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OWBPA Waivers May Not Require Nationwide Data

July 24, 2006

The Age Discrimination in Employment Act (the “ADEA”), as amended by the Older Workers Benefit Protection Act (“OWBPA”), provides that an individual’s waiver of potential age-discrimination claims is enforceable only if the waiver was “knowing and voluntary.” In particular, employers seeking waivers in connection with “an exit incentive or other employment termination program offered to a group or class of employees” must, among other things, inform the individuals from whom the waivers are sought as to “(i) any class, unit or group of individuals covered by such program, any eligibility factors for such program, and any time limits applicable to such program; and (ii) the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.”  29 U.S.C. §626 (f)(1)(H).  The purpose of these disclosure requirements is to enable the terminated employees to assess whether to sign the waiver or whether to bypass the offered separation benefits and pursue an age discrimination claim instead.

On July 12, 2006, the U.S. Court of Appeals for the Eleventh Circuit announced an important decision clarifying the required content of the disclosures that must be provided under OWBPA. In Burlison v. McDonald’s Corporation, No. 05-13991, the court ruled that an employer undertaking a nationwide reduction-in-force was only required to give terminated employees the specified information about their own “decisional unit,” as opposed to nationwide information. 

The five named plaintiffs each worked for McDonald’s Corporation for approximately fifteen years before McDonald’s terminated their employment in 2001 as part of a nationwide restructuring designed to enhance competitiveness, accountability and efficiency. McDonald’s offered its terminated employees severance packages in exchange for signing a release waiving all claims against the company.  In an effort to comply with OWBPA, McDonald’s included region-specific information with the releases.  The information provided listed the ages and job titles of the employees who were discharged and those which were retained, but only with respect to the relevant regions (Atlanta/Nashville/Greenville).  The plaintiffs accepted the packages and signed the releases, but nevertheless sued McDonald’s in 2003, alleging that they were terminated because of their age. The plaintiffs claimed that the releases they signed failed to comply with OWBPA because they did not include disclosure of nationwide information about the terminations, and that the releases therefore were no bar to the lawsuit.

The key issue in the case was whether McDonald’s complied with OWBPA by limiting each employee’s disclosure to information concerning the relevant region, rather than including nationwide data.  The Eleventh Circuit approached OWBPA’s “imprecise and ambiguous” statutory provision by giving substantial deference to the interpretation previously adopted by the Equal Employment Opportunity Commission (the “EEOC”).  EEOC regulations state that the scope of the group covered by a termination program within the meaning of OWBPA is determined by examining the “decisional unit” at issue.  The EEOC defines a “decisional unit” as “that portion of the employer’s organizational structure from which the employer chose the persons” who would be offered the waiver and those who would not.  29 C.F.R. §1625.22 (f)(3)(i)(B).  The court in Burlison endorsed the EEOC’s approach, recognizing that OWBPA’s underlying purpose is to provide employees with “appropriate data to conduct meaningful statistical analyses” as they consider whether or not to waive their legal rights.  Extending information beyond the decisional unit would obfuscate the data and make discriminatory patterns harder to detect, effectively undercutting the utility of the information.  The court concluded, therefore, that employees must be informed about “those who were considered for jobs in the same process as the terminated employees.”  The court confirmed that McDonald’s acted appropriately in this instance and dismissed plaintiff’s ADEA claims on the basis of the releases they had signed.

The Eleventh Circuit’s decision in Burlison represents a positive and practical approach to the OWBPA disclosure obligations, as it protects both the employer’s interest in limiting the scope of its disclosures, as well as the employee’s interest in securing information that will assist him or her in making an intelligent assessment of the proposed release.  It remains to be seen whether other courts will follow the same approach. In any event, employers seeking releases in the context of a reduction-in-force, restructuring, or other transaction that results in terminations of groups of employees, must continue to exercise care in fulfilling their OWBPA disclosure obligations to avoid becoming embroiled in litigation that the releases are intended to preclude.