Indiana Law Review


Indiana Iakw Revieii¥
Volume 27 1993 Number 1

NOTES

The Retention of Severance Benefits During Challenges of
Waivers Under the Age Discrimination in Employment

Act

Patrick Joseph Preston*

Introduction

The establishment of minimum standards for valid unsupervised
waivers of age discrimination claims by the Older Workers Benefit

Protection Act of 1990* followed a history of controversy^ involving the

courts, the Equal Employment Opportunity Commission (EEOC) and
Congress over the validity of such waivers under the Age Discrimination

* J.D. Candidate, 1994, Indiana University School of Law—Indianapolis; B.A.,
1989, Indiana University.

1. Older Workers Benefit Protection Act, Pub. L. No. 101-433, 104 Stat. 978

(1990) (codified at Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634 (Supp.

1993)) [hereinafter the OWBPA]. This Note is concerned only with Title II of the OWBPA,
dealing with waivers of rights or claims. Title I of the OWBPA overruled the Supreme
Court's decision in Public Employees Retirement Sys. v. Betts, 492 U.S. 158 (1989), cert,

denied, 498 U.S. 963 (1990), to restore ADEA coverage of employee benefits. In Betts,
the Court held for the first time that the ADEA applied to only a narrow range of
employee benefit programs, which effectively allowed employers to discriminate on the

basis of age with regard to other employee benefits. Title III of the OWBPA consists of
a severability clause, stating that if any provision of the OWBPA is held to be invalid,
the remainder of the Act will not be affected.

2. See generally Senate Comm. On Labor and Human Resources, 102d Cong.,
1st Sess., Legislative History of the Older Workers Benefit Protection Act (Comm.
Print 1991).



158 INDIANA LAW REVIEW [Vol. 27:157

in Employment Act of 1967.^ An unsupervised waiver"* under the OWBPA
refers to a waiver of rights or claims arising under the ADEA which
an individual has executed without the supervision of a court or the

EEOC.^ Although Congress resolved the primary controversy regarding
the enforceability of private ADEA waivers by amending the ADEA
with the OWBPA to codify the elements of a valid unsupervised waiver,^
neither Act addresses the following issues: (1) whether retention of

severance benefits constitutes ratification of an otherwise voidable un-

supervised waiver under the ADEA unless the individual tenders back
the benefits to the employer within a reasonable period of time following

execution, or (2) whether retention categorically precludes a subsequent

suit. As a result of the statutory omission, a split of authority has

developed between the Eleventh Circuit Court of Appeals'^ and the Fourth^

and Fifth^ Circuits that threatens to thwart the specific requirements and

general purposes of the OWBPA, making the enforceability of waivers
of age discrimination claims uncertain.

3. The Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634 (1988)
[hereinafter the ADEA]. All references to sections of the ADEA in this Note are to Title
29 of the current United States Code.

4. The scope of this Note with regard to the law of waivers is limited to

unsupervised waivers of claims arising under the ADEA as described in Title II of the
OWBPA. The term "waiver" will be used synonymously with "release" for the purposes
of this Note. Although the common law of contracts allocates different meanings to
"waiver" and "release," the courts, Congress and the administrative agencies have used

interchangeably the words "waiver" and "release." According to Black's Law Dictionary,
a waiver is the "intentional or voluntary relinquishment of a known right, or such conduct

as warrants an inference of the relinquishment of such right, or when one dispenses with

the performance of something he is entitled to exact or when one in possession of any

right, whether conferred by law or by contract, with full knowledge of the material facts,

does or forbears to do something the doing of which or the failure of forbearance to

do which is inconsistent with the right, or his intention to rely upon it." Black's Law
Dictionary 1580 (6th ed. 1990). A release is a "writing or an oral statement manifesting
an intention to discharge another from an existing or asserted duty." Id. at 1289. In

Farnsworth's treatise on contracts, a waiver is defined as the "excuse of the nonoccurrence

of or delay in the occurrence of a condition of a duty." E.A. Farnsworth, Contracts

§ 8.5 (1982). Farnsworth defines a release as a "formal written statement reciting that

the obligor's duty is immediately discharged; although, it has sometimes been used more

loosely to refer to any consensual discharge." Id. § 4.25.

5. In 1978, President Carter's Reorganization Plan transferred the authority for

administering and enforcing the ADEA from the Secretary of Labor to the EEOC.
Reorganization Plan No. 1 of 1978, 3 C.F.R. § 321 (1978).

6. Minimum standards for valid unsupervised waivers of ADEA claims are codified
by Title II of the OWBPA at 29 U.S.C. § 626(0 (Supp. 1993).

7. Forbus v. Sears, Roebuck & Co., 958 F.2d 1036 (11th Cir. 1992), cert, denied,
113 S. Ct. 412 (1992).

8. O'Shea v. Commercial Credit Corp., 930 F.2d 358 (4th Cir. 1991), cert, denied,

112 S. Ct. 177 (1991).

9. Grillet v. Sears, Roebuck & Co., 927 F.2d 217 (5th Cir. 1991).



1993] RETENTION OF SEVERANCE BENEFITS 159

The sharp division in a trail of district court opinions manifests the

immediate judicial impact of the appellate split. '° A number of district
courts cited the Fourth and Fifth Circuit decisions to hold that retention

of severance benefits constituted ratification of waivers to preclude sub-

sequent suits. However, as soon as the Eleventh Circuit announced a

contrary decision, district courts began to adhere to the holding that

retention of severance benefits did not bar subsequent suits under the

ADEA. The Supreme Court has declined to consider the issue in appeals
on both sides of the appellate split by denying writ of certiorari from

the Fourth Circuit decision in 1991,'' and from the Eleventh Circuit in
1992. '2 Neither Congress nor the EEOC'^ has yet addressed the issue.

The use of unsupervised waivers may be viewed as mutually beneficial
to employers and employees. When Congress amended the ADEA in
1990 with the OWBPA, employers gained a statutory checklist for ob-
taining enforceable waivers of age discrimination claims from employees.

Employers use waivers of claims to achieve settlements in a number of
contexts that involve the discharge of employees.'"* An employee may
be offered a sum of money or other valuable consideration in exchange
for the execution of a waiver that resolves potential claims resulting

from a discharge for cause. '^ Employers who need to reduce the size
of operations often implement an involuntary reduction in workforce

that involves an attempt to mitigate hardship and reduce the risk of

10. In the following cases, the courts rejected the ratification theory: Carr v.

Armstrong Air Conditioning, Inc., 817 F. Supp. 54 (N.D. Ohio 1993); Pierce v. Atchison,

Topeka and Santa Fe Ry. Co., 1993 WL 18437 (N.D. 111. Jan. 26, 1993); Isaacs v.
Caterpillar, Inc., 765 F. Supp. 1359 (CD. 111. 1991); Sperry v. Post Publishing Co., 773
F. Supp. 1557 (D. Conn. 1991); Oberg v. Allied Van Lines, Inc., 1992 WL 211506 (N.D.
111. Aug. 26, 1992); Collins v. Outboard Marine Corp., 808 F. Supp. 590 (N.D. 111. 1992).

In the remaining cases, the courts upheld the ratification theory: Seward v. B.O.C. Division

of General Motors Corp., 805 F. Supp. 623 (N.D. 111. 1992); Frumkin v. International

Business Machines Corp., 801 F. Supp. 1029 (S.D.N.Y. 1992); Alphonse v. Northern

Telecom, Inc., 776 F. Supp. 1075 (E.D.N.C. 1991); Ponzoni v. Kraft General Foods,

Inc., 774 F. Supp. 299 (D.N.J. 1991); Haslach v. Security Pacific Bank Oregon, 779 F.

Supp. 489 (D. Or. 1991).

11. O'Shea v. Commercial Credit Corp., 930 F.2d 358 (4th Cir.), cert, denied,

112 S. Ct. 177 (1991).

12. Forbus v. Sears Roebuck & Co., 958 F.2d 1036 (11th Cir.), cert, denied, 113
S. Ct. 412 (1992).

13. On March 27, 1992, the EEOC made an appeal to the public for comments
regarding the implementation of the OWBPA. 57 Fed. Reg. 10626 (1992). Although the
EEOC's request regarded various aspects of OWBPA procedure and enforcement, the
issues of ratification or tender back were not directly addressed. The comment period

ended on July 27, 1992. Id.

14. See Senate Comm. on Labor and Human Resources, The Older Workers
Benefit Protection Act, S. Rep. No. 263, 102d Cong., 2d Sess. 60 (1990).

15. Id.



160 INDIANA LAW REVIEW [Vol. 27:157

costly litigation by offering enhanced severance benefits in exchange for

waivers from employees. '^ In a variation involving the reduction of

operations, employers may offer voluntary early retirement incentives in
exchange for the execution of waivers. ^^ In each scenario, the threshold

requirements for an enforceable waiver under the OWBPA likewise
benefit employees by ensuring that the employee's decision to execute

a waiver is informed, free from coercion, and in exchange for enhanced
severance benefits beyond preexisting entitlement.*^

In light of the advantages that waivers provide to employers and

employees, the appellate split could adversely affect significant numbers

of workers and their employers in a number of ways by bringing into

question the enforceability of such waivers. First, the split provides un-

certain precedent for thousands of claims involving waivers filed under

the ADEA. Second, employers will lack the assurance that executed waivers
will prevent costly litigation because some federal courts have indicated

that a timely tender back of benefits might not preclude a subsequent

suit.'^ Finally, in the circumstances most egregious to employees, the split

provides the incentive for certain employers to circumvent the requirements

of the OWBPA through the use of any methods imaginable to induce
the execution of waivers.^° This last problem represents the specific harm

that Congress sought to remedy with the OWBPA: *The problem initially
addressed . . . [by the OWBPA] . . . involved older workers being coerced
or manipulated into waiving their rights under [the ADEA]."^*

The foregoing problems could cripple the effectiveness of the OWBPA,
which potentially affects the rights and claims of the millions of persons

at least forty years old who work for employers of more than twenty
employees.22 In 1991, the Bureau of Labor Statistics (BLS) estimated that

nearly fifty million workers age forty or older were employed in the

United States.^^ Reports from BLS also reveal that between 1987 and
1992, almost four million workers age thirty-five or older with at least

16. Id.

17. See, e.g., Julia Lawlor, Buyout Game Throws Many, Some Offers Aren't So
Voluntary, USA Today, Oct. 29, 1992, at IB.

18. 29 U.S.C. § 626(f) (Supp. 1993).

19. Grillet v. Sears, Roebuck & Co., 927 F.2d 217 (5th Cir. 1991); Sperry v. Post
Publishing Co., 773 F. Supp. 1557 (D. Conn. 1991).

20. See, e.g., Lawlor, supra note 17, at IB.

21. Legislative History of the Older Workers Benefit Protection Act, supra
note 2, at 1.

22. The OWBPA applies to all employees and employers covered by the ADEA
as amended. 29 U.S.C. §§ 630-31 (1988).

23. See Randall Samborn, Age Suits Allowed to Proceed; Keeping Severance OK'd,
Nat'l L.J., Sept. 21, 1992, at 3.



1993] RETENTION OF SEVERANCE BENEFITS 161

three years' tenure were displaced from their employment, not including

those who chose early retirement.^
Recent studies of large companies in the United States have shown

that the use of unsupervised waivers in corporate downsizing schemes

involving early retirement incentives increased significantly during the past

decade. ^^ For example, the American Management Association recently

surveyed 836 members and found that thirty-four percent offered early
retirement in 1991 compared to nineteen percent in 1989, while twenty-

nine percent offered voluntary severance incentives in 1991 compared to

nineteen and a half percent in 1989.^^ Reports also indicate a corresponding

increase in the number of employees opting for early retirement. ^^ Another

survey indicates that sixty percent of employers require employees accepting

voluntary retirement programs to execute waivers, which reflects a ten

percent increase since 1986.^^ Such statistics illuminate the necessity for

timely and permanent resolution of issues arising from the appellate split.

Resolution of these issues lies in the restoration of benefits and protections

that Congress sought to provide to employers and employees through

valid unsupervised waivers under the OWBPA.
This Note offers a model amendment to the ADEA to restore the

mandatory statutory protections provided by the OWBPA. The purpose
of the amendment is to provide certainty to employers and employees as

to what constitutes an enforceable unsupervised waiver. The amendment

essentially would codify the holding of the Eleventh Circuit decision in

Forbus V. Sears, Roebuck & Company^^ by providing a statutory right
to challenge the validity of a waiver under the ADEA without the re-
quirement of tender back. Such an amendment ultimately would prevent

employers from circumventing the statutory safeguards of the OWBPA,
while also providing the certainty to employees signing waivers that a

24. Id.

25. See, e.g., Lawlor, supra note 17, at IB (reviews surveys conducted by the

American Management Association and the benefits consulting firm of Wyatt and Drake

Beam Morin); see also Chic. Trib., Apr. 22, 1990, at 12-14B (survey of 145 Fortune 5(X)

companies conducted by Towers, Perrin, Forster & Crosby, Inc. found 44% of the
companies offered early retirement packages during a six-year period ending in 1989 with

nearly 66<7o of those early retirement incentives offered in 1988 and 1989).

26. Lawlor, supra note 17, at IB.

27. USA Today reported that IBM received 40,000 acceptances of early retirement,
although only 20,0(X) had been expected. At General Motors, 6,300 salaried employees

accepted early retirement offers, which was 2,300 more than expected. Kodak had nearly

three times the expected number of individuals opting for early retirement with 8,354

acceptances. Id.

28. Id.

29. Forbus v. Sears Roebuck & Co., 958 F.2d 1036, 1041 (11th Cir. 1992), cert,
denied, 113 S. Ct. 412 (1992).



162 INDIANA LAW REVIEW [Vol. 27:157

violation of their federal statutory rights will not be waived unless by an

express agreement in full compliance with the requirements of the OWBPA
and the ADEA. The net result should help reduce age discrimination and
allow implementation of more efficient and effective severance initiatives

by employers.

Part I of this Note discusses the waiver provisions of the OWBPA.
Part II outlines and summarizes the case history of the appellate split.

Part III contains a proposed model amendment to the ADEA. Finally,
Part IV concludes by emphasizing the importance of such an amendment.

I. Title II of the Older Workers Benefit Protection Act

On October 16, 1990, the minimum standards under Title II of the
OWBPA became effective regarding waivers of ADEA rights and claims. ^^
Title II sets forth mandatory threshold criteria for valid unsupervised

waivers of rights and claims under the ADEA, as well as for settlements
of actions filed with the courts or with the EEOC. The Act does not
apply to waivers that occurred before the effective date.^'

A. Background on the OWBPA

Prior to the enactment of the OWBPA, the courts conflicted in the
application of standards to determine whether a waiver had been executed

under circumstances consistent with ADEA purposes and protections.^^
The majority of courts favored application of a "knowing and voluntary''

standard, which had been announced by the Supreme Court in a 1974

decision involving a waiver of employment discrimination claims under

Title VII of the Civil Rights Act of 1964." An unsupervised waiver was
vahd if **the employee's consent to the settlement was voluntary and

knowing."^"* The criteria required for a waiver to be knowing and

voluntary under the ADEA that were set forth in 1988 by the Third

30. 29 U.S.C. § 626(0 (Supp. 1993). Title 1 of the OWBPA, which clarifies ADEA
coverage of employee benefits as well as wages, hirings and discharge, has a different

effective date. Id. § 623.

31. Id. ^ 626(0 (Supp. 1993).

32. See, e.g., Runyan v. National Cash Register Corp., 787 F.2d 1039 (6th Cir.)

(en banc), cert, denied, 479 U.S. 850 (1986) (knowing and voluntary standard); Coventry

V. United States Steel Corp., 856 F.2d 514 (3d Cir. 1988) (totality of circumstances

standard); O'Shea v. Commercial Credit Corp., 734 F. Supp. 218 (D. Md. 1990), cert,

denied, 112 S. Ct. 177 (1991) (totality of circumstances test and appHcation of ordinary

contract principles); EEOC v. Cosmair, Inc. L'Oreal Hair Care Div., 821 F.2d 1085 (5th
Cir. 1987) (waivers of the right to file a charge with the EEOC void as a matter of
public policy).

33. Alexander v. Gardner-Denver, 415 U.S. 36, 52 n.l5 (1974).

34. Id.



1993] RETENTION OF SEVERANCE BENEFITS 163

Circuit Court of Appeals in Cirillo v. Arco Chemical Company ^^ provided
the model for most of the minimum standards codified later in Title II
of the OWBPA. In C/r/7/o, the court determined whether the waiver
was knowing and voluntary by considering such factors as the clarity

and specificity of the release, the amount of time that the employee

was given to consider the agreement, and whether the employee was

encouraged to seek the advice of an attorney.'^

In 1987, the EEOC promulgated a rule that adopted the knowing
and voluntary standard for unsupervised waivers of rights and claims

under the ADEA.^^ The EEOC justified the regulation by stating that
'*it has been found necessary and proper and in the public interest to

permit waivers or releases of claims under the Act without the Com-
mission's supervision or approval . . . .*'^* In assessing a waiver under

the rule, indicia supporting vahdity based on the knowing and voluntary
standard included a written agreement, clear and unambiguous language,

specific reference to claims under the ADEA, a reasonable time given
to review the agreement, and the opportunity for the employee to consult

with an attorney.^^

After deciding that the EEOC*s rule provided an unsatisfactory guide
for unsupervised ADEA waivers. Congress immediately suspended fund-
ing for its enforcement during fiscal year 1988, and undertook similar

measures in 1989 and 1990."*^ The rule was criticized in the Congressional

Record as being without legal foundation and contrary to public poHcy,'*'

and strong bipartisan support continued for its suspension. Congress

concluded that evidence existed of unfair and abusive practices by em-

ployers in obtaining waivers of rights and claims under the ADEA,'*^

indicating the need for remedial legislation that would protect older

workers more adequately than the EEOC's rule.
Senate Bill 54, the Age Discrimination in Employment Waiver Pro-

tection Act of 1989, was introduced in the 101st Congress to allow

35. Cirillo v. Arco Chem. Co.. 862 F.2d 448 (3d Cir. 1988).

36. Id. at 451.

37. 29 C.F.R. §§ 1627.16 (c)(l)-(3) (1990).

38. Id. § (c)(1).

39. Id. § (c)(2).

40. Pub. L. No. 100-202, 1987 U.S.C.C.A.N. (101 Stat.) 1329-31; Pub. L. No.

100-459, 1988 U.S.C.C.A.N. (102 Stat.) 2216; Pub. L. No. 101-162, 1990 U.S.C.C.A.N.

(103 Stat.) 1020.

41. 134 Cong. Rec. S14,509, 14,511 (daily ed. Oct. 4, 1988) (statement of Sen.

Metzenbaum).

42. See Senate Comm. on Labor and Human Resources, the Age Discrimination
IN Employment Waiver Protection Act of 1989, S. Rep. No. 79, 101st Cong., 1st Sess.
9-12 (1989); House Comm. on Education and Labor, Report on the Older Workers
Benefit Protection Act (H.R. 3200), H. Rep. No. 664, 101st Cong., 1st Sess. 22-23

(1990).



164 INDIANA LAW REVIEW [Vol. 27:157

voluntary and knowing waivers given for valuable consideration, but

only in settlement of a bona fide claim alleging age discrimination/^

The drafters of the original bill specifically sought to prohibit the use
of unsupervised waivers in the absence of a bona fide claim. '*^ Subse-

quently, Senate Bill 1511, the Older Workers Benefit Protection Act,

was introduced to overturn the Supreme Court's decision in the case of

Public Employees Retirement System of Ohio v. Betts^^ The Senate

Committee on Labor and Human Resources amended Senate Bill 1511
to create a second title within the Act, which incorporated the basic

protections proposed under Senate Bill 54."*^ After substantial

compromise"*^ and further amendment that included adding provisions
to allow unsupervised waivers under the ADEA, Congress approved
Senate Bill 1511, and the President signed the OWBPA into law. The
final Act reflects the concerns of the EEOC in promoting the voluntary
and expeditious private settlement of disputes under the ADEA,"*^ a

synthesis of case precedent with respect to waivers under the ADEA,
and Congressional intent to ensure that older workers are not coerced

or manipulated into waiving their statutory protections under the ADEA.

B. Minimum Standards for Unsupervised Waivers Under
the OWBPA

Title II of the OWBPA covers the following three types of unsu-
pervised waivers under the ADEA and provides virtually the same min-
imum standards for each: (1) waivers of individual rights or claims, (2)
waivers of rights or claims in connection with group layoffs, reductions

in force or exit incentive programs, and (3) waivers in settlement of

actions filed in court or claims filed with the EEOC.^^

CompUance with the minimum standards set forth in the OWBPA
constitutes a knowing and voluntary execution of a waiver that may be

43. S. 54, 101st Cong., 1st Sess. (1989), 135 Cong. Rec. S357 (daily ed. Jan. 25,

1989). Under S. 54, a bona fide claim was defined as a charge filed with the EEOC, an
action filed by an individual in a court alleging age discrimination, or a specific com-

munication to the employer by the employee in writing and in good faith. Id.

44. The Age Discrimination in Employment Waiver Protection Act of 1989
(Report of the Senate Committee on Labor and Human Resources), supra note 42, at, 3.

45. 492 U.S. 158 (1989), cert, denied, 498 U.S. 963 (1990). See supra note 1.

46. Legislative History of the Older Workers Benefit Protection Act, supra
note 2, at 1.

47. See 136 Cong. Rec. S13,594, 13,596 (daily ed. Sept. 24, 1990) (statement of

Sen. Metzenbaum).

48. See Draft EEOC Rules Outline Support for Private Waivers Under Age Bias
Act, reprinted in Daily Lab. Rep. (BNA) No. 141, at A-6, A-7 (July 23, 1985).

49. 29 U.S.C. § 626(f)(l)-(2) (Supp. 1993).



1993] RETENTION OF SEVERANCE BENEFITS 165

enforced by the courts.^*' A waiver of individual rights or claims under
the ADEA must meet the following criteria prescribed in the OWBPA:
(1) the waiver must be part of a written agreement in language calculated

to be understood by the person who is waiving rights or claims, or by
the average individual eligible to participate; (2) the waiver must refer

specifically to rights and claims under the ADEA; (3) the individual
cannot prospectively waive rights that arise after the execution of the

waiver; (4) the waiver must be in exchange for something of value in

addition to whatever the individual is already entitled to receive; (5) the

individual must be advised in writing to consult with an attorney prior

to executing the waiver; (6) the individual must be given at least twenty-

one days to consider the agreement; and (7) the employee must be given

at least seven days following execution to revoke the waiver. If the

employer complies with all of the requirements above, the waiver will

become effective after the revocation period expires.^'
The minimum standards for waivers of rights or claims in connection

with group layoffs, reductions in force, or exit incentive programs may
be considered by an individual in the group for forty-five days." Such

waivers must otherwise comply with the requirements for a waiver by

an individual. Waivers for groups must also disclose the job titles and

ages of all individuals who are eligible to participate, and of those who
are not eligible. ^^

The last type of waiver covered by the Act involves the settlement

of a charge filed with the EEOC or an action filed in a court by an
individual alleging age discrimination. All of the minimum standards
that apply to individual and group waivers apply to waivers in settlement

of a charge or action, except for the provision of a revocation period

and the requirement of either a twenty-one or forty-five day period of

time within which to consider the waiver. ^"^ Instead, an individual must

be given **a reasonable period of time within which to consider the

settlement agreement. "^^ The lack of a specific time period reflects a

consideration by Congress, which was fundamental to waivers of bona

fide claims under the precursor to Title II, Senate Bill 54, that an

individual who has taken the formal adversarial steps of filing a claim
or charge is more likely to be aware of rights under the ADEA before
waiving them.^^ Therefore, Congress did not provide a specific period

50. Id. § (f)(1).

51. Id. § (f)(l)(A)-(G).

52. Id. § (f)(l)(F)(ii).

53. Id. § (0(l)(H)(i)-(ii).

54. Id. § (0(2)(A).

55. Id. § (f)(2)(B).

56. 135 Cong. Rec. El 131 (daily ed. Apr. 10, 1989) (statement of Rep. Roybal)



166 INDIANA LAW REVIEW [Vol. 27:157

of time for individuals to consider waivers in settlement of claims or

charges.

The waiver provisions of the OWBPA are more protective of older
workers than the EEOC*s 1987 rule. For example, the EEOC's rule did
not provide an individual the power to revoke the waiver,^^ but the

OWBPA allows an individual to revoke the waiver during a period of
at least seven days following execution. ^^ The OWBPA reverses the burden
of proof, which was imposed on the employee under the EEOC*s rule,
by requiring that the party asserting the validity of a waiver* has the

burden of proving that the waiver satisfies the minimum standards
imposed by the Act.^^ Ultimately, the OWBPA permanently nullifies the
EEOC's rule on ADEA waivers.^

C Mandatory Nature of the Minimum Standards of Title II
Ample authority exists that supports the mandatory nature of the

minimum standards for a valid unsupervised waiver under Title II of
the OWBPA. First, the Act provides in unambiguous language that '*[a]n
individual may not waive any right or claim under [the ADEA] unless
the waiver is knowing and voluntary. "^^ Under the Act, a waiver is not

knowing and voluntary unless at a minimum it meets all of the applicable
enumerated standards, depending on the type of waiver. ^^ Congress

neither contemplated nor provided any other method by which to waive

rights and claims under the ADEA. The canons of statutory construction
mandate that courts apply first the plain meaning of the statute. In the

absence of Congressional intent to the contrary, the plain meaning of

a statute provides controlling law.^^ Hence, the minimum standards of
Title II must be applied by the courts to determine whether an individual

has executed a valid waiver of rights and claims under the ADEA. If
an employer has not comphed with the minimum standards of Title II,
the waiver is invalid and unenforceable.

Under Title II, the provision that allocates the burden of proof to

the party asserting the validity of the waiver states: **In any dispute

that may arise over whether any of the requirements, conditions, and

("It is in the nonadversarial situation, such as the use of waivers in conjunction with

early retirement incentives, that the possibility of employer abuse of waivers increases.").

57. 29 C.F.R. § 1627.16(c) (1990).

58. 29 U.S.C. § 626(0(1)(G) (Supp. 1993).

59. Id. § (f)(3).

60. Id. § (f).

61. Id. § (f)(1).

62. Id.

63. See, e.g.. North Dakota v. United States, 460 U.S. 300 (1983); American

Tobacco Co. V. Patterson, 456 U.S. 63 (1982).



1993] RETENTION OF SEVERANCE BENEFITS 167

circumstances set forth [in Title II] have been met, the party asserting

the validity of a waiver shall have the burden of proving in a court of
competent jurisdiction that a waiver was knowing and voluntary . . . ."^

The language of the provision indicates that all of the minimum standards
under Title II are mandatory, and that adjudication by the courts is

unconditionally available if a dispute arises over any single standard.

Second, the language of the ADEA provides support that the min-
imum standards for waivers under Title II are mandatory. The ADEA
as amended is unique among federal statutes in light of its legislative
history of congressional concern about the misuse of waivers." Although

the ADEA encouraged voluntary settlement of claims alleging age dis-
crimination before the OWBPA, the ADEA did not do so by allowing
employers to obtain allegedly invalid waivers. Rather, the ADEA states
that voluntary settlement shall be **in compHance with the requirements
of the Act."^^ A specific mechanism of the ADEA involving conciliation
before suit through the EEOC enables the potential parties to explore
a voluntary settlement of age discrimination claims. ^^ When Congress
amended the ADEA with the OWBPA, the requirements of Title II
became the requirements of the ADEA. Congress did not alter the
provisions in the ADEA regarding compliance with the Act in voluntary
settlements or the conciHation options through the EEOC. Courts have
continued to interpret the ADEA in accordance with these provisions.^*
The Supreme Court has held that ** Congress is presumed to be aware
of an administrative or judicial interpretation of a statute and to adopt

that interpretation when it re-enacts a statute without change. "^^ There-
fore, a voluntary settlement of claims or rights under the ADEA must
comply with the minimum standards of Title II.

Third, the legislative history of Title II reveals further evidence of

the mandatory nature of minimum standards for unsupervised waivers
under the ADEA in the differences between EEOC's rule of 1987, which
Congress suspended and later nullified, and Title II as law. Under the

64. 29 U.S.C. § 626 (f)(3) (Supp. 1993) (emphasis added).

65. See generally Legislative History of the Older Workers Benefit Protection
Act, supra note 2.

66. 29 U.S.C. § 626(b) (1988).

67. Section 626(b) of the ADEA provides in part that "the Equal Employment
Opportunity Commission shall attempt to eliminate the discriminatory practice or practices

alleged, and to effect voluntary compliance with the requirements of this Act through

informal methods of conciHation, conference, and persuasion." Id.

68. Forbus v. Sears Roebuck & Co., 958 F.2d 1036, 1041 (11th Cir. 1992), cert,
denied, 113 S. Ct. 412 (1992); Isaacs v. Caterpillar, Inc., 765 F. Supp. 1359 (CD. 111.

1991); Carr v. Armstrong Air Conditioning, Inc., 817 F. Supp. 54 (N.D. Ohio 1993).

69. Lorillard v. Pons, 434 U.S. 575, 580 (1978) (holding that Congress intended

individual plaintiffs to have the right to a trial by jury under the ADEA).



168 INDIANA LAW REVIEW [Vol. 27:157

EEOC's rule, certain factors were identified as relevant to determining
whether a waiver was knowing and voluntary, but the only mandatory

requirement was that the waiver be in writing. Title II includes some

of the standards under the EEOC rule, but the requirement that a
knowing and voluntary waiver must meet all of the minimum standards
unambiguously forwards a congressional intent that Title II itself is not

merely relevant to waivers under the ADEA, but mandatory.
Fourth, Congress substantially incorporated the enforcement pro-

visions of the Fair Labor Standards Act of 1938 (FLSA)^° into the

ADEA.^^ The enforcement provisions of the FLSA have been upheld
repeatedly by the Supreme Court as mandatory."^^ Moreover, the Supreme

Court has held that the enforcement provisions of the FLSA should be
followed in interpreting the ADEA.^^ Waivers under Title II deal purely
with enforcement of the substantive prohibitions of age discrimination

under the ADEA. Hence, case precedent by the Supreme Court provides
authority that minimum standards for waivers under Title II should be
upheld as mandatory.

In sum, the plain and strict requirements in Title II of the OWBPA
provide mandatory minimum standards for unsupervised waivers of rights
and claims under the ADEA. The legislative history of Title II reflects
the strong congressional intent to ensure that older workers are not

coerced or manipulated into waiving their statutory protections under

the ADEA. While the OWBPA provides a statutory means for waiving
rights and claims under the ADEA, the only way to obtain such a valid
waiver is through full compliance with Title II. In other words, although

rights and claims arising from the substantive provisions of the ADEA
may be waived, the procedure for obtaining a valid waiver under Title
II may not be waived. A. waiver of the requirements of Title II would
be void as against public policy, as would a waiver of any other

mandatory federal requirement. The express mandates of Title II and

the clear Congressional intent of the OWBPA provide the law controlling
the issues of whether retention of severance benefits constitutes ratifi-

cation of an ADEA waiver unless the individual tenders back the benefits
to the employer, or whether retention categorically precludes a subsequent

suit.

70. 29 U.S.C. §§ 201-219 (1988).

71. 29 U.S.C. § 626 (1988). See The Age Discrimination in Employment Waiver
Protection Act of 1989 (Report of the Senate Committee on Labor and Human Re-
sources), supra note 42, at 3.

72. See Brooklyn Savings Bank v. O'Neil, 324 U.S. 697 (1945); Schulte Co. v.

Gangi, 328 U.S. 108 (1946); Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S.

728 (1981).

73. Lorillard v. Pons, 434 U.S. 575, 580 (1978).



1993] RETENTION OF SEVERANCE BENEFITS 169

II. History of the Appellate Split

On April 20, 1992, the Eleventh Circuit Court of Appeals held in
Forbus V. Sears Roebuck & Co., that **as a matter of federal law,
ADEA plaintiffs are not required to tender the consideration received
for releases as a condition prerequisite to challenging those releases in

court, and that the . . . retention of . . . severance benefits during the

pendency of [a] lawsuit does not constitute ratification of those re-

leases. "^"^ The holding of the Eleventh Circuit in Forbus contradicted
previous holdings of the Fourth and Fifth Circuits that even if the waiver

'*was invalid, "^^ or
*

'tainted by misrepresentation,*'^^ the individual al-

leging age discrimination ratified the otherwise voidable waiver under

the ordinary contract principles of the common law through retention
of severance benefits. The holdings of Courts of Appeals involved in
the split of authority have been frequently cited by the federal district

courts, producing two distinct trails of opinions regarding the issue of

waivers.^^

A. Ratification of a Waiver by Retention of Benefits: Grillet and
O'Shea

In Grillet v. Sears, Roebuck & Co.,'^ the Fifth Circuit Court of
Appeals addressed the issues of ratification and tender with regard to

a waiver of rights under the ADEA. At sixty years of age, the plaintiff
in Grillet had spent twenty-six years as a personnel representative for

a company when she was informed by her supervisor that her position
would be terminated in three days as part of a restructuring plan.^^ The

supervisor explained that the plaintiff could either accept ten weeks*

severance pay in the amount of $9,000 if she did not sign a waiver of

claims against the company, or fifty weeks' severance pay in the amount

of $45,000 if she executed the waiver. *° The supervisor presented the

plaintiff with two different waiver forms, one indicating that the employee

74. Forbus v. Sears Roebuck & Co., 958 F.2d 1036, 1041 (11th Cir. 1992), cert,
denied, 113 S. Ct. 412 (1992).

75. O'Shea v. Commercial Credit Corp., 930 F.2d 358, 362 (4th Cir.), cert, denied,

112 S. Ct. 177 (1991).

76. Grillet v. Sears, Roebuck & Co., 927 F.2d 217, 221 (5th Cir. 1991).
77. See, e.g., Seward v. B.O.C. Division of General Motors Corp., 805 F. Supp.

623 (N.D. III. 1992) (holding that ratification precludes subsequent challenge of an ADEA
waiver); Oberg v. Allied Van Lines, Inc., 1992 WL 211506 (N.D. Ill, Aug. 26, 1992)
(holding that retention of severance benefits did not preclude subsequent challenge of an

ADEA waiver).
78. 927 F.2d 217 (5th Cir. 1991).

79. Id. at 218.

80. Id.



170 INDIANA LAW REVIEW [Vol. 27:157

declined the opportunity to consult with an attorney, and the other

indicating that the employee had obtained legal advice.^' The plaintiff

chose to sign the waiver without the advice of an attorney, and $45,000

was paid to her over the next several months. ^^

A week after the plaintiff executed the waiver, she learned that the
company had offered new job assignments to three younger employees
in her department.*^ Nineteen months after her termination, the plaintiff

filed an action under the ADEA and for various state claims involving
age discrimination, misrepresentation and duress.*"* The company coun-
terclaimed for breach of contract, alleging that the plaintiff's suit con-

stituted a breach of the waiver agreement.*^ After the company moved
for summary judgment, the plaintiff offered to tender back the enhanced
severance pay with interest on the condition that she receive a rein-

statement to her former position and back pay, but this offer was

rejected by the company.*^ The district court denied the company's motion
for summary judgment based on the finding that material issues of fact
remained as to whether the plaintiff had knowingly and voluntarily

executed the waiver.*'' The company moved for reconsideration, asserting
that the plaintiff had ratified the waiver by accepting the severance

payments.** Upon denial of the company's second motion, the Fifth
Circuit accepted the appeal under the collateral order doctrine.*^

The Fifth Circuit held that the company should have been granted
summary judgment.^ The court incorporated into its holding the com-
pany's theory that even if the waiver was tainted by misrepresentation

and duress, and thus the execution was not knowing and voluntary, the

plaintiff ratified the waiver by accepting the severance benefits after

learning of the misrepresentation:^^ **If a releasor . . . retains the con-

sideration after learning that the release is voidable, her continued re-

tention of the benefits constitutes a ratification of the release. "^^

81. Id.

82. Id.

83. Id.

84. Id.

85. Id.

86. Id.

87. Id.

88. Id.

89. Id. at 219. The collateral order doctrine provides appellate jurisdiction to review

a non-final order by a district court that **(1) conclusively determines the disputed question;

(2) resolves an important issue separate from the merits of the action; and (3) would be

effectively unreviewable on appeal from a final judgment." Id.

90. Id. at 221.

91. Id. at 220-21.

92. Id. at 220.



1993] RETENTION OF SEVERANCE BENEFITS 171

Although the effective date of the OWBPA made the Act's minimum
standards inapplicable to the plaintiff's waiver, the court did not consider

congressional intent underlying the ADEA, nor the weight of the federal
common law of waivers under the ADEA. Instead, the Fifth Circuit
relied on a district court opinion that had found employees' general

waivers of employment discrimination claims enforceable based on the

theory that retention of the benefits ratified the waivers.^^ The court
also incorporated the holdings of various federal decisions applying the

common law of contracts to hold as follows:

Even if Grillet's tender-back offer had been sufficient, it came
too late. The law of contracts * 'requires a party claiming wrongful
inducement to seek rescission shortly after discovering the mis-

representation." ... To avoid ratifying the release through her
conduct, Grillet should have returned the consideration soon

after she learned that some younger employees in her department

had not been terminated.^"*

The court also reasoned that because *'[a] party seeking rescission
must attempt to restore the status quo ante — that is, to return the
parties to the positions they held just before they entered into the

agreement, "^^ the employer could not be returned to its position after

being subjected to a lawsuit for age discrimination when the employee
could have been terminated previously at the will of the employer.^

Thus, the Grillet decision stands for the proposition that retention of

benefits received from executing a voidable unsupervised waiver consti-

tutes ratification of the waiver, unless an individual tenders back the

benefits in an effort to return to the status quo soon after learning the

waiver is voidable.

Three weeks after the Fifth Circuit decided Grillet, the Fourth Circuit

independently upheld an arguably stricter application of the ratification

theory in O'Shea v. Commercial Credit Corporation.^'' In O'Shea, the

93. Id. (citing Widener v. Arco Oil and Gas Co., 717 F. Supp. 1211 (N.D. Tex.

1989)).

94. Id. at 221 (quoting United States v. Texarkana Trawlers, 846 F.2d 297, 305

n.20 (5th Cir.) (1988), cert, denied, 488 U.S. 943 (1988) citing Anselmo v. Manufacturers

Life Ins. Co., 771 F.2d 417 (8th Cir. 1985)). In Anselmo, the Eighth Circuit Court of

Appeals held that the silence, acquiescence, and according conduct by the plaintiff for a

considerable time following execution of a waiver and acceptance of severance pay benefits

amounted to a ratification that precluded subsequent state law claims for breach of contract

and fraudulent misrepresentation. Anselmo, 111 F,2d at 417.

95. Grillet, 927 F.2d at 220 (citing United States v. Texarkana Trawlers, 846 F.2d

297, 304 (5th Cir. 1988)), cert, denied, 488 U.S. 943 (1988)).

96. Grillet, 927 F.2d at 221.

97. 930 F.2d 358 (4th Cir.), cert, denied, 112 S. Ct. 177 (1991).



172 INDIANA LAW REVIEW [Vol. 27:157

defendant was an employer that terminated the position the plaintiff

had held for twenty-seven years. The plaintiff*s supervisor offered a
waiver of any claims against the employer in exchange for enhanced

severance benefits, which included twenty-seven weeks* severance pay

and a determination that she was to be considered on unpaid leave of

absence for some months in order to **bridge" her early retirement to

age fifty-five. The waiver contained a clause stating that execution must
occur within five days, or else the plaintiff's benefits would be lost.

Although the plaintiff consulted with two attorneys, neither was able

to advise her as to the validity of the waiver. The plaintiff could not

afford to lose the benefits set forth in the waiver, so she executed the

waiver. The plaintiff claimed to have learned subsequently that her

employer had taken out advertisements and had hired new employees
in her department. However, the plaintiff also admitted in a letter to

her Senator that she ***purposely avoided [filing an] age discrimination

action,'" until all of her deferred severance had been paid.^^

On appeal, the Fourth Circuit affirmed the district court's grant of
summary judgment for the employer upon three apparent grounds.^
First, after reviewing the pre-OWBPA standards for determining the
validity of an ADEA waiver, the court held that **the better approach
is to analyze waivers of ADEA claims under ordinary contract princi-
ples .... Accordingly, we turn to the appropriate state's law for guid-
ance. . . ."'°^ Applying state contract law, the court held that setting

aside a waiver could only be done for the same reasons that allow a

party to *'void a contract. "'°' However, the court's second ground for

upholding the validity of the waiver was based essentially on an ADEA
knowing and voluntary standard: **0'Shea's decision to execute the

agreement was voluntary, deliberate, and informed. "^^^ The court found

no evidence of fraud or economic duress that would allow the plaintiff

to void the waiver, and because "[i]t is a well-established proposition

that the retention of benefits of a voidable contract may constitute
ratification, .... O'Shea validly released her ADEA rights under both
federal and state law."^*^^ The court emphasized a distinction between

voidable waivers that were induced by duress and subject to ratification

absent a tender back of consideration, and void waivers that would be

unaffected by a ratification theory.'^ In the alternative, the court's third

98. Id. at 361.

99. Id. at 361-62.

100. Id. at 362.

101. Id.

102. Id.

103. Id. at 362-63.

104. Id. at 362.



1993] RETENTION OF SEVERANCE BENEFITS 173

ground held that *'even if the release executed by the appellant was

invalid, the [employer] would have prevailed on the ground that the

[individuars] subsequent acceptance of the severance pay demonstrated

an intent to ratify the agreement. "'°^

The O'Shea court also cited an Eighth Circuit case relied upon in
Grillet that discussed the effects of a timely tender back of consideration

received from a waiver, leaving open the possibility that prompt re-

pudiation of the waiver might have preserved the plaintiff's age dis-

crimination claims.'^ The court implied that if the parties could have
been returned to the status quo existing before execution of the waiver,
the plaintiff might not have been precluded from bringing her age

discrimination lawsuit:
*

'Clearly, O'Shea sought to have it both ways,

and that is something which the doctrine of ratification was designed

not to permit. "'°^ The court concluded the opinion by upholding the
facial validity of the waiver, and in the alternative, the subsequent

ratification of the waiver based upon the three asserted grounds. '^^

B. Impact and Post-OWBPA Implications of Ratification in Grillet
and O'Shea

The appellate decisions of Grillet and O'Shea have been cited by a

number of district courts holding that the failure to tender back severance

benefits received in exchange for execution of a waiver constitutes rat-

ification. ^°^ One general inquiry that these courts have borrowed from
Grillet and 0*Shea to decide whether an individual has ratified a waiver

involves evaluating the conduct of the individual after execution with

respect to the consideration from the agreement.' '^ Although some courts

have been wiUing to uphold ratification based upon the retention of a
lump sum of benefits for a period of time, other courts have made the
distinction that only conduct involving the continuous receipt of benefits

over a period of time demonstrates an intent by the individual to ratify

105. Id.

106. Id. at 362. (citing Anselmo v. Manufacturers Life Ins. Co., 771 F.2d 417 (8th

Cir. 1985)).

107. Id. at 363.

108. Id. at 362.

109. Seward v. B.O.C. Division of General Motors Corp., 805 F. Supp. 623 (N.D.

111. 1992); Alphonse v. Northern Telecom, Inc., 776 F. Supp. 1075 (E.D. N.C. 1991);

Ponzoni v. Kraft General Foods, Inc., 774 F. Supp. 299 (D. N.J. 1991); Haslach v.

Security Pacific Bank Oregon, 779 F. Supp. 489 (D. Or. 1991); Frumkin v. International

Business Machines Corp., 801 F. Supp. 1029 (S.D.N.Y. 1992).

110. See, e.g., Grillet v. Sears, Roebuck & Co., 927 F.2d 217 (5th Cir. 1991)
(continued acceptance of benefits by ex-employee after learning of alleged misrepresentation

constituted ratification).



174 INDIANA LAW REVIEW [Vol. 27:157

the agreementJ" Generally, the courts adopting ratification theories have

not scrutinized the soundness of applying state contract law with respect

to the enactment of the OWBPA and other actions by Congress expressing
concern over ADEA waivers. However, several district courts have either
expressly rejected the ratification holding in Grillet and 0*Shea or chosen

not to follow the appellate holdings by distinguishing the facts from the

instant case.''^

In Grillet, O'Shea, and their progeny at the district court level, the

courts have addressed issues involving waivers that predate the mandatory

minimum standards of the OWBPA. The suspension of the EEOC's rule
by Congress, the legislative history of Title II, and the enactment of

the OWBPA, did not convince courts upholding ratification of ADEA
waivers to provide special scrutiny to such agreements based upon the

express congressional intent: "Put simply, [the plaintiff] is inviting this

court to accord special significance to acts of Congress which have done

no more than leave the law in its nascent state on the issue of unsupervised
waivers. We decline that invitation.'*''^ Instead, the courts upheld a
ratification theory that assumed the waiver had not been executed in

accordance with a pre-OWBPA standard of knowing and voluntary
agreement and consequently treated the waiver as a voidable contract

subject either to absolute ratification upon acceptance of consideration,

or to rescission upon a timely tender back of the consideration. Moreover,

these courts have drawn a distinction between void and voidable contracts,

claiming that waivers under the ADEA are voidable, not void, for a
period of time following execution.

In light of the mandatory nature of minimum standards under Title
II, courts that have previously upheld the ratification theory should defer

to the OWBPA as controlling law for waivers executed after the effective
date of the Act. However, it is unclear whether these courts will adhere

to the mandates of the Act. Neither the decision in Grillet nor O'Shea

addresses the intended impact of the holding upon post-OWBPA cases
involving waivers that do not comply with Title II of the OWBPA. In

111. See, e.g., Sperry v. Post Publishing Co., 773 F. Supp. 1557 (D. Conn. 1991)

(retaining a lump sum severance payment, as opposed to continuous receipt of payments,

did not constitute ratification).

112. Carr v. Armstrong Air Conditioning, Inc., 817 F. Supp. 54 (N.D. Ohio 1993)

(rejecting Grillet and O'Shea); Pierce v. Atchison, Topeka and Santa Fe Ry. Co., 1993

WL 18437 (N.D. 111. Jan. 26, 1993) (distinguishing the facts of the case from Grillet and
O'Shea); Oberg v. Allied Van Lines, Inc., 1992 WL 211506 (N.D. Ill Aug. 26, 1992)
(rejecting Grillet and O'Shea); Collins v. Outboard Marine Corp., 808 F. Supp. 590 (N.D.

111. 1992) (rejecting Grillet); Sperry v. Post Publishing Co., 773 F. Supp. 1557 (D. Conn.

1991) (distinguishing the facts of the case from Grillet); Isaacs v. Caterpillar, Inc., 765

F. Supp. 1359 (CD. 111. 1991) (rejecting Grillet and O'Shea).
113. O'Shea, 930 F.2d at 361.



1993] RETENTION OF SEVERANCE BENEFITS 175

the first cases to present district courts with the issue of the validity of

waivers executed since the OWBPA became effective, employers have
asserted unsuccessful defenses that rely primarily upon Grillet and

O^SheaJ^"^ Moreover, a recent appellate decision cited O'Shea, not for

the ratification holding, but for the basic proposition that employees

may vahdly waive ADEA rights and claims in private settlements. '*' The
court remanded the case for a determination of the validity of the waiver

based upon knowing and voluntary execution.' '^ The clear impact of a
possible continued adherence by the courts to variations of a ratification

theory as applied to waivers covered by the effective date of Title II

would render the express provisions of the Act ineffective and thwart

the congressional purposes in cases involving waivers not complying with

the minimum statutory requirements.

C. Retention of Benefits Without Effect on Claims Under the

ADEA: Isaacs and Forbus

The decisions of Grillet and O'Shea were a few weeks old when a
district court issued a contrary holding regarding the issues of ratification

and tender back as a condition precedent to bringing a subsequent

action.''^ Although the case of Isaacs v. Caterpillar, Inc. does not stand

on equal authoritative ground with the appellate decisions by the Fourth

and Fifth Circuits, the rationale and holding were adopted expressly in

the decision of the Eleventh Circuit that officially created the appellate

split.
''^ Furthermore, Isaacs provides an extensive in-depth discussion of

the tender and ratification issues, compared to the relatively brief treat-

ment given by the appellate decisions in Grillet and O'Shea.

114. Carr v. Armstrong Air Conditioning, Inc., 817 F. Supp. 54 (N.D. Ohio 1993);

Pierce v. Atchison, Topeka and Santa Fe Ry. Co., 1993 WL 18437 (N.D. 111. Jan. 26,
1993); Oberg v. Allied Van Lines, Inc., 1992 WL 211506 (N.D. Ill Aug. 26, 1992); Collins
V. Outboard Marine Corp., 808 F. Supp. 590 (N.D. 111. 1992).

115. Gormin v. Brown-Forman Corp., 963 F.2d 323 (11th Cir. 1992).

116. Id. at 327.

117. Isaacs v. Caterpillar, Inc., 765 F. Supp. 1359 (CD. 111. 1991). Isaacs was
decided on May 23, 1991, O'Shea, 930 F.2d at 358, on April 11, 1991, and Grillet, 927
F.2d at 217, on March 26, 1991.

118. Forbus v. Sears, Roebuck & Co., 958 F.2d 1036 (11th Cir. 1992), cert, denied,
113 S. Ct. 412 (1992): "We agree with, and find persuasive, the reasoning set forth in
Isaacs that explains public policy considerations supporting our determination that the

Retirees should not be required to tender their retirement benefits back to Sears as a

prerequisite to the maintenance of their lawsuit." Id. at 1040. The reasoning set forth in

Isaacs that the court in Forbus relied upon also included a discussion of Hogue v. Southern

Ry. Co., 390 U.S. 516 (1968), a Supreme Court decision that rejected a tender back

requirement of a plaintiff under the Federal Employers' LiabiUty Act, 45 U.S.C. §§ 51-

60 (1988). See infra text accompanying notes 127-49.



176 INDIANA LAW REVIEW [Vol. 27:157

In Isaacs, the plaintiffs alleged a pattern or practice by their employer

of coercing older employees into retirement or separation from em-

ployment because of their age.*'^ The waivers at issue stated that the
employer was released from claims relating to retirement from employ-

ment in exchange for severance payments and benefits beyond the plain-

tiffs' entitlement under the normal retirement plan.*^^ The plaintiffs

alleged that the waivers were invalid under the ADEA because they were
not given on a knowing and voluntary basis. *^' None of the plaintiffs
offered to return the benefits they received in exchange for executing

the waivers. '22 The employer moved for summary judgment, contending
that the plaintiffs were required to tender back the benefits as a condition

precedent to bringing an action. '^^ The employer further argued that the
plaintiffs had ratified the waivers by retaining the benefits during the

three years of litigation involved in the action, thereby precluding sub-

sequent challenges on the issue of validity. '^4 ^he court adopted the
employer's assertion that the court could assume the waivers **were

entered into either as a result of duress, fraud, or mistake because the

Plaintiffs did not know what they were signing. '"'^s jj^g employer based
its sole argument for summary judgment upon the **tender/ratification
argument, "'26 relying on the holdings of Grillet and 0*Shea without

addressing the merits of the plaintiff's claims.

The district court chose not to follow Grillet and O'Shea, but relied

instead on a 1968 decision by the Supreme Court in Hogue v. Southern
Railroad Co. '^7 as the most persuasive law relating to the waivers. '^s

The Hogue decision involved an employee's lawsuit under the Federal
Employer's Liability Act (FELA). The court recognized that other cases

deciding the tender/ratification issue of ADEA waivers had not previously
cited the Supreme Court decision. '^9 However, the Isaacs court found

the decision highly instructive, stating **[u]nder Hogue, whether a tender

requirement exists is not to be decided by state contract law doctrines.

119. Isaacs, 765 F. Supp. at 1362.

120. Id. at 1363-64.

121. Id. at 1364.

122. Id.

123. Id. at 1363.

124. Id. at 1364.

125. Id. at 1365 (citing the court's transcript of the proceedings of May 3, 1991
relating to the motion for summary judgment made by the employer).

126. Id. at 1363.

127. Hogue, 390 U.S. 516 (1968).

128. Isaacs, 765 F.Supp at 1366.

129. Id. The Hogue decision had gone unnoticed during the rise of the federal
judge-made law with respect to ADEA waivers. See, e.g., Cirillo v. Arco Chem. Co.,
862 F.2d 448 (3d Cir. 1988).



1993] RETENTION OF SEVERANCE BENEFITS 177

It is a federal question, and must be decided by considering whether

such a requirement would be 'incongruous with the general policy' of

the statute in question. '''^^ The Isaacs court noted that because the FELA
and the ADEA are remedial statutes intended to protect employees, "[n]o
apparent reason exists not to apply Hogue to the ADEA."'^'

The Isaacs court applied the Hogue decision to the employees' waivers
in holding that (1) **as a matter of federal law, there is no requirement
that ADEA plaintiffs tender the consideration received for releases as
a condition of challenging those releases in a lawsuit," and (2) **[f]or

the same reasons, the retention by Plaintiffs of benefits they received

under the [releases] during the pendency of this lawsuit does not constitute
* ratification' of those releases. "'^^ The grounds offered by the Isaacs
court included following the precedent of the Supreme Court decision
in Hogue over the appellate decisions in Grillet and O'Shea,^^^ citing
the purposes and provisions of the ADEA as amended, and propounding
in the alternative an analysis of contract law that would allow the retirees

to maintain their ADEA suits without ratification or a tender back of
consideration from the waivers.'^"*

The court's analogous use of Hogue involved a detailed review of
the Supreme Court decision. ^^^ In Hogue, an injured railroad employee

signed a release in exchange for a sum of money. '^^ The employee later
sued, alleging that the release was void for mutual mistake of fact.^^^

He did not later tender back the consideration that he had been paid
for the executing the release. ^^^ The state courts held that under state
common law, failure to tender back consideration constituted ratification,
requiring the suit to be dismissed. '^^ The Supreme Court reversed on

two fundamental grounds. First, **[t]he question whether a tender back

of the consideration was a prerequisite to the bringing of the suit is to

be determined by federal rather than state law."''*^^ Second, the Court

held that a tender back prerequisite would be '**wholly incongruous with

130. Isaacs, 765 F. Supp. at 1366.

131. Id. at 1367.

132. Id. at 1371.

133. Id. at 1369. The opinion states that "while this Court has the greatest respect

for the Fourth and Fifth Circuits, it must follow the law as laid down by the Supreme
Court in Hogue, and must apply the law to the ADEA unless some tenable reason exists
not to do so." Id.

134. Id.

135. Id. at 1366.

136. Id.

137. Id.

138. Id.

139. Id.

140. Id. (citing Hogue, 390 U.S. at 517).



178 INDIANA LAW REVIEW [Vol. 27:157

the general policy of [the FELA] to give railroad employees a right to
recover just compensation for injuries negligently inflicted by their em-

ployers,"*^"^' and that the original consideration paid to the employee

"[should] be deducted from any award determined to be due . . . ."'"'^

The Isaacs court cited lower courts* application of Hogue to reject tender
requirements in lawsuits under other federal remedial statutes and noted

that the Supreme Court's decision was neither discussed nor mentioned

in either Grillet or O'SheaJ"^^ Thus, Hogue provided the highest authority
for the holdings of Isaacs.

The Isaacs court's policy grounds included **four special factors
associated with the ADEA [that] make it particularly necessary to apply
the rule of Hogue to ADEA suits. "'^ First, the court found that *'a
tender requirement would deter meritorious challenges to releases" in

ADEA lawsuits, particularly in the context of early retirement pro-
grams.'"*^ As a practical matter, the court noted the unlikeliness that
retired employees would be able to save their severance payments '*to

be able to come up with the money to make such a tender at such
later time as they acquire grounds to believe that a successful lawsuit

might be mounted in connection with their retirements."'"^ Second, the

court recognized the '^continuing [congressional] preoccupation with

ADEA releases," including suspension of the EEOC's rule and passage
of the OWBPA, ''which severely restricts the use of releases" with
minimum standards.'"*^ The court found the congressional history relevant
to the tender issue, "because Hogue instructs federal courts to consider
whether a tender requirement would interfere with the remedial purposes

of the statute."'"*^ A tender requirement would run afoul of congressional
intent by making it "impossible for most employees to challenge ADEA
releases."'"*^ Third, the court noted that a tender requirement would

allow employers to circumvent the waiver provisions of the OWBPA:
"No matter how egregiously releases might violate the requirements of
the Older Workers Benefit Protection Act, employees would be precluded

141. Isaacs, 765 F. Supp at 1366 (citing Hogue, 390 U.S. at 518 (citing Dice v.

Akron, C. & Y. R. Co., 342 U.S. 359 (1952))).
142. Isaacs, 765 F. Supp at 1366 (citing Hogue, 390 U.S. at 518).

143. The Isaacs court cited Smith v. Pinell, 597 F.2d 994, 996 (5th Cir. 1979) (Jones

Act); Wahsner v. American Motors Sales Corp., 597 F. Supp. 991, 998 (E.D. Pa. 1984)

(Automobile Dealers' Day in Court Act); Taxin v. Food Fair Stores, Inc., 197 F. Supp.

827, 830-31 (E.D. Pa. 1961) (Sherman Antitrust Act).

144. Isaacs, 765 F. Supp. at 1367.

145. Id.

146. Id.

147. Id.

148. Id.

149. Id.



1993] RETENTION OF SEVERANCE BENEFITS 179

from challenging them unless they somehow could come up with the
money they were given when allegedly forced into retirement. "''°

The fourth factor constituted an overt attack on the assumption
made in the rationales of Grillet and 0*Shea that the tender back of
consideration justified rescission by restoring the parties to the condition

existing before the employee executed the release.'^' The Isaacs court
stated that "[i]mposing a *tender' requirement for challenges to ADEA
releases would frequently create insoluble practical problems.*'*" The
court reasoned that although a tender back of consideration from a

waiver settling a personal injury claim might be fairly assumed to restore

the parties to their pre-waiver condition, the use of consideration in an

ADEA waiver frequently involves the inducement of an early retirement
program, not merely a waiver of age discrimination claims:

The purpose of such programs is to induce people to retire earlier
than they otherwise would have done. Such early retirement is

an economic benefit to the company. To get it, the company
offers the employee money for leaving early. If the company
has plaintiffs sign a release in connection with these incentive

retirement payments, the status quo is not restored if the em-
ployee tenders the consideration received in connection with his

retirement and the employer accepts it and rescinds the release.

To the contrary, such an exchange would arguably unjustly enrich
the employer. The employee is deprived of money paid to induce
him to retire, yet he or she is not restored to employment; all

he or she gets is the rescission of his or her release.'"

Thus, the insoluble practical problem that would develop from a tender

requirement in ADEA cases involves the **conundrum as to how much
should be tendered to restore the pre-release status quo.''^^^ The court

pointed to the lack of a method that would force the parties to agree

as to the appropriate amount to be tendered back, especially given that

150. Id.

151. See supra text accompanying notes 95 and 107.

152. Isaacs, 765 F. Supp. at 1367.

153. Id. Although the language of the court suggests the possibility of an express

promise not to file a lawsuit under the ADEA in a waiver, the validity and scope of
such a waiver would be highly suspect under Title II of the OWBPA. Title II expressly
prohibits prospective waiver of rights and claims arising after the date the waiver is

executed. 29 U.S.C. § 626(0(1)(C) (Supp. 1993). Analogous to the prohibition of prospective

waiver under the Title of the OWBPA, the Supreme Court has held that with respect to
employment discrimination claims under the Civil Rights Act, '*[t]here can be no prospective

waiver of an employee's rights under Title VII." Alexander v. Gardner-Denver, 415 U.S.

36 (1974).

154. Isaacs, 765 F. Supp at 1368.



180 INDIANA LAW REVIEW [Vol. 27:157

employers do not typically specify how much consideration is in exchange
for retirement and how much is in exchange for a release of claims.'"

In IsaacSy the employer made numerous assertions in favor of a
tender requirement as a condition precedent to bringing an action. '^^ In

response to the assertion by the plaintiffs that a tender requirement

would largely nullify the effectiveness of the OWBPA, the employer
argued that the OWBPA could not be retroactively applied to the
employees' waivers to preclude a tender requirement.*^'' The court rejected

the employer's argument based on the lack of precedent in the courts,

or in the legislative history, supporting a tender requirement:

Neither the text nor the legislative history of the OWBPA says
anything about tenders as a condition of challenging releases.

The law of tender, therefore, is presumably the same after the

OWBPA as it was before it. If there was a tender requirement
before the OWBPA, then there still is one; if there was not,
then there still is not. This point weighs heavily against the

existence of a judge-made tender requirement under the ADEA,
because such a judge-made requirement would ehminate the

ability of most employees to challenge releases obtained in vi-

olation of the OWBPA. '58

The employer asserted further that the consideration paid to the employees

for the waivers was for the right to be free from a lawsuit, and the

present action deprived the employer of the benefit of its bargain. '^^

The court also rejected this assertion, stating that unless a waiver is
*

'explicitly worded as a promise not to file a lawsuit," a waiver is

**merely a potential defense to a lawsuit once filed. '"^ In a general

response to several other assertions by the employer criticizing the ap-

pHcability of the Hogue decision because the ADEA "encourages vol-
untary settlement,"'^' disputing the potential deterrent effect of a tender

requirement, and denying the difficulty in determining the amount of

consideration to tender in order to return the status quo, the court

concluded that a tender requirement could not be applied to the EEOC's
right to enforce the ADEA without violating congressional purposes,
and therefore it would be an inconsistent application to actions filed by

individuals. '^2

155. Id.

156. Id. at 1368-71.

157. Id. at 1369.

158. Id.

159. Id. at 1370.

160. Id. at 1370-71.

161. Id. at 1368.

162. Id. at 1370-71.



1993] RETENTION OF SEVERANCE BENEFITS 181

A final alternative ground offered by the court in Isaacs involved
a rejection of the interpretations of contract law made in Grillet and
O'Shea: ''Grillet and 0*Shea assume that it is a universally accepted

rule of state contract law that a person who has signed a release must
tender the consideration to a defendant prior to suing to void the release.

There is no such unanimity. "'^^ In support, the court cited a number

of state cases that had either expressly abandoned a tender requirement

or refused to adopt one.'^ The court also cited section 480 of the
American Law Institute Restatement of Contracts, which does not require
a tender back of consideration "where the consideration for the release

Ms merely money paid, the amount of which can be credited in partial
cancellation of the injured party's claim. '"'^^ Moreover, the court found

relevant section 384(1 )(b) of the Second Restatement of Contracts, '* which

excuses a tender of the consideration where the 'court can assure such

return [of the consideration] in connection with the relief granted.'*''^

Neither Grillet nor O'Shea mentioned the Restatement sections relied

upon by the court, and the court concluded a discussion of applicable
common law of contracts by citing a general principle of contracts that
*'[e]ven where the law requires a tender, such tender is excused if it

would be futile. "'^^ The court primarily relied upon the question of
whether a tender in the case would be futile as a material issue of

disputed fact, which alternately would require denial of the employer's

motion for summary judgment. ^^^

In rejecting the ordinary contract principles asserted in Grillet and

O'Shea and by the employer, '^^ the Isaacs court harshly criticized the

distinction between whether a tender of consideration is a condition

precedent to bringing an action to challenge a waiver and whether the

retention of benefits constitutes a ratification of the waiver:

States that require a tender to challenge a release sometimes use

language of
*

'condition precedent to suit," and sometimes use

163. Id.

164. Id. at 1372 (citing Ruggles v. Selby, 165 N.E.2d 733, 743 (111. App. Ct. 1960)

(holding no tender necessary to void a release for mutual mistake of law); Worthey v.

Cleveland, C.C. & St. L.R. Co., 251 111. App. 585 (1929) (holding tenders to be required
in certain circumstances but not others)).

165. Isaacs, 765 F. Supp. at 1372 (citing Restatement of Contracts § 480 (1932);

Taxin v. Food Fair Stores, Inc., 197 F. Supp. 827 (E.D. Pa. 1961)).

166. Isaacs, 765 F. Supp. at 1372 (citing Restatement of Contracts (Second) §
384(l)(b) (1979)).

167. Isaacs, 765 F. Supp. at 1374 (citing Needy v. Sparks, 393 N.E.2d 1252, 1255

(111. App. Ct. 1979); 74 AM. JUR. 2D Tender §§ 4, 5 (1964)).
168. Isaacs, 765 F. Supp. at 1374.

169. Id. at 1372 (citing Grillet, 927 F.2d 217).



182 INDIANA LAW REVIEW [Vol. 27:157

the language of "ratification." But there is no meaningful dif-

ference between the two. It is impossible to understand how a
person can ratify a release by not making a tender if he can

sue to challenge the release without making a tender. No state
court decision cited by [the employer] has explained the difference

between the failure to tender as barring suit and failure to tender

as constituting "ratification. "^^°

The overriding issue for the court consisted of whether a tender re-
quirement should be imposed for challenging releases under remedial

federal statutes. •^^ Based upon the Supreme Court's decision in Hogue,
the provisions and purposes of the ADEA as amended, and varying
principles of contract law, the Isaacs court concluded that no such

requirement existed for plaintiffs under the ADEA.*''^

Nearly a year later, the Eleventh Circuit Court of Appeals reached

the same conclusion in Forbus v. Sears Roebuck & Co., relying heavily
upon the holding and rationale of Isaacs.^''^ In Forbus, the four plaintiffs

had been employed at a retail distribution center of Sears, Roebuck and

Company when the company informed them that plans to convert the
center to other uses would involve a substantial reduction in jobs.*^"*

The company offered the employees a severance incentive package, re-
quiring as a condition the execution of a waiver that precluded the

retiring employee from bringing any action against the company as a
result of termination.'^^ After each employee accepted the severance

package and received the promised benefits, the company changed the
restructuring plans and converted the center into a different facility that

required more jobs than anticipated previously. '^^ The retirees asked for
their jobs back but were informed that none were available. Thereafter,

the retirees filed charges of age discrimination with the EEOC alleging
that the ADEA had been violated, that the waivers had been executed
under duress, and that the misrepresentations which had been made by
the company constituted breach of contract and fraud. •''^ None of the
retirees tendered severance payments back to the company. '^^ Instead,

170. Id. at 1373.

171. Id. at 1376.

172. Id.

173. Forbus V. Sears, Roebuck & Co., 958 F.2d 1036 (11th Cir. 1992), cert, denied.
113 S. Ct . 412 (1992).

174. Id. at 1038.

175. Id.

176. Id.

177. Id.

178. Id.



1993] RETENTION OF SEVERANCE BENEFITS 183

the retirees offered to offset any award received in the lawsuit by the

amount of accepted severance pay.'^^

The district court granted summary judgment to the employer on

state law claims because the retirees had been at-will employees and

because the retirees failed to state a claim for breach of contract. '®° In

arriving at its decision, the court noted that the retirees ''sustained no

recoverable damages, even if Sears were guilty of fraud /'^^' The district

court determined that the "offer to offset any award [constituted] suf-

ficient tender" to the allow the suit under state law.*^^ The retirees'

ADEA claims remained for consideration by the Court of Appeals.'®^
The Eleventh Circuit accepted the appeal on the basis of the collateral

order doctrine.*^'* The court also considered a simultaneous motion for
summary judgment by the company on the basis that the retirees had
unconditionally failed to tender back severance payments, thereby rat-

ifying the waivers, even if questions of fact existed regarding the vaHdity

of the waivers based on duress and fraud. '^^

The Eleventh Circuit reviewed the ratification issue de novo and

considered the company's twin arguments: (1) even if the waivers were

"tainted by misrepresentation or duress," the retirees ratified the waivers

"by accepting the benefits," and (2) if the retirees were allowed to retain

the severance benefits while maintaining the lawsuit, the company would

be denied the benefit of its bargain. '^^ In response, the retirees contended

that the "tender back of the severance benefits [was] not an absolute

requirement. "^^^ The court cited the Supreme Court's decision in Hogue
to reverse the district court's application of state law to the issue of a

tender requirement under the ADEA.^^® Moreover, the court agreed with

the citation of Hogue as controlling law in Isaacs and followed the
holding in Hogue that where rights are conferred by a remedial federal
statute designed to protect employees, "whether a tender back . . . [is]

179. Id.

180. Id. at 1039.

181. Id.

182. Id. at 138-39.

183. Id.

184. See supra note 89 and accompanying text. The collateral order doctrine allows

an exception to the general rule that interlocutory appeals are not appealable. The dissent

argued that the collateral order doctrine did not apply and that the employer's asserted

right not to be sued because of the waivers was not sufficiently important to justify an

interlocutory appeal. Forbus, 958 F.2d at 1042-43.

185. Id. at 1038-39.

186. Id. at 1040-41.

187. Id. at 1040.

188. Id. at 1041.



184 INDIANA LAW REVIEW [Vol. 27:157

a prerequisite to the bringing of the suit is to be determined by federal

rather than state law."'^^

The court acknowledged the decisions by the Fourth and Fifth
Circuits in 0*Shea and Grillet but held Hogue to be binding precedent
and adopted the public poHcy considerations of Isaacs as persuasive

authority.'^ The court also adopted by analogy the finding in Hogue
that a tender requirement would deter meritorious challenges to waivers

in FELA lawsuits:

The same deterrence factor applies to ADEA claims. Forcing
older employees to tender back their severance benefits in order

to attempt to regain their jobs would have a crippling effect on

the ability of such employees to challenge releases obtained by

misrepresentation or duress. Such a rule would, in our opinion,

encourage egregious behavior on the part of employers in forcing

certain employees into early retirement for the economic benefit

of the company. The ADEA was specifically designed to prevent
such conduct, and we reject a tender requirement as a prerequisite
to instituting a challenge to. a release in an ADEA case.^^'

The court affirmed the district court's denial of summary judgment to
the employer by holding as a matter of federal law that ADEA plaintiffs
are not required to tender back consideration received for waivers and

that retention of the consideration "during the pendency of a lawsuit

does not constitute ratification of [the] waivers. "'^^ Thus, Forbus upheld

unequivocally the right of an individual to challenge the validity of an

ADEA waiver, without condition precedent or conflicting interpretations
of the common law of contracts. ^^^

D. Impact and Post-OWBPA Implications of Isaacs and Forbus

The precedent established in Forbus and Isaacs provided authority

for district courts deciding first impression issues regarding the validity

of waivers under the OWBPA.'^^ By the middle of 1992, two district
courts had followed Isaacs and Forbus to hold that discharged workers

who failed to return severance benefits did not lose their right to bring
an ADEA action if they had executed waivers that were invalid under

189. Id. at 1040 (citing Hogue, 390 U.S. at 517).

190. Forbus, 958 F.2d at 1040-41.

191. Id. at 1041.

192. Id.

193. Id.

194. Carr v. Armstrong Air Conditioning, Inc., 817 F. Supp. 54 (N.D. Ohio 1993);

Oberg V. Allied Van Lines, Inc., 1992 WL 211506 (N.D. Ill, Aug. 26, 1992); Collins v.
Outboard Marine Corp., 808 F. Supp. 590 (N.D. 111. 1992).



1993] RETENTION OF SEVERANCE BENEFITS 185

the OWBPA.'^^ A third district court held independently of Isaacs that
retention of a lump sum severance payment by an individual, as opposed
to continuous receipt of payments, did not constitute ratification of a

voidable waiver. '^^

The mandatory nature of the minimum standards for a valid waiver
under Title II of the OWBPA makes the continued uniformity of decisions
following Forbus and Isaacs likely, thereby allowing challenges of waivers

that are voidable under the Act. Moreover, the district court decisions

that echo the holding and rationale of Forbus and Isaacs indicate the
apparent soundness of the reasoning in those cases with respect to post-

OWBPA waivers. In light of the rough equivalence of cases on either
side of the issue, the relevant consideration mitigating in favor of the

continuing force of the decisions in Forbus and Isaacs is that the cases

rejecting tender or ratification theories are the most recent and deal with

waivers subject to the mandatory minimum standards of the OWBPA. '^^
Although Forbus and Isaacs involved waivers that were executed

before the effective date of the minimum standards for valid waivers
under the OWBPA, both courts expressly intended their holdings to set
precedent for waivers executed after the effective date of the OWBPA. '^^
The policy behind Forbus and Isaacs was to leave the doors of courthouses

open to meritorious ADEA lawsuits, while avoiding setting precedent
that would allow employers to circumvent both the pre-OWBPA knowing
and voluntary standard for ADEA waivers and the minimum standards
in Title II of the OWBPA. ^^^ The risk that the courts sought to avoid
involved the potential for employers to fraudulently induce the execution

of severance waivers by coercion or misrepresentation with the hope that

the ratification theory would preclude retirees from filing ADEA lawsuits
or that retirees would not be in a financial position to return the benefits

in order to meet a tender requirement within the two-year statute of

limitations under the ADEA.^^ The courts reasoned that the purpose
and effect of the OWBPA would be nullified if employers were able
to obtain waivers under such circumstances.^°'

195. Oberg v. Allied Van Lines, Inc., 1992 WL 211506 (N.D. 111. 1992); Collins
V. Outboard Marine Corp., 808 F. Supp. 590 (N.D. 111. 1992).

196. Sperry v. Post Publishing Co., 773 F. Supp. 1557 (D. Conn. 1991).

197. Carr v. Armstrong Air Conditioning, Inc., 817 F. Supp. 54 (N.D. Ohio 1993);

Pierce v. Atchison, Topeka and Santa Fe Ry. Co., 1993 WL 18437 (N.D. 111. Jan. 26,
1993); Oberg v. Allied Van Lines, Inc., 1992 WL 211506 (N.D. 111., Aug. 26, 1992);
Collins V. Outboard Marine Corp., 808 F. Supp. 590 (N.D. 111. 1992).

198. Forbus, 958 F.2d at 1041; Isaacs, 165 F. Supp. at 1371.

199. Id.

200. 29 U.S.C. § 626(e)(1) (1988).

201. Forbus, 958 F.2d at 1036; Isaacs, 765 F. Supp. at 1359.



186 INDIANA LAW REVIEW [Vol. 27:157

III. The Model Amendment

Title II of the OWBPA does not expressly provide an individual
with the right to retain consideration received from the execution of a

waiver during a challenge of the validity of the waiver in court. Nor
does Title II contain provisions addressing a tender back requirement

or ratification of a waiver. Moreover, nothing in the legislative history

of the OWBPA addresses the issue. Title II presently allows an individual
seven days during which to revoke a waiver,^^^ but employers customarily

do not give consideration until after expiration of the revocation period.

However, disputes over the right of an individual to bring a subsequent

ADEA lawsuit arise after execution of a waiver and exchange of severance
benefits. Courts may review the underlying purposes of the ADEA and
the OWBPA for persuasive authority, but along with absolute rejections
of the federal law, differing interpretations and constructions will in-

evitably produce a gray area of the law. Thus, the appellate split cannot

be resolved by the provisions of the ADEA as it currently stands.
Amendment of the ADEA will provide a simple and necessary resolution
of the appellate split.

A. Need for Amendment

Amendment of the Title II provisions of the OWBPA is necessary
not only to resolve the judicial inconsistencies perpetuated by the appellate

split, but also to address underlying concerns of considerable social and

economic value. First, the increasing use of severance waivers as a method

of corporate restructuring and necessary reductions in the size of op-

erations, coupled with the aging of the **baby boom*' generation, means

that more older workers and their employers will be encountering and

using unsupervised waivers. ^^'^ The continued existence of the appellate

split casts an irresolvable uncertainty upon the prerequisites for execution

of valid unsupervised waivers of ADEA rights and claims. The recurring
question facing employers and employees alike involves whether the

minimum standards of Title II apply by mandate of Congress or instead
whether employers are free to use any method of inducement in the

hope that the individual will ratify the waiver through conduct or a

failure to meet a tender back requirement. Such uncertainty threatens

to stall the economic and social benefits and necessities addressed through

the use of waivers of age discrimination claims in the termination or

discharge of employees. In the wake of such uncertainty, the split of

authority will deter the use of valid waivers and the fihng of meritorious

202. 29 U.S.C. § 626(f)(1)(G) (Supp. 1993).

203. See Rice, Wooing Aging Baby Boomers, Fortune, Feb. 1, 1988, at 68.



1993] RETENTION OF SEVERANCE BENEFITS 187

lawsuits challenging invalid waivers. In sum, the economic benefits for

both sides will be deterred with the costs passed to society.

Amendment of Title II will preserve the effectiveness of the OWBPA,
a piece of legislation that evolved through carefully calculated devel-

opments over several years, representing the interests of employers and

employees as forwarded and considered by the EEOC, Congress and
the courts. Employers have had the judge-made right to obtain waivers

of age discrimination claims for approximately twenty years. Older work-

ers have been guaranteed express federal statutory protections and rem-

edies aimed at eliminating discriminatory practices since the enactment

of the ADEA in 1967. Moreover, ambiguity regarding the applicability
of the minimum standards in Title II threatens to thwart the clear
congressional intent behind the OWBPA. An amendment resolving the
split of authority will help to guarantee that the mandatory standards

of Title II achieve widespread use.

A final relevant consideration supporting the necessity of amendment
by Congress involves the current composition of the Supreme Court.
When the Supreme Court's decision in Betts conflicted with the con-
gressional intent underlying the ADEA, Congress was forced to quickly
respond with the enactment of the OWBPA to preserve the protections
of the ADEA with respect to employee benefits.^^ The Supreme Court
has declined two opportunities to resolve the issues of tender and rat-

ification involved in the appellate split. ^^^ However, the willingness of

the Court to narrowly construe the protections accorded older workers

by the ADEA provides a further incentive for Congress to take the
initiative of resolving the issue before another decision by the Court is

handed down that potentially conflicts with the congressional intent and
stated purposes behind the ADEA.

B. Proposed Amendment to Title II of the OWBPA

The amendment of the ADEA should be consistent with the holdings
of Forbus and Hogue. The strongest authority supporting such an amend-

ment is found in the mandatory nature of the Title II provisions in the

OWBPA. Congress clearly enacted the OWBPA to set mandatory min-
imum standards for unsupervised waivers of rights and claims under the
ADEA, not as mere recommendations. The 1968 Supreme Court decision
of Hogue instructs that federal remedial statutes provide controlling law

204. See supra note 1.

205. Forbus v. Sears, Roebuck & Co., 958 F.2d 1036 (11th Cir. 1992), cert, denied,
113 S. Ct. 412 (1992); O'Shea v. Commercial Credit Corp., 930 F.2d 358 (4th Cir. 1991),
cert, denied, 112 S. Ct. 177 (1991).



188 INDIANA LAW REVIEW [Vol. 27:157

in disputes over waivers of such statutory protections.^*^ At the heart

of the matter lies the attempt by Congress to ensure that waivers of

age discrimination claims are knowingly and voluntarily executed in order

to prevent the use of coercion or fraud.

The incorporation of the Forbus holding in the model amendment
is consistent with the legislative history of the OWBPA. Title II of the
OWBPA incorporated the holdings of federal appellate decisions re-
garding the non-waivability of the EEOC's right to pursue a charge of
age discrimination and the minimum standards necessary to guarantee
a knowing and voluntary waiver.^^^ Lastly, the codification of an offset

deduction finds support in Hogue and the American Law Institute
Restatements of Contracts.^^^

The following is a model amendment, not in statutory form, which

could be incorporated into Title II of the OWBPA as a final provision
of 29 U.S.C. section 626.

Retention of Severance Benefits During Challenges Under the
ADEA

1. The purpose of this section is to permanently resolve the

inconsistencies wrought by the federal courts with regard to the

rights of ADEA plaintiffs to challenge the validity of waivers
falling under the effective date of Title II of the OWBPA.

2. Any individual or group of individuals challenging the
validity of a waiver or waivers executed since the effective date

of Title II of the OWBPA shall not be required to tender the
consideration received for such waiver or waivers as a condition

prerequisite to challenging those waivers in court.

3. The retention of such consideration from a waiver by an

individual or individuals challenging the vaUdity of a waiver or

waivers under the Act during the pendency of a lawsuit shall

not constitute ratification of such a waiver or waivers.

4. Except as such a waiver may otherwise bar recovery, or
as equitable relief may be appropriate under the ADEA, a
deduction from the sum of damages paid to an individual or

206. Hogue, 390 U.S. 516. See supra text accompanying note 140.

207. EEOC V. Cosmair, Inc. L'Oreal Hair Care Div., 821 F.2d 1085 (5th Cir. 1987)
(waivers of the right to file a charge with the EEOC void as a matter of public policy);
Cirillo V. Arco Chem. Co., 862 F.2d 448 (3d Cir. 1988) (adopting minimum standards
for knowing and voluntary waiver of rights and claims under the ADEA).

208. See Isaacs, IdS F. Supp. at 1366 (citing Hogue, 390 U.S. at 518), at 1372

(citing Restatement of Contracts § 480 (1932); Restatement of Contracts (Second)

§ 384(l)(b) (1980)).



1993] RETENTION OF SEVERANCE BENEFITS 189

individuals whose rights under the Act have been violated shall

be made in the amount of any enhanced benefits received in
exchange for execution of an ADEA waiver.

C. Impact Of The Proposed Amendment

The amendment should make an invalid waiver under Title II of
the OWBPA voidable, regardless of the retention of benefits by an
individual during a challenge of the waiver. The waiver will remain
voidable before and during adjudication. The amendment will provide
an unambiguous statement of the law of ADEA waivers for the courts
and promises to restore effective use of waivers for employers and
employees.

The safeguards of the rules of civil procedure already deter challenges
of valid waivers. For example, Rule 11 of the Federal Rules of Civil

Procedure provides a check against frivolous lawsuits.^^ Motions for

failure to state a claim upon which relief may be granted under Rule
12 also prevent the progress of claims without merit in the federal

courts. ^^° Additionally Rule 50 motions for judgment as a matter of law

and Rule 56 motions for summary judgment may be used for early
disposition of unmeritorious lawsuits or deficient pleadings.^'

^

IV. Conclusion

Congress included Title II in the OWBPA to expressly safeguard
the execution of unsupervised waivers of individual rights and claims

under the ADEA through mandatory minimum standards of validity.
The existing split of authority between the United States Courts of
Appeals threatens to undo the mandate of Congress. This Note challenges

Congress to amend Title II of the OWBPA. Such amendment will resolve
the controversy of the appellate split and will provide a more certain

future for the use of unsupervised waivers of rights and claims under

the ADEA. Congress intended the ADEA not only **to prohibit arbitrary
age discrimination in employment," but also "to help employers and

workers find ways of meeting problems arising from the impact of age

on employment. "^'^ Enforcement of waivers under Title II of the OWBPA
provides the necessary means for meeting this goal.

209. Fed. R. Civ. P. 11.

210. Fed. R. Civ. P. 12(b).

211. Fed. R. Civ. P. 50, 56.

212. 29. U.S.C. § 621(b) (1988).