No. 02-2111 _________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _________________________________________ JOHN R. WASTAK, Plaintiff-Appellant, v. LEHIGH VALLEY HEALTH NETWORK, INC., Defendant-Appellee. ______________________________________________ On Appeal from the United States District Court for the Eastern District of Pennsylvania ______________________________________________ Brief of the U.S. Equal Employment Opportunity Commission as Amicus Curiae Supporting Plaintiff-Appellant's Petition for Rehearing ______________________________________________ NICHOLAS M. INZEO Acting Deputy General Counsel CAROLYN L. WHEELER Acting Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel BENJAMIN N. GUTMAN Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, NW, Room 7022 Washington, DC 20507 (202) 663-4728 TABLE OF CONTENTS Table of Authorities ii Statement of Interest 1 Background 2 Argument 3 The panel should amend its opinion because its reading of 29 C.F.R. 1625.23 is inconsistent with the EEOC's controlling interpretation of the agency's own regulation. 3 Conclusion 8 Addendum Certificate of Service TABLE OF AUTHORITIES Cases Abdulai v. Ashcroft, 239 F.3d 542 (3d Cir. 2001) 6 Auer v. Robbins, 519 U.S. 452 (1997) 6 Chevron U.S.A. v. NRDC, 467 U.S. 837 (1984) 5 Ramey v. Gober, 120 F.3d 1239 (Fed. Cir. 1997) 6 Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994) 5 Statutes, Regulations, and Regulatory History Age Discrimination in Employment Act, 29 U.S.C. 621-634 1 29 U.S.C. 628 1 29 C.F.R. 1625.23 passim Waivers of Rights and Claims, 65 Fed. Reg. 77,438 (2000) passim LETTERHEAD INSERTED - DARK RING Begin text below line 1.5" to avoid overlay of EEOC Seal. [HRt] until status line shows Ln value greater than 1.5". STATEMENT OF INTEREST The U.S. Equal Employment Opportunity Commission enforces federal employment-discrimination statutes including the Age Discrimination in Employment Act, 29 U.S.C. 621-634. Congress has given the EEOC substantive rulemaking authority to issue regulations under the ADEA. Id. 628. In the course of deciding this appeal, this Court construed one of these regulations, 29 C.F.R. 1625.23, in a way that directly contradicts the EEOC's published interpretation. We respectfully request that the panel amend its opinion by deleting or revising the passage discussing 1625.23. The EEOC takes no position on any other matter raised by Wastak's petition for rehearing, nor do we argue that amending the opinion in this manner would change the outcome of the appeal. We also do not seek en banc review, because the error - which may have been inadvertent - can easily be corrected by the panel. Nonetheless, amending the opinion is particularly important to the EEOC because this appears to be the first published opinion discussing 1625.23, and as it stands the opinion will create unnecessary confusion about the meaning of the regulation. BACKGROUND This appeal concerns the validity of a waiver agreement that Wastak signed. Wastak, supported in part by the EEOC as amicus, argued that the waiver failed to comply with the ADEA's stringent requirements and therefore did not bar his age-discrimination claim. One provision of the waiver that Wastak challenged provided that if litigation were brought to enforce the waiver, "the prevailing party shall be entitled to recover reasonable costs and attorneys' fees." Slip op. at 19. Wastak argued that this provision was inconsistent with 29 C.F.R. 1625.23, a regulation that the EEOC promulgated more than two and a half years after his waiver was signed. In our amicus brief, the EEOC also noted that the provision was invalid under the current regulation, although we took no position on whether it alone would invalidate the entire waiver. EEOC br. at 6 n.1. This Court held, however, that 1625.23(b) prohibits only fee-shifting provisions that "punish the mere initiation of a suit, even if that suit was ultimately meritorious," not provisions granting attorneys' fees to the employer at the end of litigation if the waiver is upheld. Slip op. at 20. The Court rejected all of Wastak's and the EEOC's arguments, ruling that the fee provision was valid. ARGUMENT The panel should amend its opinion because its reading of 29 C.F.R. 1625.23 is inconsistent with the EEOC's controlling interpretation of the agency's own regulation. Contrary to the panel's understanding, 1625.23(b) prohibits including in an ADEA waiver any provision that would allow an employer to recoup its attorneys' fees merely because it was the prevailing party. The regulation broadly prohibits "any" penalty or other limitation the would "adversely affect[] any individual's right to challenge the agreement." Id. This includes provisions that allow employers to recover attorneys' fees beyond those "specifically authorized under federal law." Id. As the EEOC explained in promulgating this regulation, the ADEA (unlike Title VII) allows an employer to recover its attorneys' fees only if the plaintiff's suit was brought in bad faith. Waivers of Rights and Claims, 65 Fed. Reg. 77,438, 77,442 (2000). A prevailing-party provision like the one in Wastak's waiver goes well beyond this by allowing a prevailing employer to recover its attorneys' fees without any showing of bad faith. Because this provision imposes on Wastak "additional . . . attorneys fees" beyond those "available under established principles," it may not be included in an ADEA waiver. 65 Fed. Reg. at 77,442. The panel construed 1625.23(b) narrowly to prohibit only fee-shifting provisions that automatically award fees to an employer merely because the employee has filed suit - but not provisions that award fees because the employer has prevailed in the suit. The EEOC, however, explicitly considered - and rejected - this approach in crafting the regulation. 65 Fed. Reg. at 77,443. The EEOC did not agree with the contention that fee-shifting and other damages provisions "should be enforceable when they are included in waiver agreements that are found to be knowing and voluntary" under the ADEA - in other words, in cases in which the employer has prevailed. Id. Fee-shifting provisions chill employees' willingness to file suit under the ADEA because of the fear that they will be liable for their employers' attorneys' fees. Id. This chilling effect is problematic even with prevailing-party provisions, because the validity of a waiver often may not be apparent from the face of the document. Id. Moreover, "even individuals who are fairly certain that an ADEA waiver is unenforceable may choose not to bring suit simply because they are unwilling to risk liability for . . . the employer's attorneys' fees." Id. The regulation's limited exception allowing fees "specifically authorized under federal law" does not save the fee-shifting provision of Wastak's waiver. As the EEOC explained, this exception was intended to clarify only that an employer may recover attorneys' fees under the bad-faith standard currently applied in ADEA cases. 65 Fed. Reg. at 77,442. The EEOC did not intend to authorize any other contractual arrangements for fee-shifting, regardless of whether they might otherwise be enforceable under the common law. Cf. slip op. at 19 n.7. Otherwise, the exception would almost completely swallow the rule. To be sure, the regulation does "include[], but is not limited to," the type of fee-shifting provision discussed by the panel, which would allow an employer to recover fees merely upon the initiation of a lawsuit. 29 C.F.R. 1625.23(b) (emphasis added). But it also more broadly targets "any" fee-shifting arrangement "adversely affecting" an individual's right to challenge the waiver. Prevailing-party provisions like the one in Wastak's waiver fall squarely within this category and therefore may not be included in an ADEA waiver. We submit that this meaning is apparent on the regulation's face. But even if  1625.23(b) were also susceptible to the narrower reading suggested by the panel, this Court should nevertheless defer to the broader reading urged by the EEOC. The EEOC's interpretation of its own regulation is entitled to "substantial deference" and is "controlling" unless another interpretation is "compelled" by the regulation's plain language or other indications of the agency's intent at the time it promulgated the regulation. Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994). This standard is "even more deferential" than the deference accorded under Chevron U.S.A. v. NRDC, 467 U.S. 837 (1984), to an agency's interpretation of a statute it administers. Abdulai v. Ashcroft, 239 F.3d 542, 552 (3d Cir. 2001). Of course, as courts have recognized, interpretations that accompany a final rule in the Federal Register - such as the EEOC's interpretation of 1625.23 discussed above - are among the best evidence of contemporaneous agency intent, and therefore are particularly worthy of this high level of deference. E.g., Ramey v. Gober, 120 F.3d 1239, 1245-46 (Fed. Cir. 1997). But as the Supreme Court has held, unless it is a post hoc rationalization, even an agency interpretation set forth in an amicus brief is entitled to controlling deference. Auer v. Robbins, 519 U.S. 452, 462 (1997). Because the panel's reading of 1625.23 is inconsistent with the EEOC's controlling interpretation, we ask the panel to amend its opinion. The panel might simply delete the passage on pages 18-20 of the slip opinion (from "Wastak also argues" through footnote 8) if this section is not essential to the opinion's reasoning. Alternatively, the panel could acknowledge that under the EEOC's controlling interpretation, the fee-shifting provision in Wastak's waiver violates 1625.23. But because Wastak's waiver was signed before this regulation was promulgated, the EEOC does not argue that the fee-shifting provision alone would invalidate the entire waiver.1 CONCLUSION The panel's reading of 1625.23 conflicts with the EEOC's controlling interpretation of the regulation. We ask the panel to grant Wastak's petition for rehearing solely for the purpose of amending the opinion to reflect a correct interpretation of the regulation.Respectfully submitted, NICHOLAS M. INZEO Acting Deputy General Counsel CAROLYN L. WHEELER Acting Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel __________________________ BENJAMIN N. GUTMAN Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, NW, Room 7022 Washington, DC 20507 (202) 663-4728 June 23, 2003 ADDENDUM CERTIFICATE OF SERVICE I certify that on June 23, 2003, I served copies of this brief by having them sent via overnight delivery to: Office of the Clerk United States Court of Appeals for the Third Circuit 21400 U.S. Courthouse 601 Market Street Philadelphia, PA 19106-1790 Donald P. Russo 117 East Broad Street Bethlehem, PA 18016 Attorney for Plaintiff-Appellant Jonathan B. Sprague Post & Schell 1800 John F. Kennedy Boulevard 19th Floor Philadelphia, PA 19103 Attorney for Defendant-Appellee ____________________________ BENJAMIN N. GUTMAN Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, NW, Room 7022 Washington, DC 20507 (202) 663-4728 1. If the panel revises rather than deletes this section of the opinion, we would ask the Court to reconsider footnote 8 as well. The opinion strongly implies that an employer may cut off benefit payments due under an ADEA waiver agreement to an employee who "breach[es]" the agreement by challenging the waiver in court. The regulation provides, however, that an employer may not abrogate its duties under a waiver agreement to any employee, even one who has successfully challenged the waiver in court. 29 C.F.R. 1625.23(d). The EEOC specifically reworded the final rule in order to avoid the implication that the panel endorsed. 65 Fed. Reg. at 77,446. As the Federal Register notice explained, employees do not breach ADEA waivers by exercising their right to challenge the validity of those waivers, because this right is guaranteed by the statute. Id. at 77,443-44, 77,446. Thus, regardless of whether 1625.23 alters the "longstanding contract principle that one party's performance is excused by the other party's breach," slip op. at 20 n.8, an employer may not cut off severance payments merely because the employee has challenged the waiver in court.