Waivers of Rights and Claims: Tender Back of Consideration

A. Background

1. Introduction

In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the Supreme Court held that an individual was not required to return (``tender back'') consideration for a waiver in order to allege a violation of the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. 621 et seq., as amended by the Older Workers Benefit Protection Act of 1990 (OWBPA). The Court explained that, because the release did not comply with the ADEA, plaintiff's retention of the consideration did not constitute a ratification that made the release valid. Moreover, the employer could not invoke the employee's failure to tender back consideration as a way of excusing its own failure to comply with the statute. EEOC is issuing proposed legislative regulations to address issues raised by the Oubre decision. In summary, EEOC's position is that: (1) an individual alleging that a waiver agreement was not knowing and voluntary under the ADEA is not required to tender back the consideration as a precondition for challenging that waiver agreement; (2) a covenant not to sue or any other condition precedent, penalty, or other limitation adversely affecting any individual's right to challenge a waiver agreement is invalid under the ADEA; (3) although in some cases an employer may be entitled to setoff, recoupment, or restitution against an individual who has successfully challenged the validity of a waiver agreement, such setoff, recoupment, or restitution cannot be greater than the consideration paid to the individual or the damages awarded to the individual, whichever is less; and (4) no employer may unilaterally abrogate its duties under a waiver agreement, even if one or more of the signatories to the agreement successfully challenges the validity of that agreement under the ADEA.

2. The Older Workers Benefit Protection Act of 1990

Title II of OWBPA amended the ADEA to set out rules governing the validity of a waiver agreement. Section 7(f)(1) of the ADEA provides that ``[a]n

individual may not waive any right or claim under [the ADEA] unless the waiver is knowing and voluntary.'' Section 7(f)(1) provides a list of minimum requirements that must be met in order for a waiver to be knowing and voluntary. The statutory language and legislative history of OWBPA make it clear that the listing in Sec. 7(f)(1) is nonexhaustive, and that even waiver agreements meeting the stated minimum requirements would not satisfy the ADEA if, under the totality of the circumstances, the waiver were not knowing and voluntary. As recognized in Oubre, the ADEA waiver rules extend to the tender back situation.

3. Tender Back Requirement Before Oubre

Prior to the Supreme Court's decision in Oubre, the circuits were split on the issue of whether an individual who signed an agreement waiving rights and claims under the ADEA was required to tender back any consideration paid by the employer in order to challenge the validity of the waiver in court. Several courts took the position that an individual who accepted consideration in exchange for a waiver agreement was not required to tender back that consideration to the employer before challenging in court either the validity of the waiver agreement or any employment discrimination. See, e.g., Long v. Sears Roebuck & Co., 105 F.3d 1529 (3d Cir. 1997), cert denied, 118 S.Ct. 1033 (1998); Oberg v. Allied Van Lines, Inc., 11 F.3d 679 (7th Cir. 1993). Other courts took the position that the tender back of consideration was necessary before an individual could challenge the waiver and the discrimination in court. These courts concluded that by retaining the consideration, the individual ``ratified'' the waiver agreement and therefore could not challenge the agreement in court. See, e.g., Blistein v. St. John's College, 74 F.3d 1459, 1465-66 (4th Cir. 1996); Wamsley v. Champlin Refining & Chemicals, Inc., 11 F.3d 534 (5th Cir. 1993).

4. The Oubre Decision

In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the Supreme Court resolved the split among the circuits on the question of tender back. The facts in Oubre involved an employee who, upon her termination, signed an agreement waiving all claims against her employer in exchange for payments totalling $6,258. The waiver agreement failed to comply with at least three of the requirements of Sec. 7(f)(1) of the ADEA. It did not: (1) give her the statutorily mandated 21 days to consider the waiver agreement, but instead provided only 14 days; (2) give her seven days to revoke the agreement; or (3) make specific reference to ADEA claims. Oubre, 522 U.S. at 424. After the employee received all of the consideration for the waiver, she filed an ADEA suit against the employer without tendering back the consideration. The lower courts ruled that she could not proceed with her lawsuit because she had not offered to return the consideration to the employer, agreeing with the employer's arguments under state contract and common law. See Oubre v. Entergy Operations, Inc., 112 F.3d 787 (5th Cir. 1996), rev'd 522 U.S. 422 (1998). The Supreme Court reversed the Fifth Circuit's decision, stating that under Sec. 7(f)(1) of the ADEA:

[T]he employee's mere retention of monies [did not] amount to a ratification equivalent to a valid release of her ADEA claims, since the retention did not comply with the OWBPA any more than the original release did. The statute governs the effect of the release on ADEA claims, and the employer cannot invoke the employee's failure to tender back as a way of excusing its own failure to comply.

Oubre, 522 U.S. at 428. Thus, the Court allowed the employee's case to proceed even though she had not tendered back the consideration for the waiver agreement. In its decision, the Court addressed three main concerns. First, the Court stated that the ADEA foreclosed the employer's argument that state contract law and common law principles apply to ADEA waiver issues. The Court emphasized that ``the OWBPA sets up its own regime for assessing the effect of ADEA waivers, separate and apart from contract law.'' 522 U.S. at 427. The Court also noted that the contract law principles cited by the employer ``may not be as unified as the employer asserts.'' Id. at 426. Second, the Court reasoned that the practical effect of the employer's position, requiring tender back of consideration as a condition of bringing suit, could frustrate the purposes of the ADEA and lead to an evasion of the statute:

In many instances a discharged employee likely will have spent the monies received and will lack the means to tender their return. These realities might tempt employers to risk noncompliance with the OWBPA's waiver provisions, knowing it will be difficult to repay the monies and relying on ratification.

Oubre, 522 U.S. at 427. Finally, the Court observed that lower ``courts may need to inquire whether the employer has claims for restitution, recoupment, or setoff against the employee, and these questions may be complex where a release is effective as to some claims but not as to ADEA claims.'' 522 U.S. at 428. The Court saw no need to resolve such questions in this case, however, and simply reversed the Fifth Circuit's judgment and remanded for further proceedings consistent with its opinion. Id.

5. EEOC Negotiated Rulemaking on Waivers Under OWBPA

In 1995 and 1996, EEOC conducted a negotiated rulemaking on ADEA waivers under OWBPA. Although the Rulemaking Committee considered the issue of tender back and ratification during its deliberations, the Committee decided that it would not reach consensus and the issue was not addressed in the regulatory language recommended by the Committee to the Commission. EEOC promulgated a final regulation at 29 CFR 1625.22 on June 5, 1998, 63 FR 30624. The preamble to the final regulation confirmed that the issues raised in Oubre would not be addressed in that section, but that the tender back issue would be covered in other guidance.

B. Purpose and Discussion of This Proposed Rule

1. Purpose: Pursuant to its regulatory authority under Sec. 9 of the ADEA, EEOC has developed this proposed legislative regulation to address issues related to the Oubre decision. This proposal would add a new legislative regulation at 29 CFR Sec. 1625.23. 2. Discussion: This regulation sets forth EEOC's position on several important issues concerning tender back. a. An individual alleging that a waiver agreement was not knowing and voluntary under the ADEA is not required to tender back the consideration given for that agreement before filing either a lawsuit or a charge of discrimination with EEOC or any state or local fair employment practices agency. Retention of consideration does not foreclose a challenge to any waiver agreement; nor does the retention constitute the ratification of any waiver. A clause requiring tender back is invalid under the ADEA. (i) The Oubre Decision: The Court in Oubre made it clear that ``[a]n employee `may not waive' an ADEA claim unless the waiver or release satisfies the OWBPA's requirements. . . . Courts cannot with ease presume ratification of that which Congress forbids.'' 522 U.S. at 427. The Court emphasized that ``the employee's mere retention of monies [does not] amount to a ratification

equivalent to a valid release * * *'' Id. at 848. The facts of the Oubre case concerned a waiver agreement that clearly did not satisfy at least three of the requirements of Sec. 7(f)(1), and thus was invalid on its face. However, the holding and rationale of Oubre, which are based on the ADEA as well as important public policy concerns, are not limited to cases in which the terms of the waiver agreement are facially invalid. The ADEA's overarching standard is that waivers must be knowing and voluntary, and the specific provisions in Sec. 7(f)(1) are only minimum requirements. While a waiver agreement that fails to meet these minimum criteria cannot be knowing and voluntary, even agreements that do meet these criteria still may not be knowing and voluntary under the ADEA. For example, a waiver agreement that meets all of the enumerated requirements in Sec. 7(f)(1) still would not be knowing and voluntary if the employer obtained an employee's signature by force or compulsion. As another example, an agreement might state on its face that an individual had 45 days to accept the offer. If the individual in fact were given only 5 days to make this decision, the waiver would not be knowing and voluntary under the ADEA. See 29 CFR 1625.22(e). Finally, with regard to the informational requirements under Sec. 7(f)(1)(H), it is impossible to assess an employer's compliance by a mere examination of the waiver agreement. These requirements depend on the unique facts of a particular workforce reduction or voluntary termination program. See 29 CFR 1625.22(i); see, e.g., Griffin v. Kraft General Foods, Inc., 62 F.3d 368 (11th Cir. 1995)(analyzing the validity of the information provided under Sec. 7(f)(1)(H), the court found that, where the employer may have considered several plants for closure before it decided to close the plant at issue, it might need to provide information about employees at multiple facilities). In summary, compliance with Sec. 7(f)(1) of the ADEA cannot be determined based solely on the face of a waiver document. Because a waiver agreement may be invalid due to circumstances beyond the document itself, the Supreme Court's rationale in Oubre precludes tender back as a condition for any lawsuit or charge. (ii) ADEA Statutory Language and Legislative History: In the ADEA, as amended by the OWBPA, Congress clearly contemplated that courts would decide the validity of waiver agreements. A requirement of tender back would, as the Oubre Court pointed out, effectively prevent access to the courts for many employees and therefore would undermine this statutory scheme. Section 7(f) of the ADEA contemplates that the courts have the authority to determine the validity of a waiver agreement. Section 7(f)(3) states that:

In any dispute that may arise over whether any of the requirements [of Secs. 7(f)(1) or (2)] 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 pursuant to paragraph (1) or (2).

(Emphasis supplied). Thus, the statute does not envision a waiver agreement as a complete bar to litigation, but rather suggests that a waiver is an affirmative defense. A tender back requirement would be inconsistent with this statutory design. A tender back requirement is inconsistent with the OWBPA legislative history, which also shows that Congress contemplated that litigation would be available for deciding the validity of waiver agreements. Here, Congress expressly stated that the burden of proof described in Sec. 7(f)(3) establishes ``an affirmative defense.'' See S. 1511, Final Substitute Statement of Managers, 136 Cong. Rec. 13596- 97 (1990). In reference to an earlier version of the OWBPA legislation, the Senate Committee on Labor and Human Resources explained:

The Committee expects that courts reviewing the ``knowing and voluntary'' issue will scrutinize carefully the complete circumstances in which the waiver was executed. * * * The bill establishes specified minimum requirements that must be satisfied before a court may proceed to determine factually whether the execution of a waiver was ``knowing and voluntary.''

S. Rep. No. 101-263, at 32 (1990), reprinted in 1990 U.S.C.C.A.N. 1509, 1537 (hereinafter ``Senate Report''). The law also is clear that a waiver agreement cannot interfere with an individual's right to file a charge of discrimination or assist EEOC in any administrative or legal proceedings. Section 7(f)(4) of the ADEA states:

No waiver agreement may affect the Commission's rights and responsibilities to enforce [the ADEA]. No waiver may be used to justify interfering with the protected right of an employee to file a charge or participate in an investigation or proceeding conducted by the Commission.

See also 29 CFR 1625.22(i); EEOC Enforcement Guidance on Non-Waivable Employee Rights under EEOC Enforced Statutes, #915.002, April 10, 1997, 3 EEOC Compl. Man. (BNA) No. 2345. In light of the Oubre Court's concern about the chilling effect of a tender back requirement, imposition of such a requirement as a condition for filing an EEOC charge clearly would ``interfer[e] with the protected right of an employee to file a charge * * *,'' and therefore would contravene the statute. 29 CFR Sec. 1625.22 (i). b. A covenant not to challenge a waiver agreement, or any other arrangement that imposes any condition precedent, any penalty, or any other limitation adversely affecting any individual's right to challenge a waiver agreement, is invalid under the ADEA, whether the covenant or other arrangement is part of the agreement or is contained in a separate document. A provision allowing an employer to recover costs, attorneys' fees, and/or damages for the breach of any covenant or other arrangement is not permitted. (i) Covenants not to sue and other similar arrangements purport, on their face, to bar an individual's right to challenge a waiver agreement in court.1 Like a tender back requirement, such a covenant or other arrangement directly offends the congressional intent to afford an individual the right to challenge the validity of a waiver agreement. The ADEA clearly envisions that courts would have authority to determine the validity of the waiver and, therefore, necessarily contemplates that individuals would have the opportunity to bring such a challenge. See Sec. 7(f)(1) of the ADEA (setting out the specific standards for a court to determine the validity of a waiver agreement); Sec. 7(f)(3) of the ADEA (referring to a ``court of competent jurisdiction'' as the entity expected to decide the validity of a challenged waiver); accord Senate Report at 32. See also Raczak v. Ameritech Corp., 103 F.3d 1257, 1271 (6th Cir. 1997) (``[i]t was the intent of Congress that waivers would not preclude parties from bringing suit under the OWBPA''), cert. denied, 118 S.Ct. 1033 (1998). ---------------------------------------------------------------------------

\1\ No waiver agreement, covenant, or other arrangement may prohibit any person from filing a charge of discrimination or assisting EEOC in its law enforcement activities. See 29 CFR 1625.22(i). ---------------------------------------------------------------------------

(ii) Covenants not to sue and other such arrangements also carry with them the threat of a counterclaim for breach of the covenant and liability for costs, attorneys' fees, and damages. The threat of such a counterclaim or a similar threat, 2 with the prospect of being

forced to pay defendant's legal expenses, easily could chill persons with valid claims from challenging waiver agreements. This chilling effect runs counter to the purposes of the ADEA, a remedial civil rights statute that encourages employees to challenge illegal conduct by employers. See generally, Commonwealth of Massachusetts v. Bull HN Information Systems, Inc., 16 F.Supp. 2d 90, 106 (D. Mass. 1998) (``[u]nder Bull's proffered interpretation, employers could functionally insulate themselves from ADEA suits and ignore the waiver provisions of the OWBPA simply by including a drastic penalty provision in the waiver as Bull has done. This interpretation offends the intent of Congress. * * *''); Carroll v. Primerica Financial Services Insurance Marketing, 811 F.Supp. 1558 (N.D.Ga. 1992); Isaacs v. Caterpillar, Inc., 702 F.Supp. 711, 713 (C.D.Ill. 1988); EEOC v. United States Steel Corp., 671 F.Supp. 351, 358-59 (W.D.Pa. 1987) (the court enjoined a waiver provision wherein an employee promised not to file a charge or claim under the ADEA since the waiver ``has the potential of deterring individuals from participating in ADEA claims. * * * [I]f an individual is deterred from bringing such an action in the first instance, the validity of the waiver of rights will not be able to be determined.'') ---------------------------------------------------------------------------

\2\ For example, it would be impermissible for an employer to bring an independent legal action, such as a state or federal breach of contract lawsuit, because an employee filed a charge of discrimination or challenged a waiver agreement in court. Such lawsuits would constitute retaliation under Sec. 4(d) of the ADEA and intentional discrimination for purposes of liquidated damages under Sec. 7 of the ADEA. ---------------------------------------------------------------------------

A position permitting covenants not to sue or similar arrangements would render the OWBPA amendments and the Oubre decision a nullity. Such provisions, coupled with the threat of counterclaims, would as a practical matter undo the ADEA's carefully crafted criteria for a knowing and voluntary waiver by encouraging employers to ignore those provisions. This in turn would undermine the ADEA's objective to ``ensure that older workers are not coerced or manipulated into waiving their rights to seek legal relief under the ADEA.'' Senate Report at 5. EEOC does not find cases allowing covenants not to sue persuasive, because they are fundamentally at odds with the holding and rationale of the Supreme Court in Oubre. See, e.g., Astor v. International Business Machines Corp., 7 F.3d 533, 540 (6th Cir. 1993) (covenant not to sue permissible in release of ERISA rights); Artvale Inc. v Rugby Fabrics Corp., 363 F.2d 1002, 1008 (2d Cir. 1966). (iii) An employer does not need to bring a counterclaim to obtain what it purchased with the waiver. With a valid waiver, an employer receives an affirmative defense against ADEA claims. See Isaacs v. Caterpillar, 765 F.Supp. 1359, 1371 (C.D.Ill. 1991); Senate Report at 53. Assuming that a waiver agreement is upheld in court, and consequently serves as an affirmative defense to a discrimination suit, the employer has received the benefit of its bargain. If the waiver is not upheld because it is not knowing and voluntary under the ADEA, the employer has no right to the benefit of its bargain. c. In some circumstances an employer may be entitled to restitution, recoupment, or setoff against an employee's recovery of damages in court (or in the administrative process). In Oubre, the Court commented that, ``[i]n further proceedings in this or other cases, courts may need to inquire whether the employer has claims for restitution, recoupment, or setoff against the employee. * * *'' 522 U.S. at 428.3 In EEOC's view, restitution, recoupment, or setoff should be in the discretion of the court but never exceed the lesser of the consideration given or the damages won. In the context of the Oubre decision, with its overriding prohibition of tender back requirements, permitting any restitution beyond the lesser of the amount the plaintiff wins in court, or the amount of consideration given, would operate constructively as a tender back penalty for bringing suit. Such a tender back penalty would interfere with the plaintiff's exercise of ADEA rights, impose significant hardship, and be contrary to public policy. Additionally, Oubre dictates that general contract principles are not applicable to ADEA cases if their application would deter protected individuals from vindicating their statutory rights or encourage employers to evade their statutory responsibilities. See generally Daley v. United Technologies Corp., Civil No. 3:97 CV 00439 (AVC) (D.Conn. March 23, 1998); Pace v. United Technologies Corp., Civil No. 3:97 CV 00481(AVC) (D.Conn. March 23, 1998) (post-Oubre cases stating that the employer would be entitled to a setoff consisting of all or part of the severance benefits paid if the plaintiffs should prevail on their ADEA claims); Rangel v El Paso Natural Gas Co., 996 F. Supp. 1093, 1099 (D.N.M. 1998) (post-Oubre Title VII waiver case concluding that setoff against damages would be the proper way to handle reimbursement); 50 C.J.S. Judgment Sec. 674 (stating that set-off ``is not demandable as of course, but rests in the discretion of the court''). ---------------------------------------------------------------------------

\3\ The terms ``recoupment'' and ``setoff'' refer to the ability of a defendant to reduce the plaintiff's award of damages by amounts otherwise due to the defendant. Recoupment and setoff serve to limit the defendant's recovery to no more than the amount of plaintiff's damages. Black's Law Dictionary (6th ed. 1990), at 1275 and 1372. ``Restitution is a return or restoration of what the [employee] has gained in a transaction.'' 1 Dan B. Dobbs, Law of Remedies, Damages-Equity-Restitution Sec. 4.1(1) at 551 (1993). Generally, restitution is required to avoid the ``unjust enrichment'' of the party who previously obtained the money or property. Dobbs Sec. 4.1(2) at 557. There are several exceptions to the unjust enrichment doctrine that are relevant to ADEA waivers, including when restitution would: (1) interfere with the rights of, or otherwise be inequitable to, the party who received payment; (2) cause significant hardship because an individual changed position based upon the payment; or (3) be contrary to public policy considerations. Id . at 563. ---------------------------------------------------------------------------

This limit also ensures that employees would not be penalized for a challenge to a waiver agreement when the amount of damages awarded is low (for example, when the employee has mitigated damages by finding new employment). Moreover, as stated in section b., above, covenants not to sue or other similar arrangements are not permitted. Therefore, an employer is not entitled to restitution, recoupment, or setoff for any costs, attorneys' fees or other amounts claimed as damages attributable to an alleged breach of such a covenant or other arrangement. Finally, in a case involving more than one plaintiff, the reduction must be awarded on a plaintiff-by-plaintiff basis. Thus, no individual's award can be reduced based on the consideration received by any other person. The following is a nonexhaustive list of the factors that may be relevant in calculating the proper amount of reduction to avoid unjust enrichment. These factors reflect, in the ADEA context, equitable principles that a reduction should be allowed only if it would promote justice, and should not be allowed if it results in injustice. See generally 50 C.J.S. Judgment Sec. 674. These factors also reflect the Oubre Court's recognition that determining the proper amount of reduction may be complex when the waiver encompasses claims other than those arising under the ADEA. Oubre, 522 U.S. at 428. The factors include: (i) Whether the employer apportioned the amount paid for the waiver agreement among the rights waived, if the waiver purports to waive rights other than ADEA rights. If the employer did not apportion the consideration among the rights waived, the apportionment should be done on an equitable basis; (ii) Whether the employer's noncompliance with the ADEA waiver requirements was inadvertent or was in bad faith or fraudulent; (iii) The nature and severity of the underlying employment discrimination

in the case, including whether the employer willfully violated the ADEA. If a willful violation occurred, any deduction from the award should be made after the damages are doubled pursuant to Sec. 7(b) of the ADEA; (iv) The employee's financial condition; (v) The employer's financial condition; (vi) The effect of the reduction upon the purposes and enforcement of the ADEA and the deterrence of future violations by the employer. d. No employer may unilaterally abrogate its duties under a waiver agreement to any signatory, even if one or more of the signatories to the agreement or EEOC successfully challenges the validity of that agreement under the ADEA. In his concurrence in Oubre, Justice Breyer expressed concern that a successful challenge to a waiver agreement by one or more individuals not be construed to relieve an employer of its obligations to other individuals who did not challenge that agreement. Oubre, 522 U.S. at 431 (Breyer, J., concurring). Such an abrogation would penalize innocent employees for the employer's noncompliance with the ADEA, and would therefore be void as against public policy. See generally 17A Am. Jur. 2d Contracts Sec. 327 (1991) (stating that an illegal contract will be enforced if refusal to enforce it ``would produce a harmful effect on the party for whose protection the law making the bargain illegal exists''). e. The rules set out in this regulation apply to cases within the EEOC administrative process as well as to cases in court, and are fully consistent with the provisions of EEOC's regulation at 29 CFR 1625.22(i)(3). Comments: As a convenience to commentors, the Executive Secretariat will accept public comments transmitted by facsimile (``FAX'') machine. The telephone number of the FAX receiver is 202-663-4114. (Telephone numbers published in this Notice are not toll-free). Only public comments of six or fewer pages will be accepted via FAX transmittal in order to assure access to the equipment. Receipt of FAX transmittals will not be acknowledged, except that the sender may request confirmation of receipt by calling the Executive Secretariat staff on 202-663-4066. Comments received will be available for public inspection in the EEOC Library, Room 6502, 1801 L Street, N.W., Washington, D.C. 20507, by appointment only, from 9:00 a.m. to 5:00 p.m., Monday through Friday, except legal holidays. Persons who need assistance to review the comments will be provided with appropriate aids such as readers or print magnifiers. Copies of this Notice are available in the following alternative formats: large print, braille, electronic file on computer disk, and audio tape. To schedule an appointment or receive a copy of the Notice in an alternative format, call 202-663-4630 (voice), 202- 663-4399 (TDD).

Executive Order 12866, Regulatory Planning and Review

Pursuant to Sec. 6(a)(3)(B) of Executive Order 12866, EEOC has coordinated this NPRM with the Office of Management and Budget. Under Sec. 3(f)(1) of Executive Order 12866, EEOC has determined that the regulation will not have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State or local or tribal governments or communities. Therefore, a detailed cost-benefit assessment of the regulation is not required.

Paperwork Reduction Act

EEOC certifies that the rule as proposed does not require the collection of information by EEOC or any other agency of the United States Government. The rule as proposed does not require any employer or other person or entity to collect, report, or distribute any information.

Regulatory Flexibility Act

EEOC certifies under 5 U.S.C. 605(b), enacted by the Regulatory Flexibility Act (Pub. L. 96-354), that this regulation will not result in a significant economic impact on a substantial number of small entities. For this reason, a regulatory flexibility analysis is not required. A copy of this proposed rule was furnished to the Small Business Administration. In addition, in accordance with Executive Order 12067, EEOC has solicited the views of affected Federal agencies.

List of Subjects in 29 CFR Part 1625

Advertising, Age, Employee Benefits, Equal Employment Opportunity, Retirement.

Signed at Washington, D.C. this 19th day of April, 1999. Ida L. Castro, Chairwoman. It is proposed to amend chapter XIV of title 29 of the Code of Federal Regulations as follows:

PART 1625--AGE DISCRIMINATION IN EMPLOYMENT ACT

1. The authority citation for part 1625 continues to read as follows:

Authority: 81 Stat. 602; 29 U.S.C. 621; 5 U.S.C. 301; Secretary's Order No. 10-68; Secretary's Order No. 11-68; sec. 12, 29 U.S.C. 631; Pub. L. 99-592, 100 Stat. 3342; sec. 2, Reorg. Plan No. 1 of 1978, 43 FR 19807.

2. In part 1625, Sec. 1625.23 would be added to Subpart B-- Substantive Regulations, to read as follows:

Sec. 1625.23 Waiver of rights and claims: Tender back of consideration.

(a) An individual alleging that a waiver agreement was not knowing and voluntary under the ADEA is not required to tender back the consideration given for that agreement before filing either a lawsuit or a charge of discrimination with EEOC or any state or local fair employment practices agency. Retention of consideration does not foreclose a challenge to any waiver agreement; nor does the retention constitute the ratification of any waiver. A clause requiring tender back is invalid under the ADEA. (b) A covenant not to challenge a waiver agreement, or any other arrangement that imposes any condition precedent, any penalty, or any other limitation adversely affecting any individual's right to challenge a waiver agreement, is invalid under the ADEA, whether the covenant or other arrangement is part of the agreement or is contained in a separate document. A provision allowing an employer to recover costs, attorneys' fees, and/or damages for the breach of any covenant or other arrangement is not permitted. (c) Restitution, recoupment, or setoff. (1) Where an employee successfully challenges a waiver agreement and prevails on the merits of an ADEA claim, courts have the discretion to determine whether an employer is entitled to restitution, recoupment, or setoff (hereinafter, ``reduction'') against the employee's damages award. These amounts never can exceed the lesser of the consideration the employee received for signing the waiver agreement or the amount recovered by the employee. Consistent with paragraph (b) of this section, an employer is not entitled to restitution, recoupment, or setoff for any costs, attorneys' fees or other amounts claimed as damages attributable to an alleged breach of such a covenant or other arrangement. (2) In a case involving more than one plaintiff, any reduction must be applied on a plaintiff-by-plaintiff basis. No individual's award can be reduced

based on the consideration received by any other person. (3) A nonexhaustive list of the factors that may be relevant to determine whether, or in what amount, a reduction should be granted, includes: (i) Whether the employer apportioned the amount paid for the waiver agreement among the rights waived, if the waiver purports to waive rights other than ADEA rights. If the employer did not apportion the consideration among the rights waived, the apportionment should be done on an equitable basis; (ii) Whether the employer's noncompliance with the ADEA waiver requirements was inadvertent or was in bad faith or fraudulent; (iii) The nature and severity of the underlying employment discrimination in the case, including whether the employer willfully violated the ADEA. If a willful violation occurred, any deduction from the award should be made after the damages are doubled pursuant to Sec. 7(b) of the ADEA; (iv) The employee's financial condition; (v) The employer's financial condition; (vi) The effect of the reduction upon the purposes and enforcement of the ADEA and the deterrence of future violations by the employer. (d) No employer may unilaterally abrogate its duties under a waiver agreement to any signatory, even if one or more of the signatories to the agreement or EEOC successfully challenges the validity of that agreement under the ADEA.

[FR Doc. 99-10143 Filed 4-22-99; 8:45 am] BILLING CODE 6570-01-P