Howlett v. Holiday Inns, Inc.Howlett v. Holiday Inns, Inc.
OPINION
Wе are called upon to decide whether terminated employees who sue their former employers under the Age Discrimination in Employment Act (ADEA),
Plaintiffs are former upper-level management employees of Holiday Inns, Inc. In 1991, Holiday Inns was acquired by a British corporation, and after a corporate restructuring, plaintiffs lost their jobs. Each plaintiff signed an individual separation and release agreement in exchange for an unspecified sum of money. The agreement provides, in pertinent part:
Employee forever and unconditionally releases the Released Parties from any and all claims ... related in any way to аnything occurring up to and including the date hereof. Without limiting the generality of the foregoing, this Agreement applies to any and all claims which in any way result from, arise out of, or relate to Employee’s employment, termination or resignation from employment with the Company or any of the Released Parties, including but not limited to, any and all claims which could have been asserted under any fair employment, contract or tort laws, ordinance [sic], including Title VII of the Civil Rights Act of 1964, the Tennessee Anti-Discrimination Act, the Emplоyee Retirement Income Security Act, or under any of the Company’s employee benefit, compensation, bonus, performance, award, severance, or vacation pay plans____
Each plaintiff was instructed that he had 72 hours to sign and return thе agreement in order to be eligible for the incentive. Nowhere does the agreement explicitly refer to ADEA claims.
In 1992, plaintiffs sued, alleging that their termination violated the ADEA; however, they did not return any portion of the incentive payments that they had reсeived from Holiday Inns or offer to do so. The defendant moved for summary judgment, arguing that, even if the release is defective under the ADEA, plaintiffs ratified it by keeping the incentive money they were paid and are therefore barred from pursuing any employment-rеlated claim. The district court held otherwise, reasoning that the purposes of the ADEA would be frustrated by a tender-back requirement. Recognizing the split among the circuits on this question and the absence of controlling authority in this circuit, the district court then certified its order denying summary judgment for interlocutory appeal.
II.
A.
Under the Older Workers Benefit Protection Act (OWBPA) amendment to the ADEA, there are eight minimum requirements an ADEA release must meet before it can be considered “knowing and voluntary.”
(1) The release must be written in a mаnner calculated to be understood by the employee signing the release, or the average individual eligible to participate;
(2) the release must specifically refer to the ADEA;
(3) the release must not purport to encompass claims that may arise after the date of signing;
(4) the employеr must provide consideration for the ADEA claim above and beyond that to which the employee would otherwise already be entitled;
(5) the employee must be advised in writing to consult with an attorney;
(6) the employee must be given at least 21 or 45 days to consider signing, depending on whether the incentive is offered to a group;
(7) the release must allow the employee to rescind the agreement up to 7 days after signing; and
(8) if the release is offered in connection with an exit incentive or group termination prоgram, the employer must provide information relating to the job titles and ages of those eligible (or selected) for the program, and the corresponding information relating to employees in the same job titles who were not eligible (or not seleсted) for the program.
Additionally, the Wamsley court looked to the OWBPA’s legislative history to determine that applying the ratification doctrine was consistent with the purposes of the ADEA. That is, the congressional committee that proposed the OWBPA amendment to the ADEA discussed several of the common-law instances in which a voidable contract could be ratified, such as instances in whiсh the original contract was procured through fraud, duress, coercion, or mistake, id. at 539 n. 8, thus suggesting that Congress viewed noncomplianee with the OWBPA requirements in the same light, id. Also, the Wamsley court reasoned that, if employees were excused from tendering back the consideration paid for waiving ADEA claims when such claims are later brought anyway, employers would be deterred from offering private agreements which settle potential claims, thereby defeating one of the purposes of the ADEA. Id. at 539.
The difficulty with the defendant’s argumеnt and with the reasoning of the Blistein, Blakeney, and Wamsley decisions, we think, is that they fail to address the straightforward language of the statute. The OWBPA unambiguously states at
Thus, it is clear from the statute that а former employee could no more assent to the waiver of his ADEA claims after having signed the defective release than he could at the time of signing it. Although Congress utilized the familiar language of the common law when it deemed that no waiver would be “knowing and voluntary” unless the eight OWBPA requirements were met, it did not stop there; it also prоvided that an individual may not waive ADEA claims unless the waiver is knowing and voluntary.
Congress has purposely interposed an obstacle to application of the traditional ratification doctrine by requiring thаt a knowing and voluntary waiver of ADEA claims cannot occur except in cases in which, at a minimum, the eight OWBPA factors are met. The common law would invalidate a contract as not being knowing or voluntary if it were secured through fraud, duress, coercion, or mistаke. But, under the common law, such an invalid contract could be ratified by the retention of the consideration once the fraud, duress, coercion, or mistake was uncovered. The rationale for this rule is that, by keeping the consideration after the voidability оf the contract is discovered, the promisor makes a new contract, this time knowing all the facts and circumstances. He renews his promise and keeps the consideration, forming a new contract, because the element which made the originаl contract invalid is no longer present. Wamsley,
But, in this case, the invalidating flaw has not been eliminated. The OWBPA information still has not been supplied. It is as if, under a common-law analysis, the fraud, duress, coercion, or mistakе infected the new, supposedly ratified contract as well. Thus,
The overarching purpose of the OWBPA amendment is to provide employees with information giving them “the ability to assess the value of the right to sue for a possibly valid discrimination claim.” Raczak v. Ameritech Corp.,
B.
Nevertheless, the fact that the terminated employees cannot ratify a defective ADEA waiver merely allows them to pursue their ADEA claims. It does not, by itself, require that they be allowed to retain the consideration pаid for an invalid bargain. Although Holiday Inns argues that equitable principles require the return of this money in exchange for which there was no valid promise, we are constrained from providing such relief by the purposes of the OWBPA and, more importantly, practicаl considerations.
Notably, the OWBPA itself contains no sanction for noncompliance. In other words, although employers are charged with writing valid releases, there is no automatic penalty if they fail to do so. See
However, in cases where the employer knows that it has impermissibly discriminated based upon age and that the OWBPA information will likely demonstrate such discrimination, and we do not suggest that this is one of them, the economic incentive to cоmply with the OWBPA will be insufficient. In such a case, the employer may gamble and decide not to provide the OWBPA information, hoping that an employee who does not know he has been discriminated against will be less likely to sue, and will also accept less money for the ADEA waiver. The savings in not having to pay the full settlement value of a viable ADEA claim may outweigh the risk of later not being able to enforce the waiver. In this latter instance, the purpose of the OWBPA to provide employees with sufficient information to evaluate the worth of potential ADEA claims would be frustrated in the very ease in which the information is most important.
In the case before us, as in most instances, there has been no determination of the amount of the consideration allocable to the ADEA waiver versus the amount paid for release of other potential claims. As the separation and release agreement indicates, Holiday Inns’ former employees explicitly released the defendant from liability for numerous claims and, sincе ADEA liability was not specified, we may infer that Holiday Inns believes it has paid for the release of a number of other claims. It would be extremely difficult, if not impossible, for the district court to identify all the potential theories of liability that these former employees have waived in consideration for money payments. And it would be impossible to assign meaningful values to all those potential claims and then apportion some of the consideration for the ADEA claims, and the rest for the remaining claims. See Long,
Lastly, also аs a practical matter, we note that the eight OWBPA requirements should not be difficult for an employer to meet. Although questions may arise as to
III.
For the foregoing reasons, the district court’s order denying summary judgment is AFFIRMED, and the case is REMANDED for further proceedings.