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Review severance packages to limit liability for age bias

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in Compensation and Benefits,Human Resources

When employers offer severance packages, they often ask employees to waive their rights to sue the employer. That’s a smart strategy, but small discrepancies in the agreement’s wording can make the difference between a successful severance package and a call from the EEOC.

And the EEOC has been calling a lot lately, so it’s wise to make sure your severance policies are in good working order.

6 parts of a legal waiver

To be valid, severance packages must conform to the Age Discrimination in Employment Act (ADEA) and its companion law, the Older Workers Benefit Protection Act (OWBPA). Together, the two laws dictate how you can legally ask employees to waive their rights to sue.

When asking employees to waive their rights to file age bias lawsuits, the waiver must:

  1. Be in writing and be understandable
  2. Specifically refer to the ADEA rights or claims
  3. Not ask employees to waive claims that may arise in the future
  4. Be provided in exchange for other consideration
  5. Advise the employee in writing to consult an attorney before signing the waiver
  6. Provide the employee at least 21 days to consider the agreement and at least seven days to revoke the agreement after signing it.

Beyond those provisions, ­employers may not retaliate against an em­­ployee for filing a charge with the EEOC or any other governmental agency.

Don’t chill future claims

Dairy food giant Land O’Lakes set the EEOC churning when the company proffered a severance waiver containing language that ­the employee has “neither filed nor intends to file a discrimination charge.”

The EEOC felt this agreement violated the OWBPA because it had a chilling effect on employees who might wish to report discrimination in the future.

The OWBPA prohibits employers from making employees agree not to sue over future actions.

The EEOC attempted to settle the dispute with Land O’Lakes after the company laid off a woman when she refused to sign the waiver. Then the EEOC sought an injunction preventing the company from using the agreement or anything similar.

Ban on monetary award?

Lockheed Martin flew onto the EEOC’s radar when one of its em­­ployees tried to alter a severance agreement after she’d collected her severance money.

She felt her layoff was discriminatory and wished to file an EEOC charge. Lockheed’s agreement said the woman could not sue for monetary gain, only for injunctive relief.

A federal court sided with the woman because Lockheed had in­­sisted she drop her EEOC lawsuit before it would modify the agreement. The court decided that the agreement violated the law.

However, the restriction on monetary gain may still be in play. The court did not rule the agreement was illegal as written, only as implemented.

The EEOC closely watches such agreements. Employers that don’t execute severance agreements in good faith may end up in court.  

Online resource: Find guidance on the ADEA, OWBPA and waivers at www.eeoc.gov.

Disclosure required

When employers offer severance packages to laid-off employees, they have an obligation to disclose to the employee certain specifics about how the employer selected the employees to be terminated, and who those employees are.

The law requires employers to tell employees which “class, unit or group of individuals” is being let go, any factors used to determine who is included and how long the process will take.

Further, you must disclose “the job titles and ages of all individuals eligible or selected for [severance packages] and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected.”

The EEOC requires such disclosure to ensure that data concerning the age of furloughed workers is readily available to the terminated workers if they wish to file an EEOC complaint.

In one case, a national employer only released regional data concerning a reduction in force. Employees sued and won at the district court level, but a federal appeals court sided with the employer.

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