Collective Action Waivers in Severance Agreements Are Enforceable

Many employers are interested in having employees sign collective action waivers as part of employment agreements, including severance agreements. Such waivers mean that the employees agree that they will not bring or participate in a lawsuit as part of a group. And the U.S. Court of Appeals for the Second Circuit recently found a waiver of the right to bring a collective action under the Age Discrimination in Employment Act to be enforceable in severance agreements.

In Estle v. International Business Machines Corp., the employees signed severance agreements containing collection action waivers under the ADEA. However, they then challenged the validity of the waivers, on the grounds that the employer failed to make certain disclosures that are required for the “knowing and voluntary” waiver of “any right or claim” under the ADEA. The Second Circuit looked to the U.S. Supreme Court’s decision in 14 Penn Plaza LLC v. Pyett, in which the Supreme Court held that the ADEA’s disclosure requirements applied to “substantive right[s],” like “the statutory right to be free from workplace age discrimination,” but not procedural ones, like “the right to seek relief from a court in the first instance.” In the present case, the Second Circuit found that collective action waivers address procedural rights, and therefore the ADEA disclosures were not required for their acceptance to be “knowing and voluntary.”

This case is good news for employers, as it further supports the ability of employers to obtain collective action waivers in employment agreements.