Severance Benefits Conditional to EEOC Charge Deemed Retaliatory

From Venulex.com

On August 8, 2006, the United States District Court for the District of Maryland held that an employer violated the anti-retaliation provisions of several federal employment statutes by denying severance benefits to an employee who refused to withdraw a charge of discrimination filed with the Equal Employment Opportunity Commission ("EEOC"). The court further held that the severance agreement offered by the employer was retaliatory on its face because it contained language not only releasing the employee's individual claims for monetary relief, but barring the employee from pursuing EEOC charges against her employer. As discussed below, the decision in EEOC v. Lockheed Martin Corporation illustrates that employers must pay careful attention to release language in their form severance agreements and must avoid conditioning severance and other employment benefits on an employee's waiver of his or her right to engage in protected activity under federal law.

To understand the significance of this decision, it is necessary to review briefly the underlying facts and procedural history. Lockheed notified its employee that her position would be eliminated in two weeks as a result of a merger. The employer also informed the employee that she could receive severance benefits only by signing a "Release of Claims" form (the "Release") provided to her. The Release, among other things, required the employee to agree that "this Release prohibits my ability to pursue any Claims or charges against [Lockheed] seeking monetary relief or other remedies for myself and/or as a representative on behalf of others."

The employee refused to sign the Release, filed a charge of discrimination with the EEOC and sent the employer a demand for the severance benefits despite her refusal to sign the Release. In response, Lockheed sent the employee a letter informing her that "she will have to dismiss her EEOC charge against the company" in order to receive severance benefits. The employee refused to dismiss her charge, and the employer terminated her employment. Because the employee never signed the Release, she never received severance benefits.

The EEOC filed suit on the employee's behalf, arguing that Lockheed unlawfully retaliated against her and that the Release was retaliatory on its face. The court agreed on both counts, noting that each argument provided an independent ground upon which the EEOC could prevail, and entered summary judgment in favor of the EEOC.

As to the EEOC's first argument, the court found that the employer's letter was explicit evidence that the employer "conditioned [the employee's] receipt of severance benefits on her withdrawal of the EEOC charge." The court held that the employer's sending the letter, rather than its presentation of the Release to the employee, constituted the retaliatory act. The court further held that it did not matter that Lockheed was not obliged to provide severance benefits to any employee, observing that once the employer chose to provide such benefits it could not provide them only to employees who refrain from participating in protected activity. Finally, the court held that Lockheed's letter to the employee was not a mere offer of severance benefits in exchange for the waiver of the employee's right to collect monetary damages for potential claims, but instead improperly "demanded the withdrawal of an EEOC charge if [the employee] was to get severance benefits."

As for the language of the Release itself, the court rejected Lockheed's argument that the Release merely waived the employee's right to recover monetary damages for her own claims, including claims under federal anti-discrimination laws, in exchange for severance benefits. Rather, the court found that the Release's scope was much broader in that it prohibited employees from pursuing "any Claims or charges. . . seeking monetary relief or other remedies for [themselves] and/or as a representative on behalf of others." The court emphasized the difference between waiving claims, which is permissible, and barring the filing of EEOC charges, which is not, and found that the Release was "facially retaliatory" because its "relevant effect" was to bar employees from filing charges.

The Lockheed Martin decision illustrates the importance of carefully drafting severance and other agreements containing provisions that release claims or otherwise waive employee rights. While the decision represents only one district court's opinion and is likely to be appealed, employers should carefully review the language used in employee severance plans and related form severance agreements and correspondence to check for the following potentially troublesome verbiage:

• Language expressly conditioning receipt of the severance benefits on either the employee's withdrawal of a charge of discrimination or the employee's agreement not to file a charge of discrimination in the future; and
  
  
• Language in the release paragraph of severance agree¬ments that defines the scope of the released "claims" in a way that could be construed as prohibiting the mere filing or pursuit of a charge of discrimination.

If such language appears in your severance plans and agreements, you should consult with legal counsel to determine whether such language should be modified or eliminated to avoid potential retaliation claims. One alternative approach is to insert language in the severance agreement that does not prohibit the filing of the charge itself, but makes clear that the employee is releasing and waiving any right to receive any monetary relief in connection with the prosecution of a charge or suit brought on the employee's behalf. The holding in Lockheed Martin suggests that such language would be enforceable under its analysis.

Finally, it is unclear what effect, if any, the Lockheed Martin decision has on the enforceability of language appearing in post-employment settlement agreements (rather than severance plan agreements) that condition receipt of the settlement proceeds on the withdrawal of a pending charge. On the one hand, such a provision should be enforceable despite Lockheed Martin because there is no denial of any "employment" benefit (e.g., severance pay) to employees who have engaged in protected activity. On the other hand, language conditioning receipt of settlement proceeds on the withdrawal of a pending charge arguably "interferes with the public's interest in EEOC enforcement" of the civil rights acts, which was one of the concerns raised by the court in Lockheed Martin. Accordingly, employers may wish to modify the waiver and release language appearing in form settlement agreements as well as in severance agreements.

From Venulex.com

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On August 8, 2006, the United States District Court for the District of Maryland held that an employer violated the anti-retaliation provisions of several federal employment statutes by...