Severance Agreements Should Be Carefully Scrutinized

In this age of layoffs, employees are often presented with severance agreements when terminated.  These agreements typically require individuals to release all potential employment law claims, including age discrimination claims under the Age Discrimination in Employment Act (ADEA), in exchange for severance.Before signing away legal rights, severance agreements should be carefully scrutinized.  Our firm assists employees in reviewing severance agreements and negotiating terms contained within these agreements.

The Older Worker’s Benefit Protection Act (OWBPA), part of the ADEA, is designed to protect the rights and benefits of older workers and imposes mandatory requirements for waivers of ADEA rights.  Oubre v. Entergy Operations, Inc. 522 U.S. 422, 427 (1998).  Among these requirements, is the requirement to provide employees who are terminated in a group termination (more than one employee) with OWBPA disclosure information at the same time they are given the severance agreement. The purpose of the OWBPA’s informational requirements is to provide an employee with enough information regarding the termination program to allow the employee to make an informed choice about whether or not to sign a waiver agreement.  29 C.F.R. §1625.22(f)(1)(iv).
Attorneys reviewing severance agreements should carefully scrutinize the OWBPA disclosure information provided to the terminated employee.  In order for an employee to validly release ADEA claims, the waiver releasing such claims must meet all of the strict, mandatory OWBPA requirements outlined in the statute and regulations.  29 U.S.C. §626(f) and 29 C.F.R. §1625.22.  These requirements include, among other things, information about the “decisional unit” or group of employees from which the employer selected employees for termination; the job titles and ages of those terminated and those kept by the employer; and eligibility factors or selection criteria the employer used to make the termination decisions.
In our experience, terminated employees often do not receive the required OWBPA disclosure information or the information they receive is inadequate.  For example, and among other requirements, the decisional unit disclosed may not be the actual group of employees the employer looked at when making its termination decision; or the job titles disclosed are not the job titles the company actually used; or the disclosure information may not include everyone who was terminated, including your client.  Our firm and Dorene R. Sarnoski Law Office were successful in challenging and invalidating the waiver/release agreements signed by employees nationwide in Peterson v. Seagate US, LLC, 2008 U.S. Dist. LEXIS 42179, No. 07-2502 (D. Minn. May 28, 2008).  The court found that the release agreements were invalid as a matter of law because they failed to meet all of the OWBPA mandatory requirements when the disclosure information did not include the job titles and ages of all employees who were terminated, including one of our clients.  The court found that, “[i]t may be that the inadvertent omission of a particular employee would be enough to affect one other employee’s decision to sign the release.”  Id. at 6.

Posted by Andrea Ostapowich