United States District Court, N.D. Illinois, Eastern Division
July 23, 2004.
NICHOLAS DAVIS, L.C. ALEXANDER, DEON PAGE & GEORGE HOLLINS Plaintiffs,
PRECOAT METALS, a division of SEQUA CORPORATION Defendant.
The opinion of the court was delivered by: NAN NOLAN, Magistrate Judge
MEMORANDUM OPINION & ORDER
Plaintiffs Nicholas Davis, L.C. Alexander, Deon Page and George
Hollins have sued their former employer, Precoat Metals
("Precoat"), claiming that Precoat discriminated against them due
to their race/national origin and retaliated against them for
engaging in statutorily protected activities, thus violating
Title VII of the Civil Rights Act, 42 U.S.C. § 2000e et seq., and
42 U.S.C. § 1981. While the lawsuit was pending, Precoat shut
down the plant where plaintiffs had been employed. Plaintiffs
then filed an amended complaint, adding an allegation that the
severance agreement Precoat offered to employees when the plant
closed was discriminatory and retaliatory.*fn1 That
severance agreement is the subject of the parties' cross motions
for partial summary judgment that are presently before the court.
The parties have consented to the jurisdiction of the United
States Magistrate Judge pursuant to 28 U.S.C. § 636(c).
Plaintiffs Davis, Page, Hollins and Alexander ask the court to
find that the severance package Precoat offered (1) is
discriminatory per se under Title VII and/or (2) has a
disparate impact on African-American employees. Precoat, on the
other hand, asks the court to find as a matter of law that the severance agreement is neither discriminatory nor
retaliatory. More specifically, Precoat asks the court to find
that (a) the severance agreement is not facially discriminatory,
(b) plaintiffs have offered no evidence of unequal treatment or
intentional discrimination or retaliation, (c) plaintiffs'
disparate impact claim is not properly before the court, and (d)
even if it were, plaintiffs cannot establish that the severance
agreement had a disparate impact on African-American
For the reasons explained below, plaintiffs' motion for partial
summary judgment is denied and defendant's cross motion for
partial summary judgment is granted.
Plaintiffs Davis, Alexander, Page and Hollins, who are
African-American, were members of the United Steelworkers of
America ("Union") while they were employed by Precoat. The terms
and conditions of their employment were governed by a Collective
Bargaining Agreement ("CBA"). After filing charges of
discrimination with the Equal Employment Opportunity Commission
("EEOC") and receiving right-to-sue letters, plaintiffs commenced
this lawsuit on July 21, 2001.*fn4
On or about November 30, 2001, Precoat informed the Union and
the employees that a decision had been made to close Precoat's
Chicago facility and layoff all employees at that facility
effective January 31, 2002. Article 25 of the CBA states:
In the event of liquidation of the Company or a sale
in which operations are removed from Chicago,
Illinois, and employees have no opportunity to
transfer to the new location, the Company agrees that
it will promptly notify the Union of its intention.
Upon request of the Union, the Company will meet for
the purpose of negotiating severance pay and any
other conditions affecting employees due to the plant
closing or removal.
Pursuant to Article 25, the Union asked to meet with Precoat to
negotiate potential severance. Prior to the negotiations, Precoat
made a decision to offer severance payments in exchange for
releases as a way to settle possible claims, whether filed or
not, arising out of the operation of the Chicago
Representatives from the Union and Precoat
subsequently met several times to negotiate possible severance.
During those negotiations, Precoat and the Union exchanged
proposals regarding possible severance. Ultimately, Precoat and
the Union agreed that all severance payments would be conditioned on the execution of a
Waiver and Release Agreement ("Release"). On or about February
11, 2002, the Union and Precoat reached an agreement to amend the
CBA ("Agreement") to set severance pay and conditions affecting
the Precoat employees. The Agreement states: "The parties
acknowledge that during the negotiations that resulted in this
Agreement, each had the unlimited right and opportunity to make
demands and proposals with respect to severance pay and other
conditions affecting employees due to the plant closure." The
Agreement further states: "Individual severance payments will be
contingent on each employee signing a severance agreement."
(Emphasis in original.)
The Release, agreed to by the Union and Precoat, states that
the severance allowance and supplemental payment for health care
"are not otherwise due to me, but are provided by [Precoat] in
return for the full and complete release of any and all claims by
me, as broadly defined by Paragraph 2 of this
Agreement."*fn6 (Release, Defs.' L.R. 56.1 Statement of
Material Facts, Ex. B.) Paragraph 2 states, in relevant part,
that the employee released, waived and discharged Precoat "from
any and all claims of any kind that I may have in any way arising
out of my employment with [Precoat]" (subject to an exemption for
workers' compensation claims).*fn7 (Id.) "This release
includes, but is not limited to, all claims under federal, state
or local laws prohibiting age, sex, race, national origin,
disability, religion, retaliation, or any other form of
discrimination, such as Age Discrimination in Employment Act."
(Id.) There were 46 Union employees still working at the Chicago
plant when the plant closed on January 31, 2002, including
plaintiffs Davis, Alexander and Page. (Plaintiff Hollins, on the
other hand, had resigned from Precoat in June 2001.) Of those
employees, 14 were African-American, 23 were white and 9 were
Hispanic. All 46 employees received the Agreement, together with
the attached Release. Only those employees that executed the
Release received severance payments. Davis, Alexander and Page,
who were the only employees with discrimination claims pending
against Precoat when the Agreement was finalized, were the only
employees who refused to sign the Release. As a result, they were
the only employees who did not receive severance payments.
Summary judgment is proper only if "the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law." Fed.R.Civ.P. 56(c). Once the
movant sets forth its argument, properly supported by the record,
that there is no genuine issue of material fact requiring trial,
the burden shifts to the nonmovant to identify specific facts
that preclude summary judgment. Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986). "[U]nless there is sufficient evidence
favoring the nonmoving party for a jury to return a verdict for
that party," there is no issue for trial. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).
A. Plaintiff Hollins Has No Claim Based on the Severance
As an initial matter, the court grants summary judgment against
plaintiff Hollins for any and all claims relating to the
severance benefits, the Agreement, and the Release. Hollins voluntarily resigned from Precoat in July 2001, several months
before Precoat announced the plant closing in November 2001 and
before the Agreement was negotiated. As a former employee,
Hollins was not eligible for any benefits under the Agreement.
Just as an employer cannot be liable under Title VII*fn8 for
failing to promote an employee if that employee is not qualified
for the position, Bragg v. Navistar Int'l Transp. Corp.,
164 F.3d 373, 377 (7th Cir. 1998), an employer cannot be liable under
Title VII for failing to pay severance benefits to a former
employee who is not eligible for severance benefits. No
reasonable jury could find that Precoat unlawfully denied Hollins
severance benefits when he was not even eligible for severance
benefits under the Agreement.
B. The Severance Agreement is Not Facially Discriminatory
Plaintiffs*fn9 argue that withholding severance benefits
from those who refused to release Precoat from Title VII claims
constitutes a per se violation of Title VII. (Pls.' Mem. Supp.
Mot. Summ. J. at 1.) Specifically, plaintiffs argue that they had
a contractual right to severance, which they were unlawfully
denied. Alternatively, they contend that even if their right to
severance was not contractual, the benefits were part and parcel
of the employment relationship, and thus, could not be doled out
in a discriminatory or retaliatory manner. According to Precoat,
however, none of the employees had a contractual right to
severance benefits under the CBA prior to negotiation of the
Agreement. Further, Precoat argues, the Agreement is not facially
discriminatory or retaliatory because it was offered to every one of the 46
remaining employees, all of whom were required to sign a general
release of claims in order to receive severance benefits. The
court agrees with Precoat.
Withholding benefits to which an employee is otherwise entitled
can support a retaliation claim. Equal Employment Opportunity
Comm'n v. Cosmair, Inc., 821 F.2d 1085, 1089 (5th Cir. 1987);
Carney v. Am. Univ., 151 F.3d 1090, 1095 (D.C. Cir. 1998).
Thus, as plaintiffs correctly argue, "a severance agreement is
retaliatory if the employer takes away a severance to which the
employee was already entitled." (Pls.' Reply in Support of Mot.
Summ. J. at 17.) The problem for plaintiffs, however, is that
they were not entitled to severance benefits under the CBA as
Under the CBA, in the event of a plant closing, Precoat was
obligated to "meet for the purpose of negotiating severance
pay. . . ." (Article 25 of CBA, Pls.' L.R. 56.1 Statement of
Material Facts, Ex. B.) Significantly, this provision required
only that Precoat and the Union engage in good-faith "effects
bargaining," First Nat'l Maint. Corp. v. Nat'l Labor Relations
Bd., 452 U.S. 666, 682 (1981) Precoat had no obligation to
reach an agreement with the Union to pay severance benefits.
Carbon Fuel Co. v. United Mine Workers of Am., 444 U.S. 212,
219 (1979). In other words, Union employees did not have a
contractual right to receive severance benefits under the CBA in
the event of a plant closing. Instead, it was the Agreement
amending the CBA that established each employee's right to
receive severance benefits a right which was explicitly
conditioned on the employee executing a release of claims.
Despite plaintiffs' arguments to the contrary, an employer may
require employees to execute a release of claims as a condition
of receiving severance benefits. Offering severance benefits in
return for a general release of claims is neither discriminatory nor retaliatory.
DiBiase v. Smithkline Beecham Corp., 48 F.3d 719, 729 (3d Cir.
1995); Manning v. Chevron Chem. Co., LLC., 332 F.3d 874, 884
(5th Cir. 2003) (granting summary judgment in favor of defendants
on retaliation claim where record showed that all employees were
required to execute release in order to receive severance
package); Corneveaux v. Cuna Mut. Ins. Group, 76 F.3d 1498,
1508 (10th Cir. 1996) (affirming judgment as matter of law for
defendants on ADEA retaliation claim where only evidence showed
that all employees were required to sign release in order to
receive severance payment); Bernstein v. St. Paul Co., Inc.,
134 F. Supp.2d 730, 733 (D. Md. 2001) ("company may condition an
additional payment on the release of a filed claim, or require a
waiver of future claims in exchange for a severance package");
see also Cronin v. ITT Corp., 737 F. Supp. 224, 231 (S.D.N.Y.
1990) (granting summary judgment against plaintiff on retaliation
claim where plaintiff did not receive severance benefits because
he chose not to sign required release). In such circumstances,
the severance benefits "are properly viewed as additional
consideration for an employee's agreement to waive his or her
rights and claims." Equal Employment Opportunity Comm'n v.
Sears, Roebuck & Co., 857 F. Supp. 1233, 1240 (N.D. Ill. 1994).
Equal Employment Opportunity Commission v. Board of Governors
of State Colleges and Universities, 957 F.2d 424, 429 (7th Cir.
1992), the case on which plaintiffs rely heavily, does not compel
the court to reach a different conclusion. In Board of
Governors, the Seventh Circuit ruled that a retaliatory policy
constitutes a per se violation of Section 4(d) of the Age
Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 623(d),
regardless of whether the employer acted in good faith in
implementing the policy. Id. In Board of Governors, Union
members had a contractual right under their collective bargaining
agreement to an in-house grievance procedure. Id. If, however, a Union member filed a
claim in an administrative or judicial forum, the Board had the
right to terminate the in-house grievance proceeding. Id. at
430. The court held that this policy was facially discriminatory
because it resulted in members of a protected class losing their
contractual rights to grievance proceedings if they participated
in statutorily protected activity. Id. at 430-31. In reaching
its ruling, the court quoted Hishon v. King & Spalding,
467 U.S. 69, 75 (1984), explaining that "`[a] benefit that is part
and parcel of the employment relationship may not be doled out in
a discriminatory fashion, even if the employer would be free
. . . not to provide the benefit at all.'" Board of Governors,
957 F.2d at 430.
Unlike the employer in Board of Governors, Precoat did not
withdraw plaintiffs' right to severance benefits when plaintiffs
filed their discrimination claims. As explained above, at the
time plaintiffs filed their discrimination claims, they had no
right to severance benefits that contractual right was created
by the Agreement that amended the CBA. Had plaintiffs already
been entitled to severance with no corresponding obligation to
release their claims, Precoat could not have added such a
condition. Bernstein, 134 F. Supp.2d at 733. But here, Precoat
offered consideration to which its employees were not otherwise
entitled i.e., the severance benefits in exchange for a
general release of claims.*fn10 Id.; Sears, 857 F. Supp. at
1240. Nor did Precoat "dole out" severance benefits in a
discriminatory fashion. In offering the severance package,
Precoat did not differentiate between employees on the basis of
race, national origin, or any other classification. Precoat
offered severance benefits to every employee subject to the
same condition: that the employee execute a general release of
claims. A severance benefit offered to all employees and payable
to all employees willing to release all claims "is an
archetypical example of a facially non-discriminatory policy."
DiBiase, 48 F.3d at 727.
C. Plaintiffs Lack Evidence of Intent
Because the Agreement is not discriminatory per se,
plaintiffs must prove unequal treatment and intent to retaliate
in order to prevail. See id. at 728. "[U]nlawful retaliation
occurs when an employer takes an adverse employment action
against an employee for opposing impermissible discrimination."
Rogers v. City of Chicago, 320 F.3d 748, 753 (7th Cir. 2003).
In a retaliation case, there are two ways for a plaintiff to
prevent summary judgment: the direct method and the indirect
method (i.e., the McDonnell Douglas method). Id. Under the
direct method, there are two forms of permissible evidence,
direct and circumstantial. Id. Direct evidence "essentially
requires an admission by the decision-maker that his actions were
based upon the prohibited animus." Id. (internal quotation marks
omitted). There is no such admission here. Circumstantial
evidence, "i.e., evidence that allows a jury to infer
intentional discrimination by the decisionmaker," id., is also
lacking. Plaintiffs cite no evidence in the record to support
such an inference. In fact, plaintiff Davis admitted at his
deposition that he has no knowledge whether the Agreement was
discriminatory or retaliatory.*fn11 (Defs.' L.R. 56.1
Statement of Material Facts, ¶ 26.)
Because plaintiffs cannot defeat summary judgment under the
direct method, they are left with the McDonnell Douglas method,
which is "designed to give plaintiff[s] a boost when [they have]
no actual evidence of [retaliation] but just some suspicious
circumstances." Stone v. City of Indianapolis Pub. Util. Div.,
281 F.3d 640, 643 (7th Cir. 2002). To establish a prima facie
case of retaliation under the McDonnell Douglas method,
plaintiffs must show that: (1) they engaged in statutorily
protected activity; (2) their job performance met their
employer's legitimate expectations; (3) they suffered an adverse
employment action; and (4) similarly situated employees who did
not engage in statutorily protected activity received more
favorable treatment than they did. Hilt-Dyson v. City of
Chicago, 282 F.3d 456, 465 (7th Cir. 2002).
Here, plaintiffs have failed to establish a prima facie case.
It is undisputed that plaintiffs engaged in statutorily protected
activity, so the first prong of the McDonnell-Douglas test is
satisfied. As for the second prong, under the specific facts of
this case, the job-performance element is likely inapplicable
because all employees were being laid-off due to the plant
closing. See Collier v. Budd Co., 66 F.3d 886, 890 (7th Cir.
1995) (explaining that prima facie case is a flexible standard). Regarding the third prong, according to
plaintiffs, they suffered an adverse employment action because
they were denied severance benefits. But assuming that denial
constitutes an adverse employment action, plaintiffs cannot
satisfy the fourth prong i.e., they cannot establish that
other similarly-situated employees who did not engage in
statutorily protected activity received more favorable treatment.
To do so, plaintiffs would have to show that Precoat paid
severance benefits to another employee without requiring a
release of claims. It is undisputed that every employee who
received severance benefits signed the Release.*fn12
Plaintiffs' failure to satisfy the fourth prong dooms their
retaliation claim.*fn13 Hilt-Dyson, 282 F.3d at 465
(failure to establish any element of a prima facie case is fatal
to a plaintiff's retaliation claim).
D. Plaintiffs' Disparate Impact Claim
Plaintiffs also urge the court to grant partial summary
judgment in their favor by finding that the terms and conditions
of the Agreement setting severance benefits had a disparate
impact on African-American employees. Precoat, on the other hand,
argues that plaintiffs failed to raise a disparate impact claim in either the amended complaint or in
their EEOC charges and therefore are precluded from raising the
claim now. Additionally, according to Precoat, plaintiffs have
failed to support their disparate impact claim. The court grants
partial summary judgment in Precoat's favor, because even
assuming plaintiffs properly raised their disparate impact
claim,*fn14 the claim is fundamentally flawed.
Disparate impact claims under Title VII "`involve employment
practices that are facially neutral in their treatment of
different groups but that in fact fall more harshly on one group
than another and cannot be justified by business necessity. Proof
of discriminatory motive . . . is not required under a
disparate-impact theory.'"*fn15 Hazen Paper Co. v.
Biggins, 507 U.S. 604, 609 (1993) (quoting Teamsters v. United
States, 431 U.S. 324, 335-36, n. 15 (1977)); Watson v. Fort
Worth Bank & Trust, 487 U.S. 977, 986-87 (1988). In such cases,
the evidence "usually focuses on statistical disparities, rather
than on specific incidents, and on competing explanations for those disparities." Watson, 487 U.S. at 987. The "statistical
disparities must be sufficiently substantial that they . . .
raise an inference of causation." Id. at 995. The plaintiff
bears the initial burden to show that the challenged employment
practice has a significantly adverse impact on a protected
group.*fn16 Connecticut v. Teal, 457 U.S. 440, 446 (1982)
(facially neutral practice must have "significantly
discriminatory impact"); 42 U.S.C. § 2000e-2 (k)(1)(A)(i)
(plaintiff must demonstrate that challenged practice causes a
disparate impact "on the basis of race, color, religion, sex, or
national origin"). Here, plaintiffs fail to meet that burden.
According to plaintiffs, "[z]ero is the number of non-African
Americans that were put in the position of either
releasing/waiving discrimination claims or foregoing severance
pay as a result of Precoat's policy." (Pls.' Mem. Supp. Mot.
Summ. J. at 12.) Plaintiffs contend this "`inexorable zero'
speaks volumes and clearly supports an inference of
discrimination." (Id. at 13, quoting Barner v. City of
Harvey, No. 95 C 3316, 1998 WL 664951, at *50 (N.D. Ill. Sept.
18, 1998).) There are two fatal flaws in this argument. First,
plaintiffs contend that the three of them "were the sole
employees to have claims that were impacted by the severance
agreement." (Pls.' Mem. Supp. Mot. Summ. J. at 13.) "A neutral
policy with an adverse effect on an employee or even a few
employees does not constitute a prima facie case [of] disparate
impact."*fn17 Russell v. Enterprise Rent-A-Car Co. of Rhode
Island, 160 F. Supp.2d 239, 259 (D. R.I. 2001); Massarsky v. General Motors Corp., 706 F.2d 111,
121 (3d Cir. 1983). Even if the court agreed that the severance
agreement had an unfair, adverse impact on the three plaintiffs,
they have failed to establish that the severance agreement had a
significant adverse impact on African-Americans as a group.
The second, more significant flaw is that although plaintiffs
were the only ones who had pending discrimination claims, it does
not follow that they were the only ones with discrimination
claims to release. Supra, n. 12. Further, the release was a
general release. As a result, no employee received severance
benefits without first releasing any and all employment-related
claims, including, but not limited to, discrimination claims.
Supra, n. 10, 12. To put it another way, every employee,
regardless of race, had to decide whether to release their
claims. In O'Regan v. Arbitration Forums, Inc., 246 F.3d 975,
986 (7th Cir. 2001), a case analogous to the case at bar, the
defendant employer required managers to sign an employment
agreement with a non-compete clause. Those managers who did not
sign the agreement were terminated. Id. The plaintiff argued
that the requirement had an adverse impact on women, based on the
fact that four women were terminated after deciding not to sign
the agreement. Id. In affirming the district court's summary
judgment ruling in favor of the employer, the Seventh Circuit
held that "the policy had the same impact on male and female
professionals." Id. If they did not sign the employment
agreement, they would be terminated regardless of their gender.
Id. Like the employment agreement in O'Regan, the severance
agreement negotiated between the Union and Precoat had the same
impact on each employee. If an employee chose not to sign the
Release, he would not receive the severance package, regardless of his race.
It was up to each Precoat employee to weigh the pros and cons of
signing the Release, and to decide whether the value of his
potential claims was worth more than the severance package. The
fact that plaintiffs chose not to accept the severance offer
because they did not want to release their employment-related
claims does not mean that the severance agreement had a disparate
impact on minorities. It simply means that plaintiffs reached the
opposite conclusion in their cost-benefit analysis than their
former coworkers who signed the Release.
At the heart of plaintiffs' disparate impact claim is the
contention that Precoat should have paid plaintiffs the severance
benefits without requiring a release of claims. In taking this
position, plaintiffs are essentially claiming a right to
preferential treatment for anyone who had a pending
discrimination claim namely, plaintiffs. In plaintiffs' view,
they should have received severance benefits while retaining the
right to pursue their pending claims, even though everyone else
was required to release their claims in order to receive
severance benefits. Plaintiffs have no right to such preferential
treatment under Title VII. See DiBiase, 48 F.3d at 732
(rejecting argument that employer was required to treat people
preferentially in order to treat them equally).
Because no reasonable jury could find in favor of plaintiffs on
their disparate impact claim, the court grants partial summary
judgment in favor of Precoat.
As explained above, the court denies plaintiffs' motion for
partial summary judgment and grants defendant's cross-motion for
partial summary judgment, finding that the severance agreement is not discriminatory per se, plaintiffs lack any
evidence of intent, and plaintiffs' disparate impact claim is