FOURTH CIRCUIT PROTECTS FORMER EMPLOYEES FROM DISCRIMINATION UNDER TITLE VII

By Julie A. Moore
Steptoe & Johnson PLLC
Jun 15, 2012

Recently, the Fourth Circuit Court of Appeals – which covers West Virginia – issued an important discrimination opinion that all employers in the region need to be aware of.

In Gerner v. County of Chesterfield, Civ. Action No. 11-1218 (4th Cir. Mar. 16, 2012), the Fourth Circuit Court reinstated the lawsuit of a woman who alleged that her former employer unlawfully discriminated against her by offering her a less favorable severance package than it offered to male employees holding similar positions. In doing so, the Court held that Title VII protects both current and former employees from discriminatory adverse employment actions – including the offering of severance benefits, regardless of whether such benefits are furnished under a contractual obligation or offered only voluntarily.

The plaintiff in the case, Karla Gerner, was employed by Chesterfield County, Virginia for over 25 years, most recently as the County’s HR director. On December 15, 2009, she was informed that her position was being eliminated due to a re-organization and was offered severance of three months’ pay and health benefits in exchange for her voluntary resignation and a waiver of any cause of action against the County. After considering the County’s offer for a few days, Ms. Gerner ultimately declined to accept. The County thereafter terminated her employment, effective December 15, without any severance pay or benefits.

Ms. Gerner then filed suit under Title VII, claiming that the County discriminated against her on the basis of gender when it did not offer her the same “sweetheart” severance package it offered her male counterparts. Her complaint identified four male comparators who were either kept on the payroll with benefits for up to 6 months or more, or transferred to positions with less responsibility while continuing their prior pay, in order to allow them to enhance their retirement benefits.

Initially, the District Court granted the County’s motion to dismiss, holding that the County’s offer of a less favorable severance package could not constitute an adverse employment action under Title VII because Ms. Gerner was not contractually entitled to receive severance benefits and because the County’s offer of severance was made after Ms. Gerner had been terminated.

On appeal, however, the Fourth Circuit relied on the U.S. Supreme Court’s holding in Hishon v. Spalding, 467 U.S. 69 (1984), stating that the viability of a claim alleging a discriminatory denial of an employment benefit turns not on whether the employer was contractually obligated to provide the benefit, but rather, on whether the benefit is “part and parcel of the employment relationship.”

In addition – and following the lead of several other circuits – the Fourth Circuit ruled that a natural reading of Title VII, which makes it an unlawful employment practice to discriminate against “any individual” on the basis of membership in a protected class, indicates that potential, current and past employees are protected under the Act.

After Gerner, it is plain for most employers in this region that they can be vulnerable to some liability under Title VII even after an employee cleans out his desk and walks out the door for the last time. Additionally, Gerner is a harsh reminder to employers that they must beware of the potential for Title VII liability when it comes to providing any kind of employment benefit – whether the benefit be pursuant to a contractual obligation, a formal policy, or even an informal practice. As always, consistency and uniformity in the administration of such benefits will go a long way towards discouraging such claims.