EEOC Guidance on Separation Agreement, and FTC Red Flag Regulations to Combat Identity Theft
By: Lawrence P. Postol, Vice President of Legislative Affairs
The Equal Opportunity Commission (“EEOC”) on July 15, 2009 issued a guidance document on “Understanding Waivers of Discrimination Claims in Employee Severance Agreements.” As the EEOC emphasizes, any general release of claims, to be enforceable, must be voluntary, knowingly entered into, not coerced and not signed under duress. Moreover, for a release to waive an age discrimination claim, it must comply with the Older Worker’s Benefits Protection Act (“OWBPA”), the chief requirements of which are: the employee is given 21 days to consider the release (but if he wants, he can sign immediately), 7 days to revoke his signing, is advised to seek the advice of an attorney, and the release does not waive any future claims.
Moreover, if the release is being offered where more than one person is being let go, then 45 days must be given for consideration of the release, and a list of employees with their ages must be given. Thus, if 3 persons in an accounting department of 10 were laid off, the list must contain the job titles and ages of all 10 employees, identify the 3 who were selected for layoff, and identify the selection criteria used to select those who were laid off. While it sounds simple, identifying who was actually considered for layoff is not always easy (e.g., was the head of the department actually considered for layoff, or was he the decider who selected those for layoff?), and accurately articulating the selection criteria is often difficult.
The EEOC’s new Severance Agreement guidance is unusual in its form in that it is directed to employees in a Q&A format. Nevertheless, the guidance serves as a useful compliance tool for employers. For example, EEOC emphasizes that a general release cannot include a waiver of rights to file a charge with EEOC or to participate in an agency investigation. Similarly, the guidance states that a release cannot merely acknowledge that the employee has had sufficient time to consult with counsel; rather, the employee must be “advised to consult with an attorney” by the separation agreement itself.
The guidance contains two other noteworthy messages for employers. First, EEOC posits that employers cannot “cure” a defective waiver by later providing OWBPA information omitted from the original agreement – and commensurately restarting OWBPA’s 21- or 45-day period. Second, in a surprisingly equivocal stance, EEOC takes no position on whether employers conducting a RIF must disclose selection criteria for the RIF. Several lower courts have ruled that disclosure is required, citing OWBPA’s requirement that employers disclose the “eligibility factors” for a group termination program. The agency cites those decisions, along with its own prior regulations –which say nothing about selection criteria, with no conclusion as to whether those criteria must be disclosed. Prudent employers, however, will nevertheless continue to disclose at least general selection criteria, e.g., selection was made based on the needs of the business and the skills and competencies of the employees.
The EEOC’s guidance can be accessed directly at:
www.eeoc.gov/policy/docs/qanda_severance-agreements.html
The Federal Trade Commission in 2008 issued regulations to combat identity theft. The FTC will start enforcement of the new regulations as of November 1, 2009, and the rules likely cover most hospitals and schools, and indeed, any business which has payment plans for personnel, family our household purchases.
The new regulations are designed to combat identity theft. The regulations, known as “Red Flag” rules, are designed to help uncover, prevent, or mitigate identity theft in different types of financial transactions. The section of the regulations that likely applies to hospitals and schools requires all “creditors” that hold consumer or other “covered accounts” to develop and implement a written identity theft prevention program that covers both new and existing accounts.
The definition of “creditor” under the regulations is broad enough to cover any hospital or school that defers payment for services rendered. “Covered accounts” include those accounts that are used for personal, family or household purposes and include multiple payments or transactions. Therefore, any payment for medical services or school other than a full, lump-sum cash payment made at the same time service is rendered, is a covered account. This includes payment plans, deferred billing programs, and most submissions to insurance.
Hospitals and schools that defer payments and thus are covered must develop and implement a written Identity Theft Prevention Plan that is designed to:
· Identify suspicious activity or “red flags” that signal the possibility of identity theft in a covered transaction.
· Detect a red flag when it actually arises.
· Implement a policy to effectively respond to a red flag and reduce the risk of further identity theft. This may be as simple as conforming a change in address or name change, or may involve more in-depth analysis of suspicious activity.
· Update the program periodically.
Finally, hospitals and schools are also required to have their boards of directors approve the program before it is put into place. While the new identify theft regulations are not complicated, they are detailed, and require covered entities to implement carefully considered policies and procedures.
The rule and a guide to the rule can be found at www.ftc.gov/redglagsrule
If you have any questions about the information in this article, you may e-mail Mr. Postol at Lpostol@seyfarth.com or call him at 202-828-5385.
