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The following checklist serves as an initial agenda for discussion with management and employment counsel about how to manage professional support staff turnover: � Don’t wait. Employment terminations are frequently stressful for the employer and the employee. Emotions may run high. Personal plans may be jeopardized or disrupted. The employer may be operating under time, staff and financial constraints. Advance planning is essential. � Consider a published written severance plan coupled with a release of claims, maintained on a standby basis. � Get help. The requirements for an effective and enforceable severance and release plan are manifold and specialized matters of employment law. A necessarily incomplete list of facts to consider would include the following: � While employers remain free to negotiate individualized settlements with departing employees, recurring severance payments or settlements may imply a severance policy or practice. ERISA has been held applicable to informal severance practices. ERISA imposes specific requirements on such plans. See, e.g., ERISA �� 402, 403, 29 U.S.C. �� 1102, 1103. The plan must be in writing, must be readily understandable or accompanied by a summary plan description, must identify one or more fiduciaries to run the plan, must assign administrative duties; must define the basis for severance payments, must define the process for amending the plan, must provide a claims procedure and, if covering a large number of employees, must be filed annually with the Department of Labor with a Form 5500. � The payment formula must not discriminate on the basis of age over 40 or other legally prohibited factors. The employer will want to avoid inadvertently creating an employee pension benefit plan with its burdensome eligibility, vesting and funding requirements. See DOL Reg. � 2510.3-2. A severance arrangement will not be deemed a pension plan solely because of severance benefit payments on employment termination if: � The payments are not contingent on retirement, � The total amount of such payments does not exceed twice the employee’s annual compensation during the year immediately preceding the employment termination year, and � Payments to any participant are completed within two years after employment termination (with minor exceptions not usually relevant to individual terminations). The severance plan may be considered a pension plan if it is linked to a pension plan by requiring employees who receive severance benefits to take pension benefits at the same time, or if the severance plan requires a waiver of future employment. Advisory Opinion 83-47A (Sept. 13, 1983) and Adv. Op. 80-7A (Feb. 1, 1980). Although this leaves wide flexibility to the employer, a frequent formula consists of a defined ratio between payments and service, such as one week’s base compensation for each full year of continuous active employment. � The plan should expressly state a sunset date and should provide that benefits can be modified, reduced or completely eliminated at any time. � The plan can exclude categories of individuals on neutral grounds, such as individuals employed for less than one year; those whose employment is terminated for cause, as defined in the plan; and those who obtain speedy re-employment or who receive offers of employment in what are reasonably deemed by the plan committee to be comparable positions. � ERISA filing requirements cover severance and release welfare benefit plans. Although there are exceptions for layoff severance plans where fewer than 100 persons are eligible for plan benefits at the beginning of a plan year and where all benefits are paid from the employer’s general assets, many employers will file anyway in view of the substantial penalties for noncompliance or tardy compliance with filing requirements. Penalties for violating reporting and disclosure requirements may be a fine of up to $100,000 for a firm, or one year in jail and a fine of up to $5,000 for an individual. The more likely penalties are assessments of up to $1,000 per day for failure to file the required DOL annual reports (Form 5500) and $100 per day for failure to provide requested information to participants. Some courts have used noncompliance with reporting and disclosure requirements as a ground for determining entitlement to plan benefits, at least when participants have been prejudiced. � Care must be taken in drafting the waiver and release of claims on which severance payments are conditioned. The OWBPA requires that an enforceable waiver and release of ADEA claims be “knowing and voluntary” and that an individual release of ADEA claims incorporate at least the following provisions: � The waiver must be part of an agreement written in a manner calculated to be understood by the individual, or the average individual eligible to participate. � The waiver must specifically refer to rights or claims arising under the ADEA. General references to “age discrimination” or “equal employment” claims are insufficient. 29 C.F.R. � 1625.22(b)(6); 29 U.S.C. � 626(f) (1)(B). (Under better practice, the release should also identify other types of released claims by category and by statutory reference.) � The waiver cannot extend to rights or claims that may arise after the wavier is executed. Cautiously drafted releases will specifically exclude claims arising in the future. � The employee must waive rights or claims only in exchange for consideration in addition to anything of value to which the employee is already entitled. Note, however, that the OWBPA has been held not to require additional consideration for the release of ADEA claims beyond the consideration paid for the release of other claims. � The individual must be advised in writing to consult with an attorney prior to executing the waiver. The employer must be blunt: Advising means telling. � The employee must be given sufficient time to consider the waiver, i.e., at least 21 days in the case of an individual agreement, or 45 days in connection with an “exit incentive or other employment termination program.” The phrase is statutory and undefined, 29 U.S.C. � 626(f) (1)(F)(ii), and remains puzzling and vague despite the care and ink devoted to it in the EEOC’s negotiated rulemaking, 29 C.F.R. � 1625.22(e)-(f), and by authors and practitioners. The employee may, but need not — and often does not — take the entire available time. � The waiver agreement must provide a seven-day period following its acceptance, within which the employee may revoke the agreement as to ADEA claims. This is inherently nonwaivable. Cautious practice will condition payment on the employee’s provision of written confirmation following the seventh day, on the employer’s request, that the employee has not revoked the agreement. Consider including an arbitration provision covering: � Claims arising from the waiver and release agreement, including claims of invalid formation and breach, � Claims resolved by the waiver and release agreement, and � Other future claims between the parties. Current controversy over the scope and enforceability of employment-related arbitration agreements makes this a subject requiring an employment lawyer’s advice in the context of a specific agreement. Take care to accommodate the EEOC’s insistence that access to its process not be waived. See 29 C.F.R. � 1625.22(h)(i)(2)-(3). In general, the EEOC opposes as invalid, and in some instances unlawful, any attempt to secure a waiver of the right to file charges of discrimination or provide information lawfully requested by the EEOC. Think carefully about “tender-back” clauses. Oubre held that the plaintiff’s retention of amounts paid in settlement did not ratify an otherwise invalid release of ADEA claims. The EEOC has issued a notice of proposed rulemaking proposing regulations that would substantially expand on that decision by broadly prohibiting covenants not to sue and also fee-shifting provisions requiring that prevailing employers be paid attorney fees expended in the successful defense of an ADEA release. Courts have not yet provided firm guidance on this expansive proposal. State your agreement on attorney fees and costs. The waiver and release may be held to make the employee a “prevailing party” for fee-shifting purposes under the equal employment laws. David A. Cathcart is a partner in the employment and labor department of Gibson, Dunn & Crutcher LLP in Los Angeles, where he represents employers in all phases of labor and employment law.

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