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Planning a RIF Means Drafting Releases That Comply with Latest Interpretation from EEOC & Courts

  • July 1, 2001

The number of layoffs in recent months has increased significantly -- a sobering development likely to continue. New claims filed with state agencies for unemployment insurance benefits climbed over 375,000 during the week ending June 30, 2001. In addition, the Bureau of Labor Statistics reported in May that the number of mass layoffs lasting at least 31 days totaled 1,664 in the first quarter of 2001 and resulted in job loss for 305,227 workers, as compared to only 208,082 in the first quarter of 1998, the high est the agency has recorded since it began tallying such statistics in 1995. Sixteen percent of these mass layoffs involved the permanent closure of worksites, with the greatest number occurring in general merchandising stores. Of the 1,664 mass layoffs occurring in the first quarter of this year, 26 involved the termination of 1,000 or more employees.

While trimming payrolls may lower the costs of doing business for many employers, the legal risks involving RIF's can easily devour any savings. A carefully drafted and validly executed waiver and release of claims provides an "insurance policy" of sorts shielding an employer from liability arising from the termination of employment. Releases are an extremely common form of legal protection, and many employers will have experience using releases in prior situations. However, the law governing the validity of releases for claims arising from employment has changed and is continuing to evolve in ways that could render a previously used release no protection at all.

EEOC Challenges on the Rise

The Equal Employment Opportunity Commission has become increasingly aggressive in challenging waivers and releases under the anti-discrimination laws it enforces. Aside from recent changes in the regulations governing the waiver and release of age claims under the Older Workers Benefit Protection Act, the EEOC has targeted for attack specific provisions in releases and severance agreements:

  1. language barring the individual waiving his or her rights from filing any claims or charges with any courts or administrative agencies - the EEOC takes the position an individual cannot waive the right to file a charge with the EEOC or other fair employment practice agency;
  2. language barring the individual waiving his or her rights from participating in an EEOC or other fair employment practice agency investigation - again, the EEOC says an individual cannot waive the right voluntarily to participate in an investigation;
  3. language barring the individual waiving his or her rights from seeking to be rehired - the EEOC takes the position such a provision is retaliatory and unlawful.

The agency has taken the position that an arbitration agreement does not preclude the EEOC from pursuing claims for relief on behalf of the individual who has agreed to arbitration. Whether this is an enforceable position will be decided this fall by the U. S. Supreme Court in the case, EEOC v. Waffle House, Inc.

Avoiding Challenges Through Careful Drafting and Legal Review of Releases

The value of the protection that a valid release affords employers can be nearly priceless. In contrast, the consequences of an unlawful or invalid document can be disastrous, underscoring the need for careful drafting and individual review in every situation. Previous releases, even if from the same legal counsel, should not be used without reviewing the particular situation, as well as the current state of the law, with employment counsel.

Beyond protecting against an EEOC challenge, artful release drafting may include additional protection against the possibility of an unpredictable courtroom trial. For example, a lawfully drafted release may include a waiver of the right to a jury trial, a provision to resolve any questions regarding the validity of the release itself through arbitration, or a provision requiring arbitration of any disputes over the factual information that has been provided as part of a group termination.

©2001 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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