ADEA Waivers Must Be Written in Plain Language to Be Enforceable

Q.  I’m the HR Director of a large company that is planning a reduction in force in one of our divisions. We intend to offer early retirement incentives to some of the individuals, contingent on them signing an agreement to waive all future claims against the company under the applicable discrimination laws, including the Age Discrimination in Employment Act (ADEA).  What information needs to be included in the waiver to comply with ADEA requirements?

A.  Companies with plans to implement a reduction in force should proceed with caution following a recent decision in which the court found that a waiver and release of claims signed by an outgoing employee violated federal age discrimination laws. On January 11, 2019, in Ray v. AT&T Mobility Services, LLC, a federal judge in the Eastern District Pennsylvania held that AT&T violated the ADEA by giving employees a waiver that failed to meet the strict informational requirements of the Older Worker Benefit Protection Act (“OWBPA”).  The court found that the waiver lacked sufficient details regarding members of the overall decisional group, and therefore, affected employees did not have the information necessary to make an informed decision about whether to waive their right to assert claims against the company under the ADEA.

The OWBPA requires employers to include specific language and to follow certain safeguards when asking employees over age 40 to sign a waiver giving up their right to sue the company for age discrimination under the ADEA. This information must be provided to the employee “in writing in a manner calculated to be understood by the average individual eligible to participate.”

Among the other OWBPA requirements, exiting employees must be advised in writing that they have the right to consult an attorney before signing the waiver. If waivers are presented to a group of employees (i.e., in a RIF), each employee must be given at least 45 days to decide whether or not to sign it.  If the waiver is presented to a single employee, in the absence of a RIF, the employer must give the employee 21 days to decide whether to accept it.  In either case, after signing the waiver, employees have seven days to revoke the decision.

As demonstrated by Ray v. AT&T Mobility Services, LLC, however, the OWBPA’s most challenging requirements flow from the employer’s duty to provide information about its decision-making process, specifically in terms of the factors used to select the employees to be released.  In the context of a reduction in force, a waiver must clearly describe the group of employees under consideration and must delineate the eligibility factors relevant to the decision making process, including the job titles and ages of all individuals in the group selected and not selected for the reduction in force.

In Ray v. AT&T Mobility Services, LLC, the plaintiff, a former sales director, received a “surplus notification” letter from AT&T, informing her that she was losing her job due to a reduction in force in the company’s mobile phone sales and services division.  Employees targeted by the reduction in force were given the option either to remain in their current job while searching for other positions in the company, or to sign a waiver and release of claims ending their employment, after which they would be eligible for severance benefits.  The plaintiff decided to stay put, but after failing to land another job within the company during the 60-day period, she was terminated.  She then submitted the signed waiver and release, and the company paid her severance benefits.

Despite signing the waiver, the plaintiff filed a complaint, alleging that the waiver did not meet the “knowing and voluntary” requirements of the ADEA.

The waiver provided by AT&T informed employees that the pool from which the terminated employees were chosen was “the combined Affected Work Group(s)” in the ADEA listing, which for its part described the group as being “comprised of positions at the same level with similar definable characteristics from which the surplus employees are selected,” and further stated that the affected groups could be “any portion of an organization, described in terms of level, job title, similar job functions, geography, lines of organization or other definable attributes based on needs of the business.”

The court rejected this “vague and circuitous” language, explaining that the waiver did not provide terminated employees with “any meaningful information as to how the process of identifying those included in the reduction-in-force was conducted.” Moreover, the “combined Affected Work Group(s)” that constituted the decisional unit were created solely to effectuate the reduction, and thus “terminated employees such as [plaintiff] had no meaningful understanding of their composition or origin.”

In granting partial summary judgment to the plaintiff, the court pointed out that the company had disclosed ages and job titles only for those employees selected or not selected within certain groups it determined would be impacted by the reduction. Instead, the court explained, the company should have disclosed the job titles and ages of every employee in its sales and services division who was selected or not selected for inclusion in the decisional unit.  In other words, the company could not simply describe a subset of the larger decisional group without explaining the process by which the subgroup itself was cleaved from the division overall.  According to the court, AT&T’s “circuitous decisional unit definition is precisely the type of disclosure the OWBPA seeks to prevent.”

For companies implementing a reduction in force, the Ray v. AT&T decision serves as a reminder to pay close attention to the strict requirements of the ADEA and the OWBPA when providing waivers to outgoing employees, and to draft the language in a way that it is easy for employees to understand.  Aside from the ADEA/OWBPA rules, employers also should note that other laws may be triggered by a RIF, depending on the specific circumstances.  For example, the Worker Adjustment and Retraining Notification Act (“WARN”) requires employers to provide 60 days written notice for certain plant closings and mass layoffs. Moreover, federal and/or state anti-discrimination laws could be implicated if the RIF has a disparate impact on a protected group.

As the Ray v. AT&T court explained, the major underlying policy of the OWBPA disclosure requirements is to “arm employees with enough information to make an informed decision whether to release any potential ADEA claims against an employer.”  While it may seem counterintuitive to “arm” outgoing employees with information that might result in a lawsuit against your company, the case shows that a lack of transparency could result in liability despite the lack of discriminatory intent.  Given the myriad of rules and regulations potentially applicable to a RIF, employers should seek legal counsel prior to taking action to ensure compliance and avoid liability.

Rogers Stevens

Layoffs and Business Closures: What to Consider Before Taking Action

Q: Unfortunately, I need to lay off some employees, and possibly close my business. What steps do I need to take to ensure I am in compliance with legal obligations?

A: There are many factors and obligations to consider when laying off multiple employees and/or closing a business. It is best to consider these aspects as early as possible, even if you think layoff/closure is only a possibility.

Obligation for Advance Notice

One of the most important steps is to determine whether the layoff/closure is covered by The Worker Adjustment and Retraining Notification Act (“WARN Act”), or a state equivalent. The WARN Act is a federal law, and applies to employers with 100 or more employees.  Employees who have worked less than 6 months in the last 12 months and/or who work less than 20 hours per week are not counted toward the 100.

The WARN Act requires covered employers to give 60 days’ advance notice of a mass layoff or site closure to employees, the State dislocated worker unit, and the chief elected official of the local government unit in which the layoff occurs. For mass layoffs, employers must give notice if 500 or more employees will be laid off during a 30-day period.  Employers must also give notice if 50 or more employees are laid off, and that group makes up at least one-third of the employer’s workforce.  Similarly, for site shutdowns, employers must give notice if a shutdown will result in an employment loss for 50 or more employees during any 30-day period.  An employment loss is defined as: (1) a termination; (2) a layoff exceeding 6 months; or (3) a reduction in hours of more than 50% in each month of any 6-month period.

Many states impose additional requirements upon employers. In New York, for example, the state WARN Act applies to employers with 50 or more full-time employees in New York State, and covered employers are required to provide 90 days of advance notice.  The obligation for notice is triggered by a layoff of 25 or more employees if that comprises at least one-third of full-time workers, or layoffs of 250 or more full-time employees at a business with 50 or more employees.  New Jersey’s rules mirror the federal law, but the penalties are different.  Pennsylvania does not have any state law requirement.

Ensuring No Discrimination in Layoffs

In addition to WARN Act considerations, when planning a layoff involving multiple employees, it is important to ensure that the company has documented, well-thought out reasons for the layoff, and that it has protected itself against potential claims of discrimination. One helpful way to do so is to analyze the protected categories that the laid-off employees fall under, and determine whether there is any disparate impact upon one particular group.  For example, would the layoff impact more women than men?  Would it impact more workers over 40 than under 40?

When courts examine claims of discrimination in a layoff, they often look at the following factors:

  • whether the business criteria utilized to select employees for termination makes sense, and whether that criteria was applied consistently;
  • whether procedures in personnel policies related to terminations were followed;
  • whether the employees’ responsibilities were fully eliminated – if not, what happened to the responsibilities; and
  • whether anyone was hired to fulfill the terminated employees’ duties.

It is important for employers to think about these types of factors before a layoff is implemented to ensure that the layoff is non-discriminatory, and can be vigorously defended if the need arises.

Proper Payout and Recordkeeping

Prior to the effective date for a layoff/termination, employers should ensure that they have reviewed all obligations (both legal and under employer-specific policies, such as handbooks and employment agreements) relating to termination pay. For example, some employee handbooks provide that unused, accrued PTO will be paid out upon termination, and some employees may be owed severance pay under an employment agreement.  When drafting severance agreements (which employers may want to consider regardless of whether they are obligated by contract to pay severance), employers should ensure that such agreements comply with legal requirements for releases, as well as any requirements by third parties such as insurance carriers.  For example, the Older Workers Benefit Protection Act (“OWBPA”) provides that for a valid release of age discrimination claims, the release must contain specific language, and the employee must be given a specific amount of time to consider the release and revoke their signature.  Employers should also be careful to abide by state laws governing the timing of final pay.

Employers are obligated to maintain many types of records, including employment records, post-layoff/closure. While recordkeeping obligations vary by state, generally they range from 3 to 7 years.

– Jessica Rothenberg