Another Federal Appeals Court Invalidates a Release of Age Discrimination Claims as Not “Knowing and Voluntary”
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In severance agreements and settlement agreements, employers typically request that employees release all employment claims, including claims for age discrimination.  As many employers are aware, the Older Workers Benefits Protection Act (OWBPA) places special restrictions on purported releases of federal age discrimination claims.  The general standard is that waivers must be “knowing and voluntary” to be enforceable.  The OWBPA contains a list of minimum requirements thatmust be met if a waiver is to meet the knowing and voluntary standard.  One of the core requirements is that the waiver be “written in a manner calculated to be understood by [the employee].”  An employer’s failure to draft a release that complies with these provisions means that the purported release of age discrimination claims is unenforceable and the employee can sue for age discrimination.      

The U.S. Ninth Circuit Court of Appeals recently became the second court of appeals to invalidate a release of age discrimination claims as not “knowing and voluntary.”  (The first decision came from the U.S. Eighth Circuit Court of Appeals.)  Both cases involved a standard severance and release agreement drafted by IBM Corp.  The agreement contained a release of all claims of any kind.  It also contained a separate “covenant not to sue” stating that “you agree that you will never institute a claim of any kind against IBM . . . .”  However, the covenant not to sue went on to carve out age discrimination claims:  “This covenant not to sue does not apply to actions based solely under the [ADEA].” 

IBM said it included this carve-out to give employees the opportunity to challenge the validity of the waiver of age discrimination claims in court, but not to sue for age discrimination itself.  Both courts, however, said that while this may have been IBM’s intent, the language was ambiguous and could have led employees to believe that they had preserved the right to pursue age discrimination claims in court.  The ambiguity rendered the waiver not “knowing and voluntary,” and therefore ineffective to bar the plaintiffs’ age discrimination claims. 

Although neither of the above decisions is binding on the courts in Texas, and both courts are traditionally more employee-friendly than the federal appeals court encompassing Texas, they are the only two court of appeals decisions addressing this issue and could have some persuasive effect on certain state and federal courts in Texas. 

Lessons:  These decisions highlight the confusing nature of the OWBPA and the care that must be taken to draft enforceable releases of age discrimination claims, especially when an employer seeks to include a “covenant not to sue.”  To the extent the employer believes it needs to explicitly carve out an exception to a covenant not to sue for actions challenging the validity of an age discrimination release, it should do so in clear, explicit terms. 

The cases are Syverson v. IBM Corp., 2006 WL 2506421 (9th Cir. Aug. 31, 2006); and Thomforde v. IBM Corp., 406 F.3d 500 (8th Cir. 2005).

* Muskat, Martinez & Mahony, LLP is a boutique firm specializing in labor and employment defense. For more information, visit our website at www.m3law.com