The EEOC has lost an important test of a novel theory that could have changed how some severance agreements are structured. It wanted to forbid requiring workers to waive the right to sue if they were converted from employees to independent contractors.
Recent case: Allstate wanted to move away from its business model of having employees sell insurance at offices located inside Sears stores. It offered salespeople a chance to continue working as independent contractors—if they signed a waiver stating that they were relinquishing the right to sue Allstate for past acts of discrimination.
A group salespeople refused to sign and were terminated. The EEOC took up their case, claiming it was illegal to condition the classification change on giving up the right to sue. The EEOC’s rationale: That the salespeople did not receive anything of value in exchange for giving up their rights; they would merely continue doing the same work they had always done.
The court disagreed. The alternative, in the court’s view, would have been termination. Becoming independent contractors was therefore a benefit and giving up the right to sue would be a valid exchange. The court basically said being able to continue to work was sufficient. (EEOC v. Allstate, No. 14-2700, 3rd Cir., 2015)