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Severance Agreements And Retaliation (Part II)

June 21, 2013

In our post yesterday we discussed the pro-employee case of EEOC v. Lockheed Martin, 444 F. Supp. 2d 414 (D. Md. 2006).

The Sixth Circuit Court of Appeals issued a more employer-favorable decision on the issue in EEOC v. Sundance Rehab. Corp., 466 F.3d 490 (6th Cir. 2006). Similar to the Lockheed Martin case, the Sundance Rehab. Corp. case involved a mass lay-off and a separation agreement that offered severance pay in exchange for the employees’ signed promise not to sue or file any administrative charges against the company. Although an Ohio district court concluded that the release clause was facially discriminatory, the Sixth Circuit disagreed. It held that although the company’s release clause contained an unenforceable provision prohibiting employees from pursuing administrative charges, it was nevertheless facially permissible. The court reasoned that a severance agreement containing a release clause cannot in and of itself be retaliatory because it constitutes merely an offer for benefits – benefits employees are not entitled to receive in the first place and are free to accept or reject. Thus, the Sixth Circuit held, the EEOC failed to establish that the employer took any actual “adverse employment action” against the employees, a required element of any retaliation claim.

Other cases also tend to indicate the Lockheed Martin case is an outlier, both in terms of the factual scenario, and the legal positions the court took. For example, in EEOC v. Nucletron Corp., 563 F. Supp. 2d 592 (D. Md. 2008), Peter Dove, upon his termination, was offered a severance payment conditioned on his agreement not to file a discrimination suit or charge. Id. at 595. The severance agreement also contained a confidentiality provision. Because Dove refused to sign the severance agreement, he did not receive the severance benefits, and he was not bound by any proposed restrictions. Id. at 596. The EEOC sued, asserting that the mere offer of such a severance agreement constituted “facial retaliation” because several portions of it (i.e., the portion that required an employee to waive his right to file or participate in an EEOC discrimination charge) were unenforceable. Id. at 597. The district court in Maryland, however, determined that “[t]he mere offer of the severance package . . . does not fit the definition of retaliation under Title VII,” because the employer had not actually taken a “sufficiently adverse employment action.” Id. at 599.

In another case out of Maryland, Prelich v. Medical Resources, Inc., 813 F. Supp. 2d 654, (D. Md. 2011), the defendant terminated plaintiff’s employment, stating that her position “was being eliminated due to a reduction in force.” Id. at 658. In conjunction with the termination, defendant offered plaintiff a severance payment in exchange for her signature on a release (the “Release”), by which she would relinquish the right to institute “‘any action or complaint of any type in any administrative forum or court of law . . .’ in order to receive the proposed severance.” Id. (quoting Release). The Release also required plaintiff to “maintain the confidentiality of the fact and terms of the Release or risk repayment of the proposed severance.” Id. The plaintiff refused to sign the Release. Id. Instead, she sued, claiming the release was facially retaliatory under Title VII. The court dismissed the case, stating “[i]f the mere offer of the Nucletron Corp. severance agreement was not an actionable, adverse employment action, the mere offer of the Release here is not an adverse employment action.” Id. at 668. See also Gerner v. County of Chesterfield, Va., 765 F. Supp. 2d 770 (E.D. Va. 2011) (rejecting retaliation claim because, “[u]nlike the immediate case, the employee in Lockheed Martin was negotiating the terms of her release from employment under a contract providing for severance benefits. Plaintiff here was negotiating a waiver of any cause of action against the County in exchange for severance benefits”); Perez v. Faurecia Interior Systems, Inc., C.A. No. 6:08-4046-HMH-WMC, 2009 WL 2227510, at *5 (D.S.C. July 22, 2009) (Based on the facts of this case, “[t]he mere offer of the severance agreement is insufficient to constitute discrimination in the retaliation context.” E.E.O.C. v. Nucletron Corp., 563 F. Supp. 2d 592, 598 (D. Md. 2008). Faurecia did not require Perez to withdraw her EEOC charge in order to receive severance benefits. See E.E.O.C. v. Lockheed Martin Corp., 444 F. Supp. 2d 414, 417-18 (D. Md. 2006) (holding that employer conditioning receipt of severance benefits on employee withdrawing her EEOC charge constitutes retaliation); see also E.E.O.C. v. Sundance Rehab. Corp., 466 F.3d 490, 501 (6th Cir. 2007) (explaining that employees were not deprived of performing any protected activity by the mere offer of a severance agreement). Furthermore, there is no indication in the record that Faurecia has withheld any severance pay after Perez filed a charge with the EEOC. See Nucletron Corp., 563 F. Supp. 2d at 599 (explaining that employer’s action “only reaches the level of retaliation if it denies severance benefits that are otherwise promised or owed or if the employer sues to enforce the agreement”)); Burden v. Isonics Corp., No. 09–cv–01028–CMA–MJW, 2009 WL 3367071, at *7 (D. Colo. Oct. 15, 2009) (same).

In Mitchell v. MG Industries, Inc., 822 F. Supp. 2d 490, (E.D. Pa. 2011), the court followed Sundance Rehab. Corp., and rejected Lockheed Martin. In April through May 2004, MG offered eligible employees a severance package in the event of a Change in Control. The plan was tailored according to the employees’ salary and length of service with MG. In exchange for the benefits, MG required its eligible employees to sign a General Release and Waiver of Claims, which was set forth in the severance package materials. Shortly thereafter, on May 12, 2004, one of the plaintiffs, Muller, filed his claim with the EEOC. On October 29, 2004, Muller was terminated. On that date, Muller was notified he was eligible for the severance package provided he signed the General Release and Waiver of Claims. Rather than signing the Release as it was, Muller edited the agreement so that it carved out his ADEA claims. Despite requests urging Muller to sign the Release as written, Muller did not. As a result, MG did not provide him with any severance benefits.

Muller sued, claiming that the refusal to pay him severance was retaliation for his refusal not to dismiss his EEOC charge. In rejecting his claim, the court held that, “[i]n these circumstances, Muller’s retaliation claim fails because MG denied him severance benefits only after he refused to sign the same general Release and Waiver required of all MG employees seeking similar benefits, and Muller therefore cannot show benefits were denied because of his EEOC charge rather than his failure to sign the release.” Id. at 503 (citations omitted). Finally, in rejecting the plaintiff’s reliance on the Lockheed Martin decision, the court stated:

Muller argues EEOC v. Lockheed Martin, 444 F. Supp. 2d 414 (D. Md. 2006), is controlling on the issue of his retaliation claim. Lockheed Martin relies on Hishon in finding severance pay to be a benefit that is “part and parcel” of employment relationships. Here, again, this is not the case. Muller was informed of the severance package only months before his termination. His severance package cannot therefore be considered “part and parcel” of his employment relationship with MG. See EEOC v. SunDance Rehab. Corp., 466 F.3d 490 (6th Cir. 2006). Moreover, there is no argument concerning whether the release in Lockheed Martin was a uniform general release that was offered to all eligible employees across the board, as the Release was in this case. Finally, the doctrine of stare decisis does not compel one district court judge to follow the decision of another. Where a second judge believes that a different result may obtain, independent analysis is appropriate. See generally Threadgill v. Armstrong World Indus., Inc., 928 F.2d 1366, 1371 (3d Cir. 1991) (internal quotation marks and citation omitted); Yniguez v. State of Ariz., 939 F.2d 727, 736–37 (9th Cir. 1991) (noting that district judge’s decision is “not even binding on the same judge in a subsequent action”); United States v. Articles of Drug Consisting of 203 Paper Bags, 818 F.2d 569, 572 (7th Cir. 1987) (“[A single district court decision] is not binding on the circuit, or even on other district judges in the same district.”); Mosel Vitelic Corp. v. Micron Tech., Inc., 162 F. Supp. 2d 307, 311 (D. Del. 2000) (“[W]hile the opinion of one district judge may be found to be persuasive, it is not binding on another district judge (even if that judge happens to sit in the same district).”).

Id. at 504 n.10.

Our paper also addresses this issue in depth.

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