Aug. 31, 2006 Court Holds Release Agreements With Confusing Legalese Are No Bar to Age Discrimination Claims

Summary

Yesterday, the Ninth Circuit Court of Appeals, with jurisdiction over California, reinstated a class-action age discrimination suit against IBM finding that the release agreements the employees had signed were unenforceable because they contained confusing language regarding the employees’ waiver of rights under the Age Discrimination in Employment Act (“ADEA”.) The court in Syverson v. International Business Machines held that because of the confusing language, the releases did not comply with the special requirements of the Older Workers Benefit Protection Act (“OWBPA”) for a “knowing and voluntary” waiver of ADEA rights.

Details

As part of a 2001 reduction in force, IBM offered affected employees severance pay and benefits in exchange for signing a release of claims. The release agreements clearly stated that the employees were releasing all claims that they may have against IBM related in any way to their employment or termination, specifically including any age discrimination claims under the ADEA. The release agreement also contained a “covenant not to sue” provision that stated in very general terms that the employees agreed never to file a claim of any kind against IBM and, if they did, the employees would be liable to IBM for its attorneys’ fees and costs. Had the release been limited to these provisions, the court would have undoubtedly barred the employees’ suit.

Unfortunately, however, the agreement went on to state that the “covenant not to sue” did “not apply to actions based solely under the [ADEA], as amended,” and thus “if [an employee] were to sue IBM ... only under the [ADEA], as amended, [the employee] would not be liable under the terms this Release for their attorneys’ fees and other costs and expenses of defending the suit.” The employees argued that this language was confusing when juxtaposed with the general release language and it misled them to believe they could still pursue age discrimination claims against IBM. The court agreed, finding the release did not comply with the OWBPA requirement that it be written in a manner calculated to be understood by the average person. As such, the release was not a “knowing and voluntary” waiver of ADEA claims, and the employees’ class suit could proceed.

What This Means

This opinion demonstrates the importance of making sure that any release provided to employees who are age 40 and over includes all of the specific OWBPA criteria for waiving federal age discrimination claims and, moreover, that the language used in the release is simple and clear without any confusing legalese. Employers are well advised to review their standard release agreements with legal counsel in light of this case.

This E-Update was authored by Denise Brucker. For more information, please contact Ms. Brucker or any Paul, Plevin attorney at 619-237-5200.

SAVE THE DATE! SAVE THE DATE! SAVE THE DATE!

NOVEMBER 1, 2006

PPS&C ANNUAL EMPLOYMENT LAW UPDATE SEMINAR - WORKPLACE LAW 2007

This half-day seminar will focus on how recent developments will impact your company’s day-to-day employment practices and what you need to do in 2007 to stay current with the changing employment laws.

We will examine the impact of new laws and court decisions and how these affect the workplace. We will review the changes you should make to practices and documents and will provide concrete suggestions for improving your personnel policies and practices in the coming year.

This year’s seminar will also include the following “hot topics” for 2007:

WAGE and HOUR LITIGATION
• Recent Trends – Who Is Getting Sued And Why
• What You Can Do To Protect Yourself

RECRUITING AND HIRING
• Avoiding “Poison People”
• Covenants Not to Compete
• Trade Secret and Confidential Information Agreements
• Non-Solicitation Agreements

EMPLOYEE PRIVACY
• Mandatory Medical Testing & Screening
• Drug Testing
• Medical Certification of Employee Leave and Return to Work
• ADA Accommodation and the Interactive Process
• Monitoring Employees in the Workplace: Dealing with “Sneaks and Cheats”

As always, we will also give you the floor to ask questions of our employment law experts. Register now.