ADEA Release That Fails to Instruct Employee to Consult With an Attorney Before Signing Does Not Comply With OWBPA: D. Colo. | Practical Law

ADEA Release That Fails to Instruct Employee to Consult With an Attorney Before Signing Does Not Comply With OWBPA: D. Colo. | Practical Law

In Foster v. Mountain Coal Co., L.L.C., the US District Court for the District of Colorado held that where a severance agreement does not strictly comply with the requirement under the Older Workers' Benefit Protection Act (OWBPA) to affirmatively advise a worker protected by age discrimination law to consult with an attorney before signing it, any Age Discrimination in Employment Act (ADEA) waiver contained in that severance agreement is invalid and cannot be enforced against the employee. UPDATE: On reconsideration, the Court held that the waiver substantially complied with the OWBPA and that the employee's waiver was knowing and voluntary (see Foster v. Mountain Coal Co., LLC,  (D.Colo., July 30, 2014)).

ADEA Release That Fails to Instruct Employee to Consult With an Attorney Before Signing Does Not Comply With OWBPA: D. Colo.

by Practical Law Labor & Employment
Published on 28 May 2014 • Colorado
In Foster v. Mountain Coal Co., L.L.C., the US District Court for the District of Colorado held that where a severance agreement does not strictly comply with the requirement under the Older Workers' Benefit Protection Act (OWBPA) to affirmatively advise a worker protected by age discrimination law to consult with an attorney before signing it, any Age Discrimination in Employment Act (ADEA) waiver contained in that severance agreement is invalid and cannot be enforced against the employee. UPDATE: On reconsideration, the Court held that the waiver substantially complied with the OWBPA and that the employee's waiver was knowing and voluntary (see Foster v. Mountain Coal Co., LLC, (D.Colo., July 30, 2014)).
On May 16, 2014, in Foster v. Mountain Coal Company of Colorado, L.L.C., the US District Court for the District of Colorado held that where a severance agreement does not strictly comply with the requirement under the Older Workers' Benefit Protection Act (OWBPA) to affirmatively advise a worker protected by the ADEA to consult with an attorney before signing it, any ADEA waiver contained in that severance agreement is invalid and cannot be enforced against the employee (No. 12-CV-03341-LTB-MJW, (D. Colo. May 16, 2014)).

Background

In June 2009, Mountain Coal Company of Colorado, L.L.C. (Mountain Coal) laid off Robert Fisk and approximately 60 other employees as part of a reduction in force (RIF). Mountain Coal presented Fisk with a Severance Agreement and Release of All Claims (severance agreement) that released Mountain Coal from any and all claims arising from Fisk's employment in exchange for an $8,800 severance payment and other consideration. Fisk signed the severance agreement on July 5, 2009.
The severance agreement stated:
Employee acknowledges that Employee has carefully read this Agreement, understands all its terms, and has signed it voluntarily with full knowledge of its significance after opportunity for consideration and consultation with Employee's attorney, family and/or advisors before signing this Agreement.
Fisk filed a complaint on December 26, 2012 alleging claims under the ADA, ADEA and the Colorado Anti-Discrimination Act. Mountain Coal contends that Fisk waived his claims by signing the severance agreement when he was terminated. Fisk however argues that the release in the severance agreement is invalid because:
  • The severance agreement and accompanying documents do not comply with the OWBPA.
  • His waiver was not otherwise "knowing and voluntary."
Mountain Coal moved for summary judgment to dismiss Fisk's claims.

Outcome

The Colorado Federal district court denied Mountain Coal's motion for summary judgment. The court noted that an employer must comply with all requirements of the OWBPA in order for an employee to effectively waive an ADEA claim. Substantial compliance is not adequate. (Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998).)
The court held that:
  • The enforceability of Fisk's Severance Agreement is a threshold issue that should be resolved before commencing full discovery in Fisk's age and disability claims. Therefore, this order will only address the validity of the Severance Agreement's waiver provision.
  • The severance agreement does not strictly comply with the fifth requirement of the OWBPA ("the individual is advised in writing to consult with an attorney prior to executing the agreement") because it does not advise Fisk to consult with an attorney before signing it. While the language in the severance agreement might substantially comply with this agreement, for example by providing that Fisk "may discuss the agreement with his attorney," substantial compliance is inadequate. The statutory language of the OWBPA requires that Fisk be affirmatively "advised" that he should or ought to consult with an attorney (Am. Airlines, Inc. v. Cardoza-Rodriguez, 133 F.3d 111 (1st Cir. 1998)). The language in the severance agreement however is passive and does not advise Fisk to do anything. As the severance agreement fails to advise Fisk to consult with an attorney before signing it, the release is invalid and cannot be enforced against Fisk.
  • Mountain Coal's use of the production group as the decisional unit was sufficient to satisfy Section 626(f)(1)(H) of the OWBPA because it was an objective criteria, not a subjective criteria based on flexible or manipulative terms and did not pose the risks the regulations are meant to prevent. Further, the eligibility factors used to determine the employees terminated through the RIF were clearly stated and included the required list stating the job titles and ages of both terminated and retained employees. Finally, Mountain Coal was not required to provide the RIF program selection criteria, as OWBPA only requires disclosure of eligibility factors for a severance plan. Although Mountain Coal met these requirements of the OWBPA, summary judgment was denied because it did not meet the fifth requirement regarding attorney consultation.
  • Enforcement of the "tender-back" doctrine (requiring employees to tender-back an amount paid under an agreement before challenging it) would be improper with regard to Colorado's anti-discrimination law because in Oubre v. Entergy Operations, Inc., the US Supreme Court held that enforcement of the tender-back rule would frustrate the enforcement of the ADEA. Since Colorado state law had not yet addressed the question of the tender-back doctrine's application to claims under the Anti-Discrimination Act, it looked to the decision in Oubre for guidance and upheld its finding.

Practical Implications

Employers should consider renaming release of claims agreements they use for prospective ADEA claims to check whether it instructs the employee to seek counsel or requires the employee to acknowledge that he had the opportunity to consult counsel. At least one Federal district court has required an employer to advise the released employee to consult counsel about releases.

Update

On reconsideration, the Court held that the waiver substantially complied with the OWBPA and that the employee's waiver was knowing and voluntary (see Foster v. Mountain Coal Co., LLC, (D.Colo., July 30, 2014)).