Is Your Severance Program Release Enforceable?

by William Hayden

As most practitioners are aware, pursuant to the Older Worker Benefit Protection Act (“OWBPA”), in order for a release obtained in connection with a reduction-in-force (“RIF”) or severance program to be enforceable with respect to potential age discrimination claims, the program release documents must contain additional, more demanding terms.  See 29 U.S.C. § 626(f)(1)(A) through (H). These additional requirements are particularly important in that age discrimination claims are one of the most common legal challenges made in response to a RIF.   

Practitioners are generally aware that these additional required terms for program releases include:  

1. A 45-day “contemplation period,” instead of the required 21 days for individual release agreements;
2. An express recommendation to consult with an attorney before signing the release; and
3. Attached lists, by job title and age, of those selected for layoff and those not selected.

Less attention is given to another OWBPA requirement that program release documents include a written description of the terms of the RIF, for example, any eligibility factors, time limits, etc.  Pursuant to implementing regulations, these terms must include a clear description of the program’s “decisional unit.”  See, e.g., 29 C.F.R. § 1625.22(f)(3)(i)(A).  Stated simply, the decisional unit is that part or parts of the employer’s business that were considered by the decision maker(s) in deciding what positions would and would not be eliminated as a result of the RIF.  Even if a part of the business is not ultimately impacted by the RIF, if it was considered during the decision-making process, it becomes a part of the decisional unit.  

This OWBPA technical requirement has not historically received much attention from the plaintiffs’ lawyers and enforcement agencies who assess program releases for statutory compliance.  However, in a recent federal court decision, an AT&T program release was invalidated by the Court because the decisional unit was not clearly enough described in the release documents.  See Ray v. AT&T Inc., 2019 BL 10475, E.D. Pa., No. 18-3303.  In drafting release documents, lawyers frequently address the decisional unit (if at all) in vague, circuitous terms such as “… those business units in which incumbent employees were impacted as a result of the Program.”  

In light of this recent AT&T decision, it is anticipated that, going forward, plaintiffs’ lawyers and enforcement agencies will be examining program release documents to determine whether the decisional unit has been adequately described.  The potential consequence for failing to do so is that the employer is out what it paid in severance benefits in connection with the RIF, but may still be sued for alleged age discrimination, including potentially on a class basis.