[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Proposed Rules]
[Pages 19952-19957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10143]


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EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

29 CFR Part 1625


Waivers of Rights and Claims: Tender Back of Consideration

AGENCY: Equal Employment Opportunity Commission (EEOC).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Equal Employment Opportunity Commission (EEOC or 
Commission) is publishing this notice of proposed rulemaking (NPRM) to 
address issues related to the United States Supreme Court's decision in 
Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998).

DATES: To be assured of consideration by EEOC, comments must be in 
writing and must be received on or before June 22, 1999.

ADDRESSES: Written comments should be submitted to Frances M. Hart, 
Executive Officer, Executive Secretariat, Equal Employment Opportunity 
Commission, 1801 L Street, N.W., Washington, D.C. 20507.

FOR FURTHER INFORMATION CONTACT: Carol R. Miaskoff, Assistant Legal 
Counsel, or Paul E. Boymel, Senior Attorney-Advisor, 202-663-4689 
(voice), 202-663-7026 (TDD).

SUPPLEMENTARY INFORMATION:

A. Background

1. Introduction

    In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the 
Supreme Court held that an individual was not required to return 
(``tender back'') consideration for a waiver in order to allege a 
violation of the Age Discrimination in Employment Act of 1967 (ADEA), 
29 U.S.C. 621 et seq., as amended by the Older Workers Benefit 
Protection Act of 1990 (OWBPA). The Court explained that, because the 
release did not comply with the ADEA, plaintiff's retention of the 
consideration did not constitute a ratification that made the release 
valid. Moreover, the employer could not invoke the employee's failure 
to tender back consideration as a way of excusing its own failure to 
comply with the statute.
    EEOC is issuing proposed legislative regulations to address issues 
raised by the Oubre decision. In summary, EEOC's position is that: (1) 
an individual alleging that a waiver agreement was not knowing and 
voluntary under the ADEA is not required to tender back the 
consideration as a precondition for challenging that waiver agreement; 
(2) a covenant not to sue or any other condition precedent, penalty, or 
other limitation adversely affecting any individual's right to 
challenge a waiver agreement is invalid under the ADEA; (3) although in 
some cases an employer may be entitled to setoff, recoupment, or 
restitution against an individual who has successfully challenged the 
validity of a waiver agreement, such setoff, recoupment, or restitution 
cannot be greater than the consideration paid to the individual or the 
damages awarded to the individual, whichever is less; and (4) no 
employer may unilaterally abrogate its duties under a waiver agreement, 
even if one or more of the signatories to the agreement successfully 
challenges the validity of that agreement under the ADEA.

2. The Older Workers Benefit Protection Act of 1990

    Title II of OWBPA amended the ADEA to set out rules governing the 
validity of a waiver agreement. Section 7(f)(1) of the ADEA provides 
that ``[a]n

[[Page 19953]]

individual may not waive any right or claim under [the ADEA] unless the 
waiver is knowing and voluntary.'' Section 7(f)(1) provides a list of 
minimum requirements that must be met in order for a waiver to be 
knowing and voluntary. The statutory language and legislative history 
of OWBPA make it clear that the listing in Sec. 7(f)(1) is 
nonexhaustive, and that even waiver agreements meeting the stated 
minimum requirements would not satisfy the ADEA if, under the totality 
of the circumstances, the waiver were not knowing and voluntary. As 
recognized in Oubre, the ADEA waiver rules extend to the tender back 
situation.

3. Tender Back Requirement Before Oubre

    Prior to the Supreme Court's decision in Oubre, the circuits were 
split on the issue of whether an individual who signed an agreement 
waiving rights and claims under the ADEA was required to tender back 
any consideration paid by the employer in order to challenge the 
validity of the waiver in court. Several courts took the position that 
an individual who accepted consideration in exchange for a waiver 
agreement was not required to tender back that consideration to the 
employer before challenging in court either the validity of the waiver 
agreement or any employment discrimination. See, e.g., Long v. Sears 
Roebuck & Co., 105 F.3d 1529 (3d Cir. 1997), cert denied, 118 S.Ct. 
1033 (1998); Oberg v. Allied Van Lines, Inc., 11 F.3d 679 (7th Cir. 
1993). Other courts took the position that the tender back of 
consideration was necessary before an individual could challenge the 
waiver and the discrimination in court. These courts concluded that by 
retaining the consideration, the individual ``ratified'' the waiver 
agreement and therefore could not challenge the agreement in court. 
See, e.g., Blistein v. St. John's College, 74 F.3d 1459, 1465-66 (4th 
Cir. 1996); Wamsley v. Champlin Refining & Chemicals, Inc., 11 F.3d 534 
(5th Cir. 1993).

4. The Oubre Decision

    In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the 
Supreme Court resolved the split among the circuits on the question of 
tender back. The facts in Oubre involved an employee who, upon her 
termination, signed an agreement waiving all claims against her 
employer in exchange for payments totalling $6,258. The waiver 
agreement failed to comply with at least three of the requirements of 
Sec. 7(f)(1) of the ADEA. It did not: (1) give her the statutorily 
mandated 21 days to consider the waiver agreement, but instead provided 
only 14 days; (2) give her seven days to revoke the agreement; or (3) 
make specific reference to ADEA claims. Oubre, 522 U.S. at 424. After 
the employee received all of the consideration for the waiver, she 
filed an ADEA suit against the employer without tendering back the 
consideration. The lower courts ruled that she could not proceed with 
her lawsuit because she had not offered to return the consideration to 
the employer, agreeing with the employer's arguments under state 
contract and common law. See Oubre v. Entergy Operations, Inc., 112 
F.3d 787 (5th Cir. 1996), rev'd 522 U.S. 422 (1998).
    The Supreme Court reversed the Fifth Circuit's decision, stating 
that under Sec. 7(f)(1) of the ADEA:

    [T]he employee's mere retention of monies [did not] amount to a 
ratification equivalent to a valid release of her ADEA claims, since 
the retention did not comply with the OWBPA any more than the 
original release did. The statute governs the effect of the release 
on ADEA claims, and the employer cannot invoke the employee's 
failure to tender back as a way of excusing its own failure to 
comply.

Oubre, 522 U.S. at 428. Thus, the Court allowed the employee's case to 
proceed even though she had not tendered back the consideration for the 
waiver agreement.
    In its decision, the Court addressed three main concerns. First, 
the Court stated that the ADEA foreclosed the employer's argument that 
state contract law and common law principles apply to ADEA waiver 
issues. The Court emphasized that ``the OWBPA sets up its own regime 
for assessing the effect of ADEA waivers, separate and apart from 
contract law.'' 522 U.S. at 427. The Court also noted that the contract 
law principles cited by the employer ``may not be as unified as the 
employer asserts.'' Id. at 426.
    Second, the Court reasoned that the practical effect of the 
employer's position, requiring tender back of consideration as a 
condition of bringing suit, could frustrate the purposes of the ADEA 
and lead to an evasion of the statute:

    In many instances a discharged employee likely will have spent 
the monies received and will lack the means to tender their return. 
These realities might tempt employers to risk noncompliance with the 
OWBPA's waiver provisions, knowing it will be difficult to repay the 
monies and relying on ratification.

Oubre, 522 U.S. at 427.
    Finally, the Court observed that lower ``courts may need to inquire 
whether the employer has claims for restitution, recoupment, or setoff 
against the employee, and these questions may be complex where a 
release is effective as to some claims but not as to ADEA claims.'' 522 
U.S. at 428. The Court saw no need to resolve such questions in this 
case, however, and simply reversed the Fifth Circuit's judgment and 
remanded for further proceedings consistent with its opinion. Id.

5. EEOC Negotiated Rulemaking on Waivers Under OWBPA

    In 1995 and 1996, EEOC conducted a negotiated rulemaking on ADEA 
waivers under OWBPA. Although the Rulemaking Committee considered the 
issue of tender back and ratification during its deliberations, the 
Committee decided that it would not reach consensus and the issue was 
not addressed in the regulatory language recommended by the Committee 
to the Commission. EEOC promulgated a final regulation at 29 CFR 
1625.22 on June 5, 1998, 63 FR 30624. The preamble to the final 
regulation confirmed that the issues raised in Oubre would not be 
addressed in that section, but that the tender back issue would be 
covered in other guidance.

B. Purpose and Discussion of This Proposed Rule

    1. Purpose: Pursuant to its regulatory authority under Sec. 9 of 
the ADEA, EEOC has developed this proposed legislative regulation to 
address issues related to the Oubre decision. This proposal would add a 
new legislative regulation at 29 CFR Sec. 1625.23.
    2. Discussion: This regulation sets forth EEOC's position on 
several important issues concerning tender back.
    a. An individual alleging that a waiver agreement was not knowing 
and voluntary under the ADEA is not required to tender back the 
consideration given for that agreement before filing either a lawsuit 
or a charge of discrimination with EEOC or any state or local fair 
employment practices agency. Retention of consideration does not 
foreclose a challenge to any waiver agreement; nor does the retention 
constitute the ratification of any waiver. A clause requiring tender 
back is invalid under the ADEA.
    (i) The Oubre Decision: The Court in Oubre made it clear that 
``[a]n employee `may not waive' an ADEA claim unless the waiver or 
release satisfies the OWBPA's requirements. . . . Courts cannot with 
ease presume ratification of that which Congress forbids.'' 522 U.S. at 
427. The Court emphasized that ``the employee's mere retention of 
monies [does not] amount to a ratification

[[Page 19954]]

equivalent to a valid release * * *'' Id. at 848.
    The facts of the Oubre case concerned a waiver agreement that 
clearly did not satisfy at least three of the requirements of 
Sec. 7(f)(1), and thus was invalid on its face. However, the holding 
and rationale of Oubre, which are based on the ADEA as well as 
important public policy concerns, are not limited to cases in which the 
terms of the waiver agreement are facially invalid. The ADEA's 
overarching standard is that waivers must be knowing and voluntary, and 
the specific provisions in Sec. 7(f)(1) are only minimum requirements. 
While a waiver agreement that fails to meet these minimum criteria 
cannot be knowing and voluntary, even agreements that do meet these 
criteria still may not be knowing and voluntary under the ADEA.
    For example, a waiver agreement that meets all of the enumerated 
requirements in Sec. 7(f)(1) still would not be knowing and voluntary 
if the employer obtained an employee's signature by force or 
compulsion. As another example, an agreement might state on its face 
that an individual had 45 days to accept the offer. If the individual 
in fact were given only 5 days to make this decision, the waiver would 
not be knowing and voluntary under the ADEA. See 29 CFR 1625.22(e). 
Finally, with regard to the informational requirements under 
Sec. 7(f)(1)(H), it is impossible to assess an employer's compliance by 
a mere examination of the waiver agreement. These requirements depend 
on the unique facts of a particular workforce reduction or voluntary 
termination program. See 29 CFR 1625.22(i); see, e.g., Griffin v. Kraft 
General Foods, Inc., 62 F.3d 368 (11th Cir. 1995)(analyzing the 
validity of the information provided under Sec. 7(f)(1)(H), the court 
found that, where the employer may have considered several plants for 
closure before it decided to close the plant at issue, it might need to 
provide information about employees at multiple facilities).
    In summary, compliance with Sec. 7(f)(1) of the ADEA cannot be 
determined based solely on the face of a waiver document. Because a 
waiver agreement may be invalid due to circumstances beyond the 
document itself, the Supreme Court's rationale in Oubre precludes 
tender back as a condition for any lawsuit or charge.
    (ii) ADEA Statutory Language and Legislative History: In the ADEA, 
as amended by the OWBPA, Congress clearly contemplated that courts 
would decide the validity of waiver agreements. A requirement of tender 
back would, as the Oubre Court pointed out, effectively prevent access 
to the courts for many employees and therefore would undermine this 
statutory scheme.
    Section 7(f) of the ADEA contemplates that the courts have the 
authority to determine the validity of a waiver agreement. Section 
7(f)(3) states that:

    In any dispute that may arise over whether any of the 
requirements [of Secs. 7(f)(1) or (2)] have been met, the party 
asserting the validity of a waiver shall have the burden of proving 
in a court of competent jurisdiction that a waiver was knowing and 
voluntary pursuant to paragraph (1) or (2).

(Emphasis supplied). Thus, the statute does not envision a waiver 
agreement as a complete bar to litigation, but rather suggests that a 
waiver is an affirmative defense. A tender back requirement would be 
inconsistent with this statutory design.
    A tender back requirement is inconsistent with the OWBPA 
legislative history, which also shows that Congress contemplated that 
litigation would be available for deciding the validity of waiver 
agreements. Here, Congress expressly stated that the burden of proof 
described in Sec. 7(f)(3) establishes ``an affirmative defense.'' See 
S. 1511, Final Substitute Statement of Managers, 136 Cong. Rec. 13596-
97 (1990). In reference to an earlier version of the OWBPA legislation, 
the Senate Committee on Labor and Human Resources explained:

    The Committee expects that courts reviewing the ``knowing and 
voluntary'' issue will scrutinize carefully the complete 
circumstances in which the waiver was executed. * * * The bill 
establishes specified minimum requirements that must be satisfied 
before a court may proceed to determine factually whether the 
execution of a waiver was ``knowing and voluntary.''

S. Rep. No. 101-263, at 32 (1990), reprinted in 1990 U.S.C.C.A.N. 1509, 
1537 (hereinafter ``Senate Report'').
    The law also is clear that a waiver agreement cannot interfere with 
an individual's right to file a charge of discrimination or assist EEOC 
in any administrative or legal proceedings. Section 7(f)(4) of the ADEA 
states:

    No waiver agreement may affect the Commission's rights and 
responsibilities to enforce [the ADEA]. No waiver may be used to 
justify interfering with the protected right of an employee to file 
a charge or participate in an investigation or proceeding conducted 
by the Commission.

See also 29 CFR 1625.22(i); EEOC Enforcement Guidance on Non-Waivable 
Employee Rights under EEOC Enforced Statutes, #915.002, April 10, 1997, 
3 EEOC Compl. Man. (BNA) No. 2345. In light of the Oubre Court's 
concern about the chilling effect of a tender back requirement, 
imposition of such a requirement as a condition for filing an EEOC 
charge clearly would ``interfer[e] with the protected right of an 
employee to file a charge * * *,'' and therefore would contravene the 
statute. 29 CFR Sec. 1625.22 (i).
    b. A covenant not to challenge a waiver agreement, or any other 
arrangement that imposes any condition precedent, any penalty, or any 
other limitation adversely affecting any individual's right to 
challenge a waiver agreement, is invalid under the ADEA, whether the 
covenant or other arrangement is part of the agreement or is contained 
in a separate document. A provision allowing an employer to recover 
costs, attorneys' fees, and/or damages for the breach of any covenant 
or other arrangement is not permitted.
    (i) Covenants not to sue and other similar arrangements purport, on 
their face, to bar an individual's right to challenge a waiver 
agreement in court.1 Like a tender back requirement, such a 
covenant or other arrangement directly offends the congressional intent 
to afford an individual the right to challenge the validity of a waiver 
agreement. The ADEA clearly envisions that courts would have authority 
to determine the validity of the waiver and, therefore, necessarily 
contemplates that individuals would have the opportunity to bring such 
a challenge. See Sec. 7(f)(1) of the ADEA (setting out the specific 
standards for a court to determine the validity of a waiver agreement); 
Sec. 7(f)(3) of the ADEA (referring to a ``court of competent 
jurisdiction'' as the entity expected to decide the validity of a 
challenged waiver); accord Senate Report at 32. See also Raczak v. 
Ameritech Corp., 103 F.3d 1257, 1271 (6th Cir. 1997) (``[i]t was the 
intent of Congress that waivers would not preclude parties from 
bringing suit under the OWBPA''), cert. denied, 118 S.Ct. 1033 (1998).
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    \1\ No waiver agreement, covenant, or other arrangement may 
prohibit any person from filing a charge of discrimination or 
assisting EEOC in its law enforcement activities. See 29 CFR 
1625.22(i).
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    (ii) Covenants not to sue and other such arrangements also carry 
with them the threat of a counterclaim for breach of the covenant and 
liability for costs, attorneys' fees, and damages. The threat of such a 
counterclaim or a similar threat, 2 with the prospect of 
being

[[Page 19955]]

forced to pay defendant's legal expenses, easily could chill persons 
with valid claims from challenging waiver agreements. This chilling 
effect runs counter to the purposes of the ADEA, a remedial civil 
rights statute that encourages employees to challenge illegal conduct 
by employers. See generally, Commonwealth of Massachusetts v. Bull HN 
Information Systems, Inc., 16 F.Supp. 2d 90, 106 (D. Mass. 1998) 
(``[u]nder Bull's proffered interpretation, employers could 
functionally insulate themselves from ADEA suits and ignore the waiver 
provisions of the OWBPA simply by including a drastic penalty provision 
in the waiver as Bull has done. This interpretation offends the intent 
of Congress. * * *''); Carroll v. Primerica Financial Services 
Insurance Marketing, 811 F.Supp. 1558 (N.D.Ga. 1992); Isaacs v. 
Caterpillar, Inc., 702 F.Supp. 711, 713 (C.D.Ill. 1988); EEOC v. United 
States Steel Corp., 671 F.Supp. 351, 358-59 (W.D.Pa. 1987) (the court 
enjoined a waiver provision wherein an employee promised not to file a 
charge or claim under the ADEA since the waiver ``has the potential of 
deterring individuals from participating in ADEA claims. * * * [I]f an 
individual is deterred from bringing such an action in the first 
instance, the validity of the waiver of rights will not be able to be 
determined.'')
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    \2\ For example, it would be impermissible for an employer to 
bring an independent legal action, such as a state or federal breach 
of contract lawsuit, because an employee filed a charge of 
discrimination or challenged a waiver agreement in court. Such 
lawsuits would constitute retaliation under Sec. 4(d) of the ADEA 
and intentional discrimination for purposes of liquidated damages 
under Sec. 7 of the ADEA.
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    A position permitting covenants not to sue or similar arrangements 
would render the OWBPA amendments and the Oubre decision a nullity. 
Such provisions, coupled with the threat of counterclaims, would as a 
practical matter undo the ADEA's carefully crafted criteria for a 
knowing and voluntary waiver by encouraging employers to ignore those 
provisions. This in turn would undermine the ADEA's objective to 
``ensure that older workers are not coerced or manipulated into waiving 
their rights to seek legal relief under the ADEA.'' Senate Report at 5. 
EEOC does not find cases allowing covenants not to sue persuasive, 
because they are fundamentally at odds with the holding and rationale 
of the Supreme Court in Oubre. See, e.g., Astor v. International 
Business Machines Corp., 7 F.3d 533, 540 (6th Cir. 1993) (covenant not 
to sue permissible in release of ERISA rights); Artvale Inc. v Rugby 
Fabrics Corp., 363 F.2d 1002, 1008 (2d Cir. 1966).
    (iii) An employer does not need to bring a counterclaim to obtain 
what it purchased with the waiver. With a valid waiver, an employer 
receives an affirmative defense against ADEA claims. See Isaacs v. 
Caterpillar, 765 F.Supp. 1359, 1371 (C.D.Ill. 1991); Senate Report at 
53. Assuming that a waiver agreement is upheld in court, and 
consequently serves as an affirmative defense to a discrimination suit, 
the employer has received the benefit of its bargain. If the waiver is 
not upheld because it is not knowing and voluntary under the ADEA, the 
employer has no right to the benefit of its bargain.
    c. In some circumstances an employer may be entitled to 
restitution, recoupment, or setoff against an employee's recovery of 
damages in court (or in the administrative process).
    In Oubre, the Court commented that, ``[i]n further proceedings in 
this or other cases, courts may need to inquire whether the employer 
has claims for restitution, recoupment, or setoff against the employee. 
* * *'' 522 U.S. at 428.3 In EEOC's view, restitution, 
recoupment, or setoff should be in the discretion of the court but 
never exceed the lesser of the consideration given or the damages won. 
In the context of the Oubre decision, with its overriding prohibition 
of tender back requirements, permitting any restitution beyond the 
lesser of the amount the plaintiff wins in court, or the amount of 
consideration given, would operate constructively as a tender back 
penalty for bringing suit. Such a tender back penalty would interfere 
with the plaintiff's exercise of ADEA rights, impose significant 
hardship, and be contrary to public policy. Additionally, Oubre 
dictates that general contract principles are not applicable to ADEA 
cases if their application would deter protected individuals from 
vindicating their statutory rights or encourage employers to evade 
their statutory responsibilities. See generally Daley v. United 
Technologies Corp., Civil No. 3:97 CV 00439 (AVC) (D.Conn. March 23, 
1998); Pace v. United Technologies Corp., Civil No. 3:97 CV 00481(AVC) 
(D.Conn. March 23, 1998) (post-Oubre cases stating that the employer 
would be entitled to a setoff consisting of all or part of the 
severance benefits paid if the plaintiffs should prevail on their ADEA 
claims); Rangel v El Paso Natural Gas Co., 996 F. Supp. 1093, 1099 
(D.N.M. 1998) (post-Oubre Title VII waiver case concluding that setoff 
against damages would be the proper way to handle reimbursement); 50 
C.J.S. Judgment Sec. 674 (stating that set-off ``is not demandable as 
of course, but rests in the discretion of the court'').
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    \3\  The terms ``recoupment'' and ``setoff'' refer to the 
ability of a defendant to reduce the plaintiff's award of damages by 
amounts otherwise due to the defendant. Recoupment and setoff serve 
to limit the defendant's recovery to no more than the amount of 
plaintiff's damages. Black's Law Dictionary (6th ed. 1990), at 1275 
and 1372. ``Restitution is a return or restoration of what the 
[employee] has gained in a transaction.'' 1 Dan B. Dobbs, Law of 
Remedies, Damages-Equity-Restitution Sec. 4.1(1) at 551 (1993). 
Generally, restitution is required to avoid the ``unjust 
enrichment'' of the party who previously obtained the money or 
property. Dobbs Sec. 4.1(2) at 557. There are several exceptions to 
the unjust enrichment doctrine that are relevant to ADEA waivers, 
including when restitution would: (1) interfere with the rights of, 
or otherwise be inequitable to, the party who received payment; (2) 
cause significant hardship because an individual changed position 
based upon the payment; or (3) be contrary to public policy 
considerations. Id . at 563.
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    This limit also ensures that employees would not be penalized for a 
challenge to a waiver agreement when the amount of damages awarded is 
low (for example, when the employee has mitigated damages by finding 
new employment). Moreover, as stated in section b., above, covenants 
not to sue or other similar arrangements are not permitted. Therefore, 
an employer is not entitled to restitution, recoupment, or setoff for 
any costs, attorneys' fees or other amounts claimed as damages 
attributable to an alleged breach of such a covenant or other 
arrangement.
    Finally, in a case involving more than one plaintiff, the reduction 
must be awarded on a plaintiff-by-plaintiff basis. Thus, no 
individual's award can be reduced based on the consideration received 
by any other person.
    The following is a nonexhaustive list of the factors that may be 
relevant in calculating the proper amount of reduction to avoid unjust 
enrichment. These factors reflect, in the ADEA context, equitable 
principles that a reduction should be allowed only if it would promote 
justice, and should not be allowed if it results in injustice. See 
generally 50 C.J.S. Judgment Sec. 674. These factors also reflect the 
Oubre Court's recognition that determining the proper amount of 
reduction may be complex when the waiver encompasses claims other than 
those arising under the ADEA. Oubre, 522 U.S. at 428. The factors 
include:
    (i) Whether the employer apportioned the amount paid for the waiver 
agreement among the rights waived, if the waiver purports to waive 
rights other than ADEA rights. If the employer did not apportion the 
consideration among the rights waived, the apportionment should be done 
on an equitable basis;
    (ii) Whether the employer's noncompliance with the ADEA waiver 
requirements was inadvertent or was in bad faith or fraudulent;
    (iii) The nature and severity of the underlying employment 
discrimination

[[Page 19956]]

in the case, including whether the employer willfully violated the 
ADEA. If a willful violation occurred, any deduction from the award 
should be made after the damages are doubled pursuant to Sec. 7(b) of 
the ADEA;
    (iv) The employee's financial condition;
    (v) The employer's financial condition;
    (vi) The effect of the reduction upon the purposes and enforcement 
of the ADEA and the deterrence of future violations by the employer.
    d. No employer may unilaterally abrogate its duties under a waiver 
agreement to any signatory, even if one or more of the signatories to 
the agreement or EEOC successfully challenges the validity of that 
agreement under the ADEA.
    In his concurrence in Oubre, Justice Breyer expressed concern that 
a successful challenge to a waiver agreement by one or more individuals 
not be construed to relieve an employer of its obligations to other 
individuals who did not challenge that agreement. Oubre, 522 U.S. at 
431 (Breyer, J., concurring). Such an abrogation would penalize 
innocent employees for the employer's noncompliance with the ADEA, and 
would therefore be void as against public policy. See generally 17A Am. 
Jur. 2d Contracts Sec. 327 (1991) (stating that an illegal contract 
will be enforced if refusal to enforce it ``would produce a harmful 
effect on the party for whose protection the law making the bargain 
illegal exists'').
    e. The rules set out in this regulation apply to cases within the 
EEOC administrative process as well as to cases in court, and are fully 
consistent with the provisions of EEOC's regulation at 29 CFR 
1625.22(i)(3).
    Comments: As a convenience to commentors, the Executive Secretariat 
will accept public comments transmitted by facsimile (``FAX'') machine. 
The telephone number of the FAX receiver is 202-663-4114. (Telephone 
numbers published in this Notice are not toll-free). Only public 
comments of six or fewer pages will be accepted via FAX transmittal in 
order to assure access to the equipment. Receipt of FAX transmittals 
will not be acknowledged, except that the sender may request 
confirmation of receipt by calling the Executive Secretariat staff on 
202-663-4066.
    Comments received will be available for public inspection in the 
EEOC Library, Room 6502, 1801 L Street, N.W., Washington, D.C. 20507, 
by appointment only, from 9:00 a.m. to 5:00 p.m., Monday through 
Friday, except legal holidays. Persons who need assistance to review 
the comments will be provided with appropriate aids such as readers or 
print magnifiers. Copies of this Notice are available in the following 
alternative formats: large print, braille, electronic file on computer 
disk, and audio tape. To schedule an appointment or receive a copy of 
the Notice in an alternative format, call 202-663-4630 (voice), 202-
663-4399 (TDD).

Executive Order 12866, Regulatory Planning and Review

    Pursuant to Sec. 6(a)(3)(B) of Executive Order 12866, EEOC has 
coordinated this NPRM with the Office of Management and Budget. Under 
Sec. 3(f)(1) of Executive Order 12866, EEOC has determined that the 
regulation will not have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State or local or tribal 
governments or communities. Therefore, a detailed cost-benefit 
assessment of the regulation is not required.

Paperwork Reduction Act

    EEOC certifies that the rule as proposed does not require the 
collection of information by EEOC or any other agency of the United 
States Government. The rule as proposed does not require any employer 
or other person or entity to collect, report, or distribute any 
information.

Regulatory Flexibility Act

    EEOC certifies under 5 U.S.C. 605(b), enacted by the Regulatory 
Flexibility Act (Pub. L. 96-354), that this regulation will not result 
in a significant economic impact on a substantial number of small 
entities. For this reason, a regulatory flexibility analysis is not 
required. A copy of this proposed rule was furnished to the Small 
Business Administration.
    In addition, in accordance with Executive Order 12067, EEOC has 
solicited the views of affected Federal agencies.

List of Subjects in 29 CFR Part 1625

    Advertising, Age, Employee Benefits, Equal Employment Opportunity, 
Retirement.

    Signed at Washington, D.C. this 19th day of April, 1999.
Ida L. Castro,
Chairwoman.
    It is proposed to amend chapter XIV of title 29 of the Code of 
Federal Regulations as follows:

PART 1625--AGE DISCRIMINATION IN EMPLOYMENT ACT

    1. The authority citation for part 1625 continues to read as 
follows:

    Authority: 81 Stat. 602; 29 U.S.C. 621; 5 U.S.C. 301; 
Secretary's Order No. 10-68; Secretary's Order No. 11-68; sec. 12, 
29 U.S.C. 631; Pub. L. 99-592, 100 Stat. 3342; sec. 2, Reorg. Plan 
No. 1 of 1978, 43 FR 19807.

    2. In part 1625, Sec. 1625.23 would be added to Subpart B--
Substantive Regulations, to read as follows:


Sec. 1625.23  Waiver of rights and claims: Tender back of 
consideration.

    (a) An individual alleging that a waiver agreement was not knowing 
and voluntary under the ADEA is not required to tender back the 
consideration given for that agreement before filing either a lawsuit 
or a charge of discrimination with EEOC or any state or local fair 
employment practices agency. Retention of consideration does not 
foreclose a challenge to any waiver agreement; nor does the retention 
constitute the ratification of any waiver. A clause requiring tender 
back is invalid under the ADEA.
    (b) A covenant not to challenge a waiver agreement, or any other 
arrangement that imposes any condition precedent, any penalty, or any 
other limitation adversely affecting any individual's right to 
challenge a waiver agreement, is invalid under the ADEA, whether the 
covenant or other arrangement is part of the agreement or is contained 
in a separate document. A provision allowing an employer to recover 
costs, attorneys' fees, and/or damages for the breach of any covenant 
or other arrangement is not permitted.
    (c) Restitution, recoupment, or setoff. (1) Where an employee 
successfully challenges a waiver agreement and prevails on the merits 
of an ADEA claim, courts have the discretion to determine whether an 
employer is entitled to restitution, recoupment, or setoff 
(hereinafter, ``reduction'') against the employee's damages award. 
These amounts never can exceed the lesser of the consideration the 
employee received for signing the waiver agreement or the amount 
recovered by the employee. Consistent with paragraph (b) of this 
section, an employer is not entitled to restitution, recoupment, or 
setoff for any costs, attorneys' fees or other amounts claimed as 
damages attributable to an alleged breach of such a covenant or other 
arrangement.
    (2) In a case involving more than one plaintiff, any reduction must 
be applied on a plaintiff-by-plaintiff basis. No individual's award can 
be reduced

[[Page 19957]]

based on the consideration received by any other person.
    (3) A nonexhaustive list of the factors that may be relevant to 
determine whether, or in what amount, a reduction should be granted, 
includes:
    (i) Whether the employer apportioned the amount paid for the waiver 
agreement among the rights waived, if the waiver purports to waive 
rights other than ADEA rights. If the employer did not apportion the 
consideration among the rights waived, the apportionment should be done 
on an equitable basis;
    (ii) Whether the employer's noncompliance with the ADEA waiver 
requirements was inadvertent or was in bad faith or fraudulent;
    (iii) The nature and severity of the underlying employment 
discrimination in the case, including whether the employer willfully 
violated the ADEA. If a willful violation occurred, any deduction from 
the award should be made after the damages are doubled pursuant to 
Sec. 7(b) of the ADEA;
    (iv) The employee's financial condition;
    (v) The employer's financial condition;
    (vi) The effect of the reduction upon the purposes and enforcement 
of the ADEA and the deterrence of future violations by the employer.
    (d) No employer may unilaterally abrogate its duties under a waiver 
agreement to any signatory, even if one or more of the signatories to 
the agreement or EEOC successfully challenges the validity of that 
agreement under the ADEA.

[FR Doc. 99-10143 Filed 4-22-99; 8:45 am]
BILLING CODE 6570-01-P