In 1990 Congress enacted the Older Workers Benefit Protection Act (OWBPA) out of concern that employees terminated as part of a Reduction in Force (RIF) did not fully understand the rights they were giving up in exchange for the payment of severance benefits. Under OWBPA, a severance agreement entered into with a terminated employee over age 40 is not valid unless the agreement contains certain provisions. Among other things, the release is supposed to be written in easy to understand language rather than legal jargon; it must advise the employee to seek advice from an attorney; it must allows the employee adequate time to consider whether to sign the release (21 to 45 days, depending upon how many employees are part of the RIF); and, in the event the employee changes his mind after signing, the employee has seven days to revoke the agreement. If the release does not comply in every respect, it is not valid, and an employee who signed and accepted the severance payments may still sue for age discrimination under the federal Age Discrimination is Employment Act (ADEA). An employee who sues may not even have to return the money received as part of the severance agreement.
A recent ruling from a federal court in Pennsylvania (Ray v. AT&T, Inc., No. 18-3303, E.D. Pa, 1/11/2019 ) is an example of just such a worst case scenario: an employee who signed a release and accepted severance in a RIF was still able to sue for age discrimination. The court found the severance agreement was not valid under OWPBA because it did not provide enough meaningful information about the RIF to allow the employee to make an informed decision whether to release her right to sue.
In 2017 AT&T launched a RIF of management level employees in its Mobility Retail Sales and Services, East Region. The Plaintiff, Alison, Ray, was a Director of Sales who oversaw various retail locations in Southeastern Pennsylvania. Ray’s territory was in the Ohio/Pennsylvania market, which was part of the East Region. Ray’s position was eliminated as part of an effort to reduce layers of management and increase operational efficiencies.
In addition to the provisions described above, a valid OWBPA release involving two or more employees must provide information to the terminated employees about the “decisional unit” from which they were selected. That means the employer discloses the organizational unit that is included in the RIF; which could mean a particular location, department, or other group of employees. For each decisional unit, the employer must disclose all of the job titles in the decisional unit, how many persons were selected for termination for each position and how many are retained; and the ages of each. The purposes of the decisional unit disclosure is to give terminated employees information about the pool from which the RIF was taken and whether there is evidence of age bias in the selection of those terminated.
In Ray’s case, it was AT&T’s description of the decisional unit that resulted in the court invalidating the release. AT&T used the phrase “Affected Work Groups” to describe the decisional units from which the RIF was drawn:
Affected Work Groups (AWG) are comprised of positions at the same level with similar definable characteristics from which the surplus employees are selected. . . . The combined AWGs comprise the Decisional Unit for this business case.
The court found this definition of the decisional unit “vague and circuitous”, and that it failed to provide “the average employee with any meaningful information as to how the process of identifying those includes in the reduction in force was conducted.” Most critical to the ruling was the court’s finding that AT&T’s decisional units did not appear to be actual divisions or departments in the company, but were created solely for purposes of the required RIF disclosures. According to the court’s ruling, the terminated employees were entitled to know the job titles and ages of every employee terminated and retained in the Mobility Retail Sales and Services, East Region. What they actually got were ages and job titles of those employees selected and not selected within a certain groups within Mobility Retail Sales and Services, East Region that AT&T determined would be impacted by the reduction. What was missing, according to the court, was clarity about how the Affected Work Groups related to actual parts of the organization from which they were drawn.
It is difficult to determine from the ruling in Ray whether the lack of clarity in the release was merely the result of lawyers over-drafting; or, if it the employer intended to obscure the statistics of the RIF because it had a disproportionate impact on employees over 40. The court suggested, but did not decide, it might be the latter. Regardless, an important lesson is that clarity in describing a “decisional unit” is best achieved by relying upon the actual organizational units within the company. Developing decisional units for purposes of the RIF is more likely to raise a red flag with savvy plaintiff’s attorneys and courts.