Estle v. International Business Machines Corporation

Background

Steven Estle, Margaret Ahlders, Lance Salonia, and Cheryl Witmer were former employees of International Business Machines Corporation (IBM). The opinion states that each had worked in an IBM division for between 10 and 34 years and was over age 55 when IBM terminated the plaintiffs’ employment in May 2016 as part of a “Resource Action.”

Each plaintiff signed IBM’s 2014 Resource Action Separation Agreement as a condition of receiving severance and other benefits. The agreement required covered claims, including claims under the Age Discrimination in Employment Act (ADEA), to be submitted to final and binding arbitration. It also barred covered claims from being brought or maintained as class or collective actions in court or arbitration.

The plaintiffs sought a declaration that the collective-action waiver was invalid and an injunction preventing IBM from enforcing it. They relied on the Older Workers Benefit Protection Act (OWBPA), which provides requirements for a knowing and voluntary waiver of an ADEA right or claim. The plaintiffs alleged that IBM did not provide written information about the affected group, eligibility factors, the job titles and ages of selected employees, or the ages of employees in the same job classification or organizational unit who were not selected.

Parties’ Arguments

IBM moved to dismiss under the rule requiring a complaint to contain enough factual matter to state a plausible claim for relief. IBM argued that the OWBPA’s waiver requirements apply to substantive ADEA rights, such as the right to be free from age discrimination, but not to procedural rights such as choosing a forum or proceeding collectively.

The plaintiffs argued that the Supreme Court’s decision in 14 Penn Plaza did not decide whether the OWBPA applied to collective-action waivers. They also argued that the statutory text, the Fair Labor Standards Act’s collective-action provision, and other Supreme Court precedent supported applying the OWBPA requirements to their waivers.

Court’s Analysis

The court concluded that 14 Penn Plaza controls. In that decision, the Supreme Court held that an agreement to arbitrate ADEA claims does not waive the substantive right to be free from age discrimination. Instead, it waives only the right to seek relief from a court in the first instance. The court interpreted this reasoning to mean that the “right” covered by the OWBPA’s waiver requirements is a substantive right, not the procedural right to select a forum.

The court then held that the ability to proceed collectively is also procedural. Relying on Second Circuit authority, it described collective litigation as a procedural mechanism that presupposes, but does not create, a substantive right to bring an age-discrimination claim. The court therefore ruled that the collective-action waiver in the separation agreements did not waive a right covered by the OWBPA, and that the OWBPA did not bar IBM from enforcing the waiver.

The court rejected the plaintiffs’ reliance on Oubre v. Entergy Operations because that decision addressed an employee’s waiver of an ADEA claim and did not interpret the meaning of “right” in the OWBPA provision at issue. The court also rejected the plaintiffs’ argument that the Fair Labor Standards Act made collective action a non-waivable right.

Disposition

The court granted IBM’s motion to dismiss. The Clerk of Court was directed to terminate the motions and close the case. The opinion does not state that the dismissal was with or without prejudice.