New Developments in Employment Law: Termination Agreements and Major Changes Coming Soon to the FLSA

By Scott Dondershine
May 2015

As you consider your summer plans, you may want to consider dusting off that old employee termination agreement and revising some of its language in light of important new developments. Sound like an exciting summer?

Seriously, the EEOC has been busy attacking those run of the mill severance/release agreements over the last few years. What are they looking for? Apparently, the EEOC views provisions that force an employee to relinquish his or her right to participate in administrative or investigative matters involving the EEOC as a form of potential "retaliation". Many agreements companies have used offer the employee a benefit to which they were not previously entitled (good old cash, of course) in exchange for the employee waiving his or her right to file or participate in any claims against the employer, including matters involving the EEOC.

The EEOC previously indicated in an enforcement guide that an employer’s inclusion of waiver language in an agreement is a "per se violation of the various anti-relation provisions". EEOC is concerned that such clauses undermine a policy goal of making sure employees retain the right to report violations to the EEOC. The EEOC does not accept the quid pro quo argument of an employer – "The employee is waiving a right but I’m paying for that waiver! Cash is king!"

Although the EEOC policy has been in place since 1997 it reaffirmed that policy in 2009 and, over the past few years, the EEOC has used it as a club. In December 2012, the EEOC also established a "national priority" to target impermissible or overly-broad waivers. The EEOC has carried out its threat by bringing direct suits (meaning the EEOC itself sues) against employers that use termination agreement language obligating an employee to waive the right to participate in EEOC proceedings. No joke. The EEOC has actually sued Baker & Taylor, Inc., CVS Pharmacy, Inc., and College America Denver, Inc. because of such impermissible language.

The bottom line is that it is time to review your agreements to remove any language that might offend the EEOC’s delicate sensibilities. In addition, the agreement should affirmatively state that the employee retains the right to participate in an investigation or proceeding. Fortunately, an employee probably can be forced to agree to waive any monetary recovery associated with any charge or complaint. In other words, an employee can be forced in an agreement to waive his or her right of recovery in a proceeding but can’t be forced to give up the right to participate in a proceeding.

On another note, the Department of Labor very recently completed and sent to the Congressional Budget Office for scoring draft regulations that will substantially revise the white collar exemptions from the overtime and minimum wage requirements of the 2 Fair Labor Standards Act ("FLSA"). The draft regulations should be released to the public in the coming weeks – again – more summer fun. Skip the beach, read the new regulations. Come on, join the fun.

Under the FLSA, an employee must meet either the executive, administrative or professional "duties test" and, with a few exceptions, also receive a salary higher than the minimum threshold. The changes substantially increase the minimum salary threshold needed in order to meet the salary-basis test and reverse many of the changes made in the 2004 revisions, i.e., the 2015 amendments will reverse the 2004 revisions in several key aspects, tightening the requirements needed for an employee to meet the duties test. In other words, a lot more of your employees may end up qualifying for overtime pay under the new tests.

This Client Alert is intended as an introduction only to the topics addressed – it does not cover many key concepts. Let us know if you want to discuss the issues in this Client Alert with you in greater detail.

DISCLAIMER. This Client Alert does not provide legal advice. We are providing it for general informational purposes only.