Download Planning For a Reduction In Force: Legal and Strategic

American Bar Association
Section of Labor and Employment Law
Fifth Annual Conference
Seattle, Washington
November 4, 2011
Planning For a Reduction In Force:
Legal and Strategic Considerations
Nicole Crawford
Brooks Pierce
Greensboro, North Carolina
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On August 23, 2011, the United States Department of Labor (DOL) reported that
employers took 1,579 mass layoff actions in July 2011, affecting 145,000 workers. Each mass
layoff involved at least 50 workers from a single employer. This was a three percent increase
from June 2011. The manufacturing sector accounted for 28 percent of mass layoff events and
33 percent of initial unemployment claims filed in July 2011.
As layoffs continue across industries with no sign of abating, management-side
employment lawyers must have a basic knowledge of the legal implications of a reduction in
force (RIF), but ideally they will be able to counsel and guide clients through a RIF, particularly
those clients who have never had to lay off employees before. Clearly there is no magic bullet to
avoiding post-RIF litigation, though the heightened standard articulated in Gross v. FBL
Financial Services, ___ U.S. ___, 129 S.Ct. 2343, 2350 (2009), requiring a showing that age was
the but-for cause of termination, provides some assistance in age discrimination cases. Yet,
thoughtful advice at the outset, as well as during, a RIF will provide a solid defense to such
litigation.
The details involved in managing a client’s RIF, however, go beyond cases and citations.
They go to the heart of what employment law is all about: people. Successfully counseling
employers on RIF issues requires more than knowing how to get summary judgment or try a
discrimination lawsuit. It requires a sense of the employer’s business and its culture, and the
ability to hear and understand what the managers involved believe the future direction of the
business to be and how they want to get there. Once that becomes clear, an attorney can help
them deliberately and objectively document the RIF from beginning to end and hopefully steer
clear of litigation. If not successful at steering clear of litigation, the team will at least have
created a defensible case for the tough decisions the employer made.
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Strategy and Selection in a RIF
Employers must be intentional about planning and implementing a reduction in force, and
it is imperative to go through the process in concert with legal counsel. This helps an employer
understand the legal and economic implications of the RIF, the potential hot-spots for post-RIF
litigation, and gives the employer some tools to defend the decision in the event of such
litigation.
Counsel should guide employers as they plan and implement the RIF, ensuring that the
employer carefully documents and justifies its decisions. Steps to take include:
Examine the current situation and the anticipated/hoped-for future and draft a
business justification memo.
It is important to establish business-related and objective reasons for deciding to
implement a RIF.
What is the organizational structure that will most effectively accomplish the goals
presently set for the company?
Is it through a merger or consolidation of business units?
Closing a plant? Eliminating jobs? Are there alternatives—can the goals be achieved through a
hiring freeze, reduced hours, reducing overtime, job sharing, increasing employees’ contribution
to health care costs, or moving employees to affiliated businesses?
Why is this happening? A decrease in sales? Technological changes? A poor financial
forecast? Overstaffing? Changes in the organization? Changes in the market?
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How will the business go about changing the structure/implementing the RIF? Are there
current contractual obligations that limit the employer’s options (e.g., employee handbook
stating how layoffs will occur, written severance plans, collective bargaining agreements)?
Document the answers to these questions in a business justification memo stating:
•
why the employer finds itself in this position;
•
what its goals and plans for the future are;
•
the alternatives (to a RIF) that it considered;
•
why they are not sufficient or are impracticable.
•
how a RIF will help the employer achieve these goals.
The business justification memo provides contemporaneous (versus after-the-fact) proof
to a jury that the employer did consider the alternatives in an attempt not to lay people off, and
helps show that the RIF was for purely business (versus discriminatory) reasons.
Consider a voluntary RIF first.
Who will be selected for layoff? The first step is to consider early retirement incentive
plans (“ERIPs”). ERIP packages offer enhanced retirement benefits or severance to a group of
employees in exchange for a release of all claims against the employer. These plans may be
subject to ERISA and should be discussed with benefits counsel prior to implementation, but
they are “safe” place to begin the RIF because they create a group of employees who choose to
leave. As employers consider and design a voluntary RIF, particularly as they determine which
employees are eligible for the packages, counsel should work with the employer to carefully
discuss how to determine the categories of employees to whom packages will be offered. Stray
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remarks about the employees who would consider the package attractive (“he’s been needing to
retire for years now”), or in communicating the package to the employee (“you’ve been wanting
to retire for years now”) can create problems down the line. Also, some employees who are
offered the voluntary package may not take it, and may be subject to involuntary layoff later.
Selection considerations for an involuntary RIF.
Human resources personnel must work carefully with counsel and managers to determine
the criteria for selecting employees for lay off. This is the most volatile and vital part of pre-RIF
discussion and documentation.
Criteria for selection may include:
seniority, skill sets,
performance level, or clients/contracts assigned. The best course to avoid age discrimination
claims is to use a strictly objective criterion, such as seniority. Seniority is clearly understood by
all parties and easiest to administer. Yet even seniority may expose an employer to other
discrimination claims, such as those from women or minorities who can be the most recent hires
in companies that have historically hired white males as the bulk of their workforce. If a
decision based on seniority is well documented, it can still be defensible:
an employee
terminated in a RIF shortly after disclosing her pregnancy had no discrimination claim where the
employer’s evidence demonstrated that seniority was a selection factor.
Groves v. Cost
Planning and Mgmt. Int’l, Inc., 372 F.3d 1008 (8th Cir. 2004).
Other objective methods include production standards and quantity, location, type of
employment (contingent or part-time), or job elimination based on a thorough analysis of
positions that are not needed (versus identification of specific employees). A RIF based on a job
analysis is time-consuming and must involve use of the job description and a functional analysis
of the actual tasks and duties of the position, as well as how it relates to other positions in the
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unit/department/division.
Where an employer can demonstrate that an older employee’s
termination resulted from economic necessity, the reorganization of the employee’s department,
and her score in a Layoff Determination Comparison Matrix that was based on specific objective
factors and showed she would have been laid off regardless of her age, there is no evidence of
discrimination. Steger v. Gen. Elec. Co., 318 F.3d 1066 (11th Cir. 2003).
The problems with performance as a criterion
The subjective methods require more planning with counsel to carefully document the
decision-makers’ focus on the business reasons for the RIF—go back to the business justification
memo. Many employers choose to use relative performance as a criterion so they may keep their
most “valuable” employees. This method, of course, relies on the subjective judgment of
managers over time, any one (or many) of whom could be alleged to have had a long-standing
bias against a Hispanic employee or a female employee or an employee over 40. If an employer
wants to use subjective methods for RIF selection, counsel should recommend that the employer
deliberately and thoughtfully channel the subjectivity (and document that it did so) by focusing
on well-defined, focused, job-related criteria that can be pulled from job descriptions and actual
performance evaluations. This permits a jury to use relevant documents, not just testimony, to
logically analyze and understand a decision that may be perceived to be unfair on its face (i.e.,
the only 57-year-old in the group was let go).
When an employer wants to use performance as a criterion, counsel should ask several
questions to clarify whether this is the best method for choosing employees for a RIF.
•
Does the employer have informal and/or unwritten evaluation systems?
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•
If the employer has a formal system, is it adhered to in a consistent manner by most
of all managers?
RIFs that use performance as a selection criterion where the performance evaluation
system is informal or underutilized are extremely difficult to defend because they lack
credibility.
•
Are the performance criteria stated by the employer clearly identified and readily
measurable?
If the employer permits evaluation comments like “does not contribute to the overall
mission of the organization” or “has bad attitude” which are unrelated or cannot be readily
connected to specific performance criteria that have been articulated to the employee, the
company will be hard pressed to defend its layoff decision in a meaningful and credible way. A
consistent failure to meet clearly articulated and measurable performance goals has been upheld
by the courts as a legitimate reason to select an employee for termination—but not being able to
demonstrate it can be fatal. In one case, the Seventh Circuit found that an older employee’s
termination because of the general factor of “low productivity” could have been an excuse for
age discrimination where the evidence showed the employee was actually the most productive in
his department and younger, less qualified employees were retained. Thorn v. Sundstrand
Aerospace Corp., 207 F.3d 383 (7th Cir. 2000).
•
Does more than one person evaluate each employee’s performance?
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The integrity of an evaluation is improved when several evaluators independently assess
an employee’s performance (that is, they do not see each other’s evaluation comments or confer
before completing the evaluation).
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Are there procedural safeguards?
The process is more defensible if someone other than the first-line supervisor
reviews the evaluation before it is given to the employee and the employee is given a meaningful
opportunity to dispute or give feedback on the evaluation. The secondary reviewer could be a
member of higher level management or human resources, but a secondary review bolsters
credibility. RIFs that use performance as a selection criterion are best accomplished when the
employer has a thorough and defensible evaluation process.
Give management training.
Managers who are involved in the RIF should have some basic training to ensure
consistent and fair administration of the RIF. Remember, these managers will be key witnesses
in any post-RIF litigation. The training should include a discussion of the business justification
for the RIF, the company’s procedures for implementing the RIF, the correct methods for
selecting/ranking employees, the factors that cannot be considered or used to select/rank
employees, how to identify excess areas of staffing (if applicable), how to advise and counsel
employees (and how not to), and what the legal ramifications are for the employer if one or more
of the affected employees is treated in a discriminatory manner (or a manner that appears
discriminatory). Attorneys should advise employers against permitting any exceptions to the
selection criteria and this should also be communicated to managers.
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No matter what selection criteria are used, counsel for the employer should consider the
profile of the workforce and affected employees. Potential risks include employees:
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With a disability or regarding as having a disability
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Over 40
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Who are minorities
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With a recent grievance or complaint against the company
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On FMLA leave or recently returned from one
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On Workers’ Compensation or having recently made a claim
While it would weaken an age plaintiff’s case if the average age of the employer’s
workforce increased after a RIF, that is unlikely to be the case. Thus, the employer and its
attorney should know where the weaknesses are before implementing the RIF and also ensure
that the particularly weak cases can be properly justified and documented. The review should
not be limited to hard numbers, but should also consider how the percentages play out: one court
did not find a drop of 4 to 5 percent in the employment rate of workers over 40 as “sufficiently
substantial” to create an inference of age discrimination. Clark v. Matthews International Corp.,
8th Cir., No. 10-1037 (Dec. 27, 2010).
Implementation Issues
Wages and vacation pay
State wage payment laws generally include requirements for the payment of final
compensation upon termination. For example, in North Carolina final compensation is not due
until the next regular payday, and must include all wages, but excludes accrued vacation pay IF
there is a forfeiture clause in the employee handbook and the employees have been put on notice
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of the potential of forfeiture.
Other states require immediate payment of final wages upon
termination.
Insurance continuation and conversion privileges
Federal and state laws require employers to make group health insurance available on a
continuation basis and to offer health insurance conversion privileges to terminated employees.
Attorneys should determine company responsibilities under those laws prior to layoff, and
insurance carriers should be notified to ensure compliance with applicable laws. There are also
requirements regarding notification to the affected employees that must be met.
Pension benefits
Employees may be entitled to pension benefits depending on the provisions of the
employer’s plan. The employer should work with the plan administrator to determine what
options are available to employees and with benefits counsel to determine the legal requirements
regarding notification to the affected employees.
Severance benefits and the Older Worker Benefits Protection Act (OWBPA)
The OWBPA amended the Age Discrimination in Employment Act (ADEA) by changing
the rules for age discrimination releases in exchange for severance benefits. See 29 C.F.R. §
1625.22.
In practice, many employers, particularly smaller companies, are not aware of
OWBPA requirements when they implement RIFs—and it becomes the bane of their existence
when they do learn of it, because it requires disclosure of all jobs considered for layoff and the
ages of the employees in those jobs who were and were not selected for layoff. Specifically, the
OWBPA imposes the following requirements on any release that purports to waive any age
discrimination claim:
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•
The release must be part of an agreement between employer and employee;
•
It must be written in simple English;
•
It must specifically make reference to the employee’s rights under the ADEA which
are being waived;
•
It must be limited to claims or rights which arose before the employee executed the
release;
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It must be in exchange for something of value which is more than that to which the
employee is already entitled;
•
The employee must be advised in writing to consult with an attorney before signing
the agreement;
•
The release must allow the employee a 7-day period in which to revoke the agreement
after it is signed;
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In a layoff or early retirement situation (described as a “program”), each employee
must be given at least 45 days in which to consider the agreement;
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Each employee must be given a written disclosure, in ordinary English that contains:
o the class, unit or group of individuals covered by the program,
o the eligibility factors and time limits applicable to the program,
o the job titles and ages of all individuals eligible or selected for the program, and
o the ages of all individuals of the same job classification or organization unit who
are not eligible or selected for the program.
The courts have generally required strict compliance with the OWBPA, particularly the
“plain English” requirement, so that employees terminated under a RIF understand that they are
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releasing their age claims.
Specifically, waivers “must not have the effect of misleading,
misinforming, or failing to inform participants and affected individuals.”
29 C.F.R. §
1625.22(b)(4).
For example, one litigated release contained the following language:
“If you feel that you are being coerced to sign this General Release and Covenant
Not to Sue (hereinafter “Release”), [or] that your signing would for any reason
not be voluntary ... you are encouraged to discuss this with your manager, the
MERA Project Office or Human Resources before signing this Release.
….
In exchange for the sums and benefits received pursuant to the terms of the
MICROELECTRONICS
RESOURCE
ACTION
(MERA),
[EMPLOYEE
NAME], (hereinafter “you”) agrees to release and hereby does release [IBM] ...
from all claims, demands, actions or liabilities you may have against IBM of
whatever kind including, but not limited to, those that are related to your
employment with IBM, the termination of that employment, or other severance
payments or your eligibility for participation in the Retirement Bridge Leave of
Absence, or claims for attorneys' fees.
....
You also agree that this Release covers, but is not limited to, claims arising from
the [ADEA], as amended, ... and any other federal, state or local law dealing with
discrimination in employment, including, but not limited to, discrimination based
on sex, sexual orientation, race, national origin, religion, disability, veteran status
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or age.... This Release covers both claims that you know about and those that you
may not know about which have accrued by the time you execute this Release.
....
You agree that you will never institute a claim of any kind against IBM ...
including, but not limited to, claims related to your employment with IBM or the
termination of that employment or other severance payments or your eligibility
for participation in the Retirement Bridge Leave of Absence. If you violate this
covenant not to sue by suing IBM ..., you agree that you will pay all costs and
expenses of defending against the suit incurred by IBM ..., including reasonable
attorneys' fees, and all further costs and fees, including attorneys' fees, incurred in
connection with collection. This covenant not to sue does not apply to actions
based solely under the [ADEA], as amended. That means that if you were to sue
IBM ... only under the [ADEA], as amended, you would not be liable under the
terms of this Release for their attorneys' fees and other costs and expenses of
defending against the suit. This Release does not preclude filing a charge with the
U.S. Equal Employment Opportunity Commission.
....
You hereby acknowledge that you understand and agree to this General Release
and Covenant Not to Sue.”
Also, note 1 of the agreement explained that “[t]he [ADEA] prohibits
employment discrimination based on age and is enforced by the [EEOC].” Syverson v.
International Business Machines Corp., 472 F.3d 1072, 1081 (9th Cir. 2007).
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The Eighth and Ninth Circuits both invalidated the release because the language was
ambiguous and not designed to be understood by the average employee and therefore did not
meet the statutory waiver requirements of the OWBPA. See Thomforde v. Int’l Bus. Machs.
Corp., 406 F.3d 500, 503-4 (8th Cir. 2005); Syverson, 472 F.3d at 1083.
Additionally, determining the decisional unit is a key step in the process. The more the
attorney knows about the business of the client, the more valuable she can be in helping the
client understand how to determine and document the decisional unit, how to report out the
information regarding the unit, and the employees considered and selected, and in creating a
valid release. Sample releases and a reporting form are attached. Defending a RIF decision
requires intense consideration of the reasons behind all decisions in the RIF, which cannot be
taken lightly by employers, their managers or their counsel.
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Model Severance Agreement 1
SEVERANCE AGREEMENT, GENERAL RELEASE, AND COVENANT NOT TO SUE
THIS SEVERANCE AGREEMENT, GENERAL RELEASE, AND COVENANT NOT TO
SUE (the “Agreement”) is made between [Name of Employee], referred to as “I” or “me” and
[Name of Company], referred to as “Company”].
(“Company”) and I agree to the following:
Section 1—Agreement
In exchange for my agreement to sign this document, Company promises to pay or provide me
with the following benefits which I understand are in addition to anything of value to which I am
already entitled:
(a) Severance Pay
Company will pay me [number of weeks] weeks' pay, less applicable withholding taxes. This
payment will be made within 10 business days following the effective date of this Agreement as
defined in Section 9. Whether or not I sign this Agreement, I understand that I will receive
payment for all of my wages through the last day of my employment with Company, and [add if
applicable:payment for my accrued, unused vacation/annual leave/paid time off].
(b) Health Care Benefits
Company will continue my group health care benefits for me and my covered dependents for
[number of weeks] weeks following the effective date of this Agreement, after which I can
continue my health care benefits under COBRA health care continuation rules. [Add if
applicable: Company will deduct my premium contribution for my group health care benefits
from the severance pay described in paragraph (a)].
(c) Other Benefits
[Describe any other benefits to be provided, such as continued use or purchase of Companyprovided equipment, outplacement services, and letters of reference].
Section 2—Complete Release
(a) General Release
I release and give up all of the claims described in subsection (b) that I might have had or now
have against the parties listed in subsection (d), except that I am not releasing any claim that
relates to: (i) my right to enforce this Agreement; (ii) any rights or claims under any law that
arise after the effective date of this Agreement as defined in Section 9; (iii) any rights I might
have to indemnification from personal liability; (iv) my right, if any, to government-provided
unemployment compensation; (v) my right to file an administrative charge with a government
agency, such as the Equal Employment Opportunity Commission or the National Labor
Relations Board, or participate in an investigation or proceeding conducted by a government
agency, although I am waiving my right to monetary recovery in connection with any such
charge; (vi) my right to file a claim for workers' compensation benefits; (vii) any rights I might
have to vested benefits under the Company's standard benefit programs, such as COBRA
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benefits, except for claims specifically identified in subsection (b); or (viii) any rights or claims
that by law cannot be released by this Agreement.
(b) Claims Released
I am releasing all known and unknown claims, promises, causes of action, or similar rights of
any type that I presently might have (“claims”) with respect to any released party listed in
subsection (d). I understand that the claims that I am releasing might arise under many different
laws (including statutes, regulations, other administrative guidance, and common law doctrines),
such as the following:
Anti-discrimination statutes, including the Age Discrimination in Employment Act and
Executive Order 11,141, which prohibit age discrimination in employment; Title VII of the Civil
Rights Act of 1964, Sections 1981 and 1983 of the Civil Rights Act of 1866, and Executive
Order 11,246, which prohibit discrimination based on race, color, national origin, religion, or
sex; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the
Americans with Disabilities Act and Sections 503 and 504 of the Rehabilitation Act of 1973,
which prohibit discrimination based on disability; and any and all other federal, state, or local
laws prohibiting employment discrimination.
Federal employment statutes, such as the Worker Adjustment and Retraining Notification Act,
which requires that advance notice be given of certain work force reductions; and any and all
other federal laws relating to employment, such as veterans’ re-employment rights laws. Other
laws, such as federal, state, or local laws restricting an employer's right to terminate employees
or otherwise regulating employment; any federal, state, or local laws enforcing express or
implied employment contracts or requiring an employer to deal with employees fairly or in good
faith; any other federal, state, or local laws providing recourse for alleged wrongful discharge,
tort, physical or personal injury, emotional distress, fraud, negligent misrepresentation,
defamation, and similar or related claims.
(c) Unknown Claims
I understand that I am releasing claims that I might not know about. That is my knowing and
voluntary intent, even though I recognize that someday I might learn that some or all of the facts
I currently believe to be true are untrue and even though I might then regret having signed this
Agreement. Nevertheless, I am assuming that risk and I agree that this Agreement will remain
effective in all respects in any such case. I expressly waive all rights I might have under any law
that is intended to protect me from waiving unknown claims. I understand the significance of
doing so.
(d) Released Parties
The released parties are Company, all of its current or former related companies, partnerships, or
joint ventures, and, with respect to each of them, all of Company's or such related entities’
predecessors and successors, and, with respect to each such entity, all of its past, present, and
future employees, officers, directors, stockholders, owners, representatives, assigns, attorneys,
agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries, and
insurers of such programs), and any other persons acting by, through, under, or in concert with
any of the persons or entities listed in this subsection, and their successors.
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Section 3—My Promises
(a) Employment Termination
I understand that my employment with Company will end on [ add effective date]. I
acknowledge that the decision to terminate my employment was made before I signed this
Agreement. I further acknowledge that no one made any representations to me (other than in the
official plan document, summary plan description, and related written materials) about benefits
or programs that the Company might or might not offer in the future.
(b) Covenant Not to Sue
I agree to withdraw with prejudice all complaints or lawsuits, if any, that I have filed against any
released party with any court and I agree to request the withdrawal of all charges or complaints,
if any, that I have filed against any released party with any administrative agency. I represent that
I will not in the future seek any damages, relief, or remedies for myself (any right to which I
waive) from any released party or join any class action lawsuits based on the claims released in
this Agreement, except that I can challenge the validity of this Agreement under ADEA. If I file,
prosecute, or participate in any charge with any administrative agency with respect to any claim
purportedly released by this Agreement, I promise never to seek any damages, remedies, or other
relief for myself personally (any right to which I waive).
(c) Company Property
I have or will return to Company by [date] all files, memoranda, documents, information, and
records, including any and all electronically-stored copies of the foregoing, as well as laptop
computers, pagers, cell phones, credit cards, keys, badges, and any other property of Company or
its affiliates now in my possession. To the extent necessary to access Company property, I agree
to provide Company my passwords or passcodes.
(d) Taxes
I am responsible for paying any taxes on amounts I receive because I signed this Agreement and
I agree that Company can withhold all taxes it determines it is legally required to withhold.
(e) Ownership of Claims
I have not assigned or transferred any claim I am releasing, nor have I purported to do so.
(f) Nonadmission of Liability
I agree not to assert that this Agreement is an admission of guilt or wrongdoing by anyone and I
acknowledge that the released parties do not believe or admit that any of them has done anything
wrong.
(g) No Disparagement
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I agree not to criticize, denigrate, or disparage any released party.
[Include only if necessary under the circumstances:]
(h) Nondisclosure
I acknowledge that I possess secret, confidential, or proprietary information or trade secrets
concerning the customers, clients, operations, future plans, and business methods of Company
and its affiliates (the “information”). I agree that Company and its affiliates would be severely
damaged if I used or disclosed the information. To prevent this harm, I have made the following
promises and I acknowledge that Company would be irreparably harmed if I broke any of them.
(i) Promise Not to Disclose. I promise never to use or disclose the information before it
has become generally known within the relevant industry through no fault of my own. I agree
that this promise will never expire.
(ii) Promise Not to Solicit. To prevent me from inevitably breaking the promise contained
in paragraph (i), I further agree that, for [number of months] months from the date I sign this
Agreement: (1) as to any customer or supplier of Company with whom I had dealings or about
whom I acquired information during my employment, I will not solicit or attempt to solicit the
customer or supplier to do business with any person or entity; and (2) I will not solicit for
employment any person who is, or within the preceding [number of months] months was, an
officer, manager, employee, or consultant of Company or its affiliates, unless the individual had
terminated employment with Company before my solicitation.
(iii) Promise Not to Engage in Certain Employment. I agree that, for [number of months]
months from the date I sign this Agreement, I will not accept any employment or engage in any
activity, without Company's written consent, if the loyal and complete fulfillment of my new
duties would inevitably require me to reveal or use the information that I have promised not to
disclose or use, as reasonably determined by Company.
(iv) Promise to Discuss Proposed Actions in Advance. Before I disclose or use the
information or commence employment, solicitations, or any other activity that could possibly
violate the promises I have just made, I promise that I will discuss my proposed actions with
[name] at [telephone number], who will advise me in writing whether my proposed actions
would violate these promises.
(i) Implementation
I agree to sign any documents and do anything else that is necessary in the future to implement
this Agreement.
(j) Other Representations
I have not suffered any job-related wrongs, illnesses, or injuries for which I might still be entitled
to compensation or relief, such as an illness or injury for which I might receive a workers’
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compensation award in the future. I understand that Company relied on these representations in
entering into this Agreement with me. I further represent that I have been paid for all hours
worked and that Company relied on this representation in entering into this Agreement with me.
Section 4—Consequences of Violating My Promises
I acknowledge that if I breach any of my promises contained in this Agreement, then, to the
extent permitted by law, I will be liable to Company for either (i) the costs incurred in
prosecuting or defending against any lawsuit, including Company's reasonable attorneys' fees, or,
at Company's option, (ii) the value of the severance pay and benefits described in Section 1.
Provided, however, that with respect to any ADEA claim, Company's right to recover attorneys'
fees and costs is limited to whether Company is entitled to recovery under established principles
of law.
Section 5- Disclosure Requirements
Company has provided me with information required by law about the persons who are eligible
for or who have been selected to receive severance benefits. Add the following or include on a
separate attachment to the agreement:
(a) a description of the class, unit, or group of persons selected for termination;
(b) the eligibility factors for termination;
(c) any time limits applicable to the termination;
(d) the job titles and ages of the persons eligible or selected for termination; and
(e) the ages of the persons in the same job classification or decisional unit not eligible or selected
for termination.
Section 6—Consideration of Agreement
I acknowledge that, before signing this Agreement, I was given a period of at least 45 calendar
days to consider this Agreement. I acknowledge that: (i) I took advantage of this period to
consider this Agreement before signing it; (ii) I carefully read this Agreement; (iii) I fully
understand it; (iv) I am entering into it voluntarily; (v) I am receiving valuable consideration in
exchange for my execution of this Agreement that I would not otherwise be entitled to receive;
and (vi) Company, by this writing, advised me that I should discuss this Agreement with an
attorney of my choice before signing it, and I did so to the extent that I deemed appropriate.
Section 7—Miscellaneous
(a) Entire Agreement
This is the entire agreement between me and Company. This Agreement cannot be modified or
canceled in any manner, except by a writing signed by both me and an authorized Company
official. I acknowledge that Company has made no representations or promises to me other than
those contained in this Agreement. If any provision in this Agreement is found to be
unenforceable, all of the other provisions will remain fully enforceable.
(b) Successors
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This Agreement binds me and my heirs, administrators, representatives, executors, successors,
and assigns, and will inure to the benefit of all released parties and their respective heirs,
administrators, representatives, executors, successors, and assigns.
(c) Interpretation and Governing Law
This Agreement must be construed as a whole according to its fair meaning. It must not be
construed strictly for or against me or any released party. Unless the context indicates otherwise,
the term “or” includes the term “and,” and the singular or plural number includes the other.
Headings are intended solely for convenience of reference and are not to be used in the
interpretation of this Agreement. Except to the extent governed by federal law, this Agreement is
to be construed in accordance with and governed by the statutes and common law of the State of
[name], without reference to its choice of laws rules.
(d) Counterparts
This Agreement may be signed in several counterparts, each of which is to be considered an
original by the party that signed it, and all counterparts are to be considered one and the same
document.
Section 8—Arbitration of Disputes
Company and I agree to resolve any claims that we might have with each other (“arbitrable
dispute”), through final and binding arbitration to be conducted by [name of arbitrator, mediator,
or arbitration organization]. This arbitration agreement applies, for example, to disputes about
the validity, interpretation, or effect of this Agreement or alleged violations of it; claims of
discrimination under federal or state law; or other statutory violation claims. Should I or
Company attempt to resolve an arbitrable dispute by any method other than arbitration pursuant
to this section, the responding party will be entitled to recover from the initiating party all
damages, expenses, and attorneys' fees incurred as a result of that breach.
Section 9 —Revocation Period and Effective Date
I understand that I have seven calendar days after the date I sign this Agreement to change my
mind and revoke my acceptance by sending a written notice of revocation to [name] at [address].
I understand that any written notice of revocation must be received by [name] on or before the
seventh day after the date I signed this Agreement. If I do not revoke my acceptance, I
understand that this Agreement will become effective and enforceable on the eighth calendar day
after the date I signed this Agreement.
20
TAKE THIS AGREEMENT HOME, READ IT, AND CAREFULLY CONSIDER ALL OF ITS
PROVISIONS BEFORE SIGNING IT. IT INCLUDES A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS. YOU ARE ADVISED TO TAKE ADVANTAGE OF THE
CONSIDERATION PERIOD DESCRIBED IN SECTION 6 AND YOU SHOULD CONSULT
AN ATTORNEY.
If you decide to sign this Agreement, send a complete copy of it to [name] at [address]. Keep a
complete copy of the Agreement for your records.
Signature: ________________________ Date: ______
Print Name: ________________________
Signature of Witness: ________________________ Date: ______
Print Name of Witness:________________________
21
ATTACHMENT A
INFORMATION FURNISHED PURSUANT TO THE
OLDER WORKERS BENEFIT PROTECTION ACT
PLEASE REVIEW CAREFULLY.
1.
Decisional Unit. The decisional unit is defined as all employees who hold the job titles
of Service Technician, Parts Coordinator, Office Coordinator, Sales and Marketing Manager,
Product Trainer, Vice President Training & Technical Services, Sales Engineer, Shipping &
Receiving Coordinator, Core Coordinator, Warranty Coordinator, Service Writer, Service
Manager, VP & General Manager, Branch Manager and Sales Manager in the following six
branches of the Company: Chicago, New York, Nashville, Knoxville, Indianapolis, and Atlanta.
2.
All hourly employees in the aforementioned jobs and the aforementioned branches of the
Company and all salaried employees in the positions of Sales and Marketing Manager, Vice
President Training & Technical Services, Sales Engineer, Product Trainer, Service Manager, VP
& General Manager, Branch Manager and Sales Manager in the Chicago, New York, Nashville,
Knoxville, Indianapolis and Atlanta branches of the Company are eligible for the program.
Employees who have been terminated other than for cause since March 2008 and this September
17, 2011 reduction in force are selected for the program.
3.
All persons who are being offered consideration under a waiver agreement must sign a
Confidential Separation Agreement and General Release and return it to ____________ at the
Company’s Chicago, IL office within 45 days after receiving the Confidential Separation
Agreement and General Release. Once the Confidential Separation Agreement and General
Release is returned to _________, the employee may revoke the Confidential Separation
Agreement and General Release by providing written notice to ___________ postmarked by the
7th day following the date she/he signed it.
4.
The following is a listing of the ages and job titles of persons employed at the nine
branches of the Company who were and were not selected for termination and the offer of
consideration for signing the Confidential Separation Agreement and General Release.
Job Title
Parts Coordinator
Age
71
68
41
29
33
48(2)
34
59(3)
65(2)
56(2)
36
Number Selected
1
0
0
1
0
0
0
0
1
0
0
22
Number Not Selected
0
1
1
0
1
2
1
3
1
2
1
Job Title
Age
Number Selected
Number Not Selected
Parts Coordinator (cont’d)
56(3)
49
55(3)
1
0
1
2
1
2
Office Coordinator
42
45
47
48
51
53(2)
59
61(2)
0
1
1
0
1
1
0
0
1
0
0
1
0
1
1
2
Sales and Marketing Manager
55
56
58
59
61
67
0
0
0
0
0
1
1
1
1
1
1
0
Service Technician
20(2)
21
20(2)
21(4)
22(3)
22(4)
23
23(4)
24(3)
25(2)
26(2)
26(6)
27(4)
27(8)
28(4)
28(6)
29(4)
29(4)
30(3)
30(6)
31(2)
31(8)
32(5)
33(6)
34(6)
0
1
1
2
0
1
0
1
0
1
0
1
0
3
0
1
0
1
0
1
0
1
0
0
0
2
0
1
2
3
3
1
3
3
1
2
5
4
5
4
5
4
3
3
5
2
7
5
6
6
23
Job Title
Age
Number Selected
Number Not Selected
Service Technician (cont’d)
35(5)
36(4)
37
37(4)
38(4)
39(2)
40(5)
41(4)
42(4)
43(5)
43(4)
44(2)
45(3)
46(4)
47(2)
48(5)
49(3)
50(2)
51(2)
51(4)
52(2)
53(3)
54(2)
55(2)
56
57
58(2)
59
59
60
61(2)
62(2)
65
69
0
1
0
1
0
0
0
0
1
0
1
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
1
0
0
0
0
1
1
5
3
1
3
4
2
5
4
3
5
3
2
3
4
2
5
3
2
2
3
2
3
2
2
1
1
2
0
1
1
2
2
0
0
Warranty Coordinator
50
53
39(2)
56
0
1
0
0
1
0
2
1
59
45
58
29
1
1
1
0
0
0
0
1
Service Writer
24
Job Title
Service Writer (cont’d)
Age
27
53
60
Number Selected
0
0
0
Number Not Selected
1
1
1
Product Trainer
68
1
0
VP Training & Technical Services
50
0
1
Sales Engineer
53
0
1
Shipping & Receiving Coordinator
66
61
0
1
1
0
Core Coordinator
59
1
0
61
1
0
VP & General Manager
61
1
0
Branch Manager
53
1
0
Generator Sales Manager
55
1
0
Service Manager
25
Model Severance Agreement 2
CONFIDENTIAL SEPARATION AGREEMENT
AND GENERAL RELEASE
This Confidential Separation Agreement and General Release (“Agreement”) is made and
entered into this the _____ day of October, 2011 by and between ______________ for himself,
his heirs, executors, administrators, assigns, representatives and agents (hereafter collectively
“_____”), and __________________________ on behalf of itself, its parents, subsidiaries,
affiliates, successors, assigns, present and former shareholders, directors, officers, agents,
representatives, attorneys, and present and former employees (hereafter collectively “THE
COMPANY”). This Agreement is intended to and does resolve all claims and disputes of any
nature whatsoever by and between the parties as of the date of this Agreement.
WITNESSETH:
WHEREAS, _____ is employed by THE COMPANY as a ____________________.
WHEREAS, _____ is being terminated as part of a reduction in force due to change in
ownership effective October ____, 2011.
WHEREAS, in consideration of the monetary payments and other good and valuable
consideration set forth herein, _______ has agreed to release THE COMPANY from any and all
possible claims of liability to him.
NOW THEREFORE, for and in consideration of the premises, payment of the sums set
forth herein, and other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1.
THE COMPANY will pay to _____ a one time lump sum payment of $________ (less
withholdings and deductions required by law). This lump sum payment will be made on
the first regular pay day following the expiration of the revocation period set forth herein.
2.
_______ acknowledges that under THE COMPANY’s policies and practices, he is not
entitled to receive all of the benefits set forth above and that such additional benefits
constitute full and adequate consideration for his release set forth below.
3.
Execution of this Agreement and the payment of the consideration set forth herein shall
not constitute, or in any manner be construed as, an admission of liability by THE
COMPANY, which expressly denies any liability to _____ and further expressly denies
that THE COMPANY has engaged in any wrongful acts or conduct, violated any local,
state or Federal statutes, ordinances, regulations, provisions or orders or that it has
breached any obligations, express or implied, to ______.
26
4.
_____ does hereby release, acquit and forever discharge THE COMPANY from any and
all claims of any nature, known or unknown, which he has or may have against THE
COMPANY, including but not limited to those arising out of or relating to his
employment with and separation from THE COMPANY, to the date of this Agreement.
These Claims specifically include, but are not limited to, claims for wrongful termination,
intentional or negligent infliction of emotional distress, discharge in violation of public
policy, and/or discrimination based on race, national origin, sex, religion, color,
disability, and/or age under state or federal law (e.g., Title VII of the 1964 Civil Rights
Act, as amended, the Age Discrimination in Employment Act, the Americans with
Disabilities Act). _____ further expressly covenants not to sue THE COMPANY for
such Claims. It is agreed that nothing contained in this paragraph is intended to waive
any rights _____ may have under ERISA plans, which rights (if any) will be controlled
by the terms of such plan(s).
5.
THE COMPANY likewise releases _____ to the same extent as _____ released THE
COMPANY in ¶ 4, supra.
6.
_____ shall maintain the terms of the Agreement in strict confidence. _____ specifically
agrees not to communicate, publish, characterize, publicize or disseminate in any manner
any of the terms of this Agreement, except that _____ may communicate the terms of the
Agreement to his tax preparer, his attorney, and his spouse (each of whom shall be
informed of and be bound by this paragraph).
7.
This Agreement constitutes the entire agreement between the parties, superseding all
other prior oral or written agreements between the parties, and it is expressly understood
that no amendment, deletion, addition, modification, or waiver of any provision of this
Agreement shall be binding or enforceable unless in writing and signed by all parties.
8.
This Agreement will be governed by the laws of the State of _______.
9.
Each provision of this Agreement is intended to be severable. If any term or provision is
held to be invalid, void, or unenforceable by a court of competent jurisdiction for any
reason whatsoever, such ruling shall not affect the validity of the remainder of this
Agreement.
10.
It is understood and agreed that this Agreement shall not be subject to any claim of
mistake of fact; and regardless of the adequacy or inadequacy of the amount paid, this
release is intended to be final and complete. _____ agrees that there is absolutely no
agreement or reservation not clearly expressed herein; that the consideration stated herein
is all that he is ever to receive for all claims or potential claims for damages, costs,
attorneys’ fees, and other expenses; and that the execution hereof is with the full
knowledge that this release covers all possible claims against THE COMPANY.
27
11.
_____ acknowledges that he has been advised in writing and encouraged to consult an
attorney concerning this Agreement and the meaning and consequences of his signing it.
_____ understands that the release contained herein is a general, unconditional release
with respect to all possible claims against THE COMPANY to the effective date of this
Agreement, including all claims under the Age Discrimination in Employment Act.
_____ further acknowledges that he has been advised that he has a period of forty-five
(45) days within which to consider this Agreement and that, by executing the Agreement,
he enters into the Agreement freely and voluntarily. _____ further acknowledges that he
has read and understands the document entitled “Information Provided Pursuant to the
Older Workers Benefit Protection Act” attached to this Agreement as Attachment A.
_____ further understands and acknowledges that he has been advised that he has seven
(7) days following the execution of this Agreement within which he may revoke this
Agreement, and that this Agreement shall not become effective or enforceable (and the
benefits afforded hereunder shall not become due) until such revocation period has
expired.
12.
_____ may revoke this Agreement by providing written notice to THE COMPANY
postmarked by the seventh (7th) day following the date he signed it. Such written notice
of revocation must be addressed to:
_________________
Vice President, Human Resources
THE COMPANY
P.O. Box 18825
Chicago, IL
13.
This Agreement may be executed and delivered in two or more counterparts, each of
which when so executed and delivered shall be the original, but such counterparts
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals this ____
day of _____________________, 2011.
____________________________________
_(employee name)_______________
STATE OF
COUNTY OF
28
BEFORE ME, a Notary Public in and for said state and county, on this day personally
appeared _________________, and being by me first duly sworn, on oath, states that he
executed the foregoing CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL
RELEASE for the purposes and considerations therein expressed, that he has read it, had it
explained to him by his attorney, understands its meaning and effect, knows that it is a general
and unconditional release in full, and that he voluntarily executed it as such.
This the ____ day of ________________, 2011.
____________________________________
Notary Public Signature
____________________________________
Notary Public Printed Name
My Commission Expires: ___________________
[SEAL]
The Company
By:
___________________________________
Vice President, Human Resources
STATE OF ILLINOIS
COUNTY OF COOK
BEFORE ME, a Notary Public in and for said state and county, on this day personally
appeared ___________, and being by me first duly sworn, on oath, states that he is Vice
President, Human Resources of THE COMPANY and that as such, he is authorized to execute
the foregoing CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE
on behalf of THE COMPANY and that he voluntarily executed it on behalf of THE COMPANY.
This the ____ day of ________________, 2011.
____________________________________
Notary Public Signature
29
____________________________________
Notary Public Printed Name
My Commission Expires: __________________
[SEAL]
30