Ohio’s biggest-ever utility merger, the recently concluded marriage of Ohio Edison and Centerior Energy into First Energy Corp., is significant for any number of reasons. But in the area of employment law, it might one day come to be remembered chiefly for having touched off a test case over the issue of strong-arming downsized employees into signing severance agreements containing arguably coercive language.
In the wake of the merger, the new company in January of this year made the first of what would be several rounds of cuts, laying off about 300, mostly blue-collar, employees. That prompted anguish from all the expected quarters. But it would soon become apparent that those layoffs were accompanied by a twist which carried acute legal ramifications.
In return for severance packages of varying amounts-as much as $50,000 for long-time employees-the severed workers were first obligated to sign a waiver in which they pledged not to take part in any subsequent suit about their dismissals. That was perhaps standard. The troubling part? The waiver also sought to bar them from taking part in any proceeding before the Equal Employment Opportunity Commission and called for them to immediately reimburse all severance payments in the event they later challenge the waiver itself.
The EEOC knew a provocative challenge striking at the heart of its enforcement authority when it saw one. So in March, it filed suit in federal court in Cleveland, asserting that such clauses are flatly illegal “to the extent that they obstruct with the commission’s ability to investigate allegations.” The language in the releases, some of it illegal on its face, would have a “chilling effect” on the agency’s powers to investigate employment-discrimination laws, the agency charged in court papers before Judge Donald Nugent.
In many industries, senior employment attorneys say, these legal instruments have long been common practice. Your company might well have used them for years without stirring up much fuss. But a couple of complications, one judicial and another legislative, have intervened in recent years, rendering their use considerably murky.
The Older Workers Compensation Act of 1990 set up a new batch of rules under which employees over the age of 40 could be dismissed without triggering employers’ civil liability for age-discrimination charges. More recently, a U.S. Supreme Court ruling in January of this year may have the effect of barring the use of these so-called “tender-back” releases altogether.
Against that backdrop, the language in Akron-based First Energy’s waiver seems intended to invite, even provoke, special scrutiny. It bars any signee from participating “in any lawsuit or receiv(ing) any portion of any recovery in a proceeding conducted or brought by the EEOC or other administrative agency” based on claims covered in the waiver. In other words, it seems to attempt to enlist private individuals in an effort to stymie official investigations by federal agencies.
The company maintains the agency is on a “fishing expedition.” The EEOC’s reply: “scurrilous and inappropriate.” Says one EEOC attorney, Larry Watson: “Until the law is settled on this, there’s going to be a lot of action” on this front.
For fans of legal street brawls, this case potentially shapes up as a doozy. It has all the elements: It comes close on the heels of a Supreme Court case which substantially changes the law and entails a direct challenge to federal authority by a large, powerful company which ladled plenty of political gravy around Ohio to get its merger accomplished. Finally, it tests the mettle of a proud agency which many in the corporate community and conservative political circles would like to write off as increasingly irrelevant, but which sees itself, as EEOC chairman Paul Igasaki told SBN in a recent interview, as “essentially a prosecutorial agency.”
For all these reasons and more, United States vs. First Energy Corp. has the texture of a potentially groundbreaking test case. It pits a federal agency-perhaps a tad defensive in this era of backpedaling on workplace affirmative action, but one still backed by the awesome legal resources of the U.S. government-against a giant utility holding company which, if legal documents are any barometer, seems to be inviting old-fashioned legal fisticuffs.
We’ll keep you posted with future dispatches from ringside.
