Labor & Employment Law Daily Collective action waiver enforceable in spite of OWBPA
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Friday, September 25, 2020

Collective action waiver enforceable in spite of OWBPA

By Brandi O. Brown, J.D.

IBM employees laid off as part of a reduction in force are unable to obtain declaratory and injunctive relief protecting them from enforcement of collective action waivers included in their severance agreements.

A federal district court in New York granted IBM’s motion to dismiss an action filed by former employees seeking declaratory and injunctive relief preventing the company from enforcing a collective action waiver contained in their separation agreements. The court agreed with IBM that the use of the word “right” in the Older Workers Benefit Protection Act’s prohibition against waivers referenced only a “substantive right” under the ADEA and the right to proceed by collective action, it concluded, is procedural, rather than substantive (Estle v. International Business Machines Corp., September 21, 2020, Gardephe, P.).

Waiver of collective action required. In 2016, the employees, each of whom had worked for IBM between 10 and 34 years, were laid off as part of a “Resource Action.” All of the employees were over the age of 55 when this happened. Although the c company, in previous layoffs between 2001 and 2013, had provided the affected employees with OWBPA comparator information, it did not do this for those employees laid off in 2016.

According to the employees, that information was necessary under the OWBPA in order for IBM to obtain a waiver of their ADEA rights, such as the one contained in the separation agreements with which they were presented. The agreement required them to waive their right under the ADEA to pursue their claims collectively in any forum (including arbitration) in order to receive benefits under the agreement. It called for binding arbitration of all covered claims, including those under the ADEA.

Sought relief under OWBPA. In their complaint, the employees sought a declaratory judgment that the purported waiver was not “knowing and voluntary” under the OWBPA. They also sought an injunction to bar IBM from attempting to enforce the waivers in any forum. The company moved to dismiss the complaint, arguing that the employees failed to state a claim because the OWBPA’s “right or claim” language referred to a “substantive right” under the ADEA and not a procedural one.

As amended by the OWBPA, section 626(f) of the ADEA provides that “[a]n individual may not waive any right or claim under this chapter unless the waiver is knowing and voluntary” and it goes on to provide the requirements for a “knowing and voluntary waiver.” Citing the U.S. Supreme Court decision in 14 Penn Plaza LLC v. Pyett, IBM argued that the right to proceed by way of a collective action is a procedural right and, therefore, those requirements for a knowing and voluntary waiver do not apply.

14 Penn Plaza controls. The employees argued that the 14 Penn Plaza decision was not binding and that the U.S. Supreme Court in that decision was not considering whether the OWBPA was limited to substantive rights. Disagreeing, the court explained that 14 Penn Plaza held that, for purposes of Section 626(f), the term “right” means a “substantive right” and that interpretation was binding. “It is likewise clear that the right to bring a collective action is not a substantive right,” the court continued, citing the Second Circuit’s 2013 decision in Sutherland v. Ernst & Young LLP. Therefore, the collective action waiver in this case did not waive a “right” for the purposes of Section 626(f) and the OBWPA did not bar IBM from enforcing the waiver.

Limited to substantive rights. Moreover, to the extent the employees attempted to argue that the section of the FLSA incorporated into Section 626 (in subsection (b)) provided for the “right” to pursue collective action, the court was not persuaded. The FLSA collective action provision is a “procedural mechanism,” it explained, and it was clear in 14 Penn Plaza and other decisions that the ADEA did not “elevate” that “provision from a ‘procedural mechanism’ to a non-waivable right.”

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