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Legalese torpedoes waiver of ADEA claims
May 03, 2005 by Ross Runkel at LawMemo
When IBM terminated folks in a RIF, they asked Dale Thomforde to sign a form called "General Release and Covenant Not to Sue." Although the form was drafted as a general release of all claims, Thomforde noticed some language in the form about suing IBM under the ADEA. He asked his supervisor if that language would allow him to sue IBM if the case was limited to the ADEA. The supervisor asked the legal department and then told Thomforde that the company's attorney was "not comfortable providing an interpretation for you and suggested you consult with your own attorney."
IBM's drafters set the form up as both a release of all claims and a covenant not to sue. They created an exception to the covenant (but not to the release) for ADEA suits. Why? To allow a suit challenging the validity of the waiver, but not to allow suits on the merits of the ADEA.
The Older Workers Benefits Protection Act (OWBPA) requires waivers of ADEA rights to be "written in a manner calculated to be understood by such individual, or by the average individual eligible to participate."
In Thomforde v. IBM (8th Cir 05/03/2005) the 3rd Circuit said the difference between a release and a covenant not to sue "may not be readily apparent to a lay reader." (Chuckle. A lot of lawyers are equally clueless. That's no criticism of lawyers, just something IBM might have thought of when they were drafting.) "Once IBM chose to use the legal terms of art ..., IBM had a duty to carefully explain the provisions." The form also used the terms release and covenant in a way that suggested they were interchangeable.
So, combining the "lack of clarity" in the form plus IBM's not telling Thomforde what it meant by the language - presto - not "written in a manner calculated to be understood." The release did not satisfy the OWBPA requirements, so it was not a bar to an ADEA suit on the merits.
My view: I must confess; when I first read the document I was not sure what it was intending to say about ADEA claims, and it appeared to be internally inconsistent. So I was not surprised by the court's decision.
A case involving a similar agreement is pending in the 9th Circuit. Syverson v. IBM (ND Calif 05/04/2004), appeal docketed, No. 04-16449 (9th Cir 07/26/2004). Knowing the 9th, I expect the same result.
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