EEOC Issues Guidance on Waivers for Departing Employees

August 12, 2009 ( - Recognizing the increased incidence of layoffs during the economic downturn, the U.S. Equal Employment Opportunity Commission (EEOC) has issued guidance on waivers signed by departing employees.

The guidance addresses waivers of liability for all claims connected with the employment relationship, including discrimination claims under the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA). Though the guidance is written for employees, it serves as a reminder for employers as well by explaining what a waiver must contain and the rights departing employees may still have after signing a waiver.

The EEOC notes that a waiver in a severance agreement generally is valid when an employee knowingly and voluntarily consents to the waiver. The guidance points out that in addition to being knowingly and voluntarily signed, a valid agreement also must: (1) offer some sort of consideration, such as additional compensation, in exchange for the employee’s waiver of the right to sue; (2) not require the employee to waive future rights; and (3) comply with applicable state and federal laws.

According to the EEOC, for Title VII, ADA, and EPA claims, courts consider the following circumstances and conditions under which the waiver was signed:

  • whether it was written in a manner that was clear and specific enough for the employee to understand based on his education and business experience;
  • whether it was induced by fraud, duress, undue influence, or other improper conduct by the employer;
  • whether the employee had enough time to read and think about the advantages and disadvantages of the agreement before signing it;
  • whether the employee consulted with an attorney or was encouraged or discouraged by the employer from doing so;
  • whether the employee had any input in negotiating the terms of the agreement; and
  • whether the employer offered the employee consideration (e.g., severance pay, additional benefits) that exceeded what the employee already was entitled to by law or contract and the employee accepted the offered consideration.

The recent guidance from the EEOC includes a section addressing waivers signed by participants over 40, saying the Older Workers Benefit Protection Act (OWBPA) establishes specific requirements for a "knowing and voluntary" release of ADEA claims. There are additional disclosure requirements under the statute when waivers are requested from a group or class of employees.

According to the document, OWBPA lists seven factors that must be satisfied for a waiver of age discrimination claims to be considered "knowing and voluntary:"

  • The waiver must be written in a manner that can be clearly understood;
  • The waiver must specifically refer to rights or claims arising under the ADEA.
  • The waiver must advise the employee in writing to consult an attorney before accepting the agreement.
  • The waiver must provide the employee with at least 21 days to consider the offer.
  • The waiver must give an employee seven days to revoke his or her signature.
  • The waiver must not include rights and claims that may arise after the date on which the waiver is executed.
  • The waiver must be supported by consideration in addition to that to which the employee already is entitled.

The waiver will be invalid and unenforceable if an employer used fraud, undue influence, or other improper conduct to coerce the employee to sign it, or if it contains a material mistake, omission, or misstatement.