OWBPA Compliance Necessary For Valid Release of Claims

By: Joseph A. Vater, Jr., Esquire jav@muslaw.com

In terminating an employee or a group of employees, employers will often provide a severance or separation package in exchange for a release of claims against the employer. A recent case decided by the United States Court of Appeals for the Tenth Circuit reinforces the importance of complying with the Older Workers Benefit Protection Act (“OWBPA”) in such situations. In Ted Kruchow Ski v. Weyerhaeuser Co., the Tenth Circuit reviewed the validity of a release signed by a group of former employees of the Weyerhaeuser Company and determined that the release of the Age Discrimination in Employment Act claims was invalid because the release failed to comply with a certain requirement of the OWBPA.

The failure to comply involved an inaccurate description of the decisional unit. A decisional unit is defined by the rules interpreting OWBPA as “the portion of the employer’s organizational structure from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of the waiver.”

The group termination in the Weyerhaeuser case defined the decisional unit as all salaried employees at a facility. Weyerhaeuser later responded to interrogatories by indicating the decisional unit was salaried employees reporting to the facility manager. Fifteen employees at that facility who worked in human resources, information technology and accounting did not report to the facility manager. As a result, approximately ten percent of the employees at the facility were not a part of the actual decisional unit.

The Court recognized that the parties did not dispute that the release was written in a manner to be understood by all affected employees, that it specifically mentioned the Age Discrimination in Employment Act and that the employees waived their rights in exchange for consideration in addition to anything of value to which they were already entitled. Nonetheless, the Court held that the absence of even one of the OWBPA’s requirements invalidated the releases. Because Weyerhaeuser failed to show that the strict statutory requirements were met, the Court determined that the releases executed by the employees were invalid and unenforceable with respect to any age discrimination claim. As a result, the former employees who received benefits as a result of signing the releases were able to continue their lawsuit against the defendant on grounds of age discrimination.

Any employer considering obtaining a release from an individual terminated employee, or obtaining releases from a group of employees involved in a lay off, must ensure that its documents comply fully with OWBPA if the employer wishes to have an enforceable release against age discrimination claims.

For more information regarding the requirements of the Older Workers Benefit Protection Act, contact Joseph A. Vater, Jr. at jav@muslaw.com or 412-456-2827.