Age Discrimination and the OWBPA, Quirky Question # 22

Quirky Question # 22:

Our company decided to close one of its two manufacturing facilities in Minnesota.  In deciding which facility to close, we considered factors such as the relative productivity of the facilities and the age and condition of the buildings and equipment.

The employees of our closed facility will receive separation benefits in exchange for signing a release of claims.  We are aware that to obtain a valid release under the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act (OWBPA) requires us to provide disclosures to the terminated employees.  We understand that our disclosures must describe (among other things) the affected decisional unit – that is, the “group or class” of employees from which the termination decisions were made.

Since we terminated everyone at the closed facility, in our disclosures we defined the “decisional unit” as the manufacturing facility that we closed.  We provided the terminated employees the job titles and ages of everyone who worked at that facility.   I keep hearing about problems with ADEA releases.  Given the facts described above, do we have anything to worry about or have we complied with OWBPA?

Dorsey’s Analysis:

Your question is one of the more technical employment law questions that have been posted thus far in our Quirky Questions Blog.  (For the non-technicians among you, you’ll have to bear with us this week.)  Your question also illustrates how tricky it can be to determine the appropriate “decisional unit” under the OWBPA.

The EEOC’s interpretive regulations define the decisional unit as “that portion of the employer’s organization from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of a waiver.”  29 C.F.R. § 1625.22(f)(3) (B).  The EEOC uses the term “decisional unit” to “reflect the process by which an employer chose certain employees for a [termination or exit incentive] program and ruled out others from that program.”  Id.

Determining the appropriate “decisional unit” is highly fact intensive and there is no “safe harbor” under the regulations.  If an employer defines the decisional unit too narrowly or too broadly, it might be accused of trying to hide its discriminatory motives.  In Kruchowski v. Weyerhaeuser Co., 446 F.3d 1090 (10th Cir. 2006), for example, the federal appellate court invalidated a release because the employer misidentified the affected decisional unit.  In its OWBPA disclosures, the employer defined the decisional unit as “all salaried employees” employed at a specific mill.  In discovery, the employer clarified that the decisional unit actually consisted of “those salaried employees reporting to the Mill manager.”  The court found that 15 employees were included in the disclosures but were never considered for termination.  Although the employer tried to characterize its discovery response as a “slight clarification” of its OWBPA disclosures, the court invalidated the release.

Where an employer closes an entire plant or facility, as your company has done, it is possible that the proper decisional unit is broader than just the affected plant or facility.  Unfortunately, there is no “one size fits all” answer in these situations; rather, determining the appropriate decisional unit depends on how you arrived at the decision to close the affected facility.

In Griffin v. Kraft General Foods, Inc., 62 F.3d 368 (11th Cir. 1995), a class of plaintiffs challenged the release used in connection with a plant closing, arguing that the employer should have provided information – i.e., ages and job titles – of individuals employed at other plants if the company “considered for closure several plants producing similar products” and if “employees at other plants may assume some of the functions of the closed plant.”  The court remanded the case to the trial court for additional fact finding regarding the company’s plant closure decision.  Under Griffin, it appears that employers may have to provide information beyond a closed facility if, for example, a certain production line or function will be transferred to another facility, or if the employer evaluated several facilities before deciding which one to close.  If, however, a plant was closed because, for example, it produced a product line which the company decided to discontinue, and no serious consideration was given to closing another plant, the proper decisional unit would be the affected facility only.

Despite the reasoning of Griffin, a recent case from the District of Minnesota, Pagliolo v. Guidant Corp., 483 F. Supp. 2d 847 (D. Minn. 2007), suggests that Minnesota employers should proceed cautiously before identifying a decisional unit that is broader than a single facility.  In Pagliolo, the company implemented a reduction in force affecting employees at six separate Guidant-owned corporations, who worked in nine of the company’s 84 facilities in the United States.  The company identified the decisional unit as all United States-based employees, arguing that every department in each one of its United States-based businesses was required to examine whether staff reductions could be made.  In this case, the District of Minnesota found the decisional unit of all United States-based employees to be too broad.  The court particularly took issue with the fact that terminations were made in six separate corporations and multiple facilities, and found that a terminated employee would not be able to draw meaningful information from disclosures that lumped together employees from different facilities and corporations.  The decision goes on to express doubt that a decisional unit could ever be larger than a single facility.

In light of Guidant, we recommend that Minnesota employers carefully scrutinize their decision-making process before identifying a decisional unit broader than a single facility.  That said, the EEOC’s regulations make clear that decisional units must be defined “on a case-by-case basis,” and that, to do so, an employer must examine “its organizational structure and decision-making process.”  29 C.F.R. § 1625.22(f)(3)(B).  Further, the regulations expressly recognize that a decisional unit may comprise more than one facility.  Id. § 1625.22(f)(3)(E).  In light of this regulatory guidance, we do not recommend that employers adopt a bright-line rule that decisional units could never be broader than a single facility.  If your company seriously considered making reductions in more than one facility, and/or evaluated the operations of several facilities before deciding which one to close, the decisional unit may be broader than a single facility.

When drafting OWBPA disclosures, be sure to examine your termination decisions carefully.  Ensure that you do not define the “decisional unit” either too broadly or too narrowly.  Given the high stakes involved (the invalidation of releases of ADEA claims, often for significant numbers of potential plaintiffs), plaintiffs’ counsel may scrutinize OWBPA disclosures in the hopes of finding some deficiency in how the company defined the decisional unit.  They will have an incentive to do so as long as courts continue to invalidate releases on (sometimes) very technical grounds.

Dorsey & Whitney

Dorsey is a business law firm, applying a business perspective to clients' needs. We make it our first priority to know the context in which you do business - your market, your competitors, your industry.

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