In Barnes v. The Hershey Company, No. 3:12-cv-01334, Judge Charles R. Breyer of the U.S. District Court for the Northern District of California granted summary judgment to an employer on the age claims brought by several former employees who had signed waivers of their age discrimination claims when they were discharged. The issue before the court was whether the waivers complied with the Older Workers Benefit Protection Act of 1990 (OWBPA).
The OWBPA, which is an amendment to the Age Discrimination in Employment Act (ADEA), establishes requirements for valid waivers of federal age discrimination claims. In order to be valid, a release must be a “knowing and voluntary” waiver of ADEA claims. In order to be “knowing and voluntary,” the employee must, among other things, be given at least 21 days from the final offer to review and consider the release, and 7 additional days to revoke the waiver of the age claims. However, when the release is part of an “exit incentive or other employment termination program offered to a group or class of employees,” [emphasis added] employees must be given at least 45 days (instead of 21) to consider the offer, as well as disclosures of the job titles and ages of both those employees who were selected and those in the same job classification or organizational unit who were not selected for the group termination.
If the release fails to satisfy these requirements, it will be considered invalid and the employee may pursue an age discrimination claim against the employer. In Hershey, the question presented was whether the releases signed by several managers who were discharged under a corporate “career planning” initiative were invalid because the employer allowed for only a 21-day consideration period and the employees did not receive OWBPA disclosures.
In 2009, The Hershey Company began a project to assess the performance of its mid-level management team and develop career planning goals for them. Several of the plaintiffs were placed on performance improvement plans or development plans to address identified individual performance deficiencies. Each plaintiff was discharged when he or she failed to successfully complete their plan. The discharge decisions happened at different times, some months apart, and were made by different managers, although they all had their genesis in the career planning initiative.
Hershey offered each individual a severance package upon discharge, including a release and waiver of age discrimination claims, in exchange for certain separation benefits. Each of the plaintiffs signed the release, but later filed suit, alleging that they were discharged because of their ages and attacking the legal sufficiency of the releases they signed.
In challenging the releases, the plaintiffs claimed that their terminations were part of a group termination resulting from Hershey’s “Career Planning Project.” The plaintiffs argued that their release agreements were invalid because they were not given 45 days to consider the releases and they were not provided with OWBPA disclosures, as is required when a release is part of an employment termination program offered to a group or class of employees. Hershey responded that each plaintiff left the company’s employ due to an individualized assessment of his or her performance deficiencies, so the requirements for releases in group terminations did not apply.
In its decision, the court stated that there is nothing wrong with a company “remind[ing] its managers that part of their role was to promote high-performing employees and terminate low-performing employees who had stagnated in transitional roles without the skills or performance to advance.”HerH Thus, according to the court, the company’s Career Planning Project was not evidence of age discrimination.
The court then moved to the issue of whether the decisions to discharge these employees were, in fact, a group termination program that mandated a 45-day consideration period and OWBPA disclosures. The court correctly noted that “[t]here is no clear definition of ‘an exit incentive or other employment termination program” under the OWBPA regulations issued more than 15 years ago. However, the court found guidance as to the meaning of this phrase in the OWBPA’s legislative history, which states:
In the context of ADEA waivers, the Committee recognizes a fundamental distinction between individually tailored separation agreements and employer programs targeted at groups of employees. Individual separation agreements are a result of actual or expected adverse action against an individual employee. The employee understands that the action is being taken against him and he may engage in arms-length negotiations to resolve any differences with the employer.
Group termination and reduction programs stand in stark contrast to the individual separation. During the past decade [the 1980s], in particular, employers faced with the need to reduce workforce size have resorted to standardized programs designed to effectuate quick and wholesale reductions. The trademark of involuntary termination programs is a standardized formula or package of employee benefits that is available to more than one employee . . . [T]he terms of the programs generally are not subject to negotiation between the parties. In addition, employees affected by these programs have little or no basis to suspect that action is being taken based on their individual characteristics. Indeed, the employer generally advises them that the termination is not a function of their individual status. Under these circumstances, the need for adequate information and access to advice before waivers are signed is especially acute.
In light of this legislative history, the court rejected the plaintiffs’ argument that they were discharged as part of a “group termination program.” Instead, the discharge decisions were based on Hershey’s review of each plaintiff’s specific performance deficiencies. Each plaintiff was given this individualized information at the time of his or her termination. Consequently, the court noted that,
no Plaintiff was under the illusion that his or her termination was for abstract corporate reasons beyond his or her control; rather, each had the information he or she needed to evaluate whether the cited performance reasons were a cover for age discrimination, and chose to waive those claims in exchange for payment.
The court further observed that, in several instances, the position held by the plaintiff was back-filled after his or her termination, demonstrating that those discharge decisions were not merely an effort to reduce the head count. These facts placed the challenged releases into the category of individually tailored separation agreements, as opposed to a group termination. As a result, the plaintiffs’ ADEA claims were waived by the releases they signed and Hershey’s motion for summary judgment on those claims was granted.
Most HR professionals already appreciate that group layoffs demand a longer consideration period and require disclosures about the decisional unit. This case is an important reminder that an initiative to coach under-performing employees and to discharge those that fail to bring their performance up to acceptable levels does not necessarily amount to a group termination under the OWBPA.