Breaking and associated brands will be offline for scheduled maintenance Saturday May 8 3 AM US EST to 12 PM EST. We apologize for the inconvenience.


Thank you for sharing!

Your article was successfully shared with the contacts you provided.
General Motors Corporation, Lucent Technologies Inc., Motorola Inc., and Inc. all have laid off thousands of workers in the past few months. And these companies, along with other downsizing businesses, are sending standard severance agreements to soon-to-be-ex-employees, including those who are older than 40. Quietly, corporate employment specialists are warning these companies that age discrimination rules recently issued by the Equal Employment Opportunity Commission are calling into question the enforceability of virtually all such contracts commonly used to terminate workers over 40. Especially open to courtroom challenge are severance agreements that promise pay in return for the employee’s pledge not to sue. “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 new EEOC age discrimination regulations now in place, companies 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 an older worker — at least until the latest EEOC rules are actually tested in appellate courts. Among other things, the new EEOC rules insist that 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 they’ve already received. Also more clearly verboten 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 attorneys’ fees, simply for suing. 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.” In return for satisfying both these new and old requirements, the EEOC late last year 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 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. Although the perfect prophylactic liability waiver may no longer exist in the context of a laid-off older worker, experts say that there are steps 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. Companies also should avoid severance agreement language that suggests older workers could be penalized for exercising rights protected by federal law. Finally, each liability waiver should be supported by compensation, 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. In addition, companies should have a complete layoff policy. Related Article: “Layoff Survival Guide”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.