Employment & Labor Insider

To get a legally valid release of age discrimination claims under federal law, the release must be "knowing and voluntary." The federal Older Workers Benefit Protection Act says that a release of age claims is not knowing and voluntary unless the employee is

• Given at least 21 days to consider the agreement (45 days if the employee is part of a "group termination").
• Advised to consult with an attorney.
• Specifically told that he or she is waiving age discrimination claims under the federal Age Discrimination in Employment Act.
• Specifically told that he or she is NOT waiving claims based on actions or omissions that occur after the employee signs the agreement.
• Given seven days to revoke his or her signature after signing the agreement. 

(There are additional provisions that apply in a group termination situation, but we don't need to get into those today.)

If the employee is under age 40, you don't have to worry about age discrimination claims except in the handful of states that protect everybody, young and old, from age discrimination. So, generally, if the employee is under 40, the release only has to be "knowing and voluntary."

Even so, I've had clients who wanted to include some of the OWBPA protections in agreements with their under-40 employees. Their reasoning is that they want the employees to clearly understand their rights, and they don't want the employees to feel coerced. This makes a lot of sense to me.

Those who do it usually include a consideration period of 21 days or less, a recommendation that the employee consult with an attorney, and a statement that the employee is not waiving claims based on acts or omissions that occur after the agreement is signed.

Last week, a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit ruled 2-1 that an employee asserting claims for pregnancy and pay discrimination did not have to "tender back" her severance pay before filing suit.

"Tender back" is another concept that does not apply to certain age discrimination claims. Usually, if a person receives money in exchange for signing a release, and then decides to sue anyway, the person has to "tender back" (repay) the money before suing. In 1998, the U.S. Supreme Court ruled in Oubre v. Entergy Operations, Inc., that an employee didn't have to pay the employer back before filing a federal age discrimination lawsuit because the release didn't comply with all of the OWBPA requirements.

Last week's Sixth Circuit decision extended that principle to claims under Title VII and the Equal Pay Act.

Here's what happened in the Sixth Circuit case (allegedly). Jena McClellan was terminated by Midwest Machining, Inc., three months after she told her supervisor that she was pregnant. She alleged her supervisor made numerous "sardonic" comments and expressed annoyance when Ms. McClellan took time off work for her prenatal appointments. 

The day of the termination, Ms. McClellan was given a severance agreement by the President of the company. He allegedly told her that she had to sign the agreement right then and there "if she wanted any severance." He quickly went over the agreement with her, and Ms. McClellan did not think she could ask questions. She signed the agreement under pressure and did not understand that she was giving up her right to file a discrimination claim. The severance amount was $4,000, which was paid and which Ms. McClellan accepted.

Ms. McClellan finally met with an attorney just before her time for filing suit ran out. They quickly filed a lawsuit alleging pregnancy and pay discrimination. About a month after that, Ms. McClellan sent a letter to Midwest, saying she was rescinding the separation agreement, and she enclosed a check for $4,000. Midwest returned the check to her and said "[t]here is no legal basis for rescinding the severance agreement."

Midwest then asked the court to throw out Ms. McClellan's lawsuit on the ground that the release barred her lawsuit. A federal judge agreed, but on appeal the Sixth Circuit panel reversed. According to the panel majority, the Oubre principle for ADEA claims also applied to claims under Title VII and the Equal Pay Act.

In my opinion, that's debatable, because the Oubre agreement failed to comply with three of the specific OWBPA requirements, none of which apply to claims under Title VII or the EPA. On the other hand, Ms. McClellan had a decent argument that her release was not "knowing and voluntary," which is required under Title VII and the EPA.

In addition, the court said, Ms. McClellan had in fact tendered back her separation pay. It's just that Midwest had refused to take it.

The decision made me think of my clients who have included those extra protections in agreements for under-40 employees even though they don't have to. If Ms. McClellan had been given 21 days to consider the agreement and advised to consult with an attorney (all documented as part of the agreement), things might have turned out differently.

But I will not add that seven-day revocation period to any agreement unless I absolutely have to. Sorry, under-40s!

FUN FACTS FOR LAW NERDS: The Equal Employment Opportunity Commission filed a "friend of the court" brief on behalf of Ms. McClellan. The one judge on the Sixth Circuit panel who concurred in part and dissented in part was Amul Thapar, who was on President Trump's short list for the Supreme Court (before Judge Brett Kavanaugh received the nomination).