March 2008

Releases May Be Invalid Under OWBPA; Untimely Plaintiffs May Be Able to Piggy-Back on Timely-Filed Claims

Holland & Knight Newsletter
Mark L. Shapiro

A recent decision from the District of Minnesota demonstrates both how difficult it is to obtain valid releases of age discrimination claims in a group termination setting and how dangerous a failure to do so can be. The court ruled that where two employees filed EEOC charges claiming that an employer had discriminated against a class of employees because of their age in a reduction in force (RIF), other employees terminated in the same RIF could also participate in the class action suit and allege that their releases of age discrimination claims were invalid even though they never filed EEOC charges. (Peterson v. Seagate US LLC, D. Minn., No. 07-2502, 11/20/07). The plaintiffs who failed to file EEOC charges could still sue because they could “piggyback” on the timely-filed charges of two named plaintiffs who alleged class-wide discrimination, the court ruled. This decision shows that liability for failing to follow the special rules for age discrimination releases could be much broader than one might initially think.

The decision involves the intersection of two legal principles relating to group terminations or RIFs: the requirements to obtain a valid release of age discrimination claims in group termination settings and the charge filing requirement of the Age Discrimination in Employment Act (ADEA) and other federal discrimination statutes. First, under the Older Workers Benefit Protection Act (better known as OWBPA), employers are required to provide employees affected by a RIF or similar group termination program with information regarding the program, including information about the ages and job titles of employees who were and were not chosen for termination and severance pay. Failure to provide the required information is a basis for invalidating any release of federal age discrimination claims obtained from an employee.

Second, the federal employment discrimination statutes, including the ADEA, require employees to file discrimination charges with the EEOC before filing a federal lawsuit. Generally, an employee who has failed to file a timely charge of discrimination cannot sue.

The Seagate case arose from a 2004 RIF in which employees were offered severance pay in return for a release of all claims. Two of the terminated employees refused to sign the releases and instead filed an EEOC charge claiming that Seagate had discriminated against them and a class of others affected by the RIF because of their ages. When they later sued, 19 other former employees terminated in the RIF joined the lawsuit. These individuals had signed the releases of ADEA claims, and had not filed timely EEOC charges.

Seagate filed a motion to dismiss the claims of the 19 plaintiffs who had signed releases, arguing that they had released all of their claims in return for severance payments and asserting that they could not sue in any event because they had not filed timely discrimination charges with the EEOC. The court disagreed.

The court first denied Seagate’s motion to dismiss based on the signed releases, concluding that the complaint contained sufficient allegations that the releases were invalid because they did not meet all requirements of the OWBPA and that the plaintiffs signed the releases under duress. The complaint alleged, among other defects, that the releases materially misrepresented the number of terminated employees and the number of terminated employees age 40 and older, failed to disclose the factors used to select the employees to be terminated, prohibited individuals from filing charges of discrimination with the EEOC, and that the company pressured individuals to sign the releases immediately rather than allowing them the 45 days to consider the release the OWBPA requires. Id. at 2-3.

The court then denied Seagate’s motion to dismiss based on the plaintiffs’ failure to file timely charges with the EEOC. The court noted that the two timely charges “made reference to the July 2004 terminations, that Seagate retained younger, less qualified individuals for ongoing projects, and that [the two plaintiffs] were bringing charges on behalf of themselves and others similarly situated.” The court concluded that “similarly situated persons” were those individuals affected by the 2004 terminations, and therefore the charges “were sufficient to put Seagate on notice of the class claims of age discrimination asserted in the Complaint.” Id. at *4.

What Does This Mean for Employers?

Employers must ensure that their releases, particularly those in group terminations or RIFs, are in full compliance with all of the technical requirements of the OWBPA. Otherwise, the employees to whom they pay severance may turn around and sue them, and use the severance money to finance the lawsuits. Because the case law regarding the OWBPA’s requirements is evolving and varies from jurisdiction to jurisdiction, employers should seek legal advice before preparing a release of age discrimination claims, particularly in the group termination setting. This is a complicated and confusing area of law and employers can easily get into trouble, even if they routinely draft releases.

Employers should also be aware that if a timely-filed charge of discrimination includes allegations of class-wide discrimination, those employees who failed to file a timely charge may be allowed to join the lawsuit. This means that liability for failure to draft proper release documents may be even broader than you think.

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