Severance Agreements And Retaliation (Part I)

Employers must be careful with how their severance and release agreements are drafted, both to ensure they are effective, and that they do not stimulate retaliation claims. An extreme example is EEOC v. Lockheed Martin, 444 F. Supp. 2d 414 (D. Md. 2006). In that case, Denise Isaac was let go as part of a mass layoff when Comcast merged with Lockheed Martin. Isaac, along with other laid-off employees, was offered a separation package in exchange for her signed agreement to release the company of all claims. In relevant part, the release stated:

Claims Released. Subject only to the exclusions noted in the previous paragraph, I agree to waive and fully release any and all claims of any nature whatsoever (known and unknown), promises, causes of action or similar rights of any type (“Claims”) that I may now have or have had with respect to any of the Released Parties listed below. These Claims released include … claims for other personal remedies or damages sought in any legal proceeding or charge filed with any court, federal, state, or local agency either by me or by a person claiming to act on my behalf or in my interest.

Isaac refused to sign the release agreement but demanded severance pay, and filed a charge with the EEOC alleging that she was terminated due to her age, race and gender. The employer responded that no severance would be paid without Isaac’s signature of the release and withdrawal of her EEOC charge. Isaac refused to do either; the company consequently refused to pay her severance.

In a lawsuit initiated by the EEOC, the court found: (1) that Lockheed Martin had retaliated against Isaac by conditioning her severance benefits on her signature of the company’s release clause and withdrawal of charge; and (2) that the release clause itself was facially retaliatory. First, the court determined that even though employers indeed did not have to provide departing employees severance, those that decided to do so could not provide the benefit in a discriminatory fashion. Specifically, the district court held that “Lockheed might well have been free to offer severance benefits to no one, but it cannot provide them only to employees who refrain from participating in protected activity.” Id. at 419. In Isaac’s case, the court found that the severance was withheld in retaliation of her filing and refusal to withdraw her EEOC charge. Second, the court held that Lockheed Martin’s release clause was facially retaliatory, meaning that Isaac would not even have to make a prima facie case of retaliation in order to win. The court took particular issue with the release’s general broadness (“I agree to waive and fully release any and all claims of any nature whatsoever”) and specific language barring “any charge.” The court found that such language unlawfully interfered with the EEOC’s investigatory and enforcement functions and ran afoul of federal anti-discrimination laws.

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