On December 27, 2001 the Equal Employment Opportunity Commission filed suit in Philadelphia against Allstate Insurance Company claiming that Allstate engaged in age discrimination against its employees who worked as sales agents.

WHAT HAPPENED

Allstate is the second largest insurer of homes and automobiles in the country. Over the years, Allstate has engaged in a practice of replacing its employee sales agents with independent contractors when agents quit or retired. Independent contractors were given slightly higher commission rates but didn't get comparable benefit packages.

In November, 1999 Allstate announced a restructuring of its sales force. It dismissed approximately 6,400 employee agents and then gave these former employees the choice of becoming independent contractors or leaving the company with a higher benefit package than normal retirees. The condition of either of these choices was the signing of a release which would prevent the employee from subsequently suing Allstate. Approximately 90% of the 6,400 sales agent employees were over 40 years of age when the restructuring took place. About 4,000 employee agents opted to become independent contractors and approximately 2,400 took the proposed retirement package. All but 19 agents signed the release.

Workers sue; EEOC follows suit

In August, 2001 twenty-nine individuals filed suit against Allstate in Philadelphia alleging age discrimination on the part of the company. Fifteen of the plaintiffs are still affiliated with Allstate as independent contractor sales agents. The EEOC, which has responsibility for preventing discrimination based on age, sex, race, religion or disability, eventually decided to bring its own lawsuit against Allstate and has asked the court to join its case that was brought by the 29 individuals. The agents claim that they were coerced into signing the releases in order to keep their book(s) of business which they had developed or get enhanced retirement benefits if they chose to retire. The employees claim that they lost significant revenue as a result of the actions of Allstate.

Bottom line

Many companies have attempted to obtain releases by offering employees additional benefits in exchange for an agreement not to sue. The Allstate case raises the question as to whether an employee who is asked to sign the release is really on equal footing with his employer when faced with an immediate choice of taking some extra benefits in exchange for agreeing never to sue the company for perceived discrimination. This is a case that will be watched closely by many companies throughout the country.

Reprinted with permission of publisher. First appeared in Connecticut Employment Law Letter (February 2002). For subscription information, call (800)274-6774.