In our practice we have received a number of inquiries over the years from employers whose departing employees executed severance agreements and then turned around and filed discrimination charges against them with the EEOC, or sued them. Does this breach the severance agreement? Can an employee who receives severance file such a charge? Can the employer stop paying severance?
The answer can be found in a newly settled EEOC lawsuit against Trinity Health Corporation of Michigan. The EEOC alleged that Trinity had a policy of denying or delaying severance payments to these employees. It is clearly unlawful for an employer to punish or retaliate against employees who exercise their right under Title VII to file a charge of discrimination with the EEOC, and Trinity settled the case by agreeing to change its policy and also pay $25,000 to an employee whose severance pay was withheld after she filed an EEOC charge.
An EEOC attorney answered our initial inquiry succinctly: "even if employees sign severance agreements with their employer, they are still entitled to file a discrimination charge with the EEOC."
Of course -- and this is a big "of course" -- if the severance agreement is properly drafted and provides consideration for the employee's agreement to release the employer from all claims, then the result could be different -- the employer would have a defense to the EEOC charge based upon the release.
But could the employer also cease making severance payments based upon a breach of the severance agreement by the employee?