The Employer Adviser Hot Sheet -Breaking Developments in Labor and Employment Law
09.20.06
Two New Cases Give Guidance Regarding Requirements For Effective
Releases of Federal Age Discrimination Claims
First Case: Ninth Circuit Reinstates Employees’ Age Discrimination Claims, Even Though
Workers Signed Releases, Holding That Waivers Were Confusing to the Average Employee
In a unanimous decision, a three judge panel of the Ninth Circuit U.S. Court of Appeals held that
waiver language used by International Business Machines (“IBM”) did not meet the Age
Discrimination in Employment Act’s (“ADEA’s”) requirement that waivers “be written in a
manner calculated to be understood” by the average employee. Accordingly, 225 former IBM
employees were allowed to pursue their ADEA claims, despite their acceptance of severance pay
from IBM as consideration for the release of such claims.
In the case of Syverson v. IBM, William Syverson, a 56 year-old plaintiff laid off by IBM in a
reduction-in-force, claimed that an analysis of the laid-off employees showed that workers “who
were over 45 years old had a much higher chance of being selected for layoff than younger
employees.” IBM countered that age discrimination claims were barred because all of the
employees had signed separation and release agreements and received severance pay. IBM’s
release, utilized in connection with a large reduction in force, included a general release of all
employment-related claims. The release recited that it “covers, but is not limited to, claims
arising from the [ADEA].” The release also provided:
You agree that you will never institute a claim of any kind against
IBM...This covenant not to sue does not apply to actions based
solely under the [ADEA], as amended. This means that if you
were to sue IBM...only under the [ADEA], as amended, you would
not be liable under the terms of this Release for their attorney’s fees
and other costs and expenses of defending against the suit. This
Release does not preclude filing a charge with the U.S. [EEOC].
(Emphasis added.) The Ninth Circuit reasoned that the provisions purported to release all ADEA
claims and then, contradictorily, to preserve the employees’ right to sue under the ADEA, which
together violated the ADEA’s requirement that releases be presented in a “manner calculated to
be understood by [the] individual....” Notably, IBM argued that it was trying to comply with the
ADEA provision that prohibits employers from limiting employees’ right to challenge the
validity of their ADEA waivers. The court rejected IBM’s argument, finding it particularly
problematic that the “covenant not to sue” language was located in the “general release”
paragraph. In essence, the Ninth Circuit accepted the employees’ argument that employees could
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be misled into believing that the “carve-out” for ADEA claims from the covenant not to sue also
nullified their release of ADEA claims and rendered their release inoperative to extinguish those
claims. The Ninth Circuit also rejected IBM’s argument that “the direction to consult an attorney
or an IBM employee mitigates confusing waiver language.”
What Syverson Means for Employers
Employers should review their current separation and release agreements to make certain the
agreements do not include a “confusing” combination of general release language and covenant
not to sue language that excludes ADEA claims. ADEA releases still must permit the releasing
employee to challenge or seek a determination in good faith of the validity of any waiver under
the ADEA. Employers should consult with counsel about the language of their ADEA releases.
Second Case: Eleventh Circuit Limits Older Workers Benefit Protection Act Data
Disclosure Requirements
Syverson is not the only new development regarding ADEA releases. Under the Older Workers
Benefit Protection Act (“OWBPA”), employers are required to provide employees affected by a
reduction in force, or similar group termination program, with information regarding the
eligibility criteria for the program. This includes the disclosure of job titles and ages of
employees selected for discharge. Failure to provide the required information can be a basis for
invalidating an employee’s release of ADEA claims. What has not been entirely clear is the
required scope of this information; i.e., whether the information must be “company-wide” for a
company-wide layoff, or whether the information can be limited to the “decisional unit.” In
Burlison v. McDonald’s Corp., the Eleventh Circuit has issued a decision providing employers
with some much-needed guidance.
In Burlison, the plaintiffs were long-time employees of McDonald’s, age 40 or older, who were
terminated in conjunction with a 2001 nationwide restructuring in which McDonald's reduced its
workforce by approximately 500 employees. Each of the employees accepted a severance
package in exchange for signing a release of all claims against McDonald’s, including ADEA
claims. Pursuant to the OWBPA, McDonald’s provided the information regarding the employees
selected for discharge, including region-specific data. McDonald’s did not provide its employees
with selection data regarding other employees outside their region.
Notwithstanding having signed ADEA releases and accepting their severance pay, the employees
filed suit against McDonald’s challenging their termination and the validity of their ADEA
releases. The district court granted summary judgment for the plaintiffs, finding that the releases
violated the OWBPA because McDonald’s provided only regional, and not company-wide, data.
On appeal, the Eleventh Circuit rejected plaintiffs’ argument and concluded that the company
was only required to disclose data for the “decisional unit,” which the opinion defined as:
...that portion of the employer’s organizational structure from
which the employer chose the persons who would be offered
consideration for the signing of a waiver and those who would not
be offered consideration for the signing of a waiver.
The court observed that employers only need to provide employees enough data to conduct an
evaluation of potential age discrimination claims before releasing such claims. In Burlison, the
regional manager selected the employees in the region for layoff, so region-wide information
was sufficient.
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What Burlison Means for Employers
Employers should ensure that they provide enough data regarding job titles and ages of selected
employees to comply with the OWBPA. While employers may limit this data to a “decisional
unit,” they should be prepared to defend their definition of “decisional unit.” For this reason,
employers should consider carefully the scope of the decision maker's authority when
determining the scope of a “decisional unit.” If the decision maker is selecting employees for
layoff firm-wide, departmental or regional data may be insufficient. The “decisional unit” will
differ from employer to employer, and from program to program, depending on the specific
circumstances of the employer’s reduction in force.
For more information, please contact the Labor and Employment Law Practice Group at Lane
Powell:
206.223.7000 Seattle
503.778.2100 Portland
employlaw@lanepowell.com
www.lanepowell.com
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