Rewritten 4/8/09 to correct error. The Seventh Circuit upholds a release of claims obtained though a routine severance package, over an employee’s objection that her Title VII claim for harassment did not accrue until her right-to-sue letter arrived.
Hampton v. Ford Motor Co., No. 08-1346 (7th Cir. Apr. 6, 2009): The Ford Motor assembly plant in Chicago had for years been the focus of litigation for sex harassment of women employees. One woman, who had a pending EEOC charge asserting hostile work environment, accepted a voluntary buyout package in 2006, The accompanying release covered “any and all rights or claims [she] may have against the Ford Motor Company, its agents or employees . . . relating in any way to my employment or the termination of my employment.” The release included language that the employee “agree[d] not to institute any proceeding of any kind” against Ford and its agents. After accepting the severance check, Hampton obtained her right-to-sue letter from the EEOC, then brought suit.
The district court and the Seventh Circuit in turn find that the release is enforceable under a straight contract analysis and as a “knowing and voluntary” waiver under federal law. Thus, summary judgment was correctly entered on her lawsuit, according to the panel.
The employee’s principal argument was that the release could not apply to claims that had not accrued when she signed the document, and that her Title VII claim did not accrue until the right-to-sue letter arrived. But the Seventh Circuit holds that the claim accrued during the hostile work environment. The filing of the civil action itself violated the terms of the release:
“Furthermore, Hampton agreed not only to waive any claims that arose before signing the Waiver, but also ‘not to institute any proceedings of any kind against Ford.’ The Title VII administrative scheme is distinct from a federal lawsuit. Although filing a charge with the EEOC is a prerequisite to bringing a federal action, see 42 U.S.C. § 2000e-5(b), such a charge does not automatically institute a lawsuit. In fact, a component of Congress’s original plan in drafting Title VII and creating the EEOC was to facilitate conciliation and settlement. See id. A mere two months after signing the Waiver, Hampton filed a complaint in the district court alleging wrongdoing that occurred prior to the execution date. In so doing, she initiated a proceeding in violation of the clear terms of the Waiver.”
The panel also holds that it was not necessary for Ford to go through the employee’s attorney to get permission for her to sign:
“Hampton was represented by an attorney at the time she signed the Waiver. Although her attorney was not involved in negotiating its terms, nothing prevented Hampton from consulting him before signing, and Ford did not discourage her from doing so; Hampton even testified that she unsuccessfully attempted to reach him. Hampton provides no legal authority for her assertion that Ford had a duty to contact her attorney before she signed the Waiver. Two parties to a dispute may discuss and settle their claims directly, even if represented by counsel. See Model Rules of Prof’l Conduct R. 4.2 cmt. 4. Furthermore, Hampton showed the Waiver to her attorney prior to her last day at Ford, within the time when she could have rescinded it.”
One notable point is that the Seventh Circuit continues to enforce the tender-back rule in employment cases (other than the ADEA, governed by the OWBPA and the decision in Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998)). It holds that Hampton’s failure to offer to return the severance money also doomed her challenge. But the tender-back rule remains unsettled under Title VII, as Justice Kennedy’s majority opinion in Oubre suggests: “These general [tender-back] rules may not be as unified as the employer asserts. See generally Annot., 76 A. L. R. 344 (1932) (collecting cases supporting and contradicting these rules); Annot., 134 A. L. R. 6 (1941) (same). And in equity, a person suing to rescind a contract, as a rule, is not required to restore the consideration at the very outset of the litigation.”