So, a couple of months back, I talked about how separation agreements for small employers might not be covered by the federal law that covers such agreements.

After all, since the Age Discrimination in Employment Act only applied to employers that have 20 or more employees, the requirements for a “knowing and voluntary waiver” of claims under separation agreements only applied to those larger employers.

Because this is a federal law, it applies in Connecticut though states are free to craft additional laws if they wish.

Recently, though, I’ve heard of an employee spouting off about “advice” he received that  Connecticut state law had the same requirements as federal law did.

And since Connecticut’s anti-discrimination laws apply to employers of 3 or more employees, the employee argued that he should be provided with 21 days to consider the agreement.

When I heard this, I scratched my, well, proverbial head about this one.  Did I miss something?

The short answer is no, I didn’t miss something.  Connecticut law doesn’t say this.  You can see for yourself in Conn. Gen. Stat. 46a-60.

But how did the employee get such advice?

The first answer may be the simplest one: The attorney he spoke with doesn’t routinely practice in the area.  Sometimes, well-meaning lawyers just overstep their knowledge basis.

Another obvious answer is that the employee’s so-called advice was from “Attorney” Google.  Google is really good at finding things that might apply to your situation — not as good yet at telling you whether it actually applies to your situation.

And if you Google a topic like this, you might actually find a state court decision that looks — at first blush — like it might be on point.

State courts often use the following language in their decisions:

Although this case is based solely on Connecticut law, we review federal precedent concerning employment discrimination for guidance in enforcing our own antidiscrimination statutes.

What does THAT mean?

Typically for the same types of disparate treatment claims for, say, gender discrimination claims, courts in Connecticut don’t have as much as experience as federal law. So where the law is the SAME, it makes sense to look to federal laws that are similar.

The problem in the age discrimination statute context is that Connecticut law is DIFFERENT than federal law at times. There is no state equivalent. So looking to federal law makes no sense whatsoever.  And sure enough a quick search of Google Scholar reveals NO state law case applying that federal law to a review of separation agreements.

So how ARE separation agreements to be reviewed in Connecticut? In essence, you would most likely look at the agreement under state laws dealing with contracts.  Typically, this is also done through the “common law’ – that is precedent from the courts.  And Connecticut courts haven’t said much about separation agreements.

Employers are sometimes caught in the middle of receiving advice from their counsel (hopefully correct) and what the employee believes is true whether through an attorney or otherwise.  Employers should understand the misinformation that exists out there and, when confronted with these issues, try to explain them to employees.

Otherwise, a seemingly innocuous situation could turn much more stressful when the employee thinks (and worse, is being told) that the employer is violating a non-existent state law.

U.S. Department of Labor Headquarters
U.S. Department of Labor Headquarters

Over the last few days, Twitter has been a-twittering with buzz that the Department of Labor has sent the final overtime rules to the OMB.

This is the equivalent of one department sending another one an e-mail with the new rules. Why? Because it’s just the next step in getting the rules approved.  But nothing more than that. Moreover, this step always happens in the issuance of regulations.

And here’s the really important point: We still don’t know what these final rules will be.

So ask yourself, is it really worth getting excited about one department sending the rules to another?

That said, SHRM had some additional information from a speaker at a conference this week about when we can actually expect to see the new rules:

At the SHRM Employment Law & Legislative Conference yesterday, Tammy McCutchen, an attorney with Littler in Washington, D.C., and a former administrator of the DOL’s Wage and Hour Division, advised attendees to keep an eye on reginfo.gov, which tracks government agencies’ regulatory actions as they are submitted for review to OMB. Sure enough, the rule appeared on the site late March 14.

At the conference, McCutchen told attendees she believed the rule would work its way quickly through OMB and most likely be published by July 7, and take effect on Labor Day, Sept. 5. Alternatively, she said, the rule would be published the Friday before Labor Day, Sept. 2, to take effect Nov. 1—just prior to Election Day.

If you recall, I first reported on the timing of this back in November 2015.  In that post, I reported on what I heard at the ABA Labor & Employment Law conference — “late 2016”.

Despite all the Twitter posts this week: Things are still on target.

For employers in Connecticut, this is really wait-and-see territory.  First, we don’t know what the new overtime rules are going to be. And second, Connecticut has it’s own rules and we will need to analyze the interaction between existing state laws and these new federal overtime regulations.

Remember: Keep Calm & Carry On.

TimeIn catching up over some interesting employment law cases from 2015, I came across Lennon v. Dolce Vida Medical Spa (download here).  You would be forgiven if you missed it because it’s an unreported Superior Court decision on a seemingly-technical issue.

But, if followed by other courts, it has a notable twist.

First, the simple background: In Connecticut, employees must typically file discrimination claims first with the state agency, the Commission on Human Rights & Opportunities before going to court.  These claims are, pursuant to a work-sharing agreement with the EEOC, typically cross-filed with the federal agency too.

(For the lawyers out there — yes, you can file first at the EEOC, but the vast majority of claims get filed first at the CHRO.)

In any event, in order to bring suit in court, the employee must obtain a “right-to-sue” letter from the CHRO and, I think many people believed, from the EEOC as well.  The employee must then bring suit in court in the following 90 days from receipt.

In the Lennon case, the employee received only the right to sue letter from the CHRO and yet brought both state and federal discrimination claims.

The employer moved to dismiss the federal claims.  The Superior Court, however, rejected that motion to dismiss, saying the existence of a work-sharing agreement between the CHRO and the EEOC as well as the fact that the filing requirement is not a jurisdictional bar, does not merit dismissal of the claims here.

[Dismissal is not warranted because of] the plaintiff’s timely compliance with [the state] filing requirement, the nature of the work-sharing agreement in place between the CHRO and the EEOC, the fact that every federal circuit court presented with this issue has decided that obtaining a right-to-sue letter is a precondition rather than a jurisdictional requirement for bringing suit based on EEOC violations, and recent decisions of the district courts of Connecticut holding that a plaintiff who has a release from the CHRO is not required to obtain a duplicate right-to-sue notice from the EEOC….

Fair enough.  The court cites some similar federal court cases from Connecticut to support this position as well.  (I should note, however, that Superior Court decisions have questionable precedential value according to some so be sure to check with counsel about any use of this case.)

But if that’s going to be the law — that an employee need not wait or get a separate right-to-sue letter from the EEOC before filing suit on both state and federal grounds — what is left unanswered from the case is a different by similar set of facts.

Suppose an employee receives the right-to-sue letter from the CHRO but, for whatever reason, does not file suit in state or federal court in the next 90 days.  Months go by and the EEOC then issues its  notice of a right-to-sue nearly one year later (which is what happened in the Lennon case).  The employee then files suit in federal court on the claims within 90 days.

Are his or her federal claims now time-barred because courts have ruled that the employee could have brought suit with simply a state (CHRO) right-to-sue letter?  Are the state law claims revived based on this EEOC letter?

Employers would certainly ope the answers are “no” and “no” but we’ll just have to wait-and-see what the courts do on this. Something tells me that employers shouldn’t get their hopes up too much — at least on the first question.

Last week, a story caught my eye and the attention of some of my colleagues.  As reported first by Bloomberg BNA, IBM has stopped providing the comparison information that is typically required in separation agreements for older workers under the Older Workers Benefit Protection Act.

You may be wondering how that is possible.  Robin Shea, of Employment & Labor Insider beat me to the punch with a very good recap that I don’t think I can improve upon.  So I’ll cite two paragraphs below:

As you know, when an employer has a “group termination” — usually, a reduction in force, but a “group” can be as few as two people – it is required to disclose the job titles and ages of the individuals in the “decisional unit,” which means the working unit from which the decisions were made. If the employer doesn’t make the disclosures (and get ‘em right), then it can’t get a valid waiver of age discrimination claims under the federal Age Discrimination in Employment Act although the waiver may be valid in other respects …..

But how can IBM do this?  They aren’t requiring employees to give up their age discrimination claims, that’s how. They’re just requiring them to use arbitration instead of the court system. Which I think is legal, based on Gilmer v. Interstate/Johnson Lane, a Supreme Court decision from the 1990′s.

In essence, IBM is using a separation agreement with two sets of rules: For all claims except age discrimination, employees must release IBM. For age discrimination claims, IBM has said that employees do not have to release IBM but must take any such claims to arbitration.

Will it work? That remains to be seen. It has yet to be challenged in court or the EEOC.

But most employers are not IBM and do not have the resources to take this strategy.

So I suspect that many employers will simply follow the path of least resistance and provide the comparison information under the OWBPA.  If done right, then employers will get the benefit of an additional release without the hassle of arbitration or the added cost.   It’s worked for many employers for over 20 years and, IBM’s strategy notwithstanding, it’s probably not worth changing gears now.

There are many good free resources for additional background on this topic. One that I would suggest was produced by the ABA in 2008 and is still highly relevant today.

If you’re like most employers that do background checks, you probably haven’t thought twice about the documentation you use for it.

Perhaps you’ve copied some standard language you’ve found off the Internet (not that there is anything necessarily wrong with that), or maybe you’ve just used a form that has been handed down from one HR person to another.

A new lawsuit and a new strategic focus by the Federal Trade Commission and Equal Employment Opportunity Commission should give most employers pause on the forms that they use for background checks and the background check process itself.  This is true not only for the printed forms, but also the online forms that employers have started to use with regularity.

First off, Whole Foods was recently sued by an applicant who charged that the company’s online form seeking job applicants’ approval for criminal background check violates the Fair Credit Reporting Act.

As noted by Judy Greenwald from Business Insurance:

According to the lawsuit filed Friday in U.S. District Court in Oakland, Calif., in Esayas Gezahegne v. Whole Foods Market California Inc., the language in the authorization includes a waiver of claims against those who obtain a consumer reports, in violation of the FCRA. Consumer reports include criminal background checks, credit checks and other similar reports.  …

The online authorization forms all contained language releasing those who obtained the consumer reports from all liability, in violation of the FCRA’ s requirement that the authorizations be pristine documents that contain nothing other than the required disclosures and the requested authorization. In other words, defendant’s authorization forms were facially invalid,” the lawsuit states.

While it’s still early to draw conclusions from the lawsuit itself, the takeaway is that employers should consider having their disclosure contain only the disclosure.  Adding release language to it may be troubling to some courts.

I’ve discussed this in more detail in a client alert that we recently issued.

Second, this week the Federal Trade Commission and the EEOC released new guidance this week on employment background checks that again highlight the renewed focus these agencies have placed on the topic.

The press release states:

Hiring decisions are among the most important choices for any employer, but the process can be complex. For the first time, the Federal Trade Commission (FTC) and the Equal Employment Opportunity Commission (EEOC) have co-published two short guides on employment background checks that explain the rights and responsibilities of the people on both sides of the desk.

The FTC and the EEOC want employers to know that they need written permission from job applicants before getting background reports about them from a company in the business of compiling background information. Employers also should know that it’s illegal to discriminate based on a person’s race, national origin, sex, religion, disability, or age (40 or older) when requesting or using background information for employment.

At the same time, the agencies want job applicants to know that it’s not illegal for potential employers to ask someone about their background as long as the employer does not unlawfully discriminate. Job applicants also should know that if they’ve been turned down for a job or denied a promotion based on information in a background report, they have a right to review the report for accuracy.

With agencies and attorneys looking more closely at background checks, now is the right time to double check the forms you use — particularly if you haven’t looked at them in a while.

Giving claims a final resting place

A few days ago, I came across a thoughtful post from Work Matters, a longtime blog run by Michael Maslanka.

In it, Mike describes a clause in a settlement agreement to get around an issue that sometimes arises — how do you minimize the threat of an EEOC claim when the EEOC has taken the position that an employee cannot agree to a provision in which he or she agrees to not file a charge at the EEOC?

Mike solution is one that we often use too — a clause that limits the employee’s right to any recovery if he or she files a claim with the EEOC.  If you’re curious on the specific language, visit Mike’s blog post.

But Mike’s post got me thinking about other settlement provisions that pop up from time to time.   Of course, I wrote a bit about it back in 2011 so I’m not going to repeat what I said then; it’s a good place to start if you’re thinking about the subject.

Nor will I repeat the wisdom I’ve seen from one of the better articles I’ve seen about settlement provisions from attorney Robert Fitzpatrick.  I cited it (briefly) all the way back in 2008 and that I’ve cited from time to time. Robert’s article on settlement agreements was written ten years ago so it’s missing things like dealing with Section 409A, but the overwhelming majority of the article stands the test of time.  At over 90 pages, it pretty much covers the provisions you’ll need to consider including non-disparagement clauses, no-rehire provisions, and the like.

Indeed, in this age of shared information, employers need not draft an agreement from scratch. For employers, there are publicly available examples of settlement and severance agreements on the Internet.  For example, want to see the severance agreement that Marissa Mayer and Yahoo! have agreed to? It’s publicly posted.

Of course, employers shouldn’t just copy these.  It’s vitally important to get experienced employment law counsel to review your standard agreement (and specific ones, if possible).  Why should employers do this (besides a self-serving reminder to hire attorneys like myself)?

Because there are so many tricky little provisions that it’s easy to get tripped up.  Take “tender back” provisions (requiring employees to pay back settlement proceeds in the event of a lawsuit challenging the validity of the agreement).  They were generally struck down by the EEOC years ago. But your form may still have them, thereby putting your company at risk.

And if your eyes glazed over at my mention of Section 409A provisions before (and wondered what they were), that alone provides yet another reason.

Reaching an agreement with a former employee to resolve a claim of discrimination is difficult enough without worrying about whether your written agreement is valid.  Make sure you’ve covered yourself so that when you resolve the matter — it’s actually resolved.

Settlement provisions aren’t that complicated, but when reaching finality in claims, it’s better to cover your bases than cut corners.

 

Throw out the release?

The situation is a common one.

  • Employer terminates the employment of an employee.
  • Employer provides a severance agreement with its signature already affixed. 
  • Employee signs it and returns the agreement to the employer.
  • Employer, likely reviewing just the signature, pays the severance.

But here’s where things get interesting. Employee then sues the employer for discrimination. Employer says, “wait a minute”, the employee already signed a release.

Except the employee has the equivalent of baseball’s hidden ball trick up her sleeve.

Before the employee signed the agreement, she re-typed the entire page with the general release using the same font and margins. (You can download the agreement here.)

And, most importantly, she changed the word “including” (when referring to specific claims she was releasing) to “excluding” (thereby trying to exclude the laundry list of claims that typically follows an “including” clause).

She signed the agreement and returned it to the employer.  (There is some dispute as to whether the employee attached a yellow sticky note to the change.)

Those facts are described in a remarkable new case out of a federal district court and were first reported in the Employment Law Daily briefing

The employer argued that the employee, under either version of the release, had settled “all claims” against the employer. The court raised its own issue suggesing that the waiver was not knowing or voluntary — at least at this stage of the litigation.

Here, by changing the word “including” to “excluding” prior to the list of claims covered by the Chanel Separation and Release Agreement before signing the agreement and returning it to Defendant, Plaintiff manifested an intent to preserve her right to file a discrimination claim. Thus, Plaintiff did not knowingly, willfully, and voluntarily waive her right to file a discrimination claim, regardless of whether the Chanel Separation Release Agreement, Plaintiff’s Release, or neither represents the agreement of the parties.

The case will proceed with discovery now and it remains to be seen whether there will be additional facts gleaned during the case that could change the court’s analysis.

Regardless, the decision is a stark reminder to employers that things may not always be what they seem and that, unfortunately, it is up to the employer to police the agreements.  

When a severance agreement is returned to the employer, the case now emphasizes a need for employers to make sure that what was signed was actually the version that was sent to the employer in the first place.  

I tend to disagree with the court’s decision that a party should profit from such trickery but the court — at least in this case — refused to come down harshly on the employee.

Ultimately, it’s a scary decision for employers — particularly those that may process dozens of such agreements during a reduction in force.

The title of this post is, of course, a bit misleading.  Any lawyer will tell you that each employment case you may have is unique and that any settlement must take into account the facts and circumstances of the particular case.

All true.  And, if your company is negotiating a settlement, you ought to have your agreement reviewed by an attorney.

But for those wondering what provisions “most” settlement agreements contain, I thought it would be helpful to outline a few from an employer perspective.

  • Consideration/Payment — This paragraph describes what the employer is typically paying in the settlement and whether the paymen
    What's on YOUR checklist?

    t is to be made in a lump-sum or over time.

  • Release — Probably the single most important part of the agreement. The employee is typically waiving all of his or her rights in this paragraph.
  • Covenant Not to Sue – In this paragraph, the employee agrees not to sue the employer in the future.
  • Stipulation of Dismissal – Of course, since there is a settlement, if the matter is pending in court, the employee agrees that the matter will be dismissed as settled (various courts term such a dismissal differently).
  • No Admission of Liability – Each party agrees that the agreement is not an admission of liability but that the agreement merely represents a compromise.
  • OWBPA-compliant provisions — If the employee is over the age of 40, the Older Workers Benefit Protection Act may come into play. If so, provisions relating to OWBPA (covered in this prior post) may need to be added.
  • Confidentiality — Nearly all of the settlement agreements nowadays contain some type of provision that calls for the settlement to remain confidential (with some limited exceptions for attorneys, accountants and those within the company with a business need to know).
  • Non-disparagement — As with the confidentiality clause, often times employers (and employees) insist that the other party cease from saying negative things about the other.
  • No Rehire – If the employer is settling a dispute from a termination, typically, the employer does not want to have to rehire the employee. This provision provides that the employee agrees that he or she will not seek re-employment and waives any right to be rehired.

This list is far from comprehensive but is a starting point for employers to consider.  There are other standard provisions (governing law, severability, etc) that are also routinely added too.

Although it is a bit dated, there’s still a great checklist of all such provisions in employment settlement agreements that you may also want for your library prepared by Attorney Robert Fitzpatrick. It remains among the more comprehensive lists I’ve seen out there on the subject. It doesn’t have some of the more recent developments (such as Section 409A regarding executive compensation), but it’s a good primer on the subject.

(And another  reminder, please be sure to consult with your legal adviser regarding the drafting or reviewing of a settlement agreement that will fit with your unique legal circumstances.)

From time to time, employers are faced with a quandary: When an employee has not been following the rules, do I fire the employee straight up? Or do I give the employee an opportunity to resign first, and potentially sign a settlement agreement?

Why might an employer do that? Well, it allows the employee to save face and to say, honestly, to a potential employer that he/she left, rather than fired.  That also allows the employee to find new work quicker than having to explain that he/she was fired for violating company rules or at least suspected of such violations.

But suppose an employer did so and then asked the employee to sign a release of claims (and potentially even offered some money to settle any potential claims the employee may have). Is that agreement — which is under the veil that the employee will be fired if he/she doesn’t sign — signed under "undue influence" and thus void?

The Connecticut Appellate Court, in Gengaro v. City of New Haven (officially released on December 29, 2009), said no.  The court held that even though the employee may have had financial or medical issues, the "pressure" to settle did not rise to the level of "undue influence."

The Connecticut Business Litigation Blog discusses the legal specifics of the element in good detail this morning so I won’t repeat it here.  If you’re interested in the background of "undue influence", it’s worth a look. 

Takeaway for Employers

The case is good reminder to employers of the old expression, "It ain’t over, ’til its over".  Even after an agreement is signed, there is still a risk of attack.

So what’s an employer to do?

1) Draft the agreement in plain language that spells out exactly what the employee is agreeing to.

2) Provide the employee with a reasonable amount of time to consider it.

3) If there are age discrimination claims that are being waived, don’t forget about the obligations of the Older Workers Benefit Protection Act. 

4) Consider adding a specific reference in the agreement that the employee understands the provisions of the agreement and represents that he/she is signing it off their own free will.  

But most of all, have legal counsel help draft and review it.  Settlement agreements are an opportunity to resolve a matter once and for all; you don’t want legal loopholes or drafting errors to allow a matter to be reopened that should otherwise be closed.

With the dog days of summer in full force here in Connecticut ("it’s the heat AND the humidity"), it seemed an appropriate time to roll out another installment of the "Quick Hits" feature to touch on a few items you might have missed over the last week or so:

  • One of the biggest stories that you’ll start hearing about is the lawsuit brought by the EEOC yesterday against AT&T in federal court alleging that the company’s no-hire policy for those employees who retired under an early retirement plan violated ADEA because it discriminated against older workers.  (The lawsuit itself is available here.) Ross Runkel’s blog does a pretty good job this morning  spelling out the details.  For companies that have similar policies, this is definitely an issue to keep a close eye on.
     
  • The Connecticut  Employee Rights Blog reported on a recent Illinois decision that held that a "release signed at termination which includes a waiver of the employee’s right to bring a collective action is enforceable and bars such an action."  reports.  Decisions like this might allow employers to breathe a sigh of relief that when employees sign releases, those releases will bring finality to certain claims.
     
  • For employers that offer severance pay, one of the issues that never gets talked about  with any detail is the tax implications of such severance pay. A recent article offers a suggestion to employers and employees to reduce FICA taxes by structuring some or all of these severance payments as supplemental unemployment benefit payments ("SUB-Pay").  Well worth a read if your company is struggling with how to deal with the tax issues associated with layoffs.
     
  • Without much fanfare, the EEOC has updated a portion of its Compliance Manual addressing the timeliness of filing pay discrimination claims in light of the Lilly Ledbetter Fair Pay. (You can view portions of the Compliance Manual here.) For employers who are wondering about when such claims can be brought (and when the statute of limitations might run), the Manual provides some useful examples.
     
  • And finally, there was a good article recently in Law.com that summarizes a lot of the same issues I discussed at last week’s webinar on social media and employment law.  Nothing revolutionary, but if you’re looking for a post that helps you spot some issues, it’s a pretty good start.

(Photo courtesy of MorgueFile)