EEOC rulemaking proposal offers guidance on ADEA

On Feb. 23, 1999, the Equal Employment Opportunity Commission published a notice of proposed rulemaking in the Federal Register regarding waivers under the Age Discrimination in Employment Act.

This proposed regulation discussed payments received by terminated employees for signing an agreement to relinquish any claims under the ADEA against their employer. Although the notice has no legal effect, the proposed rule provides guidance on the use of such waivers after a 1998 Supreme Court decision.

Last year, in Oubre vs. Entergy Operations Inc., the U.S. Supreme Court resolved a split among the federal courts and held that an employee is not required to "tender back" or return payments he/she received from an employer for the agreement waiving employment claims before filing a charge or lawsuit under the ADEA against the employer.

In that case, a female employee filed an ADEA lawsuit against her former employer claiming the waiver was invalid since it failed to comply with the Older Workers Benefits Protection Act of 1990.

The Supreme Court reversed the lower court's decision in favor of the employer and held that the former employee's retention of the monies did not amount to a ratification of the invalid release, and the employer could not invoke the employee's failure to tender back the payment to excuse its failure to comply with the law.

Waivers are typically used by employers during a reduction in force or layoffs. The employer requests employees to waive any legal rights and employment claims they may have against the employer in exchange for additional benefits such as severance pay, a lump sum payment or early retirement.

Although waivers can be enforceable, the agreements must address certain legal requirements. In particular, for employees over the age of 40, the Older Workers Benefit Protection Act outlines specific time periods for an employee to review and approve the waiver.

The purpose of these restrictions is to ensure that the employee "knowingly and voluntarily" entered into an agreement which may bar an employee's claims against the employer for known or unknown employment law violations.

The Equal Employment Opportunity Commission's proposed regulation provides that an individual challenging the validity of the waiver agreement, as to an ADEA claim, is not required to return the severance or other benefits before filing either a lawsuit or charge of discrimination with the EEOC, or any state or local fair employment practices agency.

Further, an employer cannot use separate understandings with the employee, such as a covenant not to sue, to bar an employee's right to challenge the waiver. Additionally, in some circumstances, an employer may be entitled to a setoff against an employee's recovery of damages in court for the waiver payment.

Finally, the proposed regulation notes that even if an employee successfully challenges a waiver's validity, the employer must continue to pay the benefits contained in the waiver that was signed by other terminated employees who did not challenge the waiver.

The notice reflects the position of the EEOC and many courts that employment waivers will be construed against the employer. Therefore, to draft an enforceable waiver of employment claims when terminating employees within the ADEA's protective classification, employers must be aware of the statutory restrictions.

(Bob Lawson Jr. practices labor and employment law representing management with the law firm of Blackwell Sanders Peper Martin LLP in Springfield.)

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