Court Rules That Allstate Left Its Agents in Good Hands

Clifford Geiger
Clifford Geiger

In 1999, Allstate Insurance Company fired all of its employee agents and offered them four alternatives:  (1) convert to an independent contractor status and continue working as an exclusive agent; (2) convert to independent contractor status and sell the book of business they had developed; (3) receive an enhanced severance equal to one year’s pay; or (4) receive a basic severance of up to thirteen weeks of pay.  The first three options were conditioned on signing a release and waiver of all claims, including any claims of age discrimination.  The reorganization applied to all agents regardless of age, productivity, or performance, but roughly 90% of the terminated employees were more than 40 years old.

Several terminated agents filed charges of discrimination with the EEOC and subsequently initiated federal court cases.  Eventually, the EEOC filed its own federal lawsuit, claiming that Allstate retaliated against its older agents as a class in violation of the Age Discrimination in Employment Act and other federal anti-discrimination statutes.  Basically, the EEOC contended that requiring employees to sign a release in exchange for the opportunity to return as independent contractors or receive enhanced severance benefits constituted unlawful retaliation.

The Court had little trouble in dismissing the EEOC’s various legal theories, which it referred to as somewhat novel and creative but lacking any legal support.  For example, the EEOC argued that merely offering a release was retaliatory, because it was reasonably likely to deter persons from engaging in future protected activity.  However, that is the very purpose of obtaining a release, and the lawful use of waivers is well established, including under the Older Worker Benefit Protection Act.  Accepting the EEOC’s reasoning would have made illegal any offer of severance based on signing a release.  According to the Court, when an employer offers a terminated employee something extra in exchange for waiving federal discrimination claims, the waiver is not retaliatory.

The EEOC also contended that fired employees who refused to sign releases had engaged in protected activity, and Allstate retaliated by not allowing these employees to convert to independent contractors.  This Court found this argument rested on faulty assumptions and misplaced legal theories.  Logically, a retaliation claim requires an employer to know the employee engaged in protected activity before it can be guilty of retaliating.  Here, the Court declined to make the “tenuous inference” that refusal to sign a release constituted some sort of opposition to discrimination that Allstate should have understood to be protected activity.  Moreover, withholding benefits to which an employee is not otherwise entitled (e.g., enhanced severance and the right to convert to independent contractor status) is not a retaliatory adverse employment action.

The EEOC’s third theory was that Allstate unlawfully retaliated against employee agents who signed the release by threatening that they could not pursue employment discrimination claims if they wanted to convert to independent contractor status.  According to the EEOC, this constituted “anticipatory retaliation.”  While the Court acknowledged the existence of a theory of anticipatory or preemptive retaliation, it said those cases followed similar factual scenarios not present in Allstate’s case.  In these other cases, the employer had some knowledge of the employee’s concerns about discrimination or intent to pursue a discrimination claim, which triggered an adverse employment action even though the employee had not yet actually filed a claim or charge of discrimination.  There was no evidence that similar events occurred during Allstate’s reorganization.

Judge Buckwalter’s March 13 opinion can be found here. The plaintiffs and Allstate have both filed motions for clarification or reconsideration in this ongoing saga.








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