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In the past few weeks, General Motors, Lucent Technologies, Motorola, Sears and Amazon.com have announced well-publicized layoffs of thousands of workers. These companies are among the many downsizing businesses sending standard severance agreements to the soon-to-be ex-employees, including those who are older than 40. Quietly, corporate employment specialists have been warning these clients that age-discrimination rules recently issued by the Equal Employment Opportunity Commission have called into question the enforceability of virtually all such contracts commonly used to terminate workers older than 40. Especially open to a courtroom challenge, lawyers say, are severance agreements that promise pay in return for a lawsuit waiver, but do not adequately satisfy the older laid-off workers’ federal employment rights as delineated in the agency’s directives. “We’re all concerned” about the enforceability issue, says Michael Dubus, of counsel in the Atlanta office of Los Angeles’ Paul, Hastings, Janofsky & Walker. Indeed, the whole point of offering any laid-off employee severance pay, he says, has been for the employer to have “total confidence” that, in return, it will never be sued. But, thanks to the new EEOC age-discrimination regulations that are now in place, employment specialists concede, they are essentially powerless to stop courtroom challenges and the considerable expense that goes along with them — nor can they confidently predict a favorable result in a given waiver dispute with a worker older than 40, at least, until the latest EEOC rules are actually tested in the appellate courts. Of course, many downsizing employers have taken the defense bar’s advice and made some recommended adjustments. But others have not. “I’ve seen some push-back from clients,” says Dubus. “They want to get that liability release but still want it to be as short as humanly possible, so as not to set off all sorts of bells and whistles.” EEOC REGULATIONS The EEOC maintains that its regulations issued in December are legislative rules that have the force of law. The agency notes in its preamble to the rules that Congress gave the EEOC its rule-making authority through the Older Workers Benefit Protection Act of 1990, which significantly extended the original legal protections afforded most workers older than 40 through the Age Discrimination in Employment Act of 1967. Among other things, the new EEOC rules insist that the older laid-off workers must be able to challenge in court the legality of any waiver of the right to sue without first having to give back any severance pay received. Also more clearly prohibited under the new EEOC rules are clauses in severance contracts that call for the exiting 40-and-older workers to pay for court costs and attorney fees, simply for filing suit. Nor can the employer void retirement or other benefits it had promised under the final directives, even if its liability waiver is challenged in court. The new EEOC rules also reaffirm 1998 agency regulations that reflected the act’s provisions requiring downsizing employers to help make sure an older laid-off worker’s liability waiver is “knowing and voluntary.” According to those earlier rules, for instance, employers laying off workers must provide all targeted employees with written instructions advising them to consult a lawyer before signing any liability waiver and that they have 21 days to consider whether they really want to sign it, and then seven more days to change their minds. In return for satisfying both these new and old requirements, the EEOC in December reassured downsizing employers that the resulting waivers obtained from their laid-off workers would afford them an affirmative defense against any future age-discrimination lawsuit. On the other hand, the EEOC’s latest word on the subject made it clear that the burden is on the employer to prove in court that its waivers are valid. “What has changed is the lack of certainty,” says Paul Salvatore, a partner at New York’s Proskauer Rose who represents employers. The new EEOC rules, employment specialists complain, mean that a laid-off older employee now has almost nothing to lose by taking the employer’s money and testing the legal sufficiency of the signed liability waiver in court. EEOC IS CONFIDENT EEOC attorney Carolyn Wheeler is confident that her agency’s new age-discrimination rules will be upheld by the courts because, she claims, they are nearly a verbatim rendering of the Supreme Court’s read on the controlling Older Workers Protection Act in Oubre v. Entergy Operations Inc., 522 U.S. 422 (1998). Although the perfect prophylactic liability waiver may no longer exist in the context of a laid-off older worker, the experts say that there are steps that a downsizing company should take to get as much protection from potential age-discrimination lawsuits as possible. Among other things, they advise employers: � To document thoroughly the supplying of all information required by the age discrimination law and the latest EEOC regulations. � To avoid language in a severance agreement that suggests older workers will be penalized for exercising their federally protected employment rights. � To make sure to allocate pay consideration for each liability waiver and promise not to compete, so that any court-ordered striking of one part of the agreement will not necessarily affect the employer’s ability to enforce the remainder of the contract. Above everything else, corporate employment specialists emphasize that employers should follow the letter of the new EEOC rule closely, and if they do, barring a surprise in court, employers should do well. These lawyers point to a widely talked-about late 2000 decision by the 11th U.S. Circuit Court of Appeals, which adopted the view held by a majority of the federal appeals courts that a reasonably explained “subjective” reason for any adverse job action, including a termination, can be nondiscriminatory. Chapman v. A1 Transport, 229 F 3d 1012. “An employer’s decision to lay off a particular worker is almost always very subjective and hard for the plaintiff to rebut,” says the EEOC’s Wheeler. As a result, Wheeler agrees that age-discrimination lawsuits against a downsizing employer in which the employer’s severance package meets the EEOC’s directives will have a tough time making it to trial. Michael Harris, a partner at Chicago’s Connelly Sheehan & Moran, is one defense specialist who says that the adjustments triggered by the EEOC action are not “particularly painful” to make. “Anyway,” he asks, “what company really wants to be the first test case?”

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