Second Circuit Clarifies OWBPA Requirements for ADEA Release in a Separation Agreement

July 17, 2011

In an important and potentially far-reaching employment decision decided earlier this month, the United States Court of Appeals for the Second Circuit (“Second Circuit”) fleshed out the Older Worker Benefits Protection Act (“OWBPA”), 29 U.S.C. § 626(f), requirements for a release of claims made under the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq., in a separation agreement. See Ridinger v. Dow Jones & Co., Docket No. 10-1771-cv, 2011 WL 2675921 at *1 (2d Cir. July 11, 2011). This ruling is valuable for employers, especially in the Second Circuit where there is a dearth of case law on the issue, because it sheds light into how employers can satisfy the “calculated to be understood” requirement of OWPBA, and does not extend the notorious IBM decisions, Thomforde v. IBM, 406 F.3d 500 (8th Cir. 2005) and Syverson v. IBM, 472 F.3d 1072 (9th Cir. 2007). Those decisions had invalidated ADEA waivers on the theory that the language in those separation agreements, which included a release of claims and a covenant not to sue, had not been “calculated to be understood.” Plaintiff Thomas Ridinger (“Ridinger”) was hired by Dow Jones & Company (“Dow Jones”) in December 2001 as a photo editor for Smartmoney magazine. Ridinger, 2011 WL 2675921 at *1. In 2007, the 62 year old was terminated and given a severance package that included 20 weeks salary and other benefits in exchange for signing a Separation Agreement and General Release. Id. In the Separation Agreement and General Release (“Separation Agreement”), Ridinger agreed to waive and release all claims, including age discrimination claims under the ADEA, he may have against Dow Jones. The Separation Agreement, however, did include language that:

[n]othing in this Agreement shall limit or restrict Manager’s [sic] right under the ADEA to challenge the validity of this Agreement in a court of law. This waiver and release does not apply to any claim that may arise under the ADEA after the date that Employee signs the Agreement.

Id. at *2. The Separation Agreement also included language that:

[e]mployee further understands that, under the law, the obligations to repay money received and to pay the Company’s damages and costs provided for in paragraph 4(b) in the event that Employee breaches his promise not to file a suit over released claims do not apply to claims under the ADEA. Therefore, the financial obligations of paragraph 4(b) would not apply to a suit filed solely under the ADEA, but Employee nevertheless understands that the waivers and releases contained in paragraph 4(a) still apply to ADEA claims and that he has waived all ADEA claims as part of this Agreement and that in any suit brought under the ADEA, Employee would not be entitled to any damages or other relief unless this Agreement and the waivers contained in it were deemed to be unlawful or otherwise invalid.

Id. Ridinger, however, brought suit against Dow Jones under the ADEA in the United States District Court for the Southern District of New York (“Southern District”). Id. at *1. ased on the Separation Agreement, including the release of ADEA claims, Dow Jones moved to dismiss and the Southern District converted the motion into one for summary judgment. Id. at *3. Ridinger argued that the Separation Agreement was not “written in a manner calculated to be understood.” Id. at *3. He relied upon the OWBPA which requires that any release of an ADEA claim be “written in a manner calculated to be understood by such individual, or by the average individual eligible to participate.” Ridinger also sought support from the Eighth and Ninth Circuits’ interpretation of that language in striking down separation agreements in Thomforde v. IBM and Syverson v. IBM respectively, as well as Equal Employment Opportunity Commission (“EEOC”) regulations. The Southern District rejected Ridinger’s arguments and granted Dow Jones summary judgment. The primary question for the Second Circuit on Ridinger’s appeal was whether the Separation Agreement was “written in a manner calculated to be understood.” Id. at *4. On appeal, the Second Circuit affirmed the Southern District’s ruling, finding that the Separation Agreement was “written in a manner calculated to be understood” under the OWBPA. The Second Circuit refused to extend Thomforde and Syverson, finding that unlike the agreements at issue in those cases, the language in the Separation Agreement was not confusing, and it was also clear, that the waiver and release applied to ADEA claims, and it was only the financial obligations triggered by Ridinger’s promise not to sue that would not apply to an ADEA suit. Unfortunately, the Second Circuit left open the possibility that a plaintiff could argue that the “written in a manner to be understood” language of OWBPA “may warrant both a particularized and a generalized assessment of the agreement’s waiver provisions,” allowing a potential plaintiff to show “that his own comprehension level was below that of the average eligible employee.” Id. at *6. Ridinger never presented evidence of a comprehension level below that of an average employee to the Southern District, so the Second Circuit did not address the issue. Id. However, employers must now be wary of the factual issue of the comprehension level of employees who sign separation agreements in the Second Circuit. Practical Tips for Employers Based on Ridinger v. Dow Jones & Co.
  • Always make sure that separation agreements are easy to understand and do not contain complex legal terms;
  • Any points of potential confusion, such as ADEA releases and covenants not to sue, must be addressed directly and the agreement can leave open no room for misinterpretation;
  • The OWBPA has several tricky requirements all of which must be followed (this case only addressed the “written in a manner to be understood” clause); and
  • As always, consult with your legal counsel before using any separation agreement to make sure that it addresses all OWBPA requirements as well as the other potential pitfalls.
For more information please contact John C. Petrella or Harris S. Freier.