Court Finds Offer To Allow Discharged Employees To Convert To Independent Contractors In Exchange For Release of Claims Did Not Violate Anti-Retaliation Laws

As part of a reorganization process, over 6,000 sales agents who had worked for Allstate as at-will employees were terminated with an offer to subsequently work for Allstate as independent contractors. The terminated employees who chose to convert to independent contractor status also received a bonus of at least $5,000.00 and were excused from an obligation to repay any outstanding office-expense advances.  As a condition of converting to independent contractor status, the agents were required to sign a release waiving their existing legal claims against Allstate related to their employment or termination of employment.  The majority of the terminated agents chose the option to convert to independent contractor status and signed the release.

The EEOC subsequently filed a lawsuit claiming the requirement to sign releases constituted unlawful retaliation in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”), the Americans with Disabilities Act (“ADA”), and the Age Discrimination in Employment Act (“ADEA”) on the grounds that Allstate only allowed the agents to continue their careers with Allstate if they waived any discrimination claims. The EEOC sought a declaratory judgment invalidating the release.  The EEOC alleged that the “protected employee activity” in question constituting opposition to unlawful discrimination was the refusal to sign the release of claims and that the associated “adverse employment action” by Allstate was the withdrawal of the option to convert to independent contractor status.

In February 2015 ruling that granted summary judgment in favor of Allstate, the U.S. Court of Appeals for the Third Circuit commented that the EEOC “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.”  The Court stated that “the notion that the Conversion Option was inadequate consideration for the Release is remarkably counterintuitive.”  The Court also found that the refusal to sign the release of claims does not communicate opposition sufficiently specific to qualify as protected employee activity for purposes of a retaliation claim.  The Court further found that the EEOC could not establish the adverse employment action necessary to prove a violation of federal anti-retaliation laws.  In the Court’s opinion, it was noted that the EEOC did not cite to any legal authority for the proposition that an employer commits an adverse action by denying an employee an unearned benefit (in this case, the option to convert to independent contractor status after discharge) on the basis of the employee’s refusal to sign a release.  The ruling by the Third Circuit provides support for the proposition that the EEOC cannot arbitrarily limit the type of consideration exchangeable for a release of claims by a terminated employee.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, including those relating to discrimination and retaliation, for almost sixty years, and are available to discuss these issues and others.  As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.