Not in Good Hands

Under U.S. anti-discrimination laws, corporations aren’t supposed to retaliate against the workers who sue them. The idea is pretty simple; without this protection, companies could break the law and then fire any protesting employees. That would send the message to workers that “if you want to keep your job, don’t try to enforce your rights.”

Yet the Allstate Insurance Company has recently discovered a way to avoid these pesky restrictions. In 1999, the company fired a group of 6,400 home and auto insurance agents, 90 percent of whom were over the age of 40. Allstate then offered them the possibility of getting rehired as “independent contractors,” with slightly higher pay but a significant loss in health and pension benefits. What’s more, the company required the “independent contractors” to waive their right to sue Allstate for, among other things, age discrimination. The message: “If you want to keep your job, don’t try to enforce your rights.”

Emily Daly, a spokesperson for Allstate, denies any accusations of discrimination. She says that “there was nothing wrong with the releases,” and she adds that similar waivers are used routinely in the corporate world. It’s true that many companies offer their departing employees extra incentives in exchange for a promise not to sue. Employment discrimination cases are notoriously difficult to defend, and even meritless cases can be expensive to litigate and damaging to a company’s reputation—Allstate CEO Edward M. Liddy has called them “a plague on corporate America.” But Allstate’s strategy of “fire first, sign waivers later” seems new—and if it succeeds, it could undermine basic protections for American workers.

After all, what Allstate did sounds mighty coercive. During the 1990s, Allstate had attempted to convince its agents to switch to “independent contractor” status voluntarily—without much success, according to a class-action lawsuit filed by former employees. As a result of the company’s “reorganization,” however, thousands of workers signed the release and took an opportunity to keep something resembling their old jobs. How many would have taken the deal if they weren’t faced with being thrown out of work, prohibited by their contracts from soliciting old clients or from selling insurance within a mile of their old office?

To be honest, I have no idea whether age discrimination was a factor in Allstate’s layoffs. The circumstantial evidence doesn’t look good: the agreement the employees signed specifically waived “any claim for age or other types of discrimination prohibited by the Age Discrimination in Employment Act of 1967.” So let’s assume, for the sake of argument, that Allstate did have a discriminatory intent when it fired the 6,400 workers. Or, better yet, suppose that it had chosen to discriminate by firing a group of 6,400 workers, 90 percent of whom were African-American. Could it stop paying benefits and rehire them all on the condition that they wouldn’t sue? What remedy would the workers have if they wanted to keep their jobs? (When I asked this question of Daly, she quickly responded, “I can’t comment on a hypothetical.”)

Meanwhile, things have gone from bad to worse. Allstate has now tried a similar tactic on a group of 650 life insurance agents, 80 percent of whom are over the age of 40, and the company has counter-sued some of its protesting employees for fraud. (Daly also refused to comment on “pending litigation.”)

What can be done to prevent Allstate’s strategy from becoming a shield for future discrimination? If the class-action plaintiffs lose, not much. Under longstanding principles of contract law, courts will occasionally refuse to enforce non-negotiated or “adhesion” contracts whose terms are “unconscionable;” courts will also sometimes void contracts that are viewed as contrary to public policy. Yet the legal system is extremely hesitant to overturn agreements signed by both parties, and workers shouldn’t have to rely on the unpredictable intervention of a federal judge.

The executive branch might be of more help. The Equal Employment Opportunity Commission has chosen to join the Allstate class-action lawsuit, and it has also intervened on behalf of the 650 life insurance agents. However, the New York Times reports that the new Bush-appointed chair of the commission has begun to deemphasize the agency’s litigation efforts, and there’s a possibility that a Republican-dominated board could be less vigilant in prosecuting cases of discrimination.

But the federal government needs to take an active role in enforcement. The very reason why we have anti-retaliation laws is to prevent employers from leveraging their power in order to escape their obligations under the law. It may be one thing for a company to offer an extra severance package to those who sign a waiver, but it’s quite another to tell them that if they don’t sign, they’re out of work. And if the government and the legal system don’t step in to protect them, American workers may also be out of luck.

Stephen E. Sachs ’02 is a history concentrator in Quincy House. This is his final column.