Every day employers terminate employees and pay significant sums to departing workers in exchange for a release of claims. Such agreements can give employers a measure of comfort and certainty while at the same time offering departing employees value and simplicity. However, when a departing employee is 40 years of age or older, and release language is intended to include potential claims under the Age Discrimination in Employment Act of 1967 (the “ADEA”), the agreement must meet all of the requirements of the Older Workers Benefit Protection Act (the “OWBPA”). Wells v. Xpedx, a United States District Court case from the Middle District of Florida, illustrates the potential pitfalls of failing to do so carefully.
In Wells, an over-40 year old employee brought several claims against his employer, including a wrongful termination claim under the ADEA. The employer asked the court to decide the claims in its favor on the grounds that the employee signed a waiver and release that included his ADEA claims. The former employee did not dispute that he signed the agreement. Rather, he argued that the agreement was invalid because it failed to follow all of the OWBPA’s requirements—including a requirement pertaining only to releases obtained in connection with “exit-incentive” or termination programs offered to a group or class of employees, such as a reduction in force or “RIF” program. The OWBPA’s group termination program requirements provide that the employer must disclose to the employee, in writing: (a) the class, unit or group of employees covered by the termination program, (b) the factors affecting eligibility for the program, (c) any time limits that apply to the program, (d) the job titles and ages of all employees who are eligible for the program, and (e) the ages and titles of employees in the same class, unit or group who are not eligible or selected for the program.decided that the evidence—including the wording of the agreement itself—raised a legitimate dispute about whether the waiver and release fully complied with the OWBPA’s requirements. As a result, even though the employee signed the waiver and release, and even though he accepted a severance package and enhanced bonus in exchange for signing the agreement, the court nevertheless permitted the employee to pursue his ADEA claims.
Ultimately, the court
What went wrong in Wells v. Xpedx? The Wells case turned on whether the employer was obligated to comply with the disclosures mandated under the OWBPA’s group termination program requirements. The employer argued this requirement did not apply for two reasons. First, even though the employee was offered the same exit-incentives as employees who were indeed part of a larger reduction in force program, the employer claimed it terminated the employee for poor performance. The court rejected this argument based on the language in the agreement itself. For example, the agreement gave the employee 45 days to review and decide whether to sign the waiver and release. Under the OWBPA, a 45-day consideration period is only required when the termination program applies to a group or class of employees. In contrast, employers are only required to give individual employees 21 days to consider signing a waiver and release agreement under the OWBPA. Although the employer in Wells may have simply intended to give the employee additional time, the 45-day provision in the agreement created a reasonable inference that the employee was part of a group rather than individual reduction in force program.
Second, the employer argued that even if the employee was terminated as part of a broader RIF, he was the only employee in his particular department. As such, the employer argued, he was the only member of the group or class of employees potentially affected by the RIF and thus there was no information for the employer to disclose under the OWBPA’s group termination requirements. The court rejected this argument as well. Evidence presented in the case demonstrated that the employee’s position was national in scope and that there was evidence of other employees in comparable positions. Because the employer could not establish, without question, that the employee was the lone member of a group or class of potentially affected employees, the employer was obligated to provide the written disclosures mandated by the OWBPA’s group termination program requirements.
In sum, the court found that there was enough evidence to raise a dispute about whether the employee’s termination was part of larger RIF—which would require the employer to follow the OWBPA’s group termination requirements. However, because the waiver and release agreement did not follow these OWBPA requirements, the agreement could not be used to prevent the employee from pursuing his ADEA claims.
What does this means for employers? Wells v. Xpedx is part of a growing trend of recent cases illustrating that employers must exercise great care when drafting waiver and release agreements of ADEA claims under the OWBPA. Agreements must comply with all of the appropriate OWBPA—as well as any other—requirements. Moreover, the agreement itself must avoid creating any ambiguity about which OWBPA requirements apply. Employers should consider coordinating the preparation and presentation of employee waiver and release agreements with in-house or outside employment counsel to avoid getting caught on even the subtlest snag. A failure to comply with the OWBPA may force an employer to incur the cost and assume the risk of defending claims that it paid a premium to avoid.