Presenting a live 90‐minute webinar with interactive Q&A Employee Severance Agreements: Employee Severance Agreements: Latest Guidance for Employment Counsel Drafting and Negotiating Enforceable Release and Pay Provisions T d ’ f l f 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, FEBRUARY 20, 2013 T oday’ s faculty features: James F. Glunt, Shareholder, Ogletree Deakins Nash Smoak & Stewart, Pittsburgh Ian D. Meklinsky, Partner, Fox Rothschild, Princeton, N.J. Louis L. Chodoff, Partner, Ballard Spahr, Cherry Hill, N.J. Louis L. Chodoff, Partner, Ballard Spahr, Cherry Hill, N.J. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
Transcript
Presenting a live 90‐minute webinar with interactive Q&A
Employee Severance Agreements: Employee Severance Agreements: Latest Guidance for Employment CounselDrafting and Negotiating Enforceable Release and Pay Provisions
James F. Glunt, Shareholder, Ogletree Deakins Nash Smoak & Stewart, Pittsburgh
Ian D. Meklinsky, Partner, Fox Rothschild, Princeton, N.J.
Louis L. Chodoff, Partner, Ballard Spahr, Cherry Hill, N.J.Louis L. Chodoff, Partner, Ballard Spahr, Cherry Hill, N.J.
The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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EMPLOYEE SEVERANCE AGREEMENTSLatest Guidance for Employment Latest Guidance for Employment
Counsel
Presented By:
James (Ja ) F Gl nt EsqJames (Jay) F. Glunt, Esq.February 18, 2013
Recent DevelopmentsE
R • Medicare, Medicaid, and
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SCHIP Extension Act of 2007 (MMSEA) Reporting
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Requirements
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• Case Law Trends
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What does bullet proof mean?E
R • Importance of Finality
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(Release as Deterrent)
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• Importance of Compliance (D f ti V lidit Ch ll )
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, (Defeating Validity Challenge)
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• Is signing on the dotted line enough?
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g
A. MMSEA Reporting RequirementsE
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- New mandatory reporting requirements went into effect on January 1, 2012.
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- Comes out of workers’ compensation practice
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- Corporate workers’ compensation and
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, p pEPLI carriers are highly interested in compliance.
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A. MMSEA Reporting RequirementsE
R General rule: Any matter i l i t ti l
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plaintiff/claimant who is eligible for Medicare benefits
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that results in a settlement including a general release of
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, including a general release of claims will require reporting, regardless of whether there
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A. MMSEA Reporting RequirementsE
R New provisions to include in all ttl t ( t )
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agreements.
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1. Acknowledgement of Medicare’s interest.2 G l i d it l
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, 2. General indemnity language.3. Release as to private cause of
action under 42 USC 1395y(b)(3)(A)
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B. Legal Standards for Valid ReleaseE
R 1. Underlying Principles
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• offer/acceptance
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• consideration• duress, mistake, other defenses
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, duress, mistake, other defenses• affirmative defense
b d f f
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B. Legal Standards for Valid ReleaseE
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2. Title VII, Equal Pay Act, Rehabilitation
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Act, ADA, Section 1981, ERISA, WARN Act
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- knowing and voluntary test
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- totality of the circumstances- Alexander v. Gardner-Denver
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“Knowing and Voluntary”E
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clear language ► education
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consideration► business
experience
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time to read ► actually read and consider?
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advise to lt ith
and consider?
► actually
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► actually consult?
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Objective or Subjective Standard?D i l P O’G A St t f Di Th “K i d
ER
Daniel P. O’Gorman, A State of Disarray: The “Knowing and Voluntary” Standard for Releasing Claims Under Title VII of the Civil Rights Act of 1964, 8 U. Pa. J. Lab. & Emp. L. 73 (2005).
Th i Whil t t l Titl VII l i i ht
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not require the application of the objective theory of contracts like a contract in a commercial transaction, it also does not require application of the “voluntary
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knowing, and intelligent” constitutional waiver standard.
Craig Robert Senn, Knowing and Voluntary Waivers of Federal
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, g , g yEmployment Claims: Replacing the Totality of Circumstances Test with a “Waiver Certainty” Test, 58 Fla. L. Rev. 305 (2006).
Thesis: Due to the totality test’s shortcomings and
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employment claims is knowing and voluntary.
Objective or Subjective Standard?E
R Parsons v. Pioneer Seed Hi-Bred
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Int’l, Inc., 447 F.3d 1102, 1104 (8th Cir. 2006) (district court should not
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have relied upon employee’s subjective state of mind when
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, subjective state of mind when determining whether release agreement was valid under
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“Knowing and Voluntary” CasesE
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1st Hernandez v. Philip Morris USA, Inc, 486 F.3d 1 (1st. Cir. 2007)(release of Title VII claim).
3d W B v Matula 67 F 3d 484 (3d Cir 1995) (release of
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HE 3d W.B. v. Matula, 67 F.3d 484 (3d Cir. 1995) (release of
Rehabilitation Act claim).
5th Chaplin v. Nations Credit Corp., 307 F.3d 368 (5th Cir. 2002) (release of ERISA claim)
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6th Alonso v. Huron Valley Ambulance Inc., No. 09-1812 (6th Cir. April 26, 2010) (release of right to judicial forum).
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7th Hampton v. Ford Motor Co., 561 F.3d 709 (7th Cir. 2009) (release of Title VII claim, no tender back as alternative reason for denying validity challenge).
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10th Torrez v. Public Service Co., 908 F.2d 687 (10th Cir. 1990) (release of 42 U.S.C. § 1981 claim).
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Can WARN Act claims be released?E
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When it applies, the WARN Act requires employers to provide employees with 60 calendar-day advance notice before a plant closing or mass layoff.
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Can an employee’s WARN Act rights be released?• Allen v. Sybase, Inc., 468 F.3d 642, 653-56 (10th Cir.
2006) (no release of Warn Act claim when claim arose
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after release was signed).• Joe v. First Bank System, Inc., 202 F.3d 1067, 1070 (8th
Cir 2000) (WARN Act claim released by general
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, Cir. 2000) (WARN Act claim released by general waiver).
• Williams v. Phillips Petroleum Co., 23 F.3d 930, 936-37 (5th Cir 1994) (WARN Act claims released no tender
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B. Legal Standards for Valid ReleaseE
R 3. ADEA Claims
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- knowing and voluntary test is set by the OWBPA (29 USC § 626(f))
R 3rd Wastak v. Lehigh Valley Health Network, 342 F 3d 281 283 (3d Cir 2003) (OWBPA sets the
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HE F.3d 281, 283 (3d Cir. 2003) (OWBPA sets the
minimum requirements, and pre-existing totality-of-the-circumstances test also
li )
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9th Syverson v. IBM, 472 F.3d 1072, 1075-76 (9th Cir. 2007) (employer must meet statutory requirements as well as knowing and
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OWBPA is a Floor, Not a CeilingE
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10th Bennet v. Coors, 189 F.3d 1221, 1230 (10th Cir. 1999) (OWBPA compliance is
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required, coupled with an assessment of totality of the circumstances).
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11th Griffin v. Kraft General Foods, Inc., 62 F 3d 368 371 73 (11th Cir 1995)
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, F.3d 368, 371-73 (11th Cir. 1995) (OWBPA sets forth minimum requirements; totality of the
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Notable OWBPA CasesE
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Raczak v. Ameritech Corp., 103 F.3d 1257 (6th Cir. 1997) (varying potential labels to use as “job title” for group termination disclosures should be resolved by focusing on
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“understandability” to workers).
American Airlines, Inc. v. Cardoza-Rodriguez, 133 F.3d 111
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(1st Cir. 1998) (the phrase “I have had reasonable and sufficient time and opportunity to consult with an independent legal representative” insufficient).
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Cole v. Gaming Entertainment, L.L.C., 199 F.Supp.2d 208 (D. Del 2002) (the phrase “[e]mployee acknowledges that
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Notable OWBPA CasesE
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Decisional Unit means: “[T]hat portion of the employer's organizational structure from
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which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be
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offered consideration for the signing of a waiver.” 29 CFR § 1625.22(f)(3).
What Are the Standards For a Valid ReleaseFor a Valid Release
No standard formC dd id f i Can address wide range of issues
Release must be knowing and voluntary M st be s pported b consideration Must be supported by consideration - Something of value - Something to which employee is not otherwise g p y
entitled Must comply with the Older Workers Benefit
Protection Act (“OWBPA”)
Employee Severance Agreements: Latest Guidance for
Protection Act ( OWBPA )- If the employee is 40 years of age or older
OWBPA Sets forth strict criteria for releasing age
discrimination claims (ADEA)discrimination claims (ADEA) Requirements are strictly construed Applies to reductions in force as well as Applies to reductions in force as well as
individual terminations and voluntary resignations
Applies to releases by employees with existing claims and employees with no active or foreseeable claims
Employee Severance Agreements: Latest Guidance for
Should be triggered upon employee’s t l i t f itt l
(continued)
actual receipt of written release agreementC id ti i d d t Consideration period need not pass completely before release may be executedexecuted- Employee may accept the release
agreement earlier and waive the 21/45 day
Employee Severance Agreements: Latest Guidance for
OWBPA’s Release Requirements – Case LawRequirements – Case Law
Oubre v. Entergy Operations, Inc.(Supreme Court 1998)- Release of age claim which does not fully
l ith OWBPA i t i fcomply with OWBPA requirements is of no effectEmployee who executes an OWBPA- Employee who executes an OWBPA-defective release does not have to return the severance consideration received if
Employee Severance Agreements: Latest Guidance for
Facts: employee given option of improving job performance or accept a severance agreement- Given 14 days to consider offer- Consulted with attorneys- Accepted package and agreed to release all
- Employee was not given 21 days to consider her optionsE l t i 7 d t k- Employee was not given 7 days to revoke agreementRelease made no specific reference to- Release made no specific reference to claims arising under the ADEA
Oubre v. Entergy Operations, Inc. and EEOC Regulationsand EEOC Regulations
29 CFR 1625.23 – amended to codify Oubre Ruling- Employee who executes an OWBPA-
d f ti i i t i d t t ddefective waiver is not required to tender back consideration prior to filing lawsuitEmployee is not required to pay employer’s- Employee is not required to pay employer s attorneys fees solely because they bring suit
Family and Medical Leave Act (“FMLA”)ReleasesReleases
29 CFR 825.220(d)- Employee cannot release right to pursue
prospective FMLA claims against employerE l l i ht t FMLA- Employee can release right to pursue FMLA claims based on past employer conductEmployee can agree to voluntarily settle past- Employee can agree to voluntarily settle past FMLA claims
Waivers must be knowing and voluntary- Evaluated under a “totality of the
circumstances” standard Clarity and specificity of release language Clarity and specificity of release language Should clearly indicate what claims are being
waived Employee’s education and business experience Amount of time employee had to deliberate Role of employee in deciding terms of agreement
Employee Severance Agreements: Latest Guidance for
Release must contain language that employee waives rights under Cal Civemployee waives rights under Cal. Civ. Code § 1542
Release must also quote following language q g g gfrom Cal. Civ. Code § 1542:- “a general release does not extend to claims
which the creditor does not know or suspect towhich the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must h t i ll ff t d hi h ttl t
Employee Severance Agreements: Latest Guidance for
have materially affected his or her settlement with the debtor.”
To release claim under the Minnesota Civil Rights Act, employee must …- Be given 15 day revocation period Unless release is given in settlement of a claim
filed with an administrative agency- Be advised of right to rescind the release in- Be advised of right to rescind the release in
State Specific Requirements –West VirginiaWest Virginia
To release a claim under the West Virginia Human Rights Act, each of the following conditions must be met (to ensure that waiver was knowing and voluntary):- Waiver must be in plain English and
understood by average person with similar education and work background
Employee Severance Agreements: Latest Guidance for
EEOC-Approved Language(2006 Western District of New York)(2006 Western District of New York)
- “Except as described below, you agree and co enant not to file an s it charge orcovenant not to file any suit, charge or complaint against [employer] in any court or administrative agency, with regard to anyadministrative agency, with regard to any claim, demand, liability or obligation arising out of your employment with [employer] or
i h f Y f hseparation therefrom. You further represent that no claim, complaints, charges, or other proceedings are pending in any court
Employee Severance Agreements: Latest Guidance for
proceedings are pending in any court, administrative agency, commission or other
EEOC-Approved Language(2006 Western District of New York) ( ti d)(2006 Western District of New York)
forum relating directly or indirectly to your emplo ment b [emplo er] Nothing in this
(continued)
employment by [employer]. Nothing in this agreement shall be construed to prohibit you from filing a charge or participating in anyfrom filing a charge or participating in any investigation or proceeding conducted by the EEOC or comparable state or local agency. N i h di h f iNotwithstanding the foregoing, you agree to waive your right to recover monetary damages in any charge or lawsuit filed by
Employee Severance Agreements: Latest Guidance for
damages in any charge or lawsuit filed by you or anyone else on your behalf.”
Agreement should include language providing court with authority to “blue pencil” or narrow any offending provision to make it enforceable- Ensures that release is not interpreted as
b d d f bl i it ti toverbroad and unenforceable in its entirety
• 2 schools of thought re: the use of releasesg- Effective tool to prevent litigation
v.
- Document that invites/encourages litigation
68DMEAST #13684386
Employer Benefits to Use of a Severance Agreementg
• Known “ending” re: employment relationship
• Additional terms that could benefit employer• Additional terms that could benefit employer
69DMEAST #13684386
Lawyer Drafting / Review
• Not all separations are the same – agreements need to be p gtailored to particular situation
• Beware the “form” agreement! Needs to be current re: law
70DMEAST #13684386
Right of Employee to Counsel
• Agreement should expressly advise employee to consult g p y p yan attorney of own choosing.
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State Law Issues
• Employers with operations in different states – don’t use the same agreement in every location State laws arethe same agreement in every location – State laws are different
• Some differences to consider:- Allotted but unused PTO- Form and language of release- Claims prohibited from being released - Specific statutes which must be expressly mentioned in release
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Language of Agreement
• Avoid legalese – keep it as short and simple as possibleg p p p
• Multi-lingual workforce? Have agreement printed in appropriate languages based on your workforce
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Other Considerations/Specific Terms
1. Does the employee have an employment agreement?• If yes:
- What restrictions, if any, does the agreement place on employer’s i h i ?right to terminate?
- Reasons? For cause? Notice Period?
Is the employee entitled to severance pay under the employment- Is the employee entitled to severance pay under the employment agreement?
- If so, consideration issues for the release.
74DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
2. Set Termination Date• Immediate termination v. continuation of employment for period
of time
• If continuation of employment, be careful- Duty of loyalty
C t / li t i t f- Customer/client interference
- Sabotage
- Confidential/proprietary informationp p y
- Morale of other employees
75DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
3. Payments Under the Agreement• Timing of severance payment:
- Pay over a period of time or in a lump sum?
h b d- When payment to be made?
▫ Agreement signed and returned and applicable revocation period has expired with no revocation
76DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
4. Tax Issues/Consequences of Paymentsq y• Is payment gross or net?
- Wages v. emotional distress/attorney’s fees, etc.
- If no withholding: (a) state employer makes no representations regarding taxability; (b) employee is responsible for taxes, interest and penalties; and (c) agrees to indemnify employer for tax consequences
77DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
5. Benefits• Continuation of Health Benefits
• Other insurance benefits
• Company vehicle
• Outplacement Services
• Computer, blackberry, mobile phone
78DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
6. Consideration• Consideration provided in the Agreement is more than employee
is otherwise entitled to
• Consideration is being provided for employee’s execution of the agreement, which includes the general release of any and all claims against the employer
• Consideration if “agreement” revoked under ADEA
• Language of “revocation” provision in Agreement – only applies to federal age discrimination claimsto federal age discrimination claims
79DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
7. Return of property• Set date for return• Expressly identify property broadly, including document and
what should be returned, and to whom• Computers and electronic devices
80DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
8. Employee Assistance to Employer• Transition Assistance• Cooperation in Litigation and Investigations
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Other Considerations/Specific Terms (cont’d)
9. Restrictive Covenants• Include provision reaffirming existing restrictive covenants• If no prior restrictive covenant agreement with employee,
consider whether to include restrictive covenants in release agreement
82DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
10 Review of Agreement10. Review of Agreement
• OWBPA review period (21 or 45 days)• Are there any state law requirements?• Reasonable review period if no applicable statutory or regulatory
requirement
83DMEAST #13684386
Other Considerations/Specific Terms (cont’d)
11. Miscellaneous Provisions
• Confidentiality• Non-Disparagement• No Admission of Liability• No Admission of Liability• No Re-Hire Provision• References• Choice of Law• Court v. arbitration• Attorney’s fees for employer in case of employer breach• “Jointly drafted” provision
Si d i b• Signed in subparts• Integration Clause• Severability• Assignment
