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- The release is part of an agreement between the individual and the employer that is written in the manner calculated to be understood by the average individual eligible to participate.
- The release specifically refers to the Age Discrimination In Employment Act (the federal law prohibiting age discrimination) against employees who are age 40 or older.
- The release does not provide for a waiver of rights or claims that may arise after the release is signed.
- The individual waives rights or claims only in exchange for money or property that is given in addition to anything of value to which the individual already is entitled.
- The individual is advised in writing to consult an attorney prior to signing the release.
- The individual is given at least 21 days to decide whether to sign the release.
- The release provides that the individual may revoke the release within seven days after signing it, and the release does not become effective or enforceable until the seven-day revocation period has expired.
Experienced defense lawyers are fond of the saying: "The most beautiful instrument in the law is a general release."
A valid release is a relatively simple legal document that provides an absolute defense in any litigation brought by the party who signed the release. Traditionally, in order to be valid, a release must be: a written document; signed by the person releasing the claims; knowing and voluntary; and given in return for money or property.
The cost of severance pay usually is much less than the cost of defending litigation. Therefore, in light of the tremendous growth in employment litigation, obtaining a valid release from an employee upon termination of employment should be an employer's first-line defense.
In the employment law area, however, the validity of a release is more complicated than in other areas of the law. The Older Workers' Benefit Protection Act imposes several substantive and procedural requirements for a release to be an effective waiver of age discrimination claims.
For example, in order to qualify as "knowing and voluntary," the OWBPA specifies that the release must comply with the following requirements:
Special rules apply when releases are requested in connection with a group exit incentive--a special program that is offered to a group or class of employees, such as an early retirement program.
Generally, the group exit incentive release must comply with the requirements for individual releases. The 21-day period to consider whether to sign the release, however, is extended to 45 days in the case of group exit incentives. In addition, the employer must disclose to each individual in writing: the group of individuals covered by the program, eligibility factors, and any time limits for the program; and the job titles and ages of all individuals eligible for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible for the program.
An employee can voluntarily sign the release earlier than the 21- or 45-day period. The seven-day revocation period, however, may not be waived or shortened.
In the last few years, a number of cases have been brought by employees who had signed releases that did not comply with the OWBPA. In a number of those cases, the employers argued, sometimes successfully, that the employee could not invalidate the release and bring the lawsuit unless he or she had returned the money that was the consideration for the release.
This defense (known as the "tenderback" defense) was effective in many cases because few employees were willing to gamble their severance pay in the hope of receiving a larger recovery litigation.
Just this year, however, the U.S. Supreme Court rejected the employer defense. The court ruled that the requirements of the OWBPA must be strictly followed in order for the employer to have a defense based upon a release. As a result, the Supreme Court allowed an employee to bring an age discrimination lawsuit even though she refused to return the severance pay she had received in return for a signed release.
The Supreme Court decision emphasizes the need for employers to understand and follow all of the requirements of the OWBPA when obtaining releases in employment terminations. Otherwise, the employer may find itself paying out severance benefits and still facing the prospect of age discrimination claims.
Note: This article first appeared in the week of May 4, 1998 edition of the Capital District Business Review, which is published weekly in Albany, New York.