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Employers frequently offer severance benefits to discharged employees in exchange for a release of any and all claims. However, such release agreements must be tailored to comply with a myriad of legal doctrines that can make the releases unenforceable, or worse, subject the employer to liability. Several recent decisions highlight the risks in requesting release agreements without recognizing these pitfalls. Many employers use release forms containing sweeping language, prohibiting the employee from filing any claim in any forum against the employer, based on any conduct that occurred to date. It is well settled that language prohibiting the employee from filing a charge of discrimination with a governmental agency, such as the Equal Employment Opportunity Commission (EEOC), is unenforceable, as such agencies have the right to investigate such allegations to pursue the public interest in eradicating discrimination. See, e.g., EEOC v. Cosmair Inc., 821 F.2d 1085 (5th Cir. 1987). Employers generally can, however, require the employee to waive his or her own right to any recovery in such a proceeding. See, e.g., Runyan v. Nat’l Cash Register Corp., 787 F.2d 1039, 1044 (6th Cir. 1986). Language in release could itself be actionable Now there is legal authority that inclusion of language prohibiting the filing of charges could itself be actionable, and subject the employer to liability. On Aug. 8, a district court held that an employer’s release agreement was facially retaliatory because it prohibited the signor from filing an EEOC charge. See EEOC v. Lockheed Martin Corp., 444 F. Supp. 2d 414 (D. Md. 2006). The court also held that conditioning severance benefits on the withdrawal of an employee’s EEOC charge constituted retaliation. The plaintiff in the case, Denise Isaac, was offered severance benefits in exchange for signing a release agreement which provided, in relevant part, that she was releasing “all claims of any nature . . . [including] claims for other personal remedies or damages sought in any legal proceeding or charge filed with any court, federal, state or local agency either by me or by a person claiming to act on my behalf or in my interest . . . .The parties agree that this Release prohibits my ability to pursue any Claims or charges against the Released Parties seeking monetary relief or other remedies for myself and/or as a representative on behalf of others. This agreement does not affect my ability to cooperate with any future ethics, legal or other investigations, whether conducted by the Corporation or any governmental agencies.” The court found that Lockheed’s waiver agreement was facially retaliatory. Focusing on the fact that the release agreement prohibited the signor from pursuing “Claims or charges against the Released Parties” for monetary or other relief, the court found that the release agreement included EEOC charges within its scope. The court indicated that if the release had been limited to a waiver of any right of an employee to recover monetary damages against Lockheed “it would probably not be facially retaliatory.” Id. at 420. Thus, inclusion of a broad covenant not to sue was held to be an unlawful act. The court also held that Lockheed’s requirement that Isaac dismiss her EEOC charge in order to be eligible for severance benefits was retaliatory. A recent consent decree between Ventura Foods and the EEOC further underscores this issue. See EEOC v. Ventura Foods LLC, No. 05-663, (D. Minn. consent decree signed Sept. 1, 2006). The EEOC alleged that Ventura Foods violated federal law by requiring employees receiving severance benefits to waive their rights to file charges of discrimination with the EEOC. To resolve the case, Ventura Foods agreed to notify all former employees who signed releases of their right to file EEOC charges without violating the severance agreement or losing any benefits, and re-offer enhanced severance benefits to any employee who had refused to sign the agreement. Also in September, the EEOC filed a lawsuit in federal court in Minneapolis alleging that Land O’ Lakes Inc. violated federal law when it told discharged workers that they could not file a complaint with the EEOC, and by denying them severance benefits if they did so. That lawsuit is pending. Thus, employers need to draft their releases with care, so that these documents prevent litigation and do not create a new vehicle for claims. Unclear language can render a release invalid The Older Workers Benefit Protection Act (OWBPA) creates a variety of requirements for a release of claims under the federal Age Discrimination in Employment Act (ADEA) to be enforceable. 29 U.S.C. 626(f). There has been much litigation over a variety of OWBPA requirements. However, one provision of the act that has received little attention until recently is the requirement that the agreement be written in manner calculated to be understood by the recipient individual or the average individual eligible to participate. Id. at � 626(f)(1)(A). In Syverson v. Int’l Business Machines Corp., 461 F.3d 1147 (9th Cir. 2006), the 9th U.S. Circuit Court of Appeals held that International Business Machines Corp.’s release agreements failed to meet this requirement, and thus were unenforceable. The plaintiffs were former IBM employees who signed release agreements in exchange for severance benefits and later filed claims of age discrimination against the company. The EEOC and the district court agreed that the plaintiffs gave up their right to pursue their age discrimination claims when they signed the release agreements. The 9th Circuit disagreed. Although the releases clearly stated that by signing the agreement the employees were releasing all claims against IBM, including claims for age discrimination, they also included the following covenant not to sue: “You agree that you will never institute a claim of any kind against IBM . . . .If you violate this covenant not to sue . . . you will pay all costs and expenses of defending against the suit incurred by IBM . . . .This covenant not to sue does not apply to actions based solely under the [ADEA] . . . .That means that if you were to sue IBM . . . only under the [ADEA] . . . you would not be liable under the terms of this Release for their attorneys’ fees and other costs and expenses of defending against the suit.” Id. at 1157. The quoted language likely was included to address other legal authority, holding that prohibiting an employee from challenging the enforceability of a release agreement under the OWBPA can constitute unlawful retaliation. See 29 C.F.R. 1625.23(b). The 9th Circuit, however, found the language in IBM’s release to be confusing, and held that the readers could reasonably believe that they retained the right to pursue ADEA claims against IBM. The court emphasized that the average employee would not understand the technical distinction between a release and a covenant not to sue, and that the inclusion of both concepts in a single document created a high risk of confusion. Employers thus need to evaluate the clarity of their release agreements. Releases of FMLA claims can be invalid Recent cases also have questioned whether an employee’s agreement to waive rights under the Family and Medical Leave Act (FMLA) is enforceable. On Aug. 30, a district court in Pennsylvania held that a general release did not preclude a former employee from suing Teva Pharmaceuticals USA under the FMLA, because a regulation promulgated by the Department of Labor (DOL) provides that employees cannot waive their rights under the FMLA. Dougherty v. Teva Pharmaceuticals USA, No. 05-2336, 2006 WL 2529632 (E.D. Pa. Aug. 30, 2006). The district court in Dougherty relied on a similar finding of the 4th Circuit in Taylor v. Progress Energy Inc., 415 F.3d 364 (4th Cir. 2005), holding that the DOL regulation prohibits any waiver of substantive or protective rights conferred by the FMLA unless the waiver is approved by a court or the DOL. (This judgment was vacated, and a rehearing granted.) The Dougherty court rejected the reasoning in Faris v. Williams WPC-1 Inc., 332 F.3d 316 (5th Cir. 2003), in which the 5th Circuit held that the DOL regulation does not invalidate an agreement by a former employee waiving his or her rights under the FMLA, and instead only prohibits the prospective waiver of rights under the statute by a current employee. Thus, an employee may be able to collect severance pay and nonetheless bring an FMLA claim, regardless of how well the release agreement is drafted. There have long been pitfalls in drafting release agreements for employees. Recent cases have added significantly to that list. An employer that fails to keep current on such authority runs the risk of paying for release agreements without receiving the expected benefit of buying “peace” with that employee. Such employers further run the risk of creating legal claims that did not already exist. Thus, while public policy generally has been held to favor settlements, recent cases remind employers that if they wish to resolve disputes with current and former employees, they need to draft such agreements with care. David K. Haase is a partner at Chicago-based Jenner & Block and is co-chairman of the firm’s labor and employment practice group. Emma Sullivan is an associate at the firm and represents management in labor and employment counseling and litigation.

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