CAN A USERRA RELEASE BE BULLET-PROOF? by Kelly Ann Bird and Zeenat - - PDF document

22 NEW JERSEY LABOR AND EMPLOYMENT LAW QUARTERLY, Vol. 32, No. 4

In response to a client’s request for advice about the risks associated with an involuntary employee separation, management-side employment attorneys generally run down a checklist that includes the following: Has the employee recently been injured? Sought workers’ compensation benefits? Taken a protected leave for family or medical reasons? Reported a violation of workplace policies or a law or regulation?

In recent years, management employ- ment attorneys have also been asking whether the employee has served in the armed forces or has taken, or been eligi- ble to take, a military leave. Unfortunate- ly, an affirmative response to this last inquiry now causes concern that the usu- ally recommended cure-all for trouble- some separations, namely a separation agreement with consideration provided in exchange for release of all potential claims imaginable, will not, in fact, fully shield a client from liability for wrongful termination. The reason for this uncertainty is because the Uniformed Services Employment and Reemployment Rights Act (USERRA),1 the federal statute that protects civilian job rights and benefits for veterans and active and inactive members of the Armed Forces, Reserves, National Guard or other “uniformed ser- vices,” has been interpreted as both per- mitting and prohibiting a waiver of

• claims. At issue are two sections of

USERRA: 4302(a),2 which provides that USERRA will not supersede or nullify any contract or agreement that is more beneficial than rights provided by the statute; and 4302(b),3 which provides that USERRA will supersede any con- tract or agreement that reduces, limits, or eliminates any right or benefit provided by USERRA. The scant case law construing these provisions has resulted in confusion

• ver whether USERRA claims can be

waived at all and, if so, what the waiver must include to be valid. A brief review

• f the cases provides some guidance,

but also leaves some open questions. Prior to 2010, two cases, neither of which establishes federal precedent, informed this discussion. First, in 2007, a California state court addressed the issue of the validity

• f a USERRA release. In Perez v. Uline,

Inc.,4 the Court of Appeal of California, Fourth Appellate District, Division Three, considered whether a USERRA suit was barred by a broad release of

• claims. Perez, who had been out of

work on Reserve service and was immediately terminated from employ- ment at Uline after his attempt to return to work, executed a one-and-a-half page severance agreement and release that afforded him six weeks’ salary in exchange for releasing his employer, Uline, from all claims. After signing the agreement and receiving the severance pay, Perez sued Uline for, among other claims, wrongful termination in viola- tion of USERRA. Although the trial court ruled in favor of Uline, finding that Perez had released all of his claims through the severance agreement, the appeals court found that the plain lan- guage of Section 4302(b) provides that a contract may not limit the protections

• f USERRA, and thus the severance

agreement did not waive Perez’ rights under USERRA. The claims waived in the agreement included a “comprehensive but non- exclusive laundry list of named federal and state laws,” and specified “claims in tort or contract, based upon public poli- cy,” as well as a catch-all provision for “any and all claims alleging …wrongful termination.”5 The agreement further advised Perez “to consult with an advi- sor of [his] choice”6 before executing the agreement, and gave Perez seven days to review and execute the agree-

• ment. Finally, the court noted that Perez

was a college graduate who was fluent in English, “read the agreement more than once,” and understood that he had a choice to execute the agreement or not, but that without it he would not receive severance pay. Nevertheless, the appeals court con- cluded, USERRA would not permit a contractual waiver of rights. Next, in the unpublished 2008 deci- sion Jolley v. Department of Housing and Urban Development (HUD),7 the United States Court of Appeals for the Federal Circuit reached a contrary deci- sion, concluding USERRA claims could be released by waiver language in a settlement agreement. Jolley, a veter- an, had filed an Age Discrimination in Employment Act (ADEA) claim against HUD after he was passed over for vari-

• us HUD positions. In 2004, Jolley and

HUD settled the claim. In exchange for $60,000 and appointment to a position he sought, Jolley agreed to waive and release “all claims arising from any facts” through the effective date of the agreement.8 Over three years later, Jolley filed a Merit Systems Protection Board (MSPB) appeal, claiming that HUD’s failure to move him into certain posi- tions (specifically identifying one of the same positions at issue in the resolved ADEA claim) violated USERRA. The administrative court concluded that the MSPB action was barred by the 2004 settlement agreement between HUD and Jolley. On appeal, the Court of Appeals for

CAN A USERRA RELEASE BE BULLET-PROOF?

by Kelly Ann Bird and Zeenat Basrai

NEW JERSEY LABOR AND EMPLOYMENT LAW QUARTERLY, Vol. 32, No. 4 23

the Federal Circuit confirmed that set- tlements of USERRA claims are enforceable and not precluded by Sec- tion 4302(b). The court found that, although the settlement agreement did not specify USERRA in the claims to be released, the language of the agreement was broad enough to conclude that “HUD did not intend to subject itself to multiple recoveries stemming from one non-selection.”9 These conflicting decisions concern- ing similarly broad release language clearly do not provide a roadmap for federal litigation of USERRA claims. Unfortunately, despite two relatively recent federal court decisions, the land- scape is still not substantially clearer. In June 2010, in Wysocki v. Interna- tional Business Machine Corporation (IBM),10 the Sixth Circuit Court of Appeals affirmed a district court deci- sion enforcing a general release that was part of a separation agreement negotiated after Wysocki, an IBM data- base administrator, returned from mili- tary service. Upon return from service, after Wysocki advised IBM that his skills had diminished during his absence and that he would need time to update his knowledge, IBM terminated his employment. On the day of his termination, Wysocki signed an individual separa- tion allowance plan, which he negotiat- ed with IBM. The plan contained a broad release, which stated that Wysoc- ki waived all claims he might have against IBM, including discrimination in employment based on veteran status. In exchange for the release, under the plan IBM paid Wysocki $6,023.65 as a gross severance payment. Seven months after executing the plan and keeping the severance pay, Wysocki filed a com- plaint against IBM in the United States District Court for the Eastern District of Kentucky, alleging he had been discrim- inated against in violation of USERRA. IBM filed a motion to dismiss, which the district court converted into a sum- mary judgment motion and granted. On appeal, the Sixth Circuit exam- ined 38 U.S.C. Section 4302 to deter- mine whether Wysocki could waive his USERRA claim through the release contained in the plan. Wysocki argued that under Section 4302(b), USERRA superseded the release contained within the plan, because the plan was a con- tract that eliminated his rights and ben- efits under USERRA. The Sixth Circuit first examined the definition of “rights and benefits” con- tained in USERRA, concluding that a plain reading reveals the protected rights are substantive, not procedural. Although the court noted it was possible to find Section 4302(b) does not apply to procedural rights and cannot in itself preclude a waiver of rights, the court determined that Section 4302 was, in fact, implicated by a release of all claims because a waiver of all procedur- al rights would eliminate all substantive rights. The Sixth Circuit then framed “the critical inquiry”: “whether the Release is exempted from operation of § 4302(b) by § 4302(a), because the rights it provided to Wysocki were more beneficial than the rights that he waived.”11 The court concluded USER- RA rights could be waived as part of a voluntary release, if the employee believed that the consideration provided in exchange for those rights is more beneficial than what the employee might obtain otherwise. The court decided that in Wysocki’s case, the USERRA waiver was valid. The court commented on the follow- ing factors as being relevant to its deci- sion:

• the release used clear and unambigu-
• us language;
• the plan involved “a valuable amount
• f consideration” in exchange for the

waiver of claims;12

• although it did not specifically use

the name of the USERRA statute, the plan specified a release of claims with regard to “veteran status”;

• at the top of the release, in capital

letters and underlined, Wysocki was instructed to consult a lawyer;

• Wysocki was afforded adequate time

to consider the plan before he signed it;

• the record reflected that Wysocki

understood that his USERRA rights were waived under the release lan- guage and that he signed the plan “because he believed the rights pro- vided in the Release were more ben- eficial than his USERRA rights”13 and,

• “there was no evidence of mistake,

incapacity, fraud, misrepresentation, unconscionability or duress.” The court limited its holding to “USERRA rights that had already matured” and explicitly precluded from its scope the validity of a waiver in any

• ther context, for example in “an agree-

ment that eliminated a veteran’s USER- RA rights as a condition of initial employment or through a collective bar- gaining agreement.”14 Less than two months later, in Bald- win v. City of Greensboro,15 a magistrate judge in the United States District Court for the Middle District of North Caroli- na recommended denial of a motion to dismiss that was premised on the argu- ment that a settlement agreement barred a USERRA claim. Baldwin’s suit, filed more than six years after his employ- ment with Greensboro ended, asserted that Greensboro violated his USERRA rights in terminating his employment due to a reduction in force. Greensboro advised Baldwin of his job elimination five months after Baldwin put Greens- boro on notice of his imminent recall to active Coast Guard Reserve. The settlement agreement specifical- ly recited that Baldwin accepted sever- ance pay in exchange for a release of “any claims” and “in lieu of continued employment with the City of Greens- boro following his release from active duty military service.”16 Baldwin argued the release was unenforceable based on USERRA’s statutory language, lack of adequate consideration and allegations

• f duress. Based on Baldwin’s allega-

tion that he executed the release under duress, and finding a fact issue regard- ing that concern, the district court adopted the magistrate’s recommenda- tion to deny the motion to dismiss, declining to address Baldwin’s addi- tional arguments “that the release was void for lack of adequate consideration and that the express language of Section 4302 supersedes the release.”16 This limited body of law, coupled with the fact that USERRA does not provide for a statute of limitations,17 creates an open and unpredictable forum for USERRA claims. There is clearly a risk that employers seeking protection from suit may end up litigat- ing a USERRA claim years after paying

24 NEW JERSEY LABOR AND EMPLOYMENT LAW QUARTERLY, Vol. 32, No. 4

consideration in exchange for a release. However, there are some steps employ- ers can take to protect themselves from an employee bringing a USERRA claim after signing a separation or settlement agreement. First, keeping in mind the tenets of ‘plain language’ agreements, waivers must be written in clear and unambigu-

• us language. Specifically, claims under

USERRA should be identified not only by statutory reference but by a descrip- tion of what the statute involves. Employers should make it clear to the employee that he or she will not be able to sue for violation of USERRA once he

• r she has signed the agreement and the

revocation period (if applicable) has expired. Second, the agreement must contain language instructing the employee to consult with an attorney before signing. Third, the employee must be given sufficient time to review and consider the agreement before signing it. It is essential that employees execute any release knowingly, voluntarily, and without duress. If an employee indi- cates that he or she is experiencing duress, perhaps because he or she is arranging family matters in preparation for deployment, consider extending the period for review of the release. Fourth, the employee must receive valuable consideration for executing the

• release. The Wysocki case instructs that

consideration the employee receives in exchange for signing the release should be more beneficial than the USERRA rights he or she waived and released. Obviously, the question of what is valu- able consideration will vary on a case- by-case basis, leaving this goal difficult to frame with specificity. Nevertheless, the employer should try to ensure that from the employee’s perspective, the consideration was substantial. Also, for at will employees, the fact that the employee is subject to separation from employment at any time for any reason could compel a conclusion that any con- sideration is more valuable than what the employee would otherwise be enti- tled to, since the employee would not be entitled to continued employment. A best practice would be to evaluate what the consideration affords the employee in terms of financial security relative to his or her former income. A nominal payment or minimal fraction of an employee’s income would likely not be considered valuable. Fifth, employers should consider including a tender-back provision, requiring return of any monetary con- sideration in the event the employee breaches the agreement, including by seeking recourse barred by the waiver and release. Although the common law doctrines of ratification and tender-back could be asserted if litigation is institut- ed, it is a better practice to have con- tractual language providing for the return of payments. The one caveat to this suggestion is that common law and contractual tender-back provisions are not generally applied in cases involving “federal remedial legislation,” such as the Older Workers’ Benefits Protection Act, and laws that expressly limit release of claims.18 However, because the USERRA law itself is clearly still

• pen to interpretation, and in the

absence of a definitive statement regarding how a tender-back provision would be treated under USERRA, incorporating a tender-back clause into a separation agreement would, at a min- imum, allow for contractual recourse and breach of contract arguments if the employee later sues. Finally, as employers and their coun- sel have done when faced with the vari-

• us other statutory claims that are not

susceptible to release, the best practice is to consider separations carefully, plan meticulously, and check the state of the law one last time before attempting to finalize the release of claims. It seems the USERRA release debate may be just beginning. ■ Endnotes 1. 38 U.S.C. §§ 4301 et seq. 2. 38 U.S.C. § 4302(a). 3. 38 U.S.C. § 4302(b). 4. 157 Cal. App. 4th 953 (Cal. App. 4th Dist. 2007). 5.

• Id. at 956.

6. Id. 7. 299 Fed. Appx. 966 (Fed. Cir. 2008), cert. denied, 130 S. Ct. 363 (2009). 8.

• Id. at 967.

9.

• Id. at 969.
• 10. 607 F.3d 1102 (6th Cir. 2010), cert.

denied, 131 S. Ct. 945 (2011).

• 11. Id. at 1107.
• 12. Id. at 1108.
• 13. Id.
• 14. Id. at 1106, note 2.
• 15. 2010 U.S. Dist. LEXIS 82278

(M.D.N.C. Aug. 12, 2010).

• 16. Id. at *5-6.
• 17. Id. at *17.
• 18. In the 2008 amendments to USER-

RA, Congress included an express statement that there is no statute of limitations for filing a USERRA

• claim. See 38 USCS § 4327(b)

(“Inapplicability of statutes of lim-

• itations. If any person seeks to file

a complaint or claim with the Sec- retary, the Merit Systems Protec- tion Board, or a Federal or State court under this chapter [38 USCS §§ 4301 et seq.] alleging a violation

• f this chapter [38 USCS §§ 4301

et seq.], there shall be no limit on the period for filing the complaint

• r claim.”). Nevertheless, the feder-

al, four-year “catch-all” statute of limitations may be applicable to claims that arose prior to 2008. See Middleton v. City of Chicago, 578 F.3d 655, 664-665 (7th Cir. 2009).

• 19. See e.g., Oubre v. Entergy Opera-

tions, 522 U.S. 422 (1998); Long v. Sears Roebuck & Co., 105 F.3d 1529, 1541 (3d Cir. 1997), cert. denied 522 U.S. 1107 (1998). Kelly Ann Bird is a director and Zeenat Basrai is an associate in the employ- ment law group at Gibbons P.C. in Newark.