The Older Workers Benefit Protection Act Holds Traps for Employers Using Severance Agreements, Including Large Corporations

November 2015

Employers use severance agreements hopefully to secure a clean parting of ways with employees who are let go.  Paying a severance in exchange for a waiver and release of potential legal claims, can be a way to avoid costly litigation.  However, any waiver/release that is not drafted properly can allow employees to take the severance package yet still sue the company!  Nowhere are these concerns more acute than with severance agreements involving employees who are over the age of 40. This is because in order to effectively waive age discrimination claims available to workers 40 and older, a severance agreement must comply with nuanced requirements of the federal Older Workers Benefits Protection Act (OWBPA).  As a federal court case now pending in Minnesota illustrates, complying with the OWBPA can be easier said than done.

The case is a class action lawsuit brought against corporate giant, General Mills.  The plaintiffs were among approximately 850 employees who were terminated as part of a corporate restructuring dubbed by the company as “Project Refuel.”  The plaintiffs, all 40 and older and thus covered by the Age Discrimination in Employment Act, are alleging that the releases they signed as part of their severance agreements, were not “knowing and voluntary,” as required by the OWBPA.  Adding insult to injury, OWBPA regulations do not require a person claiming that a waiver and release was not knowing and voluntary, to pay back the severance or other consideration given in exchange for agreeing not to sue.  As a result, the plaintiffs in this case are keeping the relatively generous severance they received in exchange for signing their severance agreements, while suing to get out of their promises not to sue!

It is important to note that no determination has yet been made regarding whether General Mills’ severance agreements did or did not comply with OWBPA.  The company had tried to argue that its agreements included an arbitration clause and, therefore, the lawsuit should be stayed by the court to allow for arbitration of the plaintiff’s claims.  However, the federal district court denied this request, citing explicit language from the statute which states that disputes over compliance with the OWBPA must be heard in a “court of competent jurisdiction.” Further, the court refused to stay the plaintiffs’ lawsuit while General Mills is appealing its ruling regarding arbitration to the U.S. Court of Appeals.

General Mills may wind up prevailing against these plaintiffs’ attempt to use the OWBPA to get out of the waiver and release agreements they signed; however, it does not change the fact that these individuals are keeping the severances they were offered in exchange for not suing, while still suing the company.  Obviously if the agreements are determined to fail to meet the stringent requirements of the OWBPA – that is, if the court finds that the language is insufficient to make the agreements “knowing and voluntary” – the company will be defending against a class action age discrimination case by hundreds of employees laid off in a sizeable reduction in force, or RIF. 

Attorneys everywhere will no doubt be watching this case since its outcome will have a significant impact on how severance agreements will be drafted for anyone 40 or older.  In the meantime great care should be taken to avoid similar challenges afforded to employees by the complicated and very nuanced, OWBPA.

Questions? Contact the attorneys of our Minneapolis office at (952) 746-1700 or email Christine Beggan at chbeggan@wesselssherman.com for more information.

NLRB Gone Wild: Redefining Joint Employers, Confidentiality of Investigations, and Arbitration Agreements with Class Action Waivers

November 2015

The NLRB has been making headlines time and again for its radical departures from years of precedent, impacting unionized and non-union employers alike, from expanding the definition of who will be considered a “joint employer” to limiting employers’ ability to keep their investigations confidential, to preventing employers from entering into arbitration agreements with their employees that require settling disputes individually. The following are just some of the recent drastic actions taken by the NLRB and what they mean for employers.  

NLRB Expands Definition of “Joint Employer”: In a departure from its own decades-old precedent, the NLRB has redefined—with a much broader definition—who will be considered a “joint employer.” Under this new standard, it is sufficient that the employer has the right to control the terms and conditions of employment, even if the employer does not actually exercise that right. Further, this control can be exercised indirectly, such as through an intermediary. The Board’s newly articulated definition leaves its judges wide latitude to determine whether two business entities are “joint employers” based on theoretical hypotheses of potential control, rather than any demonstrated control as was required under past precedent.

What does this mean for employers? No doubt more employers will be considered as joint employers for purposes of collective bargaining, joint liability for unfair labor practices and breaches of collective bargaining agreements, and economic pressure, such as strikes, pickets, and boycotts.

NLRB Inhibits Employers’ Ability to Keep Investigations Confidential: In two separate decisions, the NLRB eroded the ability of employers to keep internal investigations of employee conduct, etc. confidential. In one decision, the NLRB reversed its long-standing precedent that an employer usually needn’t oblige a request that it share witness statements with a union representative. The new standard now, is that witness statements must be provided to a union upon request, unless the employer can demonstrate “a legitimate and substantial confidentiality interest” by showing that the “witness[es] need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is need to prevent a cover up.” Even where an employer meets this high burden the NLRB will weigh the employer’s confidentiality interest against the union’s need for the information.

In the second, related decision the NLRB held that a general policy in an employee handbook or work rule requiring confidentiality in investigations, violates employees’ “Section 7 rights” to “engage in . . . concerted activities for the purpose of . . . mutual aid or protection . . . .” Specifically implicated in this case is the right of employees to discuss potential discipline among themselves and/or with a union or other representative. Under the new rule an employer may not maintain a broad policy, but may require confidentiality only on a case-by-case basis where it can show that “corruption of its investigation would likely occur without confidentiality.” Examples cited in the Board’s decision include circumstances where “witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, [or] there is a need to prevent a cover up.”

NLRB Continues to Invalidate Arbitral Class Action Waivers: The NLRB has continued to apply its controversial holding that arbitration agreements that waive the right to engage in class actions are illegal and unenforceable under the National Labor Relations Act. The Board’s rather questionable rationale, which thankfully has yet to be adopted by any court on appeal, essentially treats the right of employees to bring class-action lawsuits the same as the right to join together in a strike. In other words, suing is just another form of “concerted activity” protected by federal labor law.

The growing number of employers using arbitration agreements that require employees to pursue grievances individually and therefore prohibit class grievances, now face the NLRB declaring their agreements unlawful. The issue seems destined for ultimate determination by the U.S. Supreme Court.

For assistance with these or other NLRB issues, contact Jim Sherman (jasherman@wesselssherman.com)  in our Minneapolis office at (952) 756-1700.

NLRB Proclaims Confidentiality Requirements Unlawful

November 2015
By Alan E. Seneczko

Having reviewed countless employee handbooks over the past 30+ years, I have found that it is not uncommon for employers to maintain policies that require employees to keep investigations of complaints of sexual harassment and other disciplinary matters confidential. Although the reasons for doing so often vary, most employers contend that this requirement is necessary due to the sensitivity of the subject matter and to protect the identity of potential witnesses. According to the NLRB, such generalized concerns are not enough to prevent such a policy from unlawfully infringing on employees’ right to discuss the terms and conditions of their employment with their fellow employees.

In The Boeing Company, 382 NLRB No. 195 (Aug. 27, 2015), the Board reviewed Boeing’s requirement that all employees involved in human resources investigations not discuss the matter with any other employee, except company officials conducting the investigation or their union representative. The Board found that such a blanket confidentiality policy violated Section 8(a)(1) and unlawfully interfered with employees’ Section 7 right to engage in concerted activity. In doing so, it rejected Boeing’s contention that the policy was necessary to protect witnesses, victims or employees under investigation from retaliation or harassment; to prevent the spread of unfounded rumors; to ensure the integrity of the investigation; and, to encourage employees with complaints to come forward. The Board disagreed, holding that an employer may only prohibit employee discussion of an investigation when its need for confidentiality with respect to that specific investigation outweighed employees’ Section 7 rights. In other words, in order to maintain such a requirement, an employer must be able to demonstrate legitimate concerns about witness intimidation or harassment, the destruction of evidence or other misconduct that might compromise the integrity of its investigation.

With this and all of its other recent decisions concerning employee handbook provisions, “no gossip” policies, interpersonal relations, and social media postings, the NLRB is continuing its aggressive and expanding effort to regulate all aspects of the workplace – and an employer’s ability to manage it, regardless of whether it is a union or non-union environment. Although the NLRB may not be knocking on your door today, it would be prudent to keep these concepts in mind the next time you are reviewing your employee handbook and other policies.

Questions? Please contact Attorney Alan E. Seneczko at (262) 560-9696, or email alseneczko@wesselssherman.com.