When it comes time to downsize or reorganize, one of the most common risks you’ll face is age-discrimination claims. That’s why it’s best to have departing employees sign severance agreements in which they waive their rights to pursue age-related claims.
Key point: The waiver wording may make the difference between a smooth severance process and a tangled lawsuit that minces semantics.
The Older Workers Benefit Protection Act (OWBPA) specifies how you must handle age-discrimination waivers for them to be valid. (See box below.) Most important, an agreement must be crystal clear and be agreed to in a “knowing and voluntary” manner.
If an older worker proves that the agreement was too confusing to understand, a federal court may throw it out. If an employee asks lots of questions before signing, that may be proof that he didn’t understand.
Recent case: Roger Parsons was 55 years old when Pioneer Seed eliminated his position. The company offered Parsons two severance package options. After talking with his attorney, Parsons chose one and signed it.
But Parsons sued the company for age discrimination anyway, alleging that the agreement violated the OWBPA because it contained allegedly contradictory language.
The wording in question said that Parsons agreed not to sue for work-related claims. But it said he could file an Age Discrimination in Employment Act (ADEA) lawsuit to challenge the validity of the agreement. Parsons took this second part to mean that the right to file a lawsuit challenging the agreement negated his promise not to sue and, thus, made the whole agreement invalid.
The court disagreed and sided with the company, saying that the agreement—although “nuanced” in legal detail— was clear enough to pass the OWBPA bar.
Another strike: Parsons never told anyone at the company that he didn’t understand the agreement; he just filed a lawsuit. (Parsons v. Pioneer Seed, No. 05-3496, 8th Cir., 2006)
Final tip: Age-bias waivers carry legal dangers. Don’t make them a do-it-yourself project; check with your attorney.