Layering administrative law and basic contract principles: Analyzing the waiver of FMLA claims in severance agreements

I. Introduction

Employee termination and severance package negotiation are a reality of daily corporate life. According to the Department of Labor's (DOL) Bureau of Labor Statistics, in June 2006 alone corporate employers took 1097 mass layoff actions, defined as layoffs of fifty or more workers, involving a total of 119,662 employees.1 Many of the discharged employees likely signed standard severance agreements whereby, in exchange for monetary consideration, they released or waived any employment-related claims against their former employers.2 Such claims include those found under federal employment statutes such as the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), the Fair Labor Standards Act (FLSA), the Age Discrimination in Employment Act (ADEA), and the Worker Adjustment and Retraining Notification Act (WARN).3

Employers who are potential defendants in employment-related lawsuits rely heavily on the validity and enforceability of claim waiver provisions in severance agreements.4They are interested in using the waiver device as an effective, voluntary means of resolving both actual and potential claims without the costs, risks, and other burdens associated with litigation. 5 Because severance agreements likely save large corporations millions of dollars annually in litigation costs, employers and their representatives pay careful attention to judicial decisions and legislation affecting the enforceability of these general claim releases.6

In 2003, the Fifth Circuit in Faris v. Williams WPC-I, Inc.7 upheld the validity of a severance agreement generally releasing the employer from all employment-related claims where the former employee attempted to sue her employer for violating her rights under the FMLA.8 In July 2007, the Fourth Circuit expressly disagreed with the Fifth Circuit and held in Taylor v. Progress Energy, Inc.9 that any waiver-prospective or retrospective-of an employee's claims under the FMLA is unenforceable without the supervision of the waiver by a court or the DOL.10 The resulting circuit split created great uncertainty and anxiety for employers and brought the practical importance of certainty surrounding post-severance agreements to the attention of lawyers and employers alike. The Taylor ruling that private parties cannot execute a valid release of claims arising under the FMLA would have a major effect on countless employers and employees. Taylor undermined the preclusionary effect of any general release of employment claims in any context, reducing its value to employers and in turn reducing what they are willing to pay for it, to the ultimate detriment of the employees who are the recipients of the consideration given for the release. 11 In short, the uncertainty in this area of law resulting from the circuit split jeopardized involuntary separation severance pay programs.

This Note addresses the law surrounding post-severance FMLA claim waivers, focusing in particular on the circuit split between the Fourth Circuit's decision in Taylor and the Fifth Circuit's decision in Faris. It provides a survey of the various approaches that courts use to analyze private waiver of federal statutory rights. The current state of federal administrative case law reveals a muddled line of decisions in which courts failed to apply a uniform analysis to waiver of federal statutory rights such as those under the FMLA, the ADA, the ADEA, the WARN, and Title VII.12 Ultimately, this Note proposes an entirely different approach than the analysis used by the Fourth and Fifth Circuits- one that uses Supreme Court precedent and embraces principles of basic contract law to achieve a more uniform and thorough analysis for post-severance waivers.

Part II.A explains severance agreements and summarizes the relevant and important FMLA provisions, including the purposes and goals of the FMLA, the rights it affords employees, and the DOL's role in implementing the FMLA statute. Part II.B details the holding and rationale of the Fifth Circuit in Faris and Part II.C details the Fourth Circuit's recent d...

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