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John Rodgers represents public and private employers in employment-related litigation and assists them with employment policies, employee handbooks, workplace investigations, disciplinary actions, and terminations. He actively litigates employment disputes on behalf of employers and has handled discrimination and retaliation, wage and hour, FMLA, and non-compete cases in both state and federal court. He also devotes substantial attention to ERISA litigation and representing individuals and businesses in conservatorship matters. View articles by John

In a decision that could have employers rethinking how they offer employees a severance agreement, in McClellan v. Midwest Machining, Inc. the Sixth Circuit held that former employees seeking to void severance agreements do not have to give the severance pay back before filing suit under Title VII or the Equal Pay Act.

Factual Summary

Tender Me This: Sixth Circuit Holds Employees Don’t Have to Give Severance Money Back before Filing Title VII or EPA LawsuitThe facts of this case help give this legal holding some flavor. In late August 2015, Jena McClellan informed her employer, Midwest Machining, Inc., that she was pregnant. After doing so, McClellan says her supervisor started making negative comments about her pregnancy and was annoyed about the pre-natal doctor’s appointments. About three months later, Midwest Machining terminated her. The decision does not provide the articulated reason for termination.

On the date of her termination, the company’s president called McClellan into his office, gave her a severance agreement, and said that she “needed to sign then if [she] wanted any severance.” The door was shut to his office, and McClellan said she did not feel free to leave. The two reviewed the agreement together, but McClellan says the president did so very quickly, did not ensure that she understood the agreement, and used a “raised” tone during the entire meeting.

McClellan testified that she felt pressured and bullied, and she signed the agreement without the benefit of a lawyer’s counsel. The agreement waived all of her claims. McClellan later testified that she did not understand that the claims she was waiving included discrimination claims; she thought it was only claims for unpaid wages and benefits. Midwest Machining paid McClellan $4,000 in exchange for signing the agreement, and she accepted the money.

Summary Judgment Initially Granted to Employer

McClellan filed an EEOC charge claiming Midwest Machining discriminated against her, and she received her right-to-sue letter. On November 6, 2016, about a year after her termination, she finally met with an attorney, who immediately filed a lawsuit alleging pregnancy discrimination in violation of the Pregnancy Discrimination Act (which is part of Title VII) and pay discrimination in violation of the Equal Pay Act (EPA), among other claims.

Midwest Machining’s counsel informed McClellan’s lawyer of the release in the severance agreement. McClellan, at the direction of her lawyer, then sent a letter (about three weeks after the suit was filed) stating that she was rescinding the severance agreement. She enclosed a $4,000 check, the amount of the severance.

Midwest Machining responded by returning the check to McClellan, stating there was no legal basis for her to rescind the severance agreement. A couple of months later, Midwest Machining moved for summary judgment because McClellan did not “tender back” the $4,000 before she actually filed suit. After some legal wrangling, the trial court eventually agreed, relying on the common law “tender-back doctrine,” which provides that “even if a party signs a release under duress,” she must return the severance monies before she can file a lawsuit. The district court held that even if McClellan signed the severance agreement under duress (a disputed issue of fact), she did not “tender back” the severance money before she filed suit. Therefore, the district court held that she had ratified the contract waiving her claims and her lawsuit had to be dismissed.

Sixth Circuit Reverses

McClellan appealed to the Sixth Circuit, which reversed, holding that a plaintiff “is not required” to give back the severance monies before bringing claims for violations of Title VII or the EPA. The Sixth Circuit noted its concern – as expressed by other courts – that the employees would have spent their severance money already and would not be able to pay it back.

“[W]e worry that requiring recently-discharged employees to return their severance before they can bring claims under Title VII and the EPA would serve only to protect malfeasant employers at the expense of employees’ statutory protections at the very time that those employees are most economically vulnerable.”

As opposed to being a bar to suit, under the Sixth Circuit’s holding, the amount of the severance is to be deducted from any judgment awarded to a plaintiff-employee. Other federal circuits have similar holdings involving other federal employment statutes. The Sixth Circuit sent the case back to the district court for further proceedings. A dissent was filed, arguing that the case should have been remanded for further fact finding on the “tender-back” doctrine and ratification of the contract.

Takeaways

Employers should not overreact to this decision as it does not mean that severance agreements are a waste of money. This decision only addresses what happens when an employee claims duress and seeks to void the severance agreement. The key is to offer severance in a way to avoid a claim of duress.

Perhaps the biggest takeaway from this decision is don’t pressure (or look like you are pressuring) separating employees to sign severance agreements. Make sure that nothing about the circumstances surrounding the severance offer could later be used to show that the employee was under duress, fraudulently induced to sign the agreement, or any other act that would give the employee an argument to claim the contract was voidable.

Assuming McClellan’s story is true – the president of a company tells a departing employee that she has to sign the agreement that day if she wants to receive her severance – what can we learn?

  • Remember your goal is to get the employee to sign the agreement (and release any claims). The situation will be uncomfortable because the employee is losing a job, but be nice. If the company representative is intimidating or could otherwise be characterized as a bully—maybe use someone else to deliver the message. It is usually best to have two people (so if the employee later accuses someone of bad behavior, the company has a witness).
  • Give the employee a reasonable amount of time to review the agreement. If the employee is age 40 or older, follow the Older Worker’s Benefits Protection Act requirements and give the employee at least 21 days to review the agreement and seven days to revoke after signing. If the employee is not yet age 40, then give a reasonable time—say five days. Keep in mind that what is reasonable can change based on the circumstances.  Five days on Monday gives the employee a week to consult a lawyer.  Five days on Friday before a holiday weekend may not be a reasonable amount of time.
  • Allow the employee to take the agreement home to review. Think of it from the employee’s perspective—would you feel pressured or fully understand an agreement that gives up your rights while the company president is standing over your shoulder?
  • Encourage the employee to consult a lawyer as needed.

Even if you follow all of these practices, if an employee claims she was pressured to sign a severance agreement under duress and argues that the contract is voidable, understand the employee does not have to give the severance money back before filing a Title VII or EPA lawsuit, at least in the Sixth Circuit.

Voluntarily Sharing Family’s Cancer History Bars GINA Claims, Court HoldsGINA—that elusive law about employers collecting genetic information that rarely comes up. What if an employee voluntarily shares his genetic history—can he turn around and claim his employer improperly acquired the genetic information? Fortunately, in Williams v. Graphic Packaging International, Inc., the U.S. District Court for the Middle District of Tennessee, provides some guidance and says no.

GINA Refresher

The Genetic Information Non-Discrimination Act (GINA) prohibits employers with 15 or more employees from discriminating against an employee on the basis of “genetic information.” Under GINA, it is “an unlawful employment practice” for an employer to “request, require, or purchase genetic information” concerning an employee or an employee’s family member (unless an exception applies). If an employee voluntarily discloses his family’s medical history, then the employer arguably did not violate GINA because it did not request, require, or purchase the genetic information.

The Williams Case

Williams was diagnosed with prostate cancer and requested medical leave from his supervisor. He claimed that his supervisor “repeatedly questioned” him about his cancer, the doctor’s opinions concerning his cancer, and the treatment options. During at least one communication, Williams told his supervisor that cancer ran in his family.

Graphic Packaging later terminated Williams, and he filed suit, bringing multiple claims including that it violated GINA because the company became aware of his family’s medical history with cancer. Graphic Packaging moved for summary judgment, and in May 2018, the court granted its motion and dismissed the case in its entirety.

In dismissing the GINA claim, the court held that because Williams voluntarily informed his supervisor (and two other people) that cancer ran in his family, his GINA claim failed. Furthermore, the court noted that Graphic Packaging never required him or any of his family members to submit to a genetic test. Williams has since appealed the dismissal of his case to the Sixth Circuit Court of Appeals.

Takeaways

Although Graphic Packaging was ultimately successful in Williams (at least pending the results of the appeal), employers should not forget about GINA. Among other prohibitions, the act bars employers from discriminating against an employee based on an employee’s genetic information. It also prohibits employers from requesting, requiring, or purchasing an employee’s or family members’ genetic information, unless one of the statute’s expressed exceptions applies. Those exceptions include when an employer inadvertently requests or requires an employee to provide his or her medical history or family medical history. If an employee voluntarily discloses that medical history, however, the employer can successfully argue – as it did in Williams – that it did not request or require the disclosure of the family’s medical history, inadvertently or otherwise, and that the GINA claim should be dismissed. It is probably safest, however, to train supervisors to not ask about an employee’s medical condition (to comply with the ADA) and also avoid asking about things such as family medical history (to comply with GINA).

Employers beware: An employee does not have to use “magic words” to complain about discrimination for it to lay the basis for a retaliation claim. The Sixth Circuit made this point in a unanimous opinion in the case of Mumm v. Charter Township of Superior.

Sixth Circuit to Employers: No ‘Magic Words’ Make a Sex Discrimination Complaint Title VII Protected ActivityFacts

Susan Mumm complained to her employer, the Township, about being disciplined for performance-related reasons (she was an accountant, among other duties). After the Township addressed her complaint, Mumm’s supervisor, Ken Schwartz, asked her to withdraw the complaint.

During a subsequent meeting, Mumm stated she would withdraw her complaint only if the Township granted her an immediate pay raise of $10,000 because she was “tired of being underpaid for all these years in relation to Keith Lockie.” Lockie (male) was another Township accountant. Mumm also claims she informed her supervisor that she had consulted a labor attorney, and she intended to file a lawsuit if the Township did not address “the pay discrimination between Keith and me.”

The Township subsequently fired Mumm because it had “lost trust” in her after the meeting, which the Township considered to be the “last straw” in a number of inappropriate actions. True to her word, Mumm filed a lawsuit alleging multiple claims, including a retaliation claim under Title VII. Under Title VII, it is unlawful for an employer to retaliate against an employee for engaging in Title VII-protected activity. The district court granted summary judgment to the Township on all of Mumm’s claims, holding Mumm’s complaint did not constitute Title VII-protected activity. Mumm appealed to the Sixth Circuit.

What the Sixth Circuit Said on Appeal

The Sixth Circuit reversed the trial court. The court held that Mumm’s threat to sue was clear enough to be protected activity and the Township “should have known Mumm was charging the Township with sex discrimination.” The Sixth Circuit sent the case back to the district court for a jury trial.

In reversing summary judgment, the Sixth Circuit found that even though Mumm did not say “sex discrimination” or make clear she believed gender explained the pay difference between her and Lockie, the Township officials knew Lockie was male, knew he occupied a similar position, and knew that he (like Mumm) was an at-will, non-unionized employee.

“Mumm pointed to a specific practice she believed to be unlawful (the pay disparity between her and Lockie) and threatened to sue if the Township did not correct it. . . .It makes no difference that Mumm did not utter the magic words ‘sex discrimination.’”

The Sixth Circuit also held that a reasonable jury could find the Township’s reasons for Mumm’s discharge were pretextual.

Takeaways

This case is a good lesson for employers dealing with employees who raise complaints.

  • Don’t be picky when determining whether an employee has complained about discrimination. As the Sixth Circuit found, an employee does not have to use certain “magic words” to engage in protected activity. If it is a close call, treat it like a discrimination complaint.
  • If an employee complains about something you think could be about discrimination (even if the employee did not expressly say it), treat it accordingly. Investigate that complaint.
  • Don’t retaliate against an employee for bringing it up. You can address issues, discipline if necessary, etc., but don’t base a decision on the fact that the employee complained. Otherwise, you may have to be explaining yourself to a jury.