Bloomberg Law for HR Professionals is a complete, one-stop resource, continuously updated, providing HR professionals with fast answers to a wide range of domestic and international human resources...
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.
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.
To contact the reporter on this story: Kevin McGowan in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Susan J. McGolrick at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)