Readers know that my favorite employment statute is the Older Workers Benefits Protection Act, which actually reinforces the stereotypes that its parent legislation, the Age Discrimination in Employment Act, seeks to do away with. OWBPA waivers are now a part of virtually every severance agreement involving reductions in force or mass layoffs.
Such was the case in a 2004 lay-off at Guidant Corporation. At the time the lay-off covered six corporations with 84 different facilities. In July of 2004, Guidant put the RIF into effect company-wide with corporate HR managers overseeing the lay-offs. Approximately 8,800 people were considered for the RIF and selection for termination was based on job performance and criticality of jobs to the future success of the organization. So far, so good. All separated employees were eligible to receive severance benefits by participating in the severance pay plan, which required a release from all claims, including ADEA claims. Consistent with the OWBPA, each individual received seven documents, including a 184-page list of 8,791 job title subtitles and birthdates, from which 721 positions were identified as eligible for severance. The affected employees had 45 days to consider the releases and the attached information, and 7 days to revoke the release after signing it, again consistent with the OWBPA.
One employee did not sign the release. Instead, based on his review of the information contained in the 184-page exhibit, he and 58 other individuals (all of whom did sign the release) sued for age discrimination.
But what about the release that they all (but one) signed? The court invalidated the release on the parties' cross motions for summary judgment. Specifically, the court found that the lengthy list of information provided to plaintiffs overstated the number of employees who were terminated because some of the individuals who were identified as having their positions terminated actually found other jobs within the company. Reading the plain language of the severance plan, the court determined that even though these individuals who found other employment were eligible to sign the release in exchange for severance benefits, they should not have been identified as eligible for severance benefits because they could not receive benefits once they accepted the new positions. A key to the court's analysis was that the individuals affected had accepted their new jobs (and were therefore ineligible for severance benefits) at the time Guidant delivered the information to the terminated employees. The inclusion of these indivsuals in the total population reduced by 10% the caculation of terminations of employees 40 and older that actually occurred. This, the court said, was a material misrepresentation and invalidated the agreement.
The court then found the release invalid because Guidant failed to disclose the "decisional unit" involved in the lay-off. Guidant's simply listing all 8800 employees subject to consideration did not disclose the "decisional unit" in a manner calculated to be understood by the average eligible employee. The court determined that Guidant improperly combined employees of its six corporations into one giant decisional unit, notwithstanding the fact that Guidant considered all of its employees in the United States to be equally eligible. The court also found that the decisional units should have been further broken down by individual facility, since it was unreasonable to expect an individual at any one facility could draw any meaningful conclusions from the 184-page list. The court noted that Guidant should have provided information about facility employees considered for termination because local vice presidents and managers played a key role in the termination decisions. Accordingly, for the report to have been meaningful, it should have broken down employees into individual facility populations.
Notwithstanding its assertion that the listing was too difficult review, the court's opinion ignores the fact that one employee simply took the information off the list and, using a readily available disparate impact analysis calculator found on the Internet, quickly calculated the adverse impact, chi-square, and standard deviation requirements for the group.
But the court invalidated the waiver on yet another ground -- failure to disclose the eligibility factors for selection. Incredibly, Guidant did not advise the employees of the basis for being selected for termination, rather, it disclosed the eligibility factors for the severance plan (i.e., the steps required to receive the benefit). The court had little difficulty rejecting this description, finding that Guidant simply could have said that job criticality and performance were the eligibility factors used in the reduction.
Finally, the court hammered Guidant for putting birthdates in the disclosure documents, rather than ages. The court stated that Guidant should have written the ages down and that it was too burdensome to require employees to calculate ages based on birthdates, apparently ignoring the fact that the use of the birth date gave a clear marker for calculating age at any point in the decision process.
The short lesson in this case is that an employer is asking for it when it creates a disclosure document pursuant to an OWBPA waiver that looks like it is designed to intimidate people from actually assessing the impact of a layoff . Courts are sensitive to the fact that individual employees do not have the time, wherewithal or, in many cases, the focus, to breakdown 8800 separate job titles, calculate their ages, and then compare and contrast that information with more than 700 additional entries to figure out the impact of a lay-off. Guidant management designed something that looked like it was going to be too difficult to analyze and the court called them on it. This is an excellent opinion of what should be involved in doing a lay-off analysis and related waiver.