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Summary of Release Requirements for Discrimination Claims

According to the EEOC summary, all federal discrimination statutes require that any valid release:

• be “knowing and voluntary” on the part of the employee (this term of art has been construed differently for the different discrimination statutes);
• be exchanged for valid consideration, such as additional compensation to which the employee would not otherwise be entitled; and
• not require an employee to waive any future rights – i.e., for claims arising after the agreement is signed.

In determining whether a release is “knowing and voluntary,” the EEOC’s summary correctly points out that courts typically consider whether a given release:

• is written in a way that is clear and specific, so that an employee can understand it (the EEOC cautions against “technical jargon and long, complex sentences”);
• has been induced by fraud or duress initiated by the employer;
• provides the employee with sufficient time for consideration before signing;
• encourages or discourages review by the employee’s attorney; and
• is subject to input from the employee before signing.

For releases that include waivers of federal age discrimination claims under the ADEA, the EEOC’s summary notes additional specific requirements for validity dictated by the federal Older Workers Benefit Protection Act:

• Specific reference to release of employee rights under the ADEA by name;
• Advice in writing that the employee should consult an attorney before signing;
• A 21-day period to consider the employer’s offer before signing (45 days in the event of a “group layoff” consisting of two or more employees);
• A seven-day period during which the employee may revoke his or her signature after signing; and
• For a group layoff, the employer must also provide the employee with information in writing about the “decisional unit” from which the employee was selected for the layoff, eligibility factors for the layoff program, any time limits, and the titles and ages for all employees within the decisional unit who were either selected or not selected for layoff.

The summary correctly notes (with citations to the EEOC’s “Enforcement Guidance” from April 1997 and to 29 C.F.R. § 1625.22(i)(2)) that a release cannot lawfully prevent an employee from bringing a later charge of discrimination with the EEOC nor prevent an employee from participating as a witness in an EEOC investigation. In fact, the EEOC takes the position that obtaining such a promise from an employee constitutes unlawful “retaliation” against the employee.

Some Overreaching Apparent

The EEOC’s summary includes an appendix with a suggested “Employee Checklist” for employer severance agreements containing releases. For the most part, the checklist merely rehashes the same validity requirements outlined above for the statutes administered by the EEOC. Readers should be cautioned, however, that the appendix appears to overreach by providing employees with gratuitous “tips” falling outside the EEOC’s normal area jurisdiction, with questionable results. These comments are unfortunate because they are likely to confuse employees and make them unduly suspicious of properly drafted agreements and well-intentioned efforts to resolve matters.  Specifically, in the final sentence of the appendix, the EEOC document advises:

"Make sure that your employer is not asking you to release your claims for unemployment compensation benefits, workers compensation benefits, claims under the Fair Labor Standards Act, health insurance benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA), or claims with regard to vested benefits under a retirement plan governed by the Employee Retirement Income Security Act (ERISA).”

Unemployment and workers compensation benefits are creatures of state law, and while many states (including Ohio) prohibit voluntary waivers of these rights, the EEOC’s broad assertion to a national audience, on a topic generally outside the bounds of equal employment opportunity, probably assumes too much.

The EEOC’s glib dismissal of proposed waivers for COBRA rights seems similarly flawed. The U.S. Department of Labor, which has primary responsibility for administering COBRA and which has published is own set of “FAQs for Employees About COBRA Continuation Health Coverage,” specifically contemplates what happens “if a qualified beneficiary waives COBRA coverage,” including methods for later revoking such waivers. Certainly employees might want to think twice before signing such a waiver, but the EEOC’s attempt to give employees advice outside its area of expertise is both unusual and inaccurate. 

Finally, the EEOC’s suggestion that employees should reject a release that waives ERISA claims does not seem to be based on any actual legal restriction prohibiting such waivers.   ERISA does prohibit certain types of waivers, and rights arising in the future cannot be waived. But it is well established that potential ERISA claims can be waived by releases that are knowing and voluntary – the same requirement used by the EEOC for the statutes it actually administers. See, e.g., Leavitt v. Nw. Bell Tel. Co., 921 F.2d 160, 162 (8th Cir. 1990).

With these exceptions, the EEOC’s new publication is a useful compilation. As always, employers are well-advised to obtain help from a qualified professional before drafting their own release agreements for use in reductions in force or other employment terminations.

According to the court, the former employees are not covered by Title I because they are not “qualified individuals” under the ADA. The Court pointed to the statute’s use of present-tense verbs in the definition of “qualified individual,” including “can perform,” “holds,” and “desires,” and held that “Title I is unambiguous; by its plain language, it does not apply to former employees who are unable to perform the essential functions of their jobs.” Finally, the Court agreed with the Ninth Circuit that ERISA, “which seeks to police . . . fringe benefit abuses” partially fills any resulting gap. 

In contrast, the Second and Third Circuits have held that former employees who are totally disabled can be considered “qualified individuals” with standing to file suit under Title I. Unlike the Sixth, Seventh and Ninth Circuits, the Second and Third Circuits found that Title I is ambiguous with respect to the definition of a “qualified individual with a disability” and therefore concluded that a broader interpretation, including disabled former employees, was consistent with the purposes of the statute. 

In light of this conflict among the federal appellate courts, it would not be surprising if the Supreme Court grants certiorari to hear any appeal that may be filed.

As previously reported, other key provisions of the ADAAA include:

• "Substantially limits" loosened:
  -  Congress rejected several U.S. Supreme Court cases that have narrowly interpreted the ADA, including the court-fashioned requirement that an individual must have an impairment that prevents or severely restricts the individual from doing activities that are of central importance to daily life in order to be considered substantially limited.
  
  -  In addition, an impairment that substantially limits one major life activity does not have to limit any other major life activities.
   
• Major life activities” expanded:   “Major life activity” is broadly defined, includes specific examples of major life activities, and extends the phrase to include “major bodily functions.”
   
• Consideration of mitigating measures largely eliminated:  Employers cannot consider the ameliorative effects of mitigating measures in determining whether an individual has a disability. The only exception is that glasses and contact lenses can still be considered.
   
• Remission or episodic impairments counted: Impairments that are episodic or in remission are disabilities if they would substantially limit a major life activity when active.
   
• Limit to life activity not applied to “regarded as” provision: An individual does not have to establish that the impairment limits or is perceived to limit a major life activity under “regarded as” disabled provisions.
   
• Minor or transitory conditions excluded: Minor or transitory conditions lasting six months or less are excluded from “regarded as” claims.
   
• No accommodation required under “regarded as” provision: Employers are not required to provide reasonable accommodations to employees who are “regarded as” disabled.

Congress’s clear intent is to provide ADA coverage to more people and to require courts to apply a less demanding standard in determining whether a person is covered by the ADA. Instead, Congress wants courts to focus on whether discrimination based on disability actually occurred. This likely means an increase in the number of employees and applicants who are considered disabled and places greater importance on employer efforts to reasonably accommodate those individuals. Indeed, the legislation strongly suggests that employers will need to reasonably accommodate individuals even if they are fully able to perform their job duties while taking medication or using prescribed medical devices. 

Though some believe that the ADAAA will not cause an increase in litigation, we believe that there will be a rise in the number of cases filed because the bill will make it easier to state a claim and because people initially will seek to test the new provisions. Additionally, under the current ADA and standards, many cases were dismissed before trial because plaintiffs could not meet the high standard of proving that they are disabled. The ADAAA makes this outcome much less likely. As a result, we expect a rise in jury trials as it becomes more difficult for employers to win at the summary judgment stage.

Having received broad bipartisan support, the bill moved quickly through the House. The Amendments also have the support of both leading employer and disability groups. The legislation is now in the Senate, where it is expected to pass by the end of the year. Some media reports suggest that the Senate may actually take action before Congress takes its August recess.     It is not clear whether the legislation will be signed by President Bush. The Bush Administration expressed its general support for the bill, but has expressed concern that certain provisions are too broad, would be difficult to implement, and would lead to increased litigation.

From a policy and practical standpoint for employers, the clarified definition of what constitutes a disability is expected to increase the overall number of people considered disabled and in turn may require employer to accommodate a larger number of employees. Indeed, the legislation can be read to require reasonable accommodations to be provided to people who are fully able to perform their job duties when they are taking medication or using prescribed medical devices.

From a litigation standpoint, the Amendments generally are not expected to mean significantly more litigation. The Amendments may, however, make it more difficult for employers to win these cases on summary judgment, resulting in more “employee-friendly decisions” and potentially larger settlements.

We will continue to monitor the progress of this bill and will report back here if and when the bill is presented to President Bush for his signature.