Advanced Issues in Reductions-in-Force: EEOC Rules, Enforcement Efforts & Priorities

Advanced Issues in Reductions-in-Force:
EEOC Rules, Enforcement Efforts & Priorities
American Bar Association
8th Annual Labor and Employment Law Conference
J.W. Marriott at L.A. Live
Los Angeles, California
November 5-8, 2014
Christopher Lage
Assistant General Counsel
U.S. Equal Employment Opportunity Commission
131 M Street, NE
Washington, DC 20507
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ADVANCED ISSUES IN REDUCTIONS-IN-FORCE:
EEOC RULES, ENFORCEMENT EFFORTS & PRIORITIES
This paper provides a brief discussion of the EEOC’s rules on “reasonable factor other
than age,” waivers of rights and claims under the ADEA, and current EEOC enforcement efforts
and priorities regarding reductions in force (RIFs). This paper expresses the views of the author
only and is not necessarily representative of the views of the U.S. government or the EEOC.
I.
Reasonable Factor Other Than Age: 29 C.F.R. §1625.7
Disparate impact under the ADEA
Under Title VII, once a practice has been proven to cause a disparate impact, the
employer must demonstrate that the practice is job-related for the position in question and
consistent with “business necessity.” The employee must then demonstrate that a less
discriminatory alternative exists that meets the business need, and the employer refuses to adopt
it. EEOC’s previous interpretive rule applied Title VII’s business necessity test to ADEA
disparate impact claims. In 2012, the EEOC revised its interpretive rule on reasonable factor
other than age (RFOA) in light of two Supreme Court decisions.
In Smith v. City of Jackson, 544 U.S. 228 (2005), the Supreme Court held that the ADEA
authorizes recovery for disparate impact claims but that Title VII’s business necessity test does
not apply. The Court ruled that practices that have an age-based disparate impact are permissible
if based on “reasonable factors other than age.” The Court affirmed EEOC’s longstanding
position that the ADEA authorizes recovery for disparate impact claims but disagreed with
EEOC’s rule insofar as it provided that Title VII’s business necessity test applied to disparate
impact claims under the ADEA. The Court did not specify who had the burden of proving that a
practice was based on an RFOA. Three years later, in Meacham v. Knolls Atomic Power
Laboratory, 554 U.S. 84 (2008), the Supreme Court held that the RFOA provision was an
affirmative defense that the employer must prove. The Court never explained the meaning of
RFOA except to say that it was easier to prove than business necessity.
EEOC Rule on RFOA
In 2012, the EEOC issued an interpretive rule (section 1625.7 of 29 C.F.R.) revising its
previous rule to make it consistent with the Supreme Court’s holding in Smith that RFOA, rather
than business necessity, is the defense to an ADEA disparate impact claim. Under the rule, an
RFOA is a non-age factor that is a reasonable way to accomplish an employer’s business goals in
light of its responsibility to avoid practices that disadvantage older workers. 1625.7(e)(1). The
RFOA standard applies both to how the employment practice is designed and how it is
administered. Id. Consistent with the Supreme Court’s rulings, the rule recognizes that RFOA is
easier to prove than business necessity. See 77 Fed. Reg. 19080, 19085-86 (noting distinction
between “reasonable” and “business necessity”). An employer is required to prove the defense
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after an employee has: identified a specific employment policy or practice that is neutral on its
face; and, established that the practice harmed older workers substantially more than younger
workers. 1625.7(c).
Five Considerations
The EEOC rule provides a non-exhaustive list of five considerations relevant to deciding
whether a practice is based on an RFOA. The considerations are not requirements, but rather
they describe the types of evidence that employers most commonly use to show that a practice is
reasonable. The defense could be established absent any of the considerations. Conversely, the
defense is not automatically established merely because one or more of the considerations are
present. 1625.7(e)(3). The preamble to the rule clarifies and elaborates on the meaning of the
factors.
1. “The extent to which the factor is related to the employer’s stated business purpose.”
1625.7(e)(2)(i)
As the rule’s preamble indicates, the “stated business purpose” is the legitimate business
purpose that the employer had at the time of the challenged employment practice. The focus of
this consideration is on the method used by the employer to achieve its purpose rather than the
purpose itself. This consideration is consistent with Smith, which expressly noted that the City’s
“stated purpose . . . was to ‘attract and retain qualified people, provide incentive for performance,
maintain competitiveness with other public sector agencies and ensure equitable compensation to
all employees regardless of age, sex, race and/or disability.’” Smith, 544 U.S. at 231. The City
reasonably achieved this purpose by raising the salaries of junior officers to make them
competitive with those of comparable positions in the region. Similarly, as explained in the
preamble, an employer whose stated business purpose is to hire qualified candidates could
reasonably achive this purpose by ensuring that its hiring criteria accurately reflect job
requirements.
2. “The extent to which the employer defined the factor accurately and applied the factor
fairly and accurately, including the extent to which managers and supervisors were given
guidance or training about how to apply the factor and avoid discrimination.”
1625.7(e)(2)(ii)
As explained in the preamble, this factor takes into account any steps the employer took
to make sure that the practice was designed and applied so as to avoid age discrimination while
achieving the intended goal. The rule does not require employers to formally validate tests or
other selection criteria. It also does not require employers to train supervisors. However,
carefully defining standards and giving guidance to supervisors on how to apply them may
minimize the effects of bias, and therefore may be used as evidence that the employer’s actions
were based on reasonable factors other than age. The rule’s reference to “guidance or training”
recognizes that the manner in which employers convey their expectations to managers will vary
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depending on the circumstances. For example, as explained in the preamble, a smaller employer
might reasonably rely entirely on brief, informal, oral instruction.
3. “The extent to which the employer limited supervisors’ discretion to assess employees
subjectively, particularly where the criteria that the supervisors were asked to evaluate
are known to be subject to negative age-based stereotypes.” 1625.7(e)(iii)
Giving supervisors unconstrained discretion may result in disproportionate harm to older
workers. Employers are free to assess employees based on subjective criteria, such as
productivity and flexibility. As the preamble cautions, however, employers should be aware that
supervisors’ negative stereotypes about older workers can infect the assessments of such criteria,
making the assessments less accurate. Employers therefore may wish to take appropriate steps to
reduce the likelihood that age bias will influence subjective assessments, such as providing
objective measures of criteria. For example, an employer that wants its supervisors to evaluate
technological skills might attempt to reduce possible harm to older workers by instructing
managers to look specifically at objective measures of the specific skills that are actually used on
the job.
4. “The extent to which the employer assessed the adverse impact of its employment
practice on older workers.” 1625.7(e)(iv)
This consideration does not require an employer to perform an adverse impact analysis of
its employment practices. However, an employer may use the fact that it considered potential
harm to older workers as evidence that it was acting in the manner that a prudent employer
would have acted under the circumstances. As the preamble explains, where an assessment is
warranted, a formal analysis will not always be needed. Whether an employer’s method is
reasonable will depend on the circumstances, including the employer’s resources and the number
of employees affected by the practice. The preamble states, for example, that a large employer
that routinely uses sophisticated software to monitor its practices for race- and sex-based
disparate impact may be acting unreasonably if it does not similarly monitor for age-based
impact. When the numbers are fairly small, employers may be able to compare the effects of the
practice on older and younger workers informally. Whether or not a formal impact analysis is
done, according to the preamble, if the impact is sufficiently large that the employer was or
should have been aware of it, a failure to have taken reasonable steps to avoid or mitigate the
impact is relevant to whether the employer’s actions were based on an RFOA.
5. “The degree of the harm to individuals within the protected age group, in terms of both
the extent of injury and the numbers of persons adversely affected, and the extent to
which the employer took steps to reduce the harm, in light of the burden of undertaking
such steps.” 1625.7(e)(v)
An employer can increase its ability to defend against a claim of age-based disparate
impact if it can show that it balanced the potential harm to older workers against the cost and
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difficulty of taking steps that would reduce the harm on older workers, while still accomplishing
its business goals. The greater the potential harm, the more steps the prudent employer should
take to reduce the harm without unduly burdening the business. The preamble expressly
recognizes that employers are not required to search for or use the least discriminatory
alternative. Whether an employer knew or reasonably should have known of measures that
would reduce harm informs the reasonableness of the employer’s choices.
Application of Rule to Reductions in Force
The preamble to the RFOA rule stresses that the “[d]esign and administration of [an]
employment practice” is relevant to whether it is an RFOA. In expounding on this concept, the
preamble states that “[t]he way in which an employer applies the claimed RFOA is probative of
whether it is reasonable; a practice that seems reasonable in the abstract might not be reasonable
in its application. For example, … although it might well be reasonable for an employer to
conduct a reduction-in-force (RIF) to save money, if an identified employment practice caused
older workers to be disparately impacted, the cost-cutting goal alone would not be sufficient to
establish the RFOA defense. The employer would have to show that the practice was both
reasonably designed to further or achieve a legitimate business purpose and administered in a
way that reasonably achieves that purpose in light of the particular facts and circumstances that
were known, or should have been known, to the employer.” Thus, an employer cannot
demonstrate RFOA merely by proving that its RIF was performed to cut costs; it must also show
that the design and administration of the RIF was reasonable.
Criticism of EEOC Rule
Critics of the EEOC rule have stated that it contradicts Smith and Meacham because it
suggests a Title VII “business necessity” standard and also suggests that an employer is liable
when it negligently failed to mitigate the disparate impact. The EEOC disagreed with and
addressed these criticisms in the rule’s preamble. The EEOC explained that the rule refers to
“considerations” rather than duties for the purpose of clarifying that the standard is lower than
business necessity. The EEOC recognizes that an employer need not search for alternatives and
use the one that is least discriminatory, but believes that “[t]here may be circumstances in which
the availability of a measure that would noticeably reduce harm was or should have been so
readily apparent that it would be manifestly unreasonable for the employer to fail to use it.” This
is so because a prudent employer would not have ignored the alternatives under the
circumstances. The EEOC further explained in the preamble that it is proper to consider an
employer’s efforts to reduce the effects of hidden bias, in light of the Supreme Court admonition
in Watson v. Fort Worth Bank and Trust, 487 U.S. 977, 990 (1988), that disparate impact
analysis may be the only way to combat “the problem of subconscious stereotypes and
prejudices” that may affect subjective decision-making. Some critics have questioned whether
courts will defer to the EEOC rule, but there have been no reported cases. Early predictions that
the EEOC rule would spur more disparate impact litigation have not come true.
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II.
Waivers & Releases of ADEA Claims: 29 C.F.R. §1625.22 & .23
OWBPA Requirements
In 1990, Congress amended the ADEA by adding the Older Workers Benefit Protection
Act (OWBPA) to clarify the prohibitions against discrimination on the basis of age. OWBPA
establishes specific requirements for a “knowing and voluntary” release of ADEA claims to
guarantee that an employee has every opportunity to make an informed choice whether or not to
sign the waiver. There are additional disclosure requirements under the statute when waivers are
requested from a group or class of employees. OWBPA lists seven factors that must be satisfied,
at a minimum, for a waiver of age discrimination claims to be considered “knowing and
voluntary.” In addition, OWBPA prohibits waiver provisions that interfere with the right to file
a charge or cooperate with the EEOC. OWBPA gives employees the right to bring suit to
challenge the validity of a waiver of age claims, and places the burden on the proponent of the
waiver to prove its validity. The EEOC explained these rules in a rule (29 C.F.R. §1625.22 &
23), and also published a “Sample Waiver and General Release” for a group lay off which
complies with those factors. See “Understanding Waivers of Discrimination Claims in
Employee Severance Agreements,” Appx. B (accessible at
http://www.eeoc.gov/policy/docs/qanda_severance-agreements.html).
Seven “Knowing and Voluntary” Factors
1. A waiver must be “written in a manner calculated to be understood” by the employee or
the average participating employee. 29 U.S.C. §626(f)(1)(A)
The EEOC rule emphasizes that waivers must be drafted in “plain language” geared to
the level of comprehension and education of the average individual(s) eligible to participate.
1625.22(b)(3). Usually this requires the “elimination of technical jargon and long, complex
sentences.” Id. In addition, the waiver “must not have the effect of misleading, misinforming, or
failing to inform participants” and must present any advantages or disadvantages “without
either exaggerating the benefits or minimizing the limitations.” 1625.22(b)(4). For example, an
agreement that refers to a release of ADEA claims, qualified by the phrase “this covenant not to
sue does not apply to actions based solely under the [ADEA],” is seemingly contradictory and
therefore not written in a matter calculated to be understood. See Thormforde v. IBM, 406 F.3d
500 (8th Cir. 1990).
2. A waiver must specifically refer to rights or claims arising under the ADEA. 29 U.S.C.
§626(f)(1)(B)
The EEOC rule states that an OWBPA waiver must expressly spell out the Age
Discrimination in Employment Act (ADEA) by name. 1625.22(b)(6). For example, “[t]his
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waiver applies to the right to raise claims under the Age Discrimination in Employment Act of
1967.”
3. A waiver must “advise[]” the employee in writing to consult an attorney before accepting
the agreement. 29 U.S.C. §626(f)(1)(E)
This requirement comes directly from the statute, and the advice must be explicit. Thus,
a release stating: “I have had reasonable and sufficient time and opportunity to consult with an
independent legal representative of my own choosing before signing this Complete Release of
All Claims,” does not comply with OWBPA’s requirement that an individual be advised to
consult with an attorney. American Airlines v. Cardoza-Rodriguez, 133 F.3d 111 (1st Cir. 1998)
(explaining that “advise” means to warn, caution or recommend).
4. The waiver must provide the employee with a minimum amount of time to consider the
offer.
For an offer given to an individual, the waiver must provide the employee with at least 21
days to consider the offer. The rule clarifies that the 21-day consideration period runs from the
date of the employer’s final offer. If material changes to the final offer are made, the 21-day
period starts over. 29 U.S.C. §626(f)(1)(F). If the offer is given to a group (i.e., two or more
people), then the waiver must provide the employee a 45-day consideration period. Although the
employee may choose to accept the offer in less time, the employer must explicitly provide at
least 21 or 45 days.
5. A waiver must give an employee seven days to revoke his or her signature. The sevenday revocation period cannot be changed or waived by either party for any reason. 29
U.S.C. §626(f)(1)(G)
6. A waiver must not include rights and claims that may arise after the date on which the
waiver is executed. 29 U.S.C. §626(f)(1)(C)
This provision bars waiving rights regarding new acts of alleged discrimination that
occur after the date of signing, such as a claim that an employer retaliated against a former
employee who filed a charge with the EEOC by giving an unfavorable reference to a prospective
employer. Thus, for example, a release of claims that an employee “may now have or have had,”
is proper because it is not a requirement to waive future claims that may arise after the waiver
was signed. Budro v. BAE Sys. Info. and Elec. Sys. Integration, Inc., 2008 WL 1774961 (D.N.H.
Apr. 16, 2008).
7. A waiver must be supported by consideration in addition to that to which the employee
already is entitled. 29 U.S.C. §626(f)(1)(D)
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If the employee was entitled to receive a particular benefit even without the waiver, such
as if a labor contract entitles all laid-off workers to outplacement service, then providing that
same benefit is not valid consideration in exchange for a waiver. Although severance packages
are often structured differently for different employees depending on position and tenure, an
employer is not required to provide an employee a greater amount of consideration than is given
to a person under the age of 40 solely because the employee is protected by the ADEA.
1625.22(d)(4).
Additional Requirements for Group Layoffs
When employers conduct a reduction in force, either through an exit incentive program or
a termination program (or both), any waiver agreement used in connection with the reduction in
force must comply with specific informational requirements set out in the OWBPA. The statute
itself requires the waiver agreement to explain, in plain language, “any class, unit, or group of
individuals” covered by the program, “any eligibility factors” and “time limits” for the program,
the “job titles and ages of all individuals eligible or selected” for the program, and the ages of all
individuals in the “same job classification or organizational unit who are not eligible or selected”
for the program. 29 U.S.C. §626(f)(1)(H). The EEOC issued a substantive rule clarifying to
whom information must be provided and what information must be disclosed, and explaining
that the purpose of the informational requirements is to provide an employee with enough
information to make an informed choice whether to sign a waiver agreement offered in
connection with a group layoff.
The rule clarifies that an “exit incentive program” refers to a request to a group of
employees to voluntarily resign, while a “termination program” refers to the involuntary
termination of a group of employees; in both situations, the group is offered additional
consideration in return for signing a waiver of claims. 1625.22(f)(1)(iii)(A). A “program” is
simply a standardized formula or package offered to two or more employees.
1625.22(f)(1)(iii)(B).
In describing the group of individuals to whom information must be given, the rule
focuses on the “decisional unit.” That term is defined as “that portion of the employer’s
organization structure from which the employer chose the persons who would be offered
consideration for the signing of a waiver and those who would not be offered consideration for
the signing of a waiver.” 1625.22(f)(3)(i)(B). The term is intended to reflect the analytical
process by which the employer chose and ruled out certain employees from a program. The
determination of what constitutes the decisional unit will necessarily be made on a case-by-case
basis. The regulation provides several context-specific examples.
1. Facilities. If an employer is reducing its workforce at a particular facility for the purpose
of eliminating excessive overhead, expenses or costs at that facility, then that facility is
the decisional unit. 1625.22(f)(3)(ii)(C). If the employer considers only a subgroup of
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employees at that facility, then that subgroup is the decisional unit. 1625.22(f)(3)(ii)(D).
If an employer analyzes its operations at several facilities, compares employee ages,
seniority rosters or similar factors and then decides to focus on a particular facility, then
the decisional unit includes all facilities considered in the employer’s analysis.
1625.22(f)(3)(ii)(E). The rule provides some additional examples to assist in determining
if the decisional unit is other than the entire facility. See 1625.22(f)(3)(v).
2. Departments, Divisions, Reporting Structures, Job Categories. The rule recognizes that
reductions in force are often not based on a facility but rather are targeted towards
departments or divisions, employees who report to a particular manager or managers, or
employees occupying specific job categories, or some combination of these criteria. The
rule provides a number of specific examples of decisional units for each of these RIF
structures. 1625.22(f)(3)(iii).
3. Level of Review. The rule explains that review of RIF decisions by an HR Department
to monitor compliance with the law or review by a regional manager who oversees a
facility or department larger than that targeted for the RIF does not affect or expand the
scope of the decisional unit. However, if the regional manager in the course of that
review determines that the scope of the employees considered for the RIF should be
changed or expanded, then the decisional unit is altered to the same extent.
1625.22(f)(3)(vi).
Decisional unit appellate court cases. Kruchowski v. Weyerhaeuser Co., 446 F.3d 1090
(10th Cir. 2006) (waiver agreement’s informational disclosure omitted 15 employees, roughly
10% of the workforce, and was therefore invalid; because §7(f)(1)(H)(i) requires precise
information regarding those in the workforce from whom a waiver is being requested and those
from whom the waiver is not being requested, omitting 10% of the workforce is a significant
enough omission to void the waiver); Burlison v. McDonald’s Corp., 455 F.3d 1242 (11th Cir.
2006) (where employer reduced its regions from 38 to 21, three particular regions were merged
into a single Atlanta region, and senior managers for the new Atlanta region decided which of
the employees from the three merged regions would be retained to work in the new Atlanta
region, employer was only required to provide information related to the three merged regions
rather than nationwide information; court stressed that providing nationwide information could
violate OWBPA’s informational requirement because the presence of irrelevant information can
mask discrimination within the decisional unit); Adams v. Moore Bus. Forms, Inc., 224 F.3d 324
(4th Cir. 2000) (court rejected plaintiffs’ argument that, while the company provided the
requisite information concerning their own facility, which was closed, company also should have
provided the information for the facility to which their work was transferred; court noted that
while a “decisional unit” can include multiple facilities, plaintiffs failed to produce evidence that
the company considered layoffs or plant closings at locations other than where the plaintiffs
worked).
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Instructive district court cases. Romero v. Allstate Ins. Co., 2014 WL 796005 (E.D. Pa.
Feb. 27, 2014) (decisional unit did not include employees whose contracts were automatically
terminated after 18 months); Ribble v. Kimberly Clark Corp., 2012 WL 589252 (E.D. Wisc. Feb.
22, 2012) (exhaustive discussion of EEOC rule and “decisional unit” assessment; where
employer decides to conduct RIF from only one portion of a department, employer’s decision
defines scope of decisional unit, but employer must use reasonably objective criteria to define
the scope and must make clear in its disclosure what portion of the department was considered
rather than saying “certain positions” within the department were considered); Pagliolo v.
Guidant Corp., 483 F. Supp. 2d 847 (D. Minn. 2007) (listing nearly all U.S.-based employees
who were discharged does not disclose decisional unit in a manner calculated to be understood;
not reasonable to expect employees to know they needed to look up terms in a glossary to figure
out who was eligible to participate in severance plan).
In describing the presentation of information, the rule provides guidance on employee
age descriptions, job descriptions, and the scope of information that must be provided. Ages
must be specifically stated; age banding is not sufficient. 1625.22(f)(4)(ii). The description of
affected jobs should include the grade or other subcategory where multiple grades or
subcategories are affected. 1625.22(f)(4)(iii). If the RIF includes a mix of voluntary
resignations and involuntary terminations, both must be included and distinguished.
1625.22(f)(4)(iv). If employees selected for lay off come from a subset of the decisional unit,
information for the entire decisional unit must be disclosed. For example, if the employer lays
off the lowest performing 10% of accountants, information relating to all accountants must be
disclosed. 1625.22(f)(4)(v). If a RIF occurs over a period of time, later terminees (but not early
terminees) must be given information relating to the entire temporal scope of the RIF.
1625.22(f)(4)(vi). The rule provides a sample informational disclosure for a hypothetical RIF in
which the employer lost a construction contract and decided it must lay off 10% of its
construction employees. 1625.22(f)(4)(vii).
Right to File a Charge and Cooperate with EEOC
In addition to the “knowing and voluntary” requirements, a waiver can never “be
used to interfere with” an employee’s right to file a charge or cooperate with the EEOC.
29 U.S.C. §626(f)(4). The EEOC rule states that “[n]o waiver agreement may include
any provision prohibiting any individual from … [f]iling a charge or complaint, including
a challenge to the validity of the waiver agreement, with EEOC, or … [p]articipating in
any investigation or proceeding conducted by the EEOC.” 1625.22(i)(2). A waiver
agreement also may not include any provision “imposing any condition precedent, any
penalty, or any other limitation adversely affecting any individual’s right to” file a
charge, participate in an investigation, or otherwise cooperate with the EEOC.
1625.22(i)(3).
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As with all other OWBPA waiver requirements, the focus is on the terms of the
waiver agreement. Thus, it does not matter whether an employee in fact filed a charge
notwithstanding agreeing not to do so. It likewise does not matter whether the employer
has ever attempted to enforce a charge-filing prohibition against an employee. Such
terms are unenforceable and may even render the entire agreement invalid.
In guidance, the EEOC has elaborated on the non-waivable nature of the right to
access the EEOC:
An employer may not interfere with the protected right of an employee to file a
charge, testify, assist, or participate in any manner in an investigation, hearing, or
proceeding under [the federal anti-discrimination statutes]. These employee
rights are non-waivable under the federal civil rights laws. … This position is
built on two cornerstones: (a) interference with these protected rights is contrary
to public policy; and (b) the anti-retaliation provisions of the civil rights statutes
prohibit such conduct.
EEOC Enforcement Guidance on Non-Waivable Employee Rights Under EEOC Enforced
Statutes (April 10, 1997), at III.A.; see also id. (“A strong public policy prohibits
interference with governmental law enforcement activities” and also with “the right to
file a charge with the EEOC.”).
The Supreme Court has explained that the purpose of a charge of discrimination is
to “place the EEOC on notice that someone . . . believes that an employer has violated
[the federal laws against employment discrimination].” EEOC v. Shell Oil Co., 466 U.S.
54, 68 (1984); see also Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 64, 67
(2006) (reiterating the importance of “maintaining unfettered access to statutory remedial
mechanisms” and stressing that “Title VII depends for its enforcement upon the
cooperation of employees who are willing to file complaints and act as witnesses”). In its
enforcement of discrimination laws, the EEOC operates not simply on behalf of the
charging party, but rather in the broader public interest. Cf. EEOC v. Waffle House, 534
U.S. 279, 296 (2002) (“whenever the EEOC chooses … to bring an enforcement action in
a particular case, the agency may be seeking to vindicate a public interest, not simply
provide make-whole relief for the employee, even when it pursues entirely victim
specific relief.”).
In the context of arbitration, the Supreme Court confirmed an employee’s right to
file a charge despite waiving the right to file a lawsuit, explaining that “[a]n individual
ADEA claimant subject to an arbitration agreement will still be free to file a charge with
the EEOC, even though the claimant is not able to institute private judicial action.”
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991). In settlement and
severance agreements, courts of appeals similarly have ruled that the rights of filing a
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charge and participating in an EEOC investigation are non-waivable. “Any agreement
that materially interferes with communication between an employee and the Commission
sows the seed of harm to the public interest.” EEOC v. Astra, 94 F.3d 738, 742 (1st Cir.
1996) (affirming preliminary injunction barring enforcement of a settlement agreement’s
provisions that prohibited employees from participating in EEOC charge investigations);
see also EEOC v. Cosmair, Inc., 821 F.2d at 1090 (invalidating former employee’s
promise in a severance agreement not to file a charge with EEOC because it “could
impede EEOC enforcement of the civil rights laws” and is void as against public policy);
EEOC v. Morgan Stanley & Co., Inc., (S.D.N.Y. 2002) (relying on Shell Oil and Astra to
invalidate non-assistance clause directed at the EEOC contained in waiver agreement).
Tenderback Rule
In 2000, the EEOC issued a rule addressing the Supreme Court’s decision in Oubre v.
Entergy Operations, Inc., 522 U.S. 422 (1998), holding that employees cannot be required to
tender back money or other benefits in order to challenge the validity of a waiver under the
OWBPA. The rule provides that an employee is not required to return or “tender back”
severance pay or other benefits as a condition of challenging a waiver as inconsistent with the
ADEA. 1625.23(a). Similarly, the rule states that an employer may not require tender back as a
term of a waiver agreement, nor may a waiver agreement include provisions requiring employees
to pay attorneys’ fees or damages because of the mere filing of an ADEA suit. 1625.23(b).
Where an employee successfully challenges a waiver agreement and prevails on the merits of an
ADEA claim, a court may in its discretion calculate a “setoff” against any monetary award, but
the reduction cannot exceed the amount awarded to the employee or the consideration the
employee received for signing the waiver. 1625.23(c). Finally, the rule clarifies that an
employer may not abrogate its own duties towards an employee who signed a waiver agreement
even if the employee or the EEOC successfully challenges the validity of the waiver.
1625.23(d). This is so because an employee has the right under OWBPA to have a court
determine a waiver’s validity.
Instructive cases. Rupert v. PPG Industries, Inc., 2009 WL 596014 (W.D. Pa. Feb. 26,
2009) (construing 1625.23 and EEOC’s accompanying commentary, court concluded that a
release written in a manner that reasonably could be understood to bar a challenge to its validity
fails to satisfy the understandability requirement of the OWBPA and would be ineffective as a
waiver of ADEA claims; finding that waiver of claims provision coupled with broadly phrased
covenant not to sue could reasonably have been understood to preclude a challenge to the
enforceability of the agreement under OWBPA); Bogacz v. MTD Prods., 694 F. Supp. 2d 400
(W.D. Pa. 2010) (finding that a broad release of claims could be construed to cover an
enforceability action in violation of OWBPA).
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Effect of Violation of OWBPA Waiver Requirements
If a waiver of age claims fails to meet any of the OWBPA minimum requirements for a
knowing and voluntary waiver, it is invalid and unenforceable. See Oubre v. Entergy
Operations, Inc., 522 U.S. 422, 426-27 (1998) (“OWBPA implements Congress’ policy via a
strict, unqualified statutory structure on waivers, and we are bound to take Congress at its
word”); Thomforde v. IBM, 406 F.3d 500 (8th Cir. 2005) (relying on Oubre to conclude that a
waiver that fails to meet any of the OWBPA requirements is ineffective as a matter of law);
Loksen v. Columbia Univ., 2013 WL (S.D.N.Y. Oct. 4, 2013) (relying on Oubre to invalidate
waiver agreement that identified 16 of 17 employees in the “decisional unit” targeted for a RIF
even though the omission of one employee could not have realistically affected plaintiff’s ability
to evaluate a possible ADEA claim). In addition, an employer cannot attempt to “cure” a
defective waiver by issuing a subsequent letter containing OWBPA-required information that
was omitted from the original agreement. See, e.g., Butcher v. Gerber Products Co., 8 F. Supp.
2d 307 (S.D.N.Y. 1998) (as a matter of law and public policy, an employer is allowed only one
chance to conform to the requirements of OWBPA and cannot “cure” a defective release by
issuing a letter to employees containing OWBPA-required information that was omitted from
their separation agreements and request that they either “reaffirm” their acceptance or “revoke”
the release). On the other hand, courts have allowed waiver agreements to stand when they
contain unenforceable provisions that interfere with the right to file a charge. See, e.g., Ribble v.
Kimberly Clark Corp., 2012 WL 589252 (E.D. Wisc. Feb. 22, 2012) (“the presence of a charge
filing ban does not, per se, invalidate a separation agreement).
The EEOC has long held the view that waiver agreements which attempt to limit an
employee’s right to file a charge constitute unlawful retaliation because, by their very existence,
they have a chilling effect on the willingness and ability of individuals to come forward with
information that may be of critical importance to the EEOC. EEOC Enforcement Guidance on
Non-Waivable Employee Rights Under EEOC Enforced Statutes (April 10, 1997), at III.B.
However, courts generally have not accepted arguments that waiver agreements prohibiting
charge filing constitute facial or anticipatory retaliation, at least where the threatened
consequence is denial of a contractual rather than an employment benefit. Compare EEOC v.
Sundance Rehab. Corp., 466 F.3d 490 (6th Cir. 2006) (employer’s offer of severance agreement
to all employees fired in RIF, which conditioned payment of severance not otherwise owed on
unenforceable promises not to file charges and authorized employer to sue for the return of
payments if the employee filed a charge, did not amount to facial retaliation) with EEOC v.
Cognis Corp., (C.D. Ill. Dec. 12 2011) (distinguishing Sundance and finding that an employer’s
offer of an ultimatum – either waive the right to file a charge or accept your discharge – is a
threat of retaliation and constitutes an unlawful retaliatory policy). In the severance context,
courts generally will recognize a retaliation claim where the employer takes some further action
beyond conditioning the severance benefits on a waiver of the right to file a charge. See, e.g.,
EEOC v. Nucletron Corp., 563 F. Supp. 2d 592 (D. Md. 2008) (if an employer offers a severance
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agreement with an unenforceable waiver of the right to file a charge, the employer commits
retaliation only if the employer attempts to enforce the agreement against an employee who files
a charge or withholds benefits already promised or owed from an employee who refuses to sign);
EEOC v. Lockheed Martin Corp., 444 F. Supp. 2d 414 (D. Md. 2006) (conditioning severance
benefits offered in exchange for waiver of claims on employee’s withdrawal of charge of
discrimination was unlawful retaliation).
EEOC Enforcement Authority & Priorities
The EEOC is not limited or bound by any provisions of a waiver agreement signed by an
employee. See 29 U.S.C. §626(f)(4)(“No waiver agreement may affect the Commission’s rights
and responsibilities to enforce this chapter.”); cf. EEOC v. Waffle House, 534 U.S. 279 (2002)
(holding that arbitration agreement between employee and employer did not preclude EEOC
from seeking monetary relief for such employee because EEOC’s authority is not derivative of
the legal rights of individuals even when it is seeking to make them whole). Thus, the EEOC
may in its discretion bring suit to challenge a RIF as age-discrimination irrespective of whether
the affected employees signed waivers and whether such waivers comply with OWBPA. See
Senich v. American-Republican, Inc., 215 F.R.D. 40 (D. Conn. 2003) (extending Waffle House
reasoning to waiver and release agreements); EEOC v. DHL Exp. (USA), Inc., 2011 WL 1326941
(N.D. Ill. 2011) (same).
Separate and apart from EEOC’s authority to bring substantive age discrimination claims
notwithstanding an employee’s waiver, the EEOC has recently begun taking the position that it
has the authority under section 707 of Title VII to bring suit challenging an employer’s practice
of requiring employees to sign a release or waiver that prohibits filing a charge of discrimination
or otherwise cooperating with the EEOC. The Commission is arguing that such provisions in a
waiver and release agreement can constitute intentional resistance to the full enjoyment of Title
VII rights (filing a charge and cooperating with EEOC). See EEOC complaints in EEOC v.
Doherty Enterprises, Inc., Civil Action No. 14 CV 81184 (S.D. Fla. filed Sep. 18, 2014); EEOC
v. CVS Pharmacy, Inc., Civil Action No. 14 C 00863 (N.D. Ill. filed Feb. 7, 2014) 1; EEOC v.
Baker & Taylor, Inc., Civil Action No. 13 C 03729 (N.D. Ill. filed & resolved May 20, 2013).
Moreover, the Commission is arguing in these cases that it need not adhere to section 706
conditions precedent to suit to challenge such agreements under section 707 when the suit is not
based on a charge. The Commission is also arguing that it need not establish that the waiver
agreement constitutes unlawful discrimination or retaliation but rather need only establish that
the agreement, through its repeated use, is intended to deny employees of the full exercise of the
right to file a charge or cooperate with the EEOC.
1
As of the time of this writing, the district court in EEOC v. CVS indicated that it was dismissing the suit but has
not yet issued a written order explaining its rationale.
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