Although not contractually required to do so, many employers offer their management-level employees a severance package in the event of a reduction-in-force or some other non-disciplinary event which requires an employer to terminate a relationship with a managerial employee. The terms and compensation contained in severance packages usually depend upon salary, years of service, and work performance and/or value of the employee to the employer. However, if an employee can show that the terms of a severance package offered to them are less favorable than those offered to other, similarly situated employees, the employee may be able to state a claim for discrimination.
In the case of Gerner v. City of Chesterfield, Virginia (2012), the United States Court of Appeals for the Fourth Circuit reversed a lower court ruling from the Eastern District of Virginia and found that although a severance agreement is offered upon employment termination and is not a contractual right, it is nevertheless an employment benefit upon which a discrimination claim may lie. Finding that the district court judge (Hudson, J.) erred in his analysis of the legal standard, the appellate court held Title VII protects current and former employees from discrimination, as well as those who have not been hired and have been discriminated against in the hiring process. Further, the Court found that Ms. Gerner's allegations that she was offered a less favorable severance package than her male counter-parts under the City’s reduction-in-force plan, were sufficient to allege an adverse employment action for a gender discrimination claim. In making its ruling, the Court relied upon U.S. Supreme Court precedent and decisions from other Circuit Courts.
This decision by the Fourth Circuit, which is the highest federal appellate court for Virginia, Maryland, West Virginia, and the Carolinas, is a reminder to employers that they must be vigilant in making sure that employment benefits (even severance packages which are often viewed as “voluntary” or “discretionary”) are provided on an equitable basis. Alternatively, employers must make sure that they have a strong, non-discriminatory, reason for any difference in the provision of such benefits among similarly situated employees.
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