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CCH® BENEFITS — 11/27/06

Employee Who Validly Waived ADEA Rights Was Precluded From Pursuing Suit Under The Statute

from Spencer’s Benefits Reports: A former employee validly waived his right to pursue a claim under the Age Discrimination in Employment Act (ADEA) and, hence, the employee could not pursue an ADEA claim against his former employer. This was the ruling of the Eighth Circuit U.S. Court of Appeals in Parsons v. Pioneer Seed Hi-Bred International, Inc. (No. 05-3496).

Roger D. Parsons began working for Pioneer Seed Hi-Bred International in 1972. Beginning in 2000, Mr. Parsons held the position of project manager of Pioneer’s Warehouse Management System (WMS). In September 2002, two Pioneer executives determined that the initial phase of the WMS project was complete, that a WMS coordinator was needed instead of a WMS project manager, and that the coordinator position would not require the level of skills possessed by Mr. Parsons. Pioneer then eliminated the WMS project manager position and gave the part-time WMS coordinator duties to a younger employee, who was age 41.

On Sept. 25, 2002, Pioneer informed Mr. Parsons—who was age 55 at the time—that his position was being eliminated, and the company gave him two severance options. Mr. Parsons consulted an attorney and chose one of the severance options, which provided him a lump sum payment of $9,896 in exchange for his agreement to waive any and all claims against Pioneer, including ADEA claims.

After signing the agreement, Mr. Parsons filed suit against Pioneer in the U.S. District Court for the Southern District of Iowa, asserting a claim under the ADEA. However, the district court granted summary judgment in favor of Pioneer, and on appeal, the Eighth Circuit affirmed that ruling.

Waiver Was Valid

In rendering its decision, the Eighth Circuit initially explained, “Congress enacted the Older Workers Benefits Protection Act (OWBPA) in 1990 to clarify the protections afforded older workers under the ADEA. Congress addressed employers’ attempts to pressure departing workers into waiving their right to bring an ADEA claim in exchange for a severance or settlement agreement. While such waivers are valid, Congress requires that the waivers be knowing and voluntary, and it enacted specific statutory requirements that must be met before the waiver can bind the worker. The requirements are strict and unqualified; if the waiver does not satisfy the statute, it is ineffective as a matter of law.”

Turning to the waiver at issue, the Eighth Circuit stated, “Parsons argues that his waiver did not satisfy the statute because it did not meet the first enumerated requirement, that ‘the waiver be part of an agreement between the individual and the employer that is written in a manner calculated to be understood by such individual.’ The severance agreement specifically released Pioneer from any cause of action under the ADEA in paragraph 11 of the agreement. Parsons claims that language in paragraphs 10 and 17 is contradictory to that release, rendering the waiver ineffective. The language here is not confusing or contradictory. Paragraph 11 is the general release and states the consideration given for the release. Paragraph 10 is a confidentiality clause and provides that an employee’s failure to abide by any of the terms of the agreement could result in loss of the consideration to be received pursuant to paragraph 11.

“Nor does paragraph 17 contradict the explicit release of ADEA rights. The paragraph merely excepts enforcement claims that pertain to the ADEA from the attorney’s fee provision. This again is consistent with the regulations that prohibit a waiver from penalizing an employee for challenging the validity of the agreement. It does not purport to negate the general release contained in paragraph 11. Legal documents by their nature are often very detailed and complex due to the need to cover a host of variables often unseen at the time of their drafting, as well as the need in this case to comply with specific regulatory requirements. Pioneer’s attempts to comply with the OWPBA and its accompanying regulations may make the agreement nuanced, but the language employed is written in a manner that is understandable by the average participant.”

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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