It is no secret that most employers attempt to manage the risk of litigation through the use of employee separation agreements. A recent Second Circuit decision serves as a valuable reminder of the importance of drafting separation agreements which will stand up to attack.
Earlier this month, in Ridinger v. Dow Jones & Co., the Second Circuit Court of Appeals found in favor of an employer in enforcing a waiver of age discrimination claims under the Age Discrimination in Employment Act (“ADEA”). The Older Workers Benefit Protection Act (“OWBPA”), which modifies the ADEA, among other very stringent and specific prerequisites, requires that a waiver and release of claims be written in a manner calculated to be understood by the employee. If it fails to meet this requirement, it is not considered knowing and voluntary.
The employee argued that the agreement was unenforceable because it did not comply with this requirement. The Second Circuit held that when there is no evidence that the individual employee’s comprehension level was below that of the average eligible employee, the employer carries its burden of proving that a waiver was sufficiently clear to meet the requirements of the OWBPA if the language is calculated to be understood by the average employee. The Court concluded that the district court correctly found that the agreement did not use or combine the terms “waiver,” “release,” and “covenant not to sue” in a manner that was found to be confusing in other cases. Accordingly, it reasoned that the employee could not have been misled by an error in the boilerplate language of the agreement giving him the right to challenge the validity of the agreement itself because this right was expressly stated. The court also pointed out that the agreement specifically provided that the employee waived his right to sue only with respect to claims “through the date of this Agreement,” consistent with the OWBPA, and contained his acknowledgment that he was advised to consult an attorney before signing it. Concluding that the employee had not pointed out anything in the agreement that could have led him to believe that he retained the right to bring an action for violation of the ADEA, rather than simply an action challenging the validity of the agreement, the court ruled that the agreement was a valid waiver of his right to bring an ADEA action against his former employer.
The take away lesson from this case is just the reminder that the OWBPA imposes strict requirements on the waiver of ADEA claims, which employers simply must be aware of and take the time to comply with. Accordingly, employers should periodically review their separation agreements, especially if they include provisions related to age discrimination