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Florida employers that that are considering offering severance agreements and releases in connection with a reduction in force may be interested in the following client alert, written by EBG attorneys Frank C. Morris, Jr. and Brian W. Steinbach.  It discusses the EEOC's memorandum Understanding Waivers of Discrimination Claims in Employee Severance Agreements.  The EEOC's memorandum does not make new law.  Still, the Q&A format makes for easy reading, and serves as a good refresher for employers and employees alike on the law governing the release of claims under the ADEA, Title VII, the ADA, and the EPA.

As has been reported routinely for many months, the extraordinary economic downturn has caused an unfortunate and still on-going stream of shutdowns, furloughs, and reductions-in-force ("RIFs"). To minimize potential legal exposure, from RIFs, many employers offer exiting employees severance compensation or benefits in exchange for waivers releasing the employers from any potential discrimination claims under state, local, and federal employment laws, including the Age Discrimination in Employment Act ("ADEA"), Title VII of the Civil Rights Act, the Americans with Disabilities Act ("ADA"), and the Equal Pay Act ("EPA"), as well as common law claims. Recognizing this, the Equal Employment Opportunity Commission ("EEOC") recently published guidance, titled Understanding Waivers of Discrimination Claims in Employee Severance Agreements, which attempts to summarize, in plain language, the statutory requirements for valid individual and group waivers under the ADEA, Title VII, the ADA, and the EPA. Although organized in a Q&A format targeted to employees, the guidance is also a valuable compliance tool for employers and their Human Resource departments. Below are highlights from this new guidance.

The guidance first discusses generally the nature of severance agreements with a release of claims and the general elements necessary for valid and enforceable waivers, particularly the requirement that a wavier be made knowingly and voluntarily. It then focuses on the unique requirements for release of ADEA claims under the Older Workers Benefits Protection Act ("OWBPA"). It also emphasizes that a waiver cannot prevent an employee from filing a discrimination charge with the EEOC or from testifying or participating in an agency investigation. The guidance explains that if an employee files an EEOC charge after signing a waiver, the employer cannot require the employee to return the severance pay he or she received. Similarly, after signing a waiver, an employee is not required to return severance pay before filing an age discrimination lawsuit (the courts are split on this issue under Title VII, the ADA or the EPA). However, if an employee successfully challenges a waiver, the court should reduce any monetary award by the amount of consideration the employee received for signing the waiver.

The guidance next addresses in detail the specific minimum requirements established by the OWBPA for a wavier of ADEA age discrimination claims to be considered "knowingly and voluntarily" According to these factors, the waiver must (1) be written in plain language easily understood by the employee eligible for termination; (2) specifically refer to rights or claims arising under the ADEA; (3) advise the employee, in writing, to consult an attorney before accepting the agreement; (4) provide the employee with at least 21 days (45 days for a program offered to a group or class of employees) to consider the offer; (5) provide the employee seven days to revoke his or her signature; (6) provide additional consideration beyond what the employee is already entitled; and (7) not waive future rights and claims. Furthermore, the guidance takes the position that employers "cannot attempt to ‘cure' a defective waiver by issuing a subsequent letter containing OWBPA-required information that was omitted from the original agreement." Material changes in the offer restart the 21-day or 45-day period for consideration.

The guidance then highlights the additional information employers must provide employees for "programs" offered in connection with group layoffs. Specifically, employees are entitled to information on: (1) the decisional units (portion of the company from which the employer selected the employees to terminate); (2) the eligibility factors for the program; (3) the time limits applicable to the program; and (4) the job titles and ages of all the employees who are eligible or were selected for the program and the ages of all individuals in the same job classification or organization unit who are not eligible or were not selected for the program. The EEOC describes this information as needed to allow employees to determine, before signing the waiver, whether age discrimination motivated the termination selections.

Notably, although both the EEOC's regulations and a sample waiver and release attached to the guidance indicate that the requirement to disclose "eligibility factors" runs to the general determination of who is and is not eligible for a particular program, in the guidance the EEOC notes without further comment that some courts have interpreted this to mean the actual criteria, such as job performance, experience or seniority, relied upon in making the final termination decision. Compare, e.g., Pagliolo v. Guidant Corp., 483 F. Supp. 2d 847 (D. Minn. 2007) (holding a release violated OWBPA by, among other things, failing to identify the general criteria by which employees were selected for termination) with Rupert v. PPG Industries, Inc., No. 07cv005, 2009 WL 596014, *49-*57 (W.D. Pa. Feb. 26, 2009) (reviewing decisions and rejecting any requirement to provide the criteria relevant to specific termination decisions, noting, inter alia, the absence of such factor in the EEOC's sample disclosure form). Thus, the EEOC fails to resolve or offer direction on this potentially vexing issue affecting the practical administration of severance programs.

Finally, the guidance includes an employee checklist on what to do when offered a severance agreement. As employees and their attorneys are likely to follow this closely, employers also should review this checklist in preparing and offering a severance agreement.
 

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The following is a client alert authored by EBG attorney Barry Guryan on the Supreme Court's recent decision in Gross v. FBL Financial Services, which I reported on last week.   

On June 18, 2009, the Supreme Court of the United States ruled fohe first time that in order to prevail in a disparate treatment case brought under the Age Discrimination in Employment Act (ADEA), the plaintiff must prove that "but for" the alleged discrimination, the employer would not have taken the "adverse employment action." Unlike a Title VII case, the burden of persuasion does not shift to the employer when the employee shows that age was one of the factors in a mixed-motive case.

In a 5-4 decision written by Justice Thomas, the majority held that it would not extend the "mixed motive" analysis applicable to Title VII cases to ADEA cases. In Title VII cases, which prohibit discrimination based on race, sex or national origin, where an employer is motivated by both a permissible factor and an impermissible factor, (i.e. a mixed motive), the Court, historically, has applied the well-known burden-shifting analysis. Thus, if the plaintiff meets his or her initial burden of persuasion by demonstrating that the employer considered an impermissible factor, such as race, in taking an adverse action against the plaintiff, the burden then switches to the employer to prove that it would have taken the same adverse action in any event.  Gross v. FBL Financial Services, Inc., No. 08-441.

The case was brought by Petitioner Jack Gross (Gross), who claimed that his employer, FBL Financial Group, Inc. (FBL), demoted him because of his age. At the time of his demotion he was 54. His duties were transferred to a woman who, at the time, was in her early forties. At trial, Gross presented evidence that age played a role in FBL's decision. The jury returned a verdict for Gross at the trial court level, after the trial judge, over FBL's objection, instructed the jury that it must return a verdict for Gross if he proved, by a preponderance of the evidence, that age was a "motivating factor" when FBL demoted him. The trial court also instructed the jury that it must find for FBL if it found that FBL would have demoted Gross regardless of his age.

On appeal, the majority held that the burden-shifting analysis does not even apply in a mixed-motive case brought under the ADEA. In reaching this conclusion, the majority noted that after the Price Waterhouse decision of 1989, which discussed the proper allocation of the burdens of persuasion in mixed-motive cases brought under Title VII, Congress explicitly amended Title VII, in 1991, by authorizing discrimination claims in which an improper consideration was a "motivating factor" for an adverse employment decision, even though other factors also motivated the adverse action. Since Congress limited its amendment to Title VII claims, the majority refused to apply the language of the amendment to the ADEA.

The Court concluded by interpreting the plain language of the ADEA, which prohibits various types of discrimination in employment "because of" age. The majority interpreted the phrase "because of" to mean that age was "the reason" that the employer decided to act. The majority concluded: "Thus, to establish a disparate treatment claim under the plain language of the ADEA, therefore, a plaintiff must prove that age was the ‘but-for' cause of the employer's adverse action." The plaintiff, therefore, retains the burden of persuasion throughout the case.

There were strong dissents written by Justice Stevens with whom Justices Souter, Ginsburg and Breyer joined. They stated that the "but for" standard was rejected in Price Waterhouse and that it should be rejected in cases alleging violations of the ADEA as well, since both statutes use identical language in prohibiting discrimination (i.e., both statutes prohibit adverse employment actions "because of" the impermissible factor). Moreover, there is precedent that Title VII analysis has historically been applied to the ADEA.

One of the most interesting questions that the Gross case raises is whether the Court's holding will extend to other discrimination statutes. Most notably is the Americans With Disabilities Act (ADA), which prohibits discrimination "because of" a disability. Even though the ADA, like the ADEA and Title VII, prohibits discrimination "because of" the protected category, the Supreme Court, if faced with the right facts, could apply the "but for" test to ADA claims, since, like the ADEA, discussed in Gross, Congress did not amend the ADA when it amended Title VII in 1991.

We will continue to follow these developments.
 

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The United States Supreme Court ruled today that a plaintiff bringing a disparate treatment claim under the federal Age Discrimination in Employment Act ("ADEA") must prove, by a preponderance of the evidence, that age was the “but-for” cause of the challenged adverse employment action. The burden of persuasion does not shift to the employer to show that it would have taken the action regardless of age, even when a plaintiff has produced some evidence that age was one motivating factor in that decision.  The case is Gross v. FBL Financial Services, Inc. (June 18, 2009). 

I will offer some analysis of the Gross decision in a future post.  Stay tuned.

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