Fifty-seven former employees of Kimberly-Clark Corporation (“K-C”), who were terminated as part of reductions in force (“RIFs”) conducted from 2005 through 2008, brought a collective action under the Age Discrimination in Employment Act (“ADEA”). All but one of the plaintiffs, signed Separation Agreements in which they received payments arranging from$10,000 to almost $139,000 in exchange for a full and final release of claims. The plaintiffs challenged the validity of the releases they signed. On February 21, 2012, a federal court in Wisconsin found that the releases used by three of the eight divisions of K-C were invalid, which means that the employees terminated by those divisions could proceed with their age discrimination claims. (Brendon F. Ribble, et al. v. Kimberly-Clark Corporation, Case No. 09-C-643.)
The Older Workers Benefit Protection Act (“OWBPA”), which amended the ADEA, imposes additional requirements in the case of a group termination or exit program. Employers are required to provide certain information so that the terminated employee can assess the viability of an age discrimination claim. Among other requirements, the employer must inform the individual in writing as to (1) any class, unit or group of individuals covered by such exit incentive or employment termination program, any eligibility factors for such program, and any time limits applicable to such a program; and (2) the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same classification or organizational unit who are not eligible or selected for the program.
While the plaintiffs in the Kimberly-Clark litigation challenged the sufficiency of the separation agreements on several bases, the court found that the three subject releases were deficient because they failed to provide sufficient information upon which the individual could make an informed decision. In the case of the Essential Sciences Department of K-C, the six employees who were terminated as part of a RIF in March 2006 were informed that “[e]mployees in specific organizations within the Essential Sciences Department are eligible” for the RIF and given a list of the ages and job titles of all 79 employees who were considered for the RIF. However, the “specific organizations” were not identified and thus, the court held that this vague description fails to convey an essential element of what the employees needed to assess the validity of a possible age discrimination claim.
The release used by the North Atlantic Consumer Products group suffered the same defect. In an exhibit to the separation agreement used by this group, K-C identified six areas that were selected for headcount reduction and stated that “[c]ertain persons within these six areas were considered for the program.” The court asked, “What types of neutral, objective criteria were used to scale down the listed six areas…?” and concluded that the employees would have no way to evaluate the likelihood their age played a role in the termination decisions.
The court found insufficient the description of the decisional unit used by K-C’s Family Care Network of the Future, which stated in part: “Employees in the Distribution Centers at Fullerton and Beach Island whose jobs were impacted by the Family Care Network of the Future project were included in this reduction-in-force.” As the court observed, presumably, all of the employees were impacted by the company’s reorganization. The failure to accurately describe the decisional unit in the disclosure rendered the waivers signed by the employees invalid.
As a result of the economic downturn, many employers have been forced to reduce their workforce and have used severance agreements to obtain their releases of any and all claims in exchange for severance payments. Some employers do not realize that there are certain requirements that must be met to obtain an effective waiver of age discrimination claims or they wrongly assume revising the last release they used for an individual termination will sufficiently protect them from claims arising from a RIF. Employers should not only use a form agreement prepared or reviewed by legal counsel, but they should also consult with counsel regarding the informational disclosures provided to the affected employees.