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Allstate’s agent-to-independent-contractor required release not substantive violation of anti-retaliation laws

By Brandi O. Brown, J.D.

In this long-running litigation against Allstate over its attempt to convert all of its insurance agents to independent contractors, a federal district court in Pennsylvania ruled that a release that it required its agents to sign, which would allow them to remain with the company as independent contractors after termination in a reorganization, was not a substantive violation of the anti-retaliation provisions found in Title VII, the ADEA, and the ADA, as argued by the EEOC. Thus, the court denied the agency’s motion for summary judgment while granting Allstate’s motion (Romero v Allstate Insurance Co, March 13, 2014, Buckwalter, R).

In 1999 Allstate announced a reorganization program under which all of its “captive agency force” would be reorganized into an independent contractor program. Allstate terminated the employment of over 6,000 agents, ninety percent of whom were over the age of 40. In connection with their termination, each agent was offered four options. The first three options included an agreement to execute a release of all statutory and common law. The fourth option did not. Under that option, the former agents would be paid up to 13 weeks of pay. The release included a waiver of claims under the ADEA, Title VII, and the ADA, as well as other federal and state law claims.

Suits filed. Several former agents brought age discrimination-based EEOC charges against their former employer and later filed two federal lawsuits against the company. The EEOC also brought its own action against Allstate for unlawful retaliation. The federal agency alleged that the company refused to permit them to continue as employees unless they signed the release. The EEOC also sought a declaratory judgment that the release was invalid. The three suits were consolidated. On February 27, 2014, the court issued a memorandum and order, denying cross-motions for summary judgment regarding the validity of the release signed by the plaintiff agents who brought the companion suits against Allstate.

In the instant motion for summary judgment, the EEOC contended that the release requirement constituted unlawful retaliation and that the ADA invalidated Allstate’s “sign the release or leave” scheme. Allstate, in its cross motion for summary judgment, contended that the release did not substantively violate any federal statute, which it contended warranted summary judgment in its favor on the entirety of the EEOC’s complaint. The court granted Allstate’s motion and denied the EEOC’s cross-motion.

Facially retaliatory. Recognizing that the case “did not precisely fit the mold of a typical retaliation claim,” i.e., protected activity followed by adverse action plus causal connection, the EEOC offered three theories to supports its claim. First, it contended that the release requirement was “facially retaliatory.” Specifically, it contended that the “very heart of the Program was a retaliatory policy” that only allowed agents who signed the release to remain employed. The EEOC argued that the release constituted an employment practice “likely to deter or disincentivize persons from engaging in future protected activity.” Although the EEOC based its argument on Trans World Airlines v. Thurston, the court noted that the Third Circuit had “subsequently clarified” the scope of that decision and “limited the reach of the so-called facial retaliation theory” in DiBiase v. SmithKline Beecham Corporation. The “touchstone” as described in that decision was whether discrimination was obvious from the terms of the policy. In such cases, the Third Circuit noted, the protected trait played a role in the decision. As applied to this case, the district court explained that it was “well established that a release of claims used in connection with termination of employment is not, in and of itself, a per se retaliatory policy simply because it may include the release of federal discrimination claims.” In fact, the court noted, Congress had already explicitly addressed this in enacting the OWBPA, when it “carefully defined the requirements necessary for such releases to be upheld.”

Jurisprudence from other jurisdictions and courts within the Eastern District of Pennsylvania supported the court’s conclusion that the mere offer of the agreement was not enough. The policy offered by Allstate was “precisely the type of general Release of claims” described in those cases. In this case, agents were terminated pursuant to the reorganization program and the program and release did not categorize them “according to age or protected activity.” Nor were the program and release facially retaliatory for taking away a right to continued employment or conditioning further employment on the release. The court found “inapposite” the Seventh Circuit case the EEOC offered in support of that argument because it involved enforcement of a policy against employees who had filed EEOC charges, not the creation of a cause of action for employees who had not yet been denied the exercise of their rights. Additionally, the court noted that the agents did not maintain a contractual or legal right to conversion to independent contractor status prior to the program. In fact, they had been terminated and thus the offered right to convert was “a benefit to which the employees were not otherwise entitled.

Retaliation against non-signing agents. The EEOC also argued that even if the release requirement was not facially retaliatory, Allstate unlawfully retaliated against agents who did not sign it by not allowing them to become independent contractors. This argument was policy-based and reliant upon the broad reach of the anti-retaliation provisions. Although the court found the EEOC’s argument “creative,” it concluded that it was infirm. First, the court found that “basic retaliation principles undermine the concept that a mere refusal to sign a broad release of claims” constituted protected conduct. Refusal to sign a release, the court found, did not “clearly signal” that the individual intended to participate in litigation. There was no evidence on the record that any agents had previously threatened to pursue age claims against Allstate. And the court declined “to make the tenuous inference that employee agents’ mere refusal to sign a release constituted some sort of opposition to discrimination that Allstate should have understood to be protected activity prior to implementing the Program.”

Even if the court did find that refusal to sign constituted protected activity, the EEOC failed to prove that the resulting withholding of benefits was an adverse employment action. The Seventh Circuit had already rejected such a claim in Isbell v. Allstate Ins. Co, a case which presented identical facts. Here, the court explained, it was “well settled that there is no retaliation where an employer withholds benefits from an employee who declines to sign a release where the employee is not otherwise entitled to such benefits.” Additionally, the EEOC’s theory ignored the fact that the program and release offered four different options to the employees. It made “little sense” to the court that by adding the fourth no-release option, Allstate would have “engaged in actionable retaliation” when such would not have been the case had the employer not offered the option at all.

Anticipatory retaliation. The EEOC’s final salvo was that Allstate had unlawfully retaliated against agents who signed the release by threatening that they could not bring discrimination claims in order to work. Such “anticipatory retaliation,” the EEOC contended, was prohibited. Although the court recognized “the principle of anticipatory or preemptive retaliation,” it explained that the principle did not apply here. In cases cited by the EEOC, the employer had either been “made aware of or reasonably feared the employee’s specific intent to engage in protected activity.” There was no record evidence that such was the case here. Moreover, in the cited cases, the employer had “threatened some form of adverse employment action following the protected activity.” In this case, the employees were terminated and had no ability to continue working. They were then offered employment if they signed a release and they were not threatened with adverse action. Nor did the evidence indicate that the employees had been retaliated against since filing suit.

The court noted that the “appropriate remedy” in a situation where the release is non-compliant with federal law is invalidation of the release. In fact, the court had noted “several infirmities” in the release in an earlier memorandum and order. The EEOC had attempted to go “one step further” and turn such infirmities “into a substantive violation of the anti-retaliation statutes,” but that attempt was “the proverbial attempt to fit a square peg into a round hole.”