Single Paragraph General Release Upheld By Sixth Circuit

On Friday, the Sixth Circuit Court of Appeals affirmed the dismissal of retaliation and discrimination claims filed by a former employee who had signed a complete general release of all claims.  Hank v. Great Lakes Const. Co., No. 19-3118 (6^th Cir. 10-18-19).   While the holding is not unusual under the circumstances, the Court engaged in an extensive analysis of each argument challenging the validity of the release, and so, is a good refresher.  

The plaintiff and his former employer apparently began having problems after he injured himself at work and required knee surgery.  He was required to return to work sooner than he preferred and threatened to file another claim.  Instead, a few months later, he was confronted with video evidence that he had falsified his time card by claiming to have reported to work sooner than he had actually done.  He was offered the opportunity to be laid off permanently with no opportunity for rehire (instead of being terminated for willful misconduct that would disqualify him from receiving unemployment benefits) if he signed a complete release of all claims against the employer and his union.  The release did not comply with the OWBPA and he was not given 21 days to consider it or the opportunity to consult with an attorney.  He signed it and then breached it the following week by filing a grievance with his union and then later filing a lawsuit against his union and the employer alleging state law claims of retaliation, disability and age discrimination and a hybrid 301 claim.  He did not assert an ADEA claim.

The Court rejected the first argument – that the general release was void because it did not specifically exempt non-waivable rights to unemployment and workers compensation and future discrimination claims.  Problem is, the plaintiff was not asserting those claims in this action and the release was valid to his other claims: retaliation, §301 and state law discrimination claims.  Personal rights can be waived as long as they do not violate public policy.  Merely “because the release could conceivably be applied in a way that would be illegal,” does not make it unenforceable against the pending claims.  His release of “any sort of claim” as well as releases of “any and all claims” are generally enforceable under Ohio law to bar most claims, but will not be applied to bar unwaivable claims. “[A] generally worded release can bar claims that are waivable, but it cannot bar claims that aren’t waivable. A general release is not void on its face; rather, its enforceability depends on the claim that is to be released.”

Second, the Court rejected the plaintiff’s challenge to the consideration provided for the release.  The plaintiff asserted that he was statutorily entitled to file an unemployment compensation claim, so that could not constitute valid consideration.  However, the consideration provided by the employer was that it would convert his termination for cause into a layoff, meaning that he would be entitled to unemployment compensation if he were laid off, but would not be entitled to it if he were discharged for time card theft.   Putting aside the Ohio law requires employers to truthfully report why an employee was separated from employment, “promises to help facilitate a former employee’s unemployment-benefits application are sufficient consideration.”  The employer’s forebearance of its right to discharge him for cause and challenging his entitlement to unemployment compensation constitutes sufficient consideration for a release of claims.  That the employer previously intended to lay him off did not change the analysis because it had grounds to discharge him for cause at the time the release was signed.

In addition, contracts are not required to specifically mention the consideration provided. ““[C]onsideration for a contract need not necessarily be recited or expressed in writing; instead, the consideration may be proved by parol evidence or may be inferred from the terms and obvious import of the contract.”

Third, the plaintiff could not prove that he signed the release under economic duress because that requires proof that the employer engaged in an unlawful or otherwise wrongful act to deprive him of his unfettered will.  In this case, the employer was entitled to discharge him, so there was not unlawful or wrongful act. “It is not generally a “wrongful or unlawful act” if the defendant threatens to do something that it is legally entitled to do.”

He also challenged whether the release was knowing and voluntary, but it was only one paragraph, so he could not prove that it was too complicated for him to understand.  The Court also found it irrelevant that the release did not comply with the OWBPA because the plaintiff failed to assert any claims under the ADEA. “Plaintiff has not alleged any violation of the ADEA, and he does not argue that Ohio Rev. Code § 4112 incorporates the OWBPA’s protections.”

Finally, the Court affirmed dismissal of the claims against the union as well.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.