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In Oubre v. Entergy Operations, Inc., 66 U.S.L.W. 4118 (U.S. Jan. 26, 1998) (No. 96-1291), the Supreme Court ruled that older employees are not required to return severance benefits paid in consideration of a release before challenging the validity of the release under the Older Workers Benefit Protection Act ("OWBPA"). The decision allows employees to accept a severance package, keep the severance benefits, and sue the company for age discrimination, claiming that the release is invalid under the OWBPA. The severance benefits paid may then be claimed as a setoff to any recovery for age discrimination. Oubre resolves a split between the circuit courts on whether a return or "tender back" of the severance benefits is required before the employee can file an age discrimination suit and challenge the release as invalid under the OWBPA. In refusing to require that the employee return the benefits paid before challenging the release, the Court rejected the argument that, by keeping the severance benefits, the employee ratified or adopted the faulty release.

Companies who want the "benefit of the bargain" for the severance benefits they have paid should consider the following:

First, review the release to ensure the OWBPA requirements have been satisfied and insert representations acknowledging that the OWBPA requirements are satisfied.

Second, where possible, revise the release to include acknowledgments in the release and independent admissions stating that there has been no age discrimination.

Third, consider a covenant not to sue clause (with attorneys' fees recoverable) that explicitly covers OWBPA and age discrimination claims. If enforceable, such a covenant may permit defense costs to be recovered even if the age discrimination claim is successful.

Fourth, when possible, the release should explicitly allocate most of the consideration to the released age discrimination claim so as to provide the maximum possible set-off against damages. Consider a stipulation that interest on the severance is due, if a lawsuit is brought, and that it accrues from the date of severance payment.

Fifth, the release should require any subsequent disputes among the parties to be resolved by arbitration.

Finally, consider a contractual "tender back" clause, with a stipulation for equitable relief and a restraining order for breach where the employee does not or cannot "tender back" the severance benefits before suing. Such a provision might at least give pause to an individual considering a challenge to the release.

Employees accepting severance packages do challenge the validity of releases of age discrimination claims under the OWBPA. Indeed, the OWBPA is fertile ground for such challenges, as employers try to comply with the statute's provisions on "exit incentive programs," which are not a model of clarity. The statute's "plain language" provision may come into play in future challenges. Going forward, well-advised employers will incorporate more protection in their severance packages to ensure that they are getting the "benefit of the bargain" in providing severance pay in exchange for a release.

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