Allstate Release Is Not Retaliation Under Federal Anti-Bias Laws, Court Affirms

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By Kevin McGowan

Feb. 13 — Allstate Insurance Co. didn't unlawfully retaliate under the federal anti-discrimination laws by requiring its employee agents in 2000 to sign releases that waived any pending discrimination claims if the terminated employees chose to become independent contractors selling Allstate products, the U.S. Court of Appeals for the Third Circuit ruled Feb. 13.

Affirming a ruling for Allstate in a long-running dispute, the Third Circuit said the Allstate conversion program, one of four termination options the company offered to some 6,200 agents previously classified as employees at will, falls within the general rule that employers may require signed releases of claims in exchange for severance pay or other enhanced benefits not normally available to fired employees.

The Third Circuit rejected the EEOC's argument that Allstate's requirement of a release for a terminated employee to continue with the company as an independent contractor is an exception to “hornbook law” that employers may require releases for post-termination benefits without running afoul of federal anti-discrimination laws.

“[T]he EEOC here fails to articulate any good reason why an employer cannot require a release of discrimination claims by a terminated employee in exchange for a new business relationship with the employer,” Judge Thomas M. Hardiman wrote.

The EEOC raises valid concerns about “the prospects of employers trading releases for new business opportunities” and terminated employees “facing ‘financial pressure' when offered such a deal,” the court said.

But the EEOC “fails to explain why this financial pressure is more offensive” to the discrimination laws' anti-retaliation provisions “than the pressure one is bound to feel when required to sign a release in exchange for severance pay,” the court said.

“In sum, we are not persuaded by the [EEOC's] efforts to arbitrarily limit the forms of consideration exchangeable for a release of claims by a terminated employee,” Hardiman wrote.

“Allstate followed the well-established rule that employers can require terminated employees to waive existing legal claims in order to receive unearned post-termination benefits,” the court said. “The EEOC has neither given us reason to craft an exception to this rule nor articulated a valid retaliation claim under the relevant statutes.”

The EEOC is examining the decision and considering its options, an agency spokeswoman said Feb. 13.

In a statement, Allstate said it was pleased the Third Circuit had resolved the contested issues in its favor after years of litigation.

“As the court noted, in offering each of its employee agents an option to continue selling insurance as Allstate exclusive agent independent contractors, ‘Allstate followed the well-established rule that employers can require terminated employees to waive existing legal claims in order to receive unearned post-termination benefits,' ” said Laura Strykowski, a company spokeswoman in Northbrook, Ill.

Employer Group Hails Broad Ruling 

The Third Circuit's opinion is a “very straightforward decision” rejecting as “untenable” the EEOC's view that a retaliation cause arises when employers simply offer enhanced benefits to terminated employees in exchange for a release of claims, said Rae Vann of Norris Tysse Lampley & Lakis in Washington, who filed an amicus brief for the Equal Employment Advisory Council, an association of large employers.

The EEOC's argument is “not supported by basic legal principles,” and the Third Circuit decision is in accord with every other federal appeals court to consider the issue, Vann told Bloomberg BNA Feb. 13.

The EEOC recently has been filing lawsuits challenging separation agreements, arbitration pacts and other employment documents containing releases as part of the agency's strategic enforcement plan, which identifies preserving access to the legal system as a priority, Vann noted. She said she hopes the Third Circuit's decision rejecting the EEOC's retaliation theory “will tamp down” the agency's enthusiasm for pursuing such cases.

No federal appeals court agrees with the EEOC's premise that an employer may be liable for retaliation by “simply making the offer” of enhanced benefits conditioned on a waiver of claims, Vann said.

In addition, as the Third Circuit found, the EEOC's argument that any employee who refuses to release claims is engaging in “protected activity” can't be squared with the relevant language in Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act or the Americans with Disabilities Act, she said.

The Third Circuit's ruling that employers may lawfully condition a terminated employee's receipt of enhanced benefits on a signed release of claims should apply broadly beyond the Allstate case's particular facts, Vann said.

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To contact the editor responsible for this story: Susan J. McGolrick at

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