From JDSupra Business Advisor, Jennifer Will of McNees Wallace & Nurick describes a case where an insurance company changed all its agents from employees to independent contractors. She writes that when the company make the change, the company
became a target of the EEOC. In its attempts to avoid litigation, [the company] decided to terminate all of its agents who were classified as employees. At the same time, the Company offered those employees a series of choices, which included a $5000 conversion bonus for those who wished to become independent contractors and a year of severance pay, for those who didn’t. In either event, a release of all discrimination claims was required.
After a few of those terminated employees filed charges, the EEOC filed a civil action of its own, seeking to invalidate the release itself, on the ground that it constituted retaliation. The EEOC took issue with [the company] only permitting employees to continue their careers if they waived all discrimination claims. What’s wrong with that?
Nothing, said the District Court (twice). Nothing, said the Court of Appeals (after a remand). Turning to well-established law, the Court rejected the EEOC’s claims that offering to convert an employee to independent contractor status was “illegal” and that the conversion bonus was insufficient consideration for a release.
How’s this for a quote? “[W]e are not persuaded by the [EEOC’s] efforts to arbitrarily limit the forms of consideration exchangeable for a release of claims by a terminated employee.” In sum, it is the employer, and not the EEOC, that gets to decide what post-termination benefits to offer an employee in exchange for a release. The act of refusing to sign a release is NOT protected activity and, therefore, cannot give rise to a claim of retaliation….”
This decision allows a company to terminate employees and engage with them as independent contractors. The worker can accept the company’s offer in exchange for a release of any claims or the worker can pursue any claims s/he may have.
Read the full story at You’re fired! Want to continue to work for us as an Independent Contractor?