For Last Paycheck, More Workers Cede Their Rights to Sue
By JONATHAN D. GLATER
With layoffs on the rise again, many employees are facing an uncomfortable new choice as they walk out the door: agree never to sue their employer or walk away with less money.
Amazon.com offered laid-off employees 12 weeks of severance pay if they signed away their right to sue, but just two if they did not. Longtime Motorola employees who sign releases get twice the weeks of severance as those who do not. General Motors employees who sign releases will get vouchers toward car purchases or other incentives not offered to those who refuse. At Lucent Technologies, laid-off employees get no severance pay whatsoever unless they sign a release. Many other companies have also made such releases standard practice.
The agreements are perfectly legal. Their use has increased as the threat of employment-related lawsuits has risen, lawyers for corporations say. The number of federal employment lawsuits has more than doubled over the last 10 years, from 8,413 in 1990 - 3.9 percent of all federal civil filings - to 21,032 last year, or 8.1 percent of the total, according to the Administrative Office of the United States Courts in Washington.
Employees might sue because they think the company singled people out illegally on the basis of age, sex, race or some other characteristic, or used the layoff to try to avoid paying benefits, or perhaps engaged in illegal discrimination before the layoff. Amazon.com even tried recently to include a requirement that laid-off employees refrain from making negative comments about the company, but dropped that particular provision for some employees after bad publicity.
"If you're going to give enhanced severance, you want to get something for it, and you don't want to fund a lawsuit against you," said Lawrence Z. Lorber, a Washington lawyer at Proskauer Rose who advises employers. "That's all very, very common now."
But some critics say people who have been laid off may not feel able to pass up hard cash - and sometimes benefits - to pursue an uncertain legal claim, even if it is valid. Or they may not have enough time or information to decide if they should sign a release or preserve the right to sue.
"There are real reasons to be concerned about how voluntary these releases are," said Christine Jolls, who teaches employment law at Harvard Law School. "In some ways it's an inherently coercive situation."
In the 1980's, releases were usually requested only from more senior management-level employees, because they earned higher salaries and therefore could demand more money in a lawsuit and because until 1990 no law spelled out the steps employers had to take to obtain valid releases, said Michael C. Harper, a professor of law at Boston University. Now, companies say that they ask for releases from the rank and file as well.
Releases are not foolproof and can be successfully challenged, but such alternatives are not easy, and labor lawyers say employees should weigh carefully whether to sign - even though they may feel tremendous financial pressure to do so.
Kathy Fionte, a 33-year employee who was laid off from the Lucent Merrimack Valley plant in Massachusetts early last year, said that although she waited until the last possible minute to sign the release, she always knew she would.
"If you did not sign the paper, you did not get the 30 weeks" of severance pay, said Ms. Fionte, who now works at the Massachusetts Society for the Prevention of Cruelty to Children. Employees who did not sign got nothing but pension benefits, she said, so signing "was the only option."
The releases are usually governed by a 1990 law, the Older Workers Benefit Protection Act, which was the response by Congress to a rising number of lawsuits filed by older workers asserting that they did not receive the same severance packages as their younger colleagues, who were given incentives to quit early.
The law states that if a release is "knowing and voluntary, it's O.K. to waive your rights" to sue, Professor Harper said. A release is presumed voluntary if, for example, employees are advised to consult a lawyer before signing and they have 21 days to consider whether to sign a release and then seven more days to change their minds, he said.
The law provided additional protections for workers, said Professor Jolls, because it outlined the steps that companies had to take in obtaining releases.
"From the opposite perspective," though, she said, "the law created a safe harbor" for companies, which knew they could obtain valid releases by following the law's requirements.
Those requirements do not provide enough protection, because making an informed decision about whether to sign a release takes more time, plaintiffs' lawyers say.
"To get appropriate legal advice takes months," said Cyrus Mehri, whose Washington law firm, Mehri, Malkin & Ross, represented plaintiffs in a racial discrimination suit against Coca-Cola that was settled for $192 million. While that suit was pending, Coca-Cola tried to obtain releases from employees who were being laid off, but backed down.
"If I needed a lawyer for myself, to look into the facts of my situation, I wouldn't be able to get it in 30 days or even 60 days," Mr. Mehri said.
But Professor Jolls said more time might not be the answer either. "Their basic situation is as someone about to lose their job," she said. More time, she added, cannot change that fundamental fact.
Andrew Morgan, who was laid off by Amazon.com at the end of January, did see a lawyer before signing a release, but still did not feel able to walk away from the more generous severance package.
"When they're holding a big check out in front of you, you're kind of stuck," he said, adding that he thought the company was generous in extending some of his medical benefits.
In addition to the growing number of employment lawsuits filed, companies and their lawyers say current antidiscrimination laws make it possible for almost any employee to sue, on the basis of sex, race, ethnicity, national origin or age, said Thomas P. Burke, head of the labor and employment group at Brobeck, Phleger & Harrison, a San Francisco firm.
"There are a lot of categories that are protected," and that means that from an employer's point of view, there are many potential lawsuits, he said.
Determining how many employers use these releases is not easy, but several large companies that have announced layoffs recently have indicated that they use them or plan to use them. Others refused to comment, perhaps out of concern that employee lawsuits might be inspired just by discussion of releases.
The severance program at the Motorola semiconductor products division, which announced earlier this month that it would lay off 4,000 employees, is typical. The company will offer more generous benefits, based in part on years of service, to those laid-off employees who sign releases, said Ken Phillips, a Motorola spokesman. Mr. Phillips said the widespread use of releases was a relatively recent step by the company, and that it was a response to what it regarded as a greater risk of litigation.
For example, he said, employees who have been at the company for 10 years and who sign releases will get two weeks' pay for every year they have worked, but only one week a year if they refuse to sign.
Lucent, which has announced plans to trim its work force by 10,000 by July, goes a step further and requires laid-off employees to sign a release to receive any severance benefits, a spokesman said. New York Times Digital, the Times Company's Internet division, has the same policy, said Catherine J. Mathis, a spokeswoman for the company.
For union employees, severance is usually governed by contract terms, so enhanced packages are not applicable. For nonunion employees, no specific severance benefit is required, Professor Harper said.
"If there's no implied contract or some public policy protection under some other statute, then you're an employee at will and you can be discharged at any time," he said.
Any benefit that an employer pays then is "partially buying good will," Professor Harper said.