T Commission (EEOC) has promulgated the employer? In that regard, - PDF document

G Employment Alert August 2001 New Regulations Limit Employers Under ADEA Waivers By Martha L. Lester, Esq. and Vincent A. Antoniello, Esq. he Equal Employment Opportunity possible claims might the employee bring against T Commission (“EEOC”) has promulgated the employer? In that regard, the employer will regulations that alter an employer's latitude want to consider the following circumstances: when obtaining waivers of claims under the federal • Analyze whether the employee is in Age Discrimination in Employment Act (“ADEA”). These regulations, codified at 29 C.F.R. § 1625.23, a class protected under applicable will likely change significantly the way separation law. For example, is the individual and release agreements involving individuals age 40 male or female, over or under the or older are negotiated and interpreted. age of 40, heterosexual or homosexual, caucasian or a Essentially, separation and release agreements minority, disabled and so forth. are contracts that memorialize and set the terms of • Did the employee recently apply, or the termination of an employment relationship. From an employer’s standpoint, the most vital become eligible for, or receive portion of any separation agreement is usually the benefits under workers’ compen- release under which the employee agrees to release sation, a disability insurance policy, any and all claims that he or she may have against or the provisions of the Family the employer in exchange for a severance payment Leave Act or Family Medical Leave or other consideration. With the marked increase Act? in employment litigation and the expenses it incurs, • Has the employee filed a report of employers have generally been more willing to enter into severance arrangements with departing sexual or other harassment, a employees in order to avoid lawsuits. discrimination complaint, or raised allegations that the employer has Should An Employer engaged in unlawful conduct? Request A Severance Agreement? • Was the employee fired without There are several factors that an employer should consider when deciding whether to offer an first receiving progressive discipline employee the option of entering into a separation (if required by company policy) or agreement. First and foremost is the threat of other warnings typically afforded to litigation. Under what conditions was the other company employees? employee severed from employment and what This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. Roseland, New Jersey Telephone 973.597.2500 L 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400

G • Did the employer have either an ADEA claims which were waived. Any provisions express or implied contract with the in the waiver requiring the employee to “tender- employee that restricts the back” monies or other benefits received upon the employer’s termination rights? filing of an ADEA suit will be rendered unenforceable, and further, such provisions may • Was the employee eligible to even serve to invalidate the separation agreement receive any benefit, such as a bonus in its entirety. The regulations represent a or stock option vesting immediately significant deviation from the traditional contract prior to the termination date? law principle of “tender-back” - which requires a party challenging the validity of a legal agreement • Was the employee entitled to a to return or tender back payments received under reasonable accommodation con- that agreement as a precondition to bringing suit. templated under applicable law? If it is determined that a separation agreement “The new EEOC regulations impact is appropriate in an individual circumstance or it is profoundly an employer’s protection the company’s policy to do so, the employer should under waivers of federal age assess the risk of liability exposure, together with discrimination claims under ADEA.” the company’s financial position, in order to calculate an appropriate amount of money (or other benefits) to offer in exchange for a release. The following summarizes the effects of the In order to be legally enforceable, such a release or new EEOC regulations: waiver must be entered into “knowingly and • The contract principles of tender voluntarily,” and must be supported by “adequate consideration.” back do not apply to ADEA waivers. Accordingly, an older If the employer pays the employee only those worker may retain severance or sums the employer otherwise owes the employee by other benefits, even if he or she virtue of the employment relationship, the challenges the validity of a release agreement will not be supported by adequate under ADEA. consideration and may not be binding. • Employers may not avoid the no The New Regulations tender back rule by using other The new EEOC regulations impact profoundly means to limit an older worker’s an employer’s protection under waivers of federal right to challenge a release age discrimination claims under ADEA. agreement, or by penalizing an Essentially, the regulations allow an employee who older worker for challenging a has entered into an ADEA waiver to keep the release agreement. For example, monies (or other benefits) paid by the employer in this means that an employer may exchange for such waiver, while at the same time not require older workers to agree maintaining suit against the employer for the very to pay damages to the employer or

G pay the employer’s attorney’s fees participation. For this reason, consultation with simply for filing suit. counsel may be critical. • An employer may recover money or Should you have any further questions with regard a credit for amounts it paid for a to ADEA releases or any other employment-related release if the older worker matters, please contact Martha L. Lester, Chair of the successfully challenges the release, Employment Law Practice Group, or Vincent A. proves age discrimination, and Antoniello, member of the Employment Law Practice obtains a monetary award. Group at (973) 597-2500. However, the employer’s recovery may not exceed the amount it paid You may also wish to obtain a copy of our newly for the release in the first place. published book, “A Practical Guide to New Jersey Employment Law: The Employer’s Resource.” This • An employer may not, on its own, Guidebook, published in connection with the New avoid the obligations to which it Jersey Business and Industry Association, is the agreed in the agreement, even if the resource for New Jersey employers seeking to comply release were challenged. For with New Jersey laws, regulations and procedures in the example, an employer will still be employment-related area. It provides management with obligated to make the payments or information concerning existing laws, emerging trends, continue the benefits it agreed to most frequently asked questions, and practical tips on provide to the older worker even in managing the workforce and workplace. the face of suit. In sum, the recent EEOC regulations have significantly limited employers’ protection under ADEA waivers. With regard to such waivers, employers may no longer require employees to tender-back monies or other consideration paid or made in exchange for the waiver as a precondition to bringing suit. Accordingly, employers should consider revising the terms of their separation agreements to comply with the new EEOC regulations, thus providing the maximum protection afforded by the law. Employers also should be aware that as a matter of public policy and EEOC regulation, an effective release agreement cannot preclude an employee from later participating in an EEOC administrative proceeding, although a well drafted release should preclude that employee from receiving any benefits or monetary awards as a result of such