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Sixth Circuit Allows Employee to Revoke Entire Settlement

Federal law allows employees signing releases of age discrimination claims to revoke their release within seven days of signing.

Because a release agreement did not limit the revocation right only to age claims (the former employee did not even assert any), the U.S. Court of Appeals for the Sixth Circuit recently permitted an employee to revoke her agreement to settle and release all of her claims against her former employer in Neely v. Good Samaritan Hosp., 2009 WL 2341513 (6th Cir. July 31, 2009).

On March 20, 2002, Doris Neely filed a complaint in district court alleging a claim for race discrimination in violation of Title VII and state-law claims for harassment, hostile work environment, and retaliation against her employer, Good Samaritan Hospital.  At no time did Neely complain of age discrimination, even though she was over forty years old.  Upon Good Samaritan’s motion for summary judgment, the district court dismissed all of the claims except Neely’s race discrimination claim.

Before trial, the parties entered into mediation before a magistrate judge that resulted in settlement of all claims.  Later, Good Samaritan prepared a written settlement agreement which included:  (1) a general release of all claims, including age claims under the Age Discrimination in Employment Act (ADEA); (2) a seven-day period for Neely to consider and revoke the agreement; and (3) a merger clause providing that the written agreement was “the entire understanding and agreement between the parties.”  Although Neely never raised an age discrimination claim, the settlement agreement properly contained the revocation language because she was over forty and could assert a claim.  Under the Older Worker Benefit Protection Act (OWBPA), an employee must be given seven days to revoke an agreement after it is signed if the employee is releasing the defendant from an age discrimination claim.  The release agreement did not, however, limit the revocation right only to her age discrimination claims.

Neely signed the release agreement and then revoked it within the seven-day revocation period.  Two years after the revocation, Good Samaritan filed a motion to enforce the original settlement terms.  The district court enforced most of the agreement, but Neely appealed to the Sixth Circuit.

The Sixth Circuit reversed because the parties bargained for a general release of all her claims and the release agreement included the right to revoke not only any ADEA claims, but all of her claims. 

Employers should carefully draft settlement agreements to permit revocation of any age claims only.  Thus, if the employee decides to revoke within the seven-day period, only the age discrimination claims are revoked, while the rest of the agreement remains effective and in force against all other claims.

If you have questions regarding settlement agreements, please contact any member of Greenebaum’s Labor and Employment Group

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