Releases can give employers peace of mind and limit liability, but they must be properly drafted and implemented.  A district court in Minnesota has invalidated releases signed by the plaintiffs in a putative age discrimination class action because the court found the releases did not satisfy the requirement of including a “knowing and voluntary” waiver of the former employees’ right to sue under the Older Workers Benefit Protection Act (“OWBPA”).  Peterson, et al. v. Seagate U.S. LLC, 2008 U.S. Dist. LEXIS 42179 (May 28, 2008).  Plaintiffs, who signed releases when they were terminated during a reduction in force (“RIF”), alleged the company violated the Age Discrimination in Employment Act (“ADEA”) by disproportionately terminating older workers during the RIF. 

The OWBPA was enacted to “protect the rights and benefits of older workers” who are being laid off.  The U.S. Supreme Court has interpreted the statute as requiring “‘strict, unqualified statutory stricture on waivers’” executed by these workers in exchange for compensation and benefits.   The party defending a release’s validity bears the burden of proving compliance with the OWBPA’s statutory prerequisites, Judge Michael J. Davis of the U.S. District Court for the District of Minnesota said.  Because the ADEA waivers in issue misrepresented the total number of terminated employees, failed to clearly identify the job categories of the employees who were selected for termination, and required employees to waive their right to file charges with the Equal Employment Opportunity Commission (“EEOC”), Judge Davis found them invalid.

The OWBPA provides that a waiver of an individual’s rights under the ADEA must be “knowing and voluntary.”  The statute specifies that, at a minimum, a release must: 

1. be “written in a manner calculated to be understood” by the employee;
2. refer specifically to rights and claims available under the statute;
3. not waive prospective claims;
4. provide consideration in exchange for the release beyond something of value the employee is already entitled to;
5. advise the employee, in writing, to consult with an attorney;
6. give the employee at least 21 days to consider the agreement (or at least 45 days in the case of an exit incentive or other group termination program such as a RIF);
7. give the employee at least seven days to revoke the agreement; and
8. in the case of an exit incentive or other group termination program, contain information regarding: (a) the “job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program;” (b) any eligibility factors for the program; and (c) any time limits applicable to the program.

Emphasizing that “substantial compliance” is not enough under the statute, Judge Davis ruled that some of the waivers were legally invalid because they inaccurately stated that 154 employees were separated at one RIF location when, in fact, only 152 employees at the location were terminated.  Judge Davis also ruled that the company's listing in its disclosure of four different job codes for engineers, which were not grouped together and did not include any definitions or explanations for the codes, was too confusing and failed to "provide information in a manner calculated to be understood by the individual employees." 

Judge Davis also held that a provision prohibiting employees from filing an EEOC charge or participating in an EEOC investigation was unlawful, although it was not so misleading as to render the releases entirely invalid.  Because the prohibition on EEOC waivers is not expressed in the OWBPA, “the inclusion of a restriction to communicate with the EEOC does not automatically invalidate [a] release in its entirety,” Judge Davis said.  Instead, he said, when there is a restriction on filing EEOC charges, the court must look at the totality of the circumstances to determine, as directed by a federal regulation, whether the restriction has “the effect of misleading, misinforming, or failing to inform participants and affected individuals” to such an extent as to render the entire agreement invalid.