Voluntary Benefits Provided in Discriminatory Manner May Constitute Adverse Employment Action

  27 July 2016

A recent decision by the U.S. Court of Appeals, 4th Circuit, emphasizes that if an employer provides benefits in a discriminatory manner that may constitute an adverse employment action even if the employer is not required to provide the benefits. Further, Title VII protects both current and former employees from discriminatory employment actions. The case involves Karla Gerner, who sued her former employer, Chesterfield County, Virginia ("County"), claiming that the County unlawfully discriminated against her by offering her a less favorable severance package than that offered male employees holding similar positions. Gerner worked for the County for more than twenty-five years and always received “positive performance evaluations.”  In 2009, County officials advised Gerner that due to reorganization, her position was being eliminated. They asked her to sign a severance agreement that included three months of pay and health benefits in exchange for a voluntary resignation and waiver of any cause of action against the County. Gerner refused to sign the agreement, and upon receipt of her right to sue letter from the Equal Employment Opportunity Commission (EEOC) she filed a lawsuit against the County alleging disparate treatment on the basis of sex in violation of Title VII. Specifically, Gerner alleged that the County did not offer her the same “sweetheart” severance package offered to her male counterparts, which included offers of transfers to other positions with less responsibility (and the same salary and benefits) or being kept on the payroll with benefits of up to 6 months to enhance their retirement benefits. The district court dismissed Gerner’s complaint, on the ground that she failed to allege a Title VII claim because the County’s allegedly discriminatory denial of severance benefits did not constitute an adverse employment action unless the benefits were a “contractual entitlement.”

On appeal, the court held that if a benefit is part of the employment relationship it may not be “doled out in a discriminatory fashion” even if the employer is not required to offer the benefit.  Thus, benefits that an employer is not required to provide, such as a severance package, may still qualify as a privilege of employment and as such provide the basis for a Title VII action if the benefits are provided in a discriminatory manner thereby constituting an adverse employment action. The court emphasized that if the “employee did not volunteer for a change in employment benefits or retain a job in lieu of a new benefit, courts have consistently recognized that the discriminatory denial of a non-contractual employment benefit constitutes an adverse employment action.” The court further highlighted that “Title VII protects both currentand former employees from discriminatory adverse employment actions. Title VII makes it an unlawful employment practice for an employer "to discriminate against any individual" on the basis of membership in a protected class. Courts have consistently interpreted this intentionally broad language to apply to potential, current, and past employees.” Read More.