So If I Have to Allow Employees to Revoke a Waiver, How Much Should I Allow Them to Revoke?

12 May 2014 Labor & Employment Law Perspectives Blog

When was the last time you reviewed your form release agreements to make sure they adequately protect you from both age- and non-age-related claims? We mentioned last week that, in light of attention the Equal Employment Opportunity Commission is paying to release agreements, now is a good time for employers to revisit their forms. In addition to those issues being focused on by the EEOC, employers might also want to evaluate whether their form release agreement for employees age 40 or older is not unintentionally giving employees the opportunity to revoke the entire release, and not just the a release of a potential age discrimination claim.

When entering into a release agreement with an employee age 40 or older, there are some important issues to address if you want the employee to waive his or her right to bring an age discrimination claim against the company. The Older Worker Benefit Protection Act (“OWBPA”) requires that employers seeking a waiver of Age Discrimination in Employment Act (“ADEA”) claims provide sufficient disclaimers of the wavier such that the employee “knowingly and voluntarily” chooses to waive his or her rights to file an age-related claim. For example, as part of this “knowing and voluntary” requirement, the statutes require employers to give OWBPA-eligible employees 21 days to sign the release agreement, and the opportunity to revoke the agreement within 7 days of signing.

Many standard agreements include boilerplate waiver provisions required under OWBPA and, for the most part, these waivers are fine because most employees do not turn around and sue their former employer – especially after receiving some kind of severance. However, a concern can arise if the right to revocation allows for a walk-away from an entire release agreement, rather than merely the age discrimination waiver, particularly where the employer might be still be satisfied with a binding release of all claims other than one for age discrimination. Although the OWBPA mandates the seven-day revocation period for waiver of age-related claims, it is silent as to whether an employee’s waiver of other, non-age-related claims, including those under Title VII and the ADA, must also be subject to a revocation period. In other words, severance agreements may require that an employee only have the opportunity to revoke a release of age discrimination claims and be bound by all other releases the minute the employee signs on the dotted line.

A release agreement that does not intentionally account for this careful distinction potentially causes an employer to lose an important level of protection by including language that, though intended to comply with the age discrimination revocation requirements, applies more broadly than the specific OWBPA provisions require. In one circumstance, even though an employee may be age 40 or older, an employer may still want the benefit of a broad release covering everything other than an age discrimination claim and not want to lose the binding effect of the release as to all other non-age-related claims, even if the employee revokes. However, in a second circumstance, having a binding age discrimination waiver may be of paramount importance, and in that case, the employer would not want to be stuck paying the employee the full consideration amount, but not holding on to the most important benefit of the bargain. In the first circumstance, the employer would want the revocation language to apply only to the age discrimination waiver, but in the second circumstance, the employer would want the revocation language to apply to the entire agreement.

In light of this dichotomy, it makes sense to take some time and consider the language of a form agreement and whether you want revocation language to apply just to the age discrimination waiver or to the entire agreement. In every circumstance, a tweak of just a few words gives an employer the chance to make sure that, even though an employee must have a right to revoke where an age discrimination waiver is the agreement, the employer can maximize its likelihood of getting the waivers it considers critical if it is going to pay a severance benefit to a terminating employee.

 

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