EMPLOYER SURVIVES CHALLENGE THAT ITS SEVERANCE PLAN WAIVERS WERE INVALID, NOT MEETING REQUIREMENTS OF GROUP WAIVERS
The Age Discrimination in Employment Act (ADEA) contains various protective provisions governing the binding nature of a settlement or waiver of a potential age discrimination claim. The ADEA is somewhat unique in setting forth additional requirements that are not necessary for a settlement or waiver to be binding in any other discrimination claims, such as race or sex discrimination, etc. The ADEA provides that individual waivers must be "knowing and voluntary" and they must meet certain requirements, including that they be written so the employee can understand it. Employees given individual waivers must have 21 days to consider the agreement, but for waivers arising from "group" terminations, the law gives employees 45 days to consider whether to sign the waiver, and a number of other requirements must be contained in the waiver. Among other things, for a "group" waiver to be valid, specific information must be included in a release, including:
- The "decisional unit" or class, unit or group of employees from which the employer chose the employees who were and who were not selected for layoff;
- Eligibility factors for any exit incentive program;
- The time limits applicable to the exit incentive program;
- The job titles and ages of all individuals who are eligible or who were selected for the program (the use of age bands broader than one year does not satisfy this requirement) and the ages of all individuals in the same job classifications or organizational unit who are not eligible or who were not selected.
Employers do not like the group waivers because they are much more complicated and legalistic to prepare, require a longer period for acceptance, and require giving a lot of information to those offered the waiver that some employers find invite controversy. Indeed, Congress passed the revisions just for that purpose, so that employees over 40 could have various information about an employer's employment practices so as to make an intelligent decision whether to accept the group waiver and severance, or to reject it and potentially sue for age discrimination.
The real problem for employers occurs when several persons 40 or over are terminated in a relatively short period of time, for similar reasons, and the issue comes up whether this is an "individual" situation entitled to one type of ADEA wavier, or a "group" situation in which a more complicated waiver must be used. A recent case addresses some of these distinctions. Barnes v. Hershey Co., No. 12-1334, 2015 WL 4129573 (N.D. Cal. July 9, 2015). In Hershey, seven former managers who were terminated over the course of several months between 2009 and 2010, sued the company alleging that the terminations were part of an effort to eliminate older workers. The plaintiffs alleged their terminations resulted from a 2010 career-planning meeting during which workers were rated on their likelihood to advance. While the plaintiffs acknowledge signing their severance and waiver agreements, they claimed they believed they had to sign such agreements in order to receive severance, and that the waivers were invalid because they were terminated as part of a group-termination program.
A federal district court judge granted Hershey summary judgment on five of the seven plaintiffs, finding that they were terminated individually and so their waivers were valid. The judge found there was a lack of evidence of a group termination, as the plaintiffs were all terminated alone over the course of several months, had different supervisors, and worked in different states. The judge did allow one of the plaintiff’s claims to proceed, finding a factual question or whether he was terminated as part of a group or individually. Although the company cited the plaintiff's individual performance as the reason for his termination, it occurred around the same time as the restructuring of his work group, under circumstances where a jury could conclude that he was let go with the other members of the group.
Editor's Note: This case illustrates how the decision of whether to use an "individual" ADEA waiver/severance agreement or a "group" waiver is a difficult one. The advice of counsel is critically necessary because it is damaging to a company to make a substantial severance payment as part of an individual waiver, and then have that same employee turn around and sue the employer for age discrimination, with the company thinking those issues were resolved by the severance and waiver agreement.