The Facts

I represent a national company with operations in California. A former employee recently filed a lawsuit against them in a California state court. After negotiating with opposing counsel, the parties entered into a settlement agreement resolving the lawsuit after the action was filed but before trial.

The complaint contained multiple causes of action including a claim for age discrimination under the California Fair Employment and Housing Act (FEHA), Cal. Govt. Code §12940(a). The settlement agreement, therefore, contained a waiver of the right to proceed with the state age claim under FEHA and also released any claim for age discrimination that the employee could bring under the federal Age Discrimination in Employment Act (ADEA), 29 U.S.C. §623.

The Employer’s Question

Why do we need to include an ADEA waiver if the claim is brought only under the FEHA?

The Answer

Any time the plaintiff in an employment lawsuit is over 40 years of age, the parties’ settlement agreement should include a waiver of the right to bring an age claim under both federal and state law regardless of whether the complaint actually contains a claim of age discrimination. This is to prevent the employee from bringing a second lawsuit for age discrimination under either law should a second suit still be possible under the statute of limitations.

The Employer’s Second Question

Well, if a settlement agreement must always include an ADEA waiver, shouldn’t it also include the 21-day consideration and 7-day revocation periods mandated by the Older Workers Benefit Protection Act (OWBPA)?

The Answer

Good question, but the answer is “not necessarily.”

The OWBPA is a rider to the ADEA, 29 U.S.C. §626. It states, essentially, that when a current or former employee is asked to waive his or her right to proceed with an age claim under the ADEA, he or she must be given 21 days to seek the advice of counsel (45 days in a group layoff) and consider what effect the waiver will have on his or her legal rights (the “consideration” period) before signing the agreement. The OWBPA also mandates that once the agreement containing the waiver has been signed, the employee has seven days to revoke the agreement (“revocation period”), 29 U.S.C. §626(f)(1)(F) and (G).

With belt-and-suspenders caution, some employers insist on having two settlement agreements:  one for the ADEA waiver containing the consideration and revocation periods, and one for all the other claims in the lawsuit. If the employee then revokes the ADEA waiver, the balance of the lawsuit is not revived along with the age claim. There is nothing legally wrong with this strategy, but it can be difficult determining the way in which the consideration is divided so as to make both enforceable while discouraging revocation of the waiver.

Alternatively, some employers simply insert the consideration and revocation periods in any settlement agreement when the employee is over 40 years of age. Again, there is nothing wrong with this strategy but there may be times when settlement is time sensitive (on the eve of trial, for instance) and you just don’t want to risk revocation.

Take heart. There is an exception baked into the OWBPA for waivers arising from currently pending lawsuits where the complaint contains a claim for age discrimination under either state or federal law. The ADEA waiver is valid and enforceable without inclusion of the consideration and revocation periods under 29 U.S.C. §626(f)(2)(A) and(B)  if the settlement agreement,

  1. is between an employer and employee;
  2. is signed after a lawsuit is filed by the employee or his or her attorney;
  3. contains an express ADEA waiver; and
  4. the employee:
    1. is currently represented by counsel in the pending lawsuit; and
    2. has been given a “reasonable amount of time” to consider the effect of the release before signing.

In the present case, I suggested my client include a paragraph expressly referencing the relevant federal code section and spelling out that the statutory criteria had been met prior to the execution of the settlement agreement.