period has expired.

REQUIREMENTS WHEN A GROUP (I.E., TWO OR MORE EMPLOYEES) IS BEING TERMINATED: For a group release (when 2 or more employees are being terminated), the requirements above apply except the 21-day period to consider the release agreement is extended to a 45-day period and the employer must also attach to that release agreement a disclosure form presenting in writing:

• the class, unit or group of employees covered by the termination program
• the factors affecting eligibility for the program
• any time limits that apply to the program
• the job titles and ages of all employees eligible for the program
• ages and titles of employees in the same class, unit, or group who are not eligible or selected for the program.

Of course, like with any contract, there must be legal consideration to seal the release agreement. Consideration is something of value (usually money) passing between the employer and the departing employee such as severance. It must be severance that the employee is not already entitled to by virtue of the employee handbook or an employment agreement. Consideration must be above and beyond what the employer is already giving the departing employee.

If the release agreement is not in full compliance with the OWBPA group release requirements, a court may permit the employees under this group termination program to pursue their ADEA claims (even though the employees signed the waiver and release agreements and accepted a severance package).

Group terminations for older workers (those 40 years of age and older) are unusually technical. The legal requirements are strict. Failure by an employer to meet all the legal requirements means that the employer may be giving the older workers severance for signing the release, but, if the release is not legally enforceable, those workers can still bring lawsuits against the employer for age discrimination.

Questions? Call Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.