Age Discrimination Settlement Agreements

Employers who are terminating the employment of older employees often enter into settlement agreements with these employees in which the employer provides benefits to the employee in return for the employee’s release of his or her claims against the employer. The release usually focuses on waiving rights that the employee may otherwise have to bring claims of age discrimination under the Minnesota Human Rights Act or the ADEA. Such releases will usually be upheld if the agreement contains specific language notifying the employee of his or her 15-day right of rescission under the Minnesota Human Rights Act.249 For releases of ADEA claims, however, the seven-day right to revoke is only one of several statutory requirements; for an ADEA waiver to be enforceable, the agreement must satisfy all of the conditions described in the next section.250

Under the ADEA, the employer must provide the employee with at least 21 days to consider an individual agreement and to consult with legal counsel before signing the agreement, and another seven days to revoke the agreement after having signed it. The employer may revoke its settlement offer during the 21 day review period before the employee accepts. If the waiver is requested in connection with an exit incentive program such as an early retirement program, the employer is subject to additional specific notice requirements and the 21 day review period for the employee is increased to 45 days. Be aware that when an employer requests waivers from two or more employees, it may be considered an exit incentive type program under the ADEA and that additional information must be included in the release document in order for it to be enforceable.

Settlement Agreement Enforceability

To be enforceable, an agreement which contains a release of age claims in exchange for benefits must be written in a manner calculated to be understood by the employee and must specifically refer to the age discrimination rights and claims that the employee is waiving.251 The agreement must also advise the employee of the right to consult with an attorney before signing and must not waive rights of the employee which arise after the agreement is signed. These requirements are strictly interpreted and the EEOC from time to time issues regulations and Guidance documents describing its view on the requirements of a knowing and voluntary waiver of ADEA claims. In fact, a release of age discrimination claims that does not satisfy all of the statutory requirements is not an effective waiver of claims and does not prevent the assertion of an ADEA claim even if the employee signs the waiver and release agreement and keeps the money or other consideration offered in connection with the release of claims.252 Therefore, these (as well as all other) release agreements should be implemented only with the advice of legal counsel.

A release is also voidable for coercion, but it is not undone by any mere hint of pressure. Under Minnesota law, a release is voidable on this ground only where the releasing party shows duress: coercion by physical force or unlawful threats that destroys the party’s free will and compels compliance.253 Ordinary pressure, hard bargaining, financial stress, or a lawful threat (such as a threat to bring litigation the other side has a right to bring) does not constitute duress and does not void an otherwise knowing and voluntary release. The amount of consideration (benefits) provided generally depends upon the employee’s salary, the length of employment and other like factors.

249. Minn. Stat. § 363A.31, subd. 2 (2024) (available at https://www.revisor.mn.gov/statutes/cite/363A.31).
250. Older Workers Benefit Protection Act § 201, 29 U.S.C. § 626(f)(1) (available at https://www.law.cornell.edu/uscode/text/29/626); Oubre v. Entergy Operations, Inc., 522 U.S. 422, 426-27 (1998) (available at https://www.law.cornell.edu/supct/html/96-1291.ZO.html).
251. Older Workers Benefit Protection Act § 201, 29 U.S.C. § 626(f)(1) (available at https://www.law.cornell.edu/uscode/text/29/626).
252. Oubre v. Entergy Operations, Inc., 522 U.S. 422, 426-28 (1998) (available at https://www.law.cornell.edu/supct/html/96-1291.ZO.html).
253. Wise v. Midtown Motors, Inc., 231 Minn. 46, 51, 42 N.W.2d 404, 407 (1950) (available at https://law.justia.com/cases/minnesota/supreme-court/1950/35-021.html).