Employee Waivers: A Trap for the Unwary

There are many situations in which employers offer employees compensation—usually in the form of severance pay—in exchange for a release of all claims that the employee may have against the employer. However, recent court decisions highlight that employers must exercise extreme caution when obtaining and enforcing such releases.

Releases Of Age Discrimination Claims
In order for a release to be valid, it must be “knowing and voluntary.” For releases of age discrimination claims arising under the Age Discrimination in Employment Act (“ADEA”), the Older Workers’ Benefit Protection Act (“OWBPA”) sets forth explicit language that must be included in the release, including advice to consult with an attorney, 21 days to consider the agreement and a seven-day recission period. The language of the release must exactly comply with the technical requirements of the OWBPA to be enforceable; substantial compliance is not sufficient. An employee who signs an invalid release is not required to tender back any severance payments in order to pursue an ADEA claim; the employee can keep the money and file a lawsuit against the employer.

Releases of Equal Employment Opportunity Commission Charges
The federal employment discrimination statutes (Title VII, ADEA, the Americans with Disabilities Act, and the Equal Pay Act) all contain provisions that prohibit retaliation against employees for enforcing the protections of these statutes. The Equal Employment Opportunity Commission (“EEOC”), the federal agency charged with enforcement responsibility of these statutes, has promulgated regulations that prohibit the waiver of an employee’s right to file a charge of discrimination with the EEOC; courts routinely find such waivers to be unenforceable as against public policy. The EEOC goes even further, however, taking the position that clauses requiring employees to waive their right to file a charge of discrimination with the EEOC have a “chilling effect” on employees’ pursuit of such rights and are therefore “facially retaliatory.”

At least one federal circuit court—the Fourth Circuit--has adopted the EEOC’s position and held that requiring an employee to sign a waiver of the right to file a charge of discrimination is “facially retaliatory” and thus actionable, although waiving only the right to obtain monetary damages is not. In a recent decision, the Sixth Circuit Court of Appeals disagreed with the Fourth Circuit holding that the mere act of requiring an employee to execute a release in order to be eligible to receive severance benefits does not constitute actionable retaliation. In its decision, the Court indicated, though it did not decide the issue that actions taken to enforce such a provision, such as cutting off severance payments, may be retaliatory.

Conclusion
Great care must be taken when obtaining waivers of employee claims as part of a negotiated severance package. Unless the release is carefully and accurately worded, it may not be worth the paper on which it is written. Even worse, under certain circumstances, the employee can keep the severance pay and still file an action against his employer. In the worst case scenario, the employee can keep the severance payments and file an action for damages, claiming that the employer retaliated against him by requiring him to sign the release. To avoid such nightmare scenarios, it is imperative to enlist the assistance of legal counsel when obtaining releases of claims from employees.