A severance agreement helps to allow businesses to ensure
that former employees don't sue. The concept is fairly simple: in exchange for
$X, the former employee agrees to release the company from every claim under
the sun from the beginning of time through the date the former employee signs
the agreement (or seven
days after the agreement is signed in cases where the employee releases
claims under the Age
Discrimination in Employment Act).
Where am I going with this? Let's take a hypothetical.
Assume that ABC Company decides to lay off two employees: Bob and Mary. Both
worked the same position, have the same seniority, and reported to the same
supervisor. However, ABC offers Bob six weeks of severance and Mary only three
weeks of severance. Does Mary have a potential gender discrimination claim
According to a recent decision from the Fourth Circuit
Court of Appeals, Mary may have a claim.
A female HR Director claims she received a
lesser severance package than her male counterparts.
The case is Gerner v. County
Of Chesterfield. There, Ms. Gerner, the County's HR Director -- I mean,
former HR Director -- alleged that the County of Chesterfield offered
"sweetheart" severance deals to many of her male co-workers. Ms
Gerner too received a severance offer as part of a County downsizing. Except,
according to Ms. Gerner, her offer was not so sweet. Certainly not as sweet as Hoosier football fans breaking into a
rendition of Sweet Caroline at a game against Iowa.
Snap out of it. Where was I? Oh yeah, so Ms. Gerner sued
her former employer for gender discrimination, claiming that the company
treated male former employees better than it did her (i.e., disparate
Former employees may have tenable
Now, to prove gender discrimination based on a theory of
disparate treatment, a female plaintiff must demonstrate, among other things,
that she suffered an adverse employment action and that similarly-situated male
employees received more favorable treatment.
The County moved to dismiss Ms. Gerner's complaint,
claiming that the terms and conditions of a severance package do not constitute
an actionable "adverse employment action". The lower court reasoned
that severance benefits are not a "contractual entitlement" and,
therefore, cannot be used to demonstrate an adverse employment action.
The Fourth Circuit concluded otherwise. It recognized
that the Supreme
Court has held that even benefits that an employer is not obligated to
provide may qualify as a privilege of employment. Therefore, those benefits may
provide a basis for a gender discrimination claim, where a company favors men
who are receive the benefit. Consequently, absent a "wholly
voluntary" reduction-in-force plan, the discriminatory denial of a
non-contractual employment benefit constitutes an adverse employment action.
Ok, but doesn't it matter that Ms. Gerner is a former
employee? That is, former employees can't prove disparate treatment based on
the denial of an employment benefit because former employees aren't entitled to
any employment benefits, right? Wrong. The
Supreme Court rejected the idea that denial of an employment benefit could
not constitute an adverse employment action because it only affected a former
employee. That would be inconsistent with the
goal of anti-discrimination statutes like Title VII, which is to eliminate
discrimination in employment, whether against current or former
For these reasons, the Fourth Circuit found that MS.
Gerner had pled an adverse employment action, as well as the other elements of
a disparate impact claim, and denied the County's motion to dismiss.
Same severance for everyone?
Of course not. There may be many factors not related to
one's gender that help dictate the amount of severance to offer. Title,
experience, and litigation risk are just a few. However, where you have two or
more similarly-situated employees who are laid off at the same time, assume
that they may talk to each of about the severance agreements that they receive.
In that situation, be careful about offering different agreements.
This article was originally published on Eric B. Meyer's blog, The Employer
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