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Title VII protection of severance benefits extends to former employees: Court


RICHMOND, Va.—Former and current employees can seek redress under Title VII of the Civil Rights Act of 1964, says a U.S. appellate court in a case involving a severance package.

According to the March 16 decision in Karla Gerner vs. County of Chesterfield, Va., by the 4th U.S. Circuit Court of Appeals in Richmond, Va., on Dec. 15, 2009, Ms. Gerner, who was the county's human resources director and had worked there since 1983, was told her position was being eliminated.

She was asked to sign an agreement that offered her three months' pay and health benefits in exchange for her voluntary resignation and waiver of any cause of action against the county. When Ms. Gerner rejected the offer a few days later, she was terminated without any severance pay or benefits.

Ms. Gerner sued under Title VII, charging disparate treatment on the basis of sex. She alleged the county did not offer her the same “sweetheart” severance package it had offered similarly situated male colleagues when it sought to terminate their employment, according to the appellate decision.

According to the decision, Ms. Gerner claimed these men were transferred to positions with less responsibility while being allowed to continue with their salary and benefits, or were kept on the payroll with benefits of six months or more, to enhance their retirement benefits.

In overturning a lower court ruling dismissing the case, the appellate court said Title VII “protects both current and former employees from discriminatory adverse employment actions. Title VII makes it an unlawful employment practice for an employer ‘to discriminate against any individual' on the basis of membership in a protected class,” said the ruling. “Courts have consistently interpreted this intentionally broad language to apply to potential, current and past employees.”

The three-judge panel's unanimous ruling also states the district court incorrectly held that severance benefits must be a “contractual entitlement” to provide the basis of an adverse employment action under Title VII. The decision says the U.S. Supreme Court's 1984 ruling in Hishon vs. King & Spalding “forecloses a holding that an employment benefit must be a contractual right in order for its denial to provide the basis for a Title VII claim.”

The case was remanded to the lower court for further proceedings.

Commenting on the ruling, plaintiff attorney Mark D. Dix of Bucci & Dix L.L.C. in Chesterfield, Va., said the ruling is “a game changer for employers—certainly in the 4th Circuit, if not the country—with respect to the offering of severance benefits.

“This is the first clear enunciation that I could find in any federal appeals court stating that Title VII protects against disparate treatment in the offering of severance benefits, regardless of whether they’re offered contractually, voluntarily or otherwise.”

In addition, said Mr. Dix, the ruling is important because it is “the first clear statement by this appeals circuit, the 4th Circuit, that Title VII protects against disparate treatment of former employees.”

An attorney for the Chesterfield County could not be reached for comment.