75 Fair empl.prac.cas. (Bna) 1217, 73 Empl. Prac. Dec. P 45,332, Pens. Plan Guide (Cch) P 23940r American Airlines, Inc. v. Radames Cardoza-Rodriguez, Marta Elaine Coll-Figueroa, Isabel De La Paz, Maria D. Garcia-Caceres, Ernesto Lopez-Garcia Ana L. Marin De Rivero, Carmen Ana Martinez-Rivera Carmen Alicia Mattos, Guillermo Ortiz-Rosa, Margarita Santiago-Negron and Margarita Zequeira-Julia
Docket: 97-1363
Court: Court of Appeals for the First Circuit; January 6, 1998; Federal Appellate Court
Defendants-appellants Radames Cardoza-Rodriguez and others, employees of American Airlines, appealed a district court's declaratory judgment favoring American Airlines, which enforced releases of age discrimination claims they had signed and dismissed their counterclaims under the Age Discrimination in Employment Act (ADEA) and Puerto Rico Law 100. The appeals court partially reversed and vacated the district court's ruling on the enforceability of the releases but upheld the dismissal of the employees' ADEA claims, deeming them time-barred.
The case arose from a Voluntary Early Retirement Program (VERP) offered by American Airlines in September 1994 as part of a workforce reduction. This program was available to certain employees who met specific criteria, including being at least 45 years old and at the maximum pay scale. Employees received detailed information about the program, which included a participation deadline of November 11, 1994, and a seven-day rescission period post-election. To participate, employees had to sign a 'Voluntary Early Retirement Election Form' confirming their voluntary decision and relinquishing reemployment rights. Additionally, they were required to sign a 'Complete Release of All Claims' on their last day of work, releasing American from all employment-related liabilities, specifically including age discrimination claims.
The VERP election form required employees to confirm they had read the entire release before opting for early retirement. By signing the release, employees agreed not to initiate legal proceedings against American Airlines, acknowledged the forfeiture of extra retirement benefits for any material breach, and accepted that the party enforcing the release would recover costs and attorney's fees. The release included a clause stating that employees had adequate time to consult an independent legal representative, but the VERP documentation did not explicitly encourage seeking legal advice before signing. Employees signed the release on their last workday, with elections for the early retirement program occurring between October 11 and December 13, 1994, followed by individual terminations starting December 30, 1994, and ending September 29, 1995. After termination, employees received enhanced retirement benefits, which they accepted for an undefined time.
On October 27, 1995, over a year after opting into the VERP, employees filed age discrimination claims with the Puerto Rico Anti-Discrimination Unit and the EEOC, alleging their retirement was involuntary and that they faced age discrimination. They claimed management misled them about job security, suggesting potential moves or outsourcing, which did not occur, despite being asked to train younger replacements.
In response to the ADU claims, American Airlines filed a declaratory judgment action on April 18, 1996, seeking clarification of rights under the Employee Retirement Income Security Act. American also requested court approval to deposit future retirement benefit payments into a court-designated bank account, which the court granted. Consequently, American has since been placing these payments into an interest-bearing account. Employees counterclaimed for age discrimination under the ADEA, OWBPA, and Puerto Rico Law 100, but many of the original claimants abandoned their claims, leaving eleven remaining in the appeal.
On July 22, 1996, American filed a motion for summary judgment, seeking a declaration that employees had ratified a release agreement under federal and local law and that the defendants could not pursue claims related to early retirement. American also argued that the employees’ counterclaims were untimely. The court granted American's motion, issuing a declaratory judgment on January 27, 1997, which stated: (1) the defendants ratified the release agreements regarding early retirement benefits; (2) the agreements barred any claims against American related to employment or retirement, including age discrimination claims under the ADEA, OWBPA, and Puerto Rico Law; and (3) the defendants failed to file age discrimination claims within the applicable limitations period. Consequently, the court granted summary judgment on the employees' ADEA and Law 100 counterclaims, leading to the current appeal.
The standard of review for summary judgment is de novo, where the court examines the record favorably towards the opposing party, requiring the nonmoving party to present sufficient evidence to create a trial-worthy issue. An appellate panel may affirm a summary judgment on any valid ground, not limited to the district court's reasoning.
The appeal presents two questions: whether the release bars the employees' ADEA and Law 100 claims and, if not, whether the claims are barred by law. The appellate court disagreed with the district court's conclusion that the release barred the ADEA counterclaims but concurred that the statute of limitations precludes the counterclaim. American argued that the release was enforceable either by compliance with the OWBPA or by ratification due to the employees' acceptance of enhanced retirement benefits. The appellate court found that the release did not comply with the OWBPA and that the ratification doctrine does not apply to invalid ADEA waivers.
For an employee's waiver of ADEA rights to be enforceable, it must be 'knowing and voluntary,' as established in case law. Prior to the OWBPA's enactment, courts had differing approaches to determining the validity of such waivers, with some using ordinary contract principles and others adopting a 'totality of circumstances' test. The OWBPA clarified this by requiring waivers to contain specific information to ensure they are 'knowing and voluntary,' including: clear writing for understanding, specific reference to ADEA claims, exclusion of post-signing claims, additional consideration beyond entitlements, written advice to consult an attorney, a minimum of 45 days for consideration if offered to a group, a 7-day rescission period, and disclosure of job titles and ages of eligible versus ineligible employees in group terminations.
Furthermore, the OWBPA places the burden on the party asserting the waiver's validity to prove it meets the 'knowing and voluntary' standard. In this case, American needed to show compliance with all requirements under section 626(f) for a summary judgment. However, the VERP documents failed to specifically advise employees to consult an attorney before signing the release, which is a statutory requirement. While employees acknowledged reading the release, the advice regarding legal consultation was only mentioned in the release itself, which would be signed later. The VERP Agreement also encouraged consulting financial advisors but did not stress the importance of seeking independent legal advice prior to retirement and release execution.
OWBPA imposes a significant burden on employers to ensure that agreements meet specific informational requirements. A mere reference in a release does not satisfy the criteria outlined in 626(f)(1)(E). Congress intended for employers to provide necessary data to enable employees to evaluate the viability of ADEA claims with legal counsel. The statute mandates that a waiver is not considered knowing and voluntary unless individuals are explicitly advised in writing to consult an attorney prior to signing the agreement. The definition of "advise" includes cautioning or recommending, which highlights the importance of this requirement.
American contends that its waiver form complied with OWBPA because employees knew they were waiving rights for enhanced benefits. However, the court disagrees, asserting that mere awareness of waiving rights does not fulfill the requirement to advise employees to seek legal counsel. This failure undermines the statute's intent, as American did not directly inform employees to consult a lawyer before executing the waiver.
Regarding the ratification of the employees’ ADEA waiver, the district court ruled that acceptance of enhanced retirement benefits ratified the original release. The court, however, disagreed with this interpretation. Previous cases indicate that a release induced by duress is voidable, requiring prompt repudiation by the affected party. American claims that employees' retention of benefits validates the waiver, but this argument only holds if the ratification and tender-back doctrines apply to ADEA waivers post-OWBPA.
Circuits are divided on whether accepting benefits ratifies an invalid waiver of Age Discrimination in Employment Act (ADEA) claims. The majority view, upheld by several circuits, maintains that ratification and tender-back do not apply to invalid ADEA waivers, citing cases such as Howlett v. Holiday Inns, Long v. Sears Roebuck, and Oberg v. Allied Van Lines. A notable district court, Soliman v. Digital Equip. Corp., aligns with this majority.
Conversely, the Fourth and Fifth Circuits, along with some district courts, argue that non-compliant waivers under the Older Workers Benefit Protection Act (OWBPA) are voidable, meaning that retaining benefits can ratify the waiver, as shown in cases like Blistein v. St. John's College and Blakeney v. Lomas Info. Sys.
Proponents of ratification argue that the use of "knowing" and "voluntary" in the statute implies that Congress intended to define circumstances under which a contract is voidable rather than void. They assert that absent explicit language in the OWBPA against ratification, common-law principles apply.
The majority opinion rejects this voidable interpretation, asserting that the OWBPA establishes a distinct framework for waivers, emphasizing that Congress intended specific procedural safeguards before a waiver can be considered effective. The statute requires that an ADEA waiver be both "knowing and voluntary," contingent on the employer fulfilling eight specified OWBPA requirements.
Incorporating the ratification doctrine into the Older Workers Benefit Protection Act (OWBPA) would undermine the Act's purpose, which is to provide employees with sufficient information to evaluate ADEA waivers. The ratification doctrine assumes that an employee's retention of benefits after discovering fraud creates a new contract, but this is flawed; an employee cannot validly consent to waive ADEA claims under a defective release, whether at the time of signing or after. If employers could validate noncompliant waivers simply by having employees retain benefits, it would contradict the protections intended by the OWBPA. Employers would be incentivized to bypass necessary legal consultations for employees, forcing them to choose between retaining benefits and preserving their rights against age discrimination.
The conflict arises starkly in cases of early retirement inducement, where employees may have agreed to retire for enhanced benefits without fully recognizing potential age discrimination claims. Courts have held that requiring a return of benefits to restore the status quo does not adequately apply in the context of voluntary retirement, as it does not reflect the original employment situation. American Airlines does not propose that employees should refuse retirement benefits to sue, indicating an intent to benefit economically from employees' retirement decisions made under OWBPA violations. This could prompt employers to exploit early retirement options detrimentally. The conclusion reached aligns with the majority of courts that assert an employee's retention of benefits does not ratify an invalid waiver of ADEA claims under the OWBPA. The district court's ruling that the release prevents defendants from asserting age discrimination claims is therefore reversed.
The district court's judgment regarding the ratification of the Employees' Law 100 waivers is under scrutiny, particularly concerning whether the release bars non-ADEA claims despite the invalidity of ADEA waivers. Both parties focused on the ratification doctrine rather than state law, leaving the court's stance ambiguous on whether the release affects Puerto Rico Law 100 claims and other employment-related claims. The Third Circuit's approach in Long, which vacated a summary judgment on non-ADEA claims, suggests a similar route is warranted here. Consequently, the district court's decision that the release bars non-ADEA claims is vacated, and the issue is remanded for further consideration.
Additionally, the district court's order from May 1996 for the deposit of employees' retirement benefits into an interest-bearing account remains unresolved. The parties did not address this on summary judgment or appeal, so the court will determine the proper disposition of these funds on remand.
Regarding statutes of limitations, the district court granted summary judgment to American, asserting that the limitations periods barred the employees' counterclaims. This ruling is affirmed for federal claims, though it is clarified that four employees' Law 100 claims are not barred by the statute of limitations. Employees in Puerto Rico must file age discrimination claims with the EEOC within 300 days of the alleged unlawful practice, and it was determined that their filings were untimely. The employees' claim centers on being misled into a "take it or leave it" choice regarding retirement benefits, which constitutes unlawful age discrimination as per established case law.
To establish a constructive discharge due to early retirement offers, a plaintiff must demonstrate that the offer was merely a facade intended to eliminate the employee based on age. If the retirement offer effectively presented a choice between early retirement with benefits or termination without benefits, it could indicate discrimination against older employees. The statute of limitations for discrimination claims begins when an employee accepts such an offer. In this case, all employees accepted the Voluntary Early Retirement Program (VERP) more than 300 days before filing claims, rendering their claims time-barred.
The employees incorrectly argued that the limitations period did not start until they actually left the employer, but precedent indicates that the claims accrue at the moment of the discriminatory act—in this case, the acceptance of the VERP. Furthermore, the employees' assertion that their claims did not begin to accrue until younger workers replaced them is misguided, as age discrimination claims do not require such replacement to be valid. The acceptance of the VERP by employees over forty-five indicated they were aware of the discriminatory nature of the program, providing sufficient grounds to initiate their claims.
The limitations period for the employees' Age Discrimination in Employment Act (ADEA) claims began upon their acceptance of the VERP. Without valid grounds for equitable modification of the limitations period, the employees' claims are dismissed as barred by law. Additionally, the court found no justification for applying equitable estoppel or tolling to preserve the employees' claims.
Equitable estoppel applies when an employee is misled by their employer's deceptive conduct, leading to a delayed filing of ADEA claims. The employees in this case failed to demonstrate such conduct, as their claims merely reiterated the misleading events surrounding the VERP without evidence of delay caused by the employer. Consequently, equitable estoppel is not applicable.
Equitable tolling requires proof of 'excusable ignorance' regarding statutory rights, but does not apply if the employee is aware of their ADEA rights. Each employee signed a VERP election form affirming they had read a release stating they waived any age discrimination claims against American. This indicates actual knowledge of their rights. The employees also claimed that American misled them about job security yet did not establish that this led to a justified delay beyond the 300-day limit to file their claims, making their ignorance unreasonable.
Regarding Puerto Rico Law 100 claims, which prohibit discriminatory employment actions based on protected characteristics like age, the statute of limitations begins when the employee becomes aware of their injury. The Supreme Court of Puerto Rico has ruled that a one-year limitation applies to Law 100 claims, similar to ADEA claims. In cases of constructive discharge, the limitation period starts when the employee decides to retire. Most of the employees' claims are barred by the statute of limitations, except for four specific individuals mentioned.
The Law 100 claims of four employees are not time-barred but are dismissed on the merits due to insufficient evidence of age discrimination. To avoid summary judgment, employees must provide evidence that a jury could use to find an employer liable for age discrimination. In this case, the employees failed to present any competent evidence, such as sworn affidavits, and relied solely on general allegations and the testimonies of other employees, which are inadequate for summary judgment. Additionally, the release in question violated the Older Workers Benefit Protection Act (OWBPA), and the employees' retention of benefits does not ratify their waiver of Age Discrimination in Employment Act (ADEA) claims. The court reversed the district court's ruling that the retention of benefits ratified the release, vacated and remanded the case for further consideration regarding the release's impact on non-ADEA claims, and affirmed the summary judgment on the employees' counterclaims. Regarding jurisdiction, the case involves a federal question concerning a declaratory judgment under the Employee Retirement Income Security Act (ERISA), as the underlying issue pertains to the employees' rights under the retirement plan and related federal laws.
American's request for a declaratory judgment is recognized under 28 U.S.C. 1331, focusing specifically on invalid releases of ADEA claims under the OWBPA. The court does not address the validity of non-ADEA claims released by employees. On appeal, American asserts that the VERP encouraged employees to seek personal legal advice before participating, yet only the release document explicitly mentions private legal counsel. The OWBPA's legislative history highlights a distinction between individually tailored agreements and standardized employer programs, emphasizing the necessity for employees to receive adequate information and access to advice prior to waiving their rights. Some technical violations of the OWBPA may be minimal and not invalidate a release; however, American's failure to adequately inform employees about obtaining counsel is significant. Additionally, the waiver’s broad prohibition against legal proceedings conflicts with Section 626(f)(4), which protects employees' rights to file charges or participate in EEOC investigations. Recent case law supports that agreements cannot interfere with employee communication with the EEOC, and the Supreme Court is currently reviewing related issues in Oubre v. Entergy Operations, Inc.
American's argument relies on the case Deren v. Digital Equipment Corp. to support the ratification of waivers under the Older Workers Benefit Protection Act (OWBPA), suggesting that ratification is valid unless Congress clearly states otherwise. However, this reliance is incorrect, as Deren pertains to ERISA claims, whose waivers are governed by federal common law rather than specific statutory requirements, unlike the ADEA waivers at issue. The court clarifies that its ruling addresses only waivers that violate OWBPA requirements, leaving open the question of whether ratification applies to waivers that comply with OWBPA but lack "knowing and voluntary" consent for other reasons.
The court affirms the dismissal of ADEA and Law 100 claims due to the statute of limitations, although this does not independently justify the district court's declaratory judgment. The judgment consists of three parts: 1) the release was ratified, 2) it precludes all employment-related claims including ADEA claims, and 3) the employees' age discrimination claims are time-barred. The court must assess the correctness of the entire declaratory judgment, which is res judicata in future litigation regarding the release.
A table submitted by the defendants lists relevant dates for calculating limitations periods, which American does not dispute. The ADEA filing period is treated similarly to a statute of limitations and may be equitably modified. The employees mention a continuing violations theory regarding ongoing discrimination claims but fail to substantiate this with evidence of discriminatory acts occurring within the limitations period, leading to a legal failure of their claim.
The employees further reference Sanchez v. A.E.E. to argue that the Law 100 statute of limitations starts from the last employment day. American counters that this case lacks precedential value due to its informal nature. Additionally, the employees did not comply with procedural requirements for citing non-English opinions from the Supreme Court of Puerto Rico, resulting in the court's refusal to acknowledge their argument regarding the overruling of Rodriguez.
