If an employee who signed an agreement waiving discrimination claims later files a lawsuit asserting such claims, he or she will argue that the waiver is legally invalid while the employer will, of course, argue the opposite. A court, therefore, would have to determine whether the waiver is valid and binding on the employee before considering the substance of the underlying discrimination action.
A waiver in a severance agreement generally is valid if the employee knowingly and voluntarily consented to it. Courts look to different factors to determine whether the consent was knowing and voluntary, and this could depend upon the statute under which the discrimination action is brought. While some courts rely on traditional contract interpretation principles and focus on whether the language of the waiver was clear, most courts will look at a number of factors, or what is referred to as “the totality of the circumstances,” to determine if the employee knowingly and voluntarily waived his or her right to bring a lawsuit.
When an employee asserts claims under Title VII of the Civil Rights Act, the Americans with Disabilities Act, or the Equal Pay Act, courts considering the totality of circumstances will look to:
- Whether the waiver was clear, specific (e.g., explicitly referred to the types of claims being waived), and written in a way that the employee could understand given his or her education and experience;
- Whether the waiver was induced by fraud, duress, undue influence, or other improper conduct by the employer;
- Whether the employee had enough time to consider the waiver and the advantages or disadvantages of signing it;
- Whether the employee consulted an attorney or was encouraged or discouraged from doing so by the employer;
- Whether the employee had input in negotiating the terms of the agreement; and
- Whether the employer offered the employee consideration, such as additional pay or benefits, beyond what the employee was already entitled to by law or under a contract, and the employee accepted this consideration.
When an employee brings a lawsuit under the Age Discrimination in Employment Act (“ADEA”), courts will look to additional factors under this statute to determine whether the waiver was knowing and voluntary. For example, the waiver for an ADEA claim must specifically refer to rights or claims arising under the ADEA, must advise the employee to consult with an attorney, must provide the employee with at least 21 days to consider the offer and a further seven days to revoke his or her signature, and the waiver may not include any rights or claims that arise after the date the waiver is signed.
Accordingly, if some or all of the factors listed above are not met, an employer may still face exposure to a discrimination lawsuit – although it appeared that the company was insulated from due to a waiver signed by its former employee.
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