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EFFECTIVE EVALUATION, ADR AND SETTLEMENT OF EMPLOYMENT

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EFFECTIVE EVALUATION, ADR AND SETTLEMENT OF EMPLOYMENT

    EFFECTIVE EVALUATION, ADR AND SETTLEMENT OF EMPLOYMENT

    DISCRIMINATION CLAIMS

    March 19-21, 2003

    Jill Bodensteiner

    University of Notre Dame

    Notre Dame, IN

    Legal Issues in Settlement of Employment Claims

    I. Critical Components of an Agreement

    A. Adequate Consideration

    1. Above and beyond what the employee is already entitled to.

2. Non-monetary consideration, e.g., computer and computer training;

    relocation expenses; outplacement; tickets; use of e-mail address; tuition

    benefit for employee or family members; neutral reference or letter of

    recommendation; waiver of money or property due/owing from employee to

    employer.

    Make sure parties are aware of tax implications of non-monetary

    consideration, particularly tuition benefits.

    ;General rule: A tuition reduction for education below the graduate

    level is tax free if provided as part of a qualified plan by an

    educational institution to a current employee, a former employee

    who retired or left on disability, a widow or widower of such an

    employee, or a dependent child or spouse of any of the above.

3. Continued employee benefits.

    Do your benefit contracts have Aactively at work@ clauses that might

    prohibit such arrangements? Consider placing employee on Apaid leave@ if

    circumstances allow.

    4. If payment is to be made by certain date, make sure you are not promising to

    pay during the consideration or revocation period mandated by the Older

    Workers= Benefit Protection Act (if employee is waiving age claims).

    B. Confidentiality

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    1. Confidentiality of both the terms of the agreement and underlying facts. A

    good plaintiff=s attorney will want reciprocal language.

    ;Even if there is no reciprocal language, employers should be very cautious

    about disclosing the information or it will be difficult to prove breach by

    employee.

    2. The question of confidentiality should be discussed early; settlements have

    potential to fall apart when this is introduced for the first time after other

    material terms are agreed upon.

    3. Include non-disparagement of employer in addition to confidentiality?

4. Remedy for breach should include liquidated damages (e.g., $1000 per

    disclosure) and injunctive relief, attorney=s fees and costs.

    ;Note: Be careful demanding return of full consideration as remedy for

    breach; the employee might have an argument that the entire agreement is

    void for lack of consideration.

    ;EEOC comment on such provisions (in its final regulation on tender-back):

    AIn addition, while the Commission takes no position on non-ADEA

    provisions such as non-disparagement and confidentiality clauses, it notes

    that settlement agreements sometimes contain such clauses along with

    liquidated damages provisions for breach. A reasonable employee must be

    able to determine that any liquidated damages provisions for breach of

    non-ADEA clauses have no effect on the employee=s ability to bring an

    ADEA charge or lawsuit challenging the waiver.@ 65 Fed. Reg. at 77444.

    C. Release Language

1. Use Aany and all claims@ language.

     th Cir. 2002) (holding !Chaplin v. Nationscredit Corp., 307 F.3d 368, 373 (5

    that broad release language applied to bar plaintiffs= ERISA claim, stating

    that Aa general release of >any and all= claims applies to all possible causes

    of action, unless a statute specifically and expressly requires a release to

    mention the statute for the release to bar a cause of action under the

    statute.@).

    2. Include a waiver of damages by employee in the event that a state or federal

    agency pursues case on behalf of employee.

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!Employers cannot seek waivers of an employee=s right to file or otherwise

    participate in charge of discrimination, and cannot prohibit EEOC from enforcing rights of employees and seeking relief for those who have not waived their rights (see EEOC Enforcement Guidance on Non-Waivable

    Employee Rights Under Equal Employment Opportunity Commission (EEOC) Enforced Statutes; April 10, 1997).

    ;A...Promises not to file a charge or participate in an EEOC

    proceeding are null and void as a matter of public policy.

    Agreements extracting such promises from employees may also

    amount to separate and discrete violations of the anti-retaliation

    provisions of the civil rights statutes.@ Id. (emphasis added).

!EEOC acknowledges that employers can obtain waiver of an individual=s

    right to personal recovery from an EEOC enforcement action.

    3. Workers= Compensation

!Do not assume that a release includes pending or potential workers=

    compensation claims.

    ;There are often state law requirements for settlement of workers=

    compensation claims.

     compensation; this could ;Consider specifically excluding workers=

    prove helpful in establishing that all other claims not specifically

    excluded were agreed to be included.

See, e.g., Seman v. FMC Corp. Retirement Plan for Hourly Employees,

    2002 WL 385571 (D. Minn. Mar. 7, 2002) (granting summary judgment for defendant on plaintiff=s ERISA claim for disability pension benefits because the plaintiff and his employer had previously settled an age and disability discrimination charge filed with the EEOC and included broad release language that barred the current ERISA claim; the court noted that the fact that plaintiff=s workers= compensation claims were explicitly excluded from the release reinforced the court=s reading that Aany and all@ other claims

    were released).

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    ;Note: Also consider the reverse scenario. When you are settling a workers= compensation case B often pursuant to state-mandated language,

    forms and/or approval by the Workers= Compensation Board B are you

    expecting a release of related claims?

See, e.g., Jefferson v. Calif. Dep=t of Youth Auth., 121 Cal. Rptr. 2d 391

    (Cal. 2002) (employee settled a workers= compensation claim against her

    employer for work-related stress due to sexual harassment; the court held that the workers= compensation settlement signed by employee prohibited her from bringing a sexual harassment claim against her employer because she had knowledge of the potential harassment claim and did not expressly exclude it from her workers= compensation release).

    4. Family and Medical Leave Act

!29 C.F.R. ' 825.220(d): AEmployees cannot waive, nor may employers

    induce employees to waive, their rights under FMLA.@

! Dierlam v. Wesley Jessen Corp., 222 F. Supp. 2d 1052 (N.D. Ill. 2002)

    (holding that the Department of Labor regulation prohibiting waiver of FMLA claims is a permissible construction of the FMLA and consistent with Congress= expressed intent; therefore, waiver of FMLA rights in employee=s Separation Agreement was unenforceable as a matter of law).

    5. Miscellaneous Items

!Ability to reapply for employment; use clear language (see, e.g., Dhaliwal thv. Hesston Corp., 930 F.2d 547 (7 Cir. 1991) (agreement that employee

    would not seek reinstatement in the position from which he was terminated did not extend to prohibit former employee from seeking other positions at defendant employer).

    ; In many cases, lawyers must balance the negative impact this

    language will have on the employee and/or the possibility that

    employer might want to re-employ the individual vs. the likelihood

    that the employee will apply for future employment, be denied and

    bring a retaliation or other claim (prospective claims cannot be

    waived, so employer cannot defend based on settlement agreement).

    !Express waiver of right to use any internal appeal process?

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    D. Knowing and voluntary

    1. Settlement of age claims: Aknowing and voluntary@ minimum standards are

    contained in Older Workers Benefit Protection Act (OWBPA). See Section

    II of this outline for a more thorough discussion of the OWBPA.

    !Legislative history of OWBPA suggests that, in addition to the enumerated statutory requirements, courts should also continue to apply the Atotality of

    circumstances@ test adopted by many circuits to determine whether a waiver of ADEA claims was Aknowing and voluntary@ (see 65 Fed. Reg. at 77438); th Cir. 1999) see also Bennett v. Coors Brewing Co., 189 F.3d 1221, 1228 (10

    (recognizing that OWBPA factors are not exclusive and that courts should also apply Atotality of circumstances@ approach).

;See also Wastak v. Lehigh Valley Health Network, 2002 WL 468709 (E.D.

    Pa. Mar. 27, 2002) (holding that plaintiff did not provide evidence to support his argument that although the release of ADEA claims that he signed met

    knowing and voluntary@ the minimum OWBPA requirements, it was not A

    because his emotions were overriding his intellectual processes).

    2. Settlement of claims other than ADEA (e.g., Title VII, ADA, state law, etc.):

    waivers are generally subject to a federal common law Atotality of

    circumstances@ standard to determine whether the waivers were Aknowing

    and voluntary.@

    Check your jurisdiction for the precise standard to apply in determining whether a wavier of claims was Aknowing and voluntary.@

     thSee, e.g., Smith v. Amedisys Inc., 298 F.3d 434, 441-44 (5 Cir. 2002)

    (applying Atotality of circumstances@ test in a Title VII case); Long v. Sears rdRoebuck & Co., 105 F.3d 1528, 1539 (3 Cir. 1997) (Atotality of

    circumstances@ test to determine whether a release was voluntary is no longer appropriate for ADEA claims after enactment of OWBPA, but continues to be applicable to Title VII claims); Cole v. Gaming

    Entertainment, L.L.C., 199 F. Supp. 2d 208 (D. Del. 2002) (applying the Third Circuit=s Atotality of circumstances@ test to waiver purporting to

    settle Title VII claims).

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    E. Miscellaneous Issues

    1. How will the parties frame the separation (resignation, termination, etc.)?

    ;Consider whether this has unemployment compensation implications.

    2. Do you want to agree not to contest unemployment compensation claims?

    ;May want to add language stating that agreement not to contest does not

    apply if employer receives subpoena to testify at unemployment hearing.

3. Are there any outstanding property or money issues to settle (e.g., loans,

    expense accounts)?

4. Severability provision.

5. Selection of governing law and venue.

6. No admission of wrongdoing by employer.

    II. Older Workers Benefit Protection Act (OWBPA)

    A. Scope of OWBPA, 29 U.S.C. ' 626(f)

1. Requirements for Waivers B Individual Separation

    (a) Written in a manner understandable by employee

    (b) Expressly refer to waiver of claims arising under the ADEA

    !Thiessen v. General Electric Capital Corp., 232 F. Supp. 2d 1230,

    1235 (D. Kansas 2002) (waiver did not meet OWBPA requirement

    that waiver expressly mention claims under the ADEA where

    language stated that the Arelease includes...any claim of

    discrimination on the basis of ... age@ but did not mention the

    ADEA).

    (c) Cannot attempt to waive prospective rights or claims

    (d) Supported by consideration in addition to anything of value to which

    employee is already entitled

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    !Thiessen, 232 F. Supp. 2d at 1236-37 (workplace computer and extra vacation pay each constitute sufficient consideration).

    (e) Advise the employee in writing to consult with attorney

!Cassiday v. Greenhorne & O=Mara, Inc., 220 F. Supp. 2d 488,

    492-93 (D. Maryland 2002) (employer advised employee to consult with an attorney and then refused to talk to the attorney; court held that employer=s refusal to communicate with attorney did not render the waiver invalid under the OWBPA B while it might have been

    Ahard bargaining,@ it was not inconsistent with the letter of the law).

!Cole v. Gaming Entertainment, L.L.C., 199 F. Supp. 2d 208,

    213-14 (D. Del. 2002) (following language is not sufficient to fulfill

    this requirement without more: A[e]mployee acknowledges that

    he/she has been advised to consult with an attorney prior to executing this Agreement,@ because such language is in the passive and does not indicate present advice to seek counsel); but see

    Thiessen, 232 F. Supp. 2d at 1238-39 (holding that the language A[T]he company hereby advises the Employee in writing to consult with a lawyer before signing the Agreement@ complies with OWBPA,

    but that the language Athe Company advised the Employee in writing to consult with a lawyer before signing this Agreement@ does not

    comply with OWBPA because it suggests that the employer advised at some previous time instead of advising at the time of the release).

    ;In addition to using active language in the release, consider providing the employee with a letter along with the release that specifically advises the employee to consult with a lawyer before her or she signs.

    (f) Provide employee with 21 days to consider the agreement

!Cole v. Gaming Entertainment, L.L.C., 199 F. Supp. 2d 208,

    213-14 (D. Del. 2002) (language of the release allowing for 21-day review period was negated by employer=s verbal pressure to sign the

    agreement within 1 day).

    ; Employees can waive this requirement by returning the signed agreement early as long as there was no pressure to do so by the employer.

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(g) Provide employee with 7 days after execution to revoke

    2. Requirement for Waivers B Group Separation

; These requirements apply to waivers Arequested in connection with an

    exit incentive or other employment termination program offered to a group or class of employees...@ See generally Blackwell v. Cole Taylor Bank, 152 th Cir. 1998) for a thorough discussion of what circumstances F.3d 666 (7

    trigger these Agroup separation@ requirements.

    (a) Must meet the requirements set forth in (a) - (e) and (g) above

    (b) With respect to (f) above, employer must provide 45 days to consider in a group situation instead of the 21 days required in an individual separation

    (c) The following additional requirements apply to group separations (29 U.S.C. ' 626(f)(1)((H)):

    At the beginning of the 45-day period, the employer must inform the individuals (in writing, in a manner calculated to be understood by the average individual eligible to participate) as to:

    ! any class, unit, or group of individuals covered by such program,

    any eligibility factors for such program, and any time limits applicable

    to such program; and

    ! 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

    Employer cannot substitute Asalary grade@ for Ajob titles@ when

    implementing this requirement. Adams v. Ameritech Services, Inc., th231 F.3d 414, 431 (7 Cir. 2000).

    3. Applicability of OWBPA

    (a) Broad applicability: the requirements apply to the waiver of ADEA claims regardless of the context, e.g., employee handbook, separation

    agreements, early retirement incentive programs, private mediation, settlement of EEOC charges, settlement of lawsuits.

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    ;Note: For waivers used to settle EEOC charges or lawsuits, employers do not have to provide 21 days (or 45 days) to consider or 7 day revocation period; rather, employers must provide a Areasonable time@ to consider. See

    29 U.S.C. ' 626(f)(2).

;See Manning v. New York Univ., 299 F.3d 156, 164 (2d Cir. 2002) (leaving

    open the question of whether the OWBPA applies to settlement negotiations in judge=s chambers).

(b) OWBPA requirements apply to the waiver of any rights or claims under

    the ADEA. See, e.g., Hammaker v. Brown & Brown, Inc., 214 F. Supp. 2d

    575 (E.D. Va. 2002) (holding that OWBPA requirements apply to procedural as well as substantive rights under ADEA; therefore, clause in employment agreement purporting to waive right to a jury trial was unenforceable because it did not comply with OWBPA).

    B. Effect of Failure to Satisfy OWBPA Requirements

    ! If a waiver fails to satisfy these requirements, it will be deemed invalid and the

    employer will remain subject to suit on ADEA claims.

Employees not required to Atender back@ consideration prior to

    challenging waiver (Oubre v. Entergy Operations, Inc., 522 U.S. 422

    (1998)).

EEOC final regulation regarding Atender back.@ See 29 C.F.R.

    ' 1625.23; see also 65 Fed. Reg. 77437-77447 (Dec. 11, 2000).

    C. Additional Recent Case Law Under OWBPA

    1. Revocation of consideration when employee refuses to sign release.

!Miller v. Eby Realty Group, 2003 WL 105257 (D. Kansas Jan. 6, 2003)

    (holding that A[a]n employer=s withdrawal of an offer to pay additional

    benefits upon an employee=s failure to execute a waiver offered in exchange for them is not retaliation within the meaning of the ADEA@).

    !EEOC v. UBS Brinson, Inc., 2003 WL 133235, at *7 (S.D.N.Y. Jan. 15,

    2003) (holding that withdrawal of an offer of additional consideration in exchange for a release cannot be deemed retaliation because there is no Aadverse action@; the consideration was withdrawn before employee

    accepted the offer).

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2. Separate allocation of consideration?

    ;It might make sense for an employer to split the consideration offered in

    conjunction with a release between ADEA and other claims so that, if an

    employee revokes the agreement within the OWBPA 7-day revocation

    period or if a court holds that the release is invalid under the OWBPA, the

    employer has not lost the employee=s waiver of non-ADEA claims.

    !Flick v. Bank of America, 197 F. Supp. 2d 1229 (D. Nevada 2002)

    (plaintiff gave her attorney oral authority to settle her discrimination claims

    under the ADEA and Title VII for $500,000, but she changed her mind

    within 21 days and therefore the settlement was not valid under the OWBPA;

    because the parties had not apportioned the settlement amount between the

    different discrimination claims, the court could not enforce the settlement

    with respect to any of plaintiff=s claims); see also Cole, 199 F. Supp. 2d at

    216.

    III. Enforcement of Settlement Agreements B Recent Case Law

    1. Chitkara v. New York Telephone Co., 2002 WL 31004729, at **2 (2d Cir. 2002)

    (unpublished opinion) (rejecting plaintiff=s attempt to disavow settlement reached

    during a court-sponsored mediation based on his claim that the mediator mislead him as to the effect of his pending bankruptcy on his ability to recover damages; the court noted that A[t]he nature of mediation is such that a mediator=s statement regarding

    the predicted litigation value of a claim, where the prediction is based on fact that can readily be verified, cannot be relied on by a counseled litigant whose counsel is present at the time the statement is made.@).

    2. Manning v. New York Univ., 299 F.3d 156, 164 (2d Cir. 2002) (rejecting plaintiff=s

    argument that an on-the-record settlement agreement entered into following Avigorous@ negotiations in the court=s chambers was unenforceable because the

    written form of the agreement included provisions that he had not endorsed (a clause addressing whether he could reapply at NYU and a clause involving a waiver of all claims); the court held that these terms had been explained to plaintiff during negotiations and, even if they had not been, Athe district court had ample authority

    to clarify ambiguities in the description of the settlement reached ... by crafting the terms at issue.@).

     th Cir. 2002) (reversing a settlement 3. Hensley v. Alcon Lab. Inc., 277 F.3d 535 (4

    agreement enforcement order entered by the district court, finding that unrecorded findings from an off-the-record conference could not be the basis for the enforcement order where there was a factual dispute about the existence and terms of the alleged agreement; the court remanded the case to a different district court

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