Sundance Rehabilitation Corporation v. EEOC

August 26, 2004

The above decision was issued by the United States District Court, Northern District of Ohio, Eastern Division on July 26, 2004. The decision pertains to the enforceability of a general release of all claims that includes a provision that states that the individual will not file a claim with an administrative agency, such as the Equal Employment Opportunity Commission (EEOC). We thought that you should be aware of the above case ruling with respect to any general release that you may be using.
In Sundance, the Court found such a provision unenforceable under the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), discrimination claims under Title VII , and the Equal Pay Act (EPA). The Court found that an employee could waive the filing of a discrimination claim in court, but not the filing of a discrimination claim with the EEOC. However, apparently, an employee can waive the recovery of damages that may result from the filing of a charge with EEOC. The Court stated:

. . . This distinction between waiving the right to recover in a lawsuit versus waiving the right to file a charge with the EEOC applies equally in the context of the other anti-discrimination statutes at issue in this case. Finally, Board of Governors (a decision decided by the 7th Circuit Court of Appeals whose jurisdiction encompasses Wisconsin) makes clear that a policy conditioning an employment benefit on an employee’s agreement not to file an EEOC charge constitutes facial retaliation. Therefore, when an employer requires an employee as part of a separation agreement to give up her right to file a charge with the EEOC in exchange for severance benefits, the employer violates the anti-retaliation provisions of the law enforced by the EEOC. This Court holds that the provision of the Sundance Separation Agreement conditioning severance payments on an employee’s agreeing not to file a charge with the EEOC is facially retaliatory in violation of the ADA, EPA, and Title VII.

The rationale of the above ruling is based in part on the fact that the EEOC is charged with enforcing the aforementioned laws and that prohibiting a person from filing a charge with the EEOC, which may alert the EEOC that an employer is violating the EEOC laws, would interfere with the EEOC’s enforcement functions. The EEOC has issued a guidance on such nonwaivable claims.
The Court went on to hold that although the provision referred to was illegal and could not be enforced, the remainder of the provision in regard to the employee not filing a lawsuit in court was enforceable. The Court based its rationale in this regard on a common severability provision that was contained in the severance agreement. However, a different ruling could result if there were no such severability provision or the facts were otherwise different.
We recommend that you review the release of claims and waiver provision currently being used in your severance/settlement documents, if any, for purposes of compliance with the Sundance decision. If you have questions regarding the above, please contact any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.

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