As part of massive reorganization, Allstate severed the employment of approximately 6,200 employee agent. In connection with the layoff, Allstate offered all of the employee agents the opportunity to convert their employment status into that of an independent contractor selling Allstate insurance products, provided that they signed a release of all legal claims against Allstate, including federal employment discrimination claims.
In filing suit on behalf of the employees, the EEOC took the position that conversion from an employee to an independent contractor, coupled with a general release, constitute unlawful retaliation under the federal civil rights laws.
In EEOC v. Allstate Ins. Co. (2/13/15) [pdf], the Third Circuit flatly rejected the EEOC’s folly.
It is hornbook law that employers can require terminated employees to release claims in exchange for benefits to which they would not otherwise be entitled. Nothing in the employment-discrimination statutes undermines this rule….
According to the Commission, Allstate could have complied with the antiretaliation statutes by simply firing all its employee agents for good, instead of giving them the opportunity to sell Allstate insurance in a different capacity. We are confident that federal laws designed to protect employees do not require such a harmful result….
The EEOC here fails to articulate any good reason why an employer cannot require a release of discrimination claims by a terminated employee in exchange for a new business relationship with the employer.…. [W]e are not persuaded by the Commission’s efforts to arbitrarily limit the forms of consideration exchangeable for a release of claims by a terminated employee.
In other words, the employer, and not the EEOC, gets to decide the post-employment benefit to provide an employee in exchange for a release of claims—whether it’s severance pay, continued health benefits, an engagement as a independent contractor, or something else. As long as the consideration is not something to which the employee is already entitled, a court will not second-guess its sufficiency.