This article accompanies Good Buys.
If your company is considering a voluntary buyout, make sure employees sign a waiver-and-release agreement.
Sure, a buyout is voluntary. It is even legal to "cherry pick" among poor-performing individuals, age groups, skilled workers or departments. But that kind of pre-selection opens a company up to potential claims of bias, says Paul Hamburger, head of Proskauer's Employee Benefits, Executive Compensation and ERISA Litigation Practice Center in Washington.
"There are implications to doing it. If you start cherry-picking, there can be claims of [unfairness]." The chief concern would be claims of age discrimination, "because the people who are eligible and encouraged to leave tend to be older."
For example, when Pasco County, Fla., offered a voluntary buyout to employees over 55 years of age, it included a waiver that released the county from claims under the federal Age Discrimination in Employment Act, as amended with the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act and the Americans with Disabilities Act.
Some companies resist using waivers for a number of reasons: They don't want to look like they're doing something wrong; they don't want to give employees ideas about suing; or waivers may be contrary to their corporate culture.
If a company has any doubts, it need only consult a 2009 appeals court ruling called Hampton vs. Ford.
The case involved a woman who took a $100,000 voluntary buyout from Ford Motor Co. in 2006 and signed a waiver agreeing she would not institute proceedings of any kind against the company.
Two months later, she sued Ford, charging she had been sexually harassed by co-workers during her employment. Even though the suit was unrelated to her buyout, and she had filed a complaint with the Equal Employment Opportunity Commission before the buyout, the court ruled for Ford. And an appeals court agreed.
"A good lawyer would recommend that you consider [offering ] a waiver," Hamburger says. " ... Every company should discuss it, but not every company does it. You'd think everyone would use it [to avoid litigation]."