EEOC Issues Additional Guidance Concerning Discrimination Claim Waivers

July 29, 2009

By: Robert A. LaBerge

On July 15, 2009, the EEOC issued additional guidance to employees and employers on the use of releases in employment severance agreements.  After acknowledging the current economic downturn and the resultant increase in workforce reductions, the EEOC noted that increasing numbers of employees are being presented with severance agreements containing release language and are wondering: “Is this legal? Should I sign it?”  The EEOC Guidance is designed to assist employees in understanding waiver agreements and answering these questions.  The Guidance is also useful to employers seeking to develop severance and release arrangements that will pass muster with the EEOC. 

The EEOC Guidance provides instruction on the general requirements for a valid release of discrimination claims, as well as on the additional requirements applicable to age discrimination waivers covered by the Older Worker Benefit Protection Act (“OWBPA”) amendments to the Age Discrimination in Employment Act (“ADEA”).  The EEOC has issued detailed regulations interpreting and implementing the OWBPA/ADEA waiver rules (29 CFR § 1625.22), and much has previously been written about the requirements that must be satisfied to obtain an effective age discrimination waiver.  Under the ADEA waiver rules:  workers must be advised in writing to consult with an attorney; be afforded specified minimum time periods to consider the waiver (at least 21 days, or 45 days if offered as part of an “exit incentive” or "other termination program”); be allowed at least seven days after signing the waiver to revoke it; and receive other information about the benefits they will be receiving and the rights they will be giving up in order for the ADEA waiver to be valid (See EEOC Guidance at pp. 5-15). 

The EEOC Guidance is perhaps most instructive on rules applicable to non-age discrimination waivers.  The Guidance confirms that a waiver will not be valid unless it is signed by the employee “knowingly and voluntarily” and it is supported by sufficient “consideration” provided by the employer.  The EEOC states that for the employer’s “consideration” to be adequate, it must be something of value that is additional to the payments or benefits to which the employee is already entitled.  Therefore, offering employees their existing pension benefits or payments for their earned and unused vacation time or sick leave in exchange for a release will not be sufficient in the EEOC’s view.  Moreover, while acknowledging that Title VII, the ADA, and the EPA do not require employers to satisfy the OWBPA/ADEA disclosure requirements, the EEOC indicates that the following factors will be carefully examined to ascertain whether the employee’s waiver was provided “knowingly and voluntarily:”

1. Was the waiver obtained through fraud, duress, undue influence, or other improper conduct?;
2. Was the waiver written in plain language sufficient to be understood by an individual with the employee’s education and business experience?;
3. Was the employee given enough time to read and consider the advantages and disadvantages of the waiver?;
4. Was the employee encouraged to consult, or discouraged from consulting, with an attorney?;
5. Was the employee allowed to negotiate the terms of the agreement?; and
6. How valuable was the consideration offered for the waiver?

The EEOC Guidance illustrates the importance of specifically referencing employment discrimination claims as part of the waiver language, indicating that even if a general release is “clear and unambiguous,” it may not bar employment discrimination claims if they are not mentioned specifically.  Examples provided in the EEOC Guidance highlight the significance of an employee’s education and sophistication levels in assessing whether the waiver of employment discrimination claims was “knowingly and voluntarily” provided by that employee.

Finally, the EEOC Guidance states that if an employee signs a waiver and later files a discrimination charge against the employer, the EEOC will not require that individual to “tender back” the severance pay received before attempting to pursue that charge.  In this regard, the EEOC apparently will apply the “no tender back” rule applicable to ADEA waivers in the context of the other federal employment discrimination statutes (See Questions and Answers: Final Regulation on “Tender Back” and Related issues Concerning ADEA Waivers). The EEOC Guidance likewise reaffirms that broad language in severance agreements that seeks to limit employees in, or discourage them from, filing charges with the EEOC or participating or testifying in an EEOC investigation or proceeding is invalid and will not be enforced (See EEOC Enforcement Guidance on Non-Waivable Employees Rights under EEOC Enforced Statutes (Apr. 1997)).

In view of the growing willingness of agencies and courts to scrutinize and limit the terms of waiver agreements, employers planning additional workforce reductions will be well-served to review their standard severance agreements to ensure compliance with the EEOC Guidelines.  If you have questions or comments on the EEOC Guidance, please post them below or contact your BS&K employment attorney for additional information.