GWENDOLYN L WESLEY, Complainant
TMP WORLDWIDE INC, Respondent
An administrative law judge (ALJ) for the Equal Rights Division of the Department of Workforce Development issued a ruling in this matter. A timely petition for review was filed.
The commission has considered the petition and the positions of the parties, and it has reviewed the parties' submissions to the ALJ. Based on its review, the commission agrees with the ruling of the ALJ, and it adopts it as its own, except that it makes the following modifications:
The second sentence in the first paragraph on page 3 is modified to read as follows in order to correct an error:
The Release provided the Complainant with a 7 day time period to revoke and cancel the agreement after she signed the agreement, and the Complainant never revoked that agreement.
The third sentence in numbered section 2) of the third full paragraph on page 5 is modified to read as follows in order to correct an error:
In addition, she had an additional 7 days to revoke her agreement.
In the ALJ's ruling, he referred in both of these sentences to a 21-day, rather than a 7-day, time period in which complainant could revoke the agreement.
The ruling of the administrative law judge (copy attached), as modified, is affirmed.
Dated and mailed February 7, 2003
weslegw . rmd : 115 : aty
/s/ David B. Falstad, Chairman
/s/ James A. Rutkowski, Commissioner
Complainant (a black female) alleges the facts stated in this paragraph in support of her complaint of race discrimination. Prior to October 25, 2001, the effective date of her separation, the payroll department in which she was employed had the following organizational hierarchy: payroll clerks, payroll supervisors (2), payroll manager (1), payroll director (1). Until October of 2001, the payroll director was Maxine Haynes, a black female. The complainant and Haynes were the only two black employees in the payroll department at the time. Haynes was replaced by Thomas Beatty, a white male, some time in October of 2001, and Haynes entered into a severance agreement with respondent as a part of her separation which was effective October 4, 2001. At some point in time while she was still the payroll director, Haynes promoted complainant to payroll manager. Some time on or before October 24, 2001, complainant was notified that, due to a payroll department reorganization, her payroll manager position was to be eliminated and she was to be laid off. Complainant accepted a severance agreement whereby she accepted $2,596 in severance pay in exchange for giving up all present and future rights to challenge her separation. By the terms of the agreement, complainant had 21 days (from October 24, 2001) to consider and sign the agreement, and 7 days after signing to unilaterally revoke it. Complainant signed the agreement on October 29, 2001, and received the severance payment thereafter. Between October 24, 2001, and November 20, 2001, one of the payroll supervisors to whom complainant's former duties had been assigned was demoted to a payroll clerk position, and the remaining payroll supervisor (Yonke-white female) was named payroll manager.
On April 19, 2002, complainant filed a charge with the Equal Rights Division, alleging that respondent discriminated against her on the basis of race by terminating her employment. While the case was still in the investigative stage, respondent filed a motion to dismiss, contending that complainant had given up her right to file this complaint when she entered into the severance agreement with respondent. As a result, the investigator issued a non-substantive probable cause determination. The ALJ issued a ruling granting the motion to dismiss on August 1, 2002.
It is undisputed that the complainant entered into an agreement with respondent effective October 25, 2001, the terms of which included the following:
(1) Respondent was to make a severance payment to complainant of $2,596 (¶ 3 of agreement).
(2) Complainant did "hereby irrevocably and unconditionally release" respondent "from any and all actions, causes of action, . . . administrative or agency charges, . . . claims, complaints . . . of any nature whatsoever, known or unknown, suspected or unsuspected, . . . including but not limited to rights or claims under federal, state, or local laws, regulations, or requirements, . . .Title VII of the Civil Rights Act, . . . the laws of the state of Wisconsin . . . and all rights and claims relating to . . .discrimination (on the basis of sex, race, color, national origin, . . .), fraud, misrepresentation, breach of contract, . . .breach of any covenant of good faith and fair dealing, . . .wrongful termination, wrongful employment practices or relating to Employee's employment with, or separation of employment from, the Company, or any other claims arising under any federal, state or local law, statute, regulation or case law." (¶ 4)
(3) Complainant had a period of 21 days to review and sign the agreement, and a period of 7 days after signing to unilaterally revoke it. (¶ 6).
(4) Complainant agreed that she would not file any complaint or charges or lawsuits against respondent after the agreement was effected other than to enforce the terms of the agreement. Complainant also agreed that she had not "relied on any representation or statement" of respondent's "which is not set forth in this Agreement." (¶ 11)
(5) The parties agreed that the agreement constituted the entire agreement of the parties with respect to the subject matter of the agreement. (¶ 12)
(6) Complainant acknowledged that "employee has been advised to consult with an attorney prior to executing this agreement;" and that "employee has read this agreement carefully and understands all of its terms, and is signing this agreement knowingly and voluntarily and with the full intent of, among other things, releasing the company and certain other parties of all known and unknown claims." (¶ 13)
It should be noted that, in her petition, complainant concedes that :
The judge stated I knew what I was signing because of my education and understanding. He was right, even if, I would have contacted a lawyer it still would not have changed the agreement or my situation. I knew what I was signing and at that time I had no evidence to back up my suspension [sic] of foul play.
It should also be noted that, generally, complainant's petition sets forth those allegations and arguments she had already made to the ALJ except that, for the first time, she offers to return the severance payment to respondent.
The first issue presented by the petition then is whether complainant is barred from challenging the validity of the severance agreement since she has not returned the severance payment to respondent. The commission has consistently held that a complainant cannot challenge the validity of a separation agreement and, at the same time, keep the proceeds of that agreement, Lynch v. Zalk Joseph's Fabricators, ERD Case No. 9401181 (LIRC July 17, 1996); but that it is sufficient if the complainant offers to return the benefit even if payment has not yet been made, Grahl v. Mercury Marine, ERD Case No. 8902050 (LIRC Dec 4, 1992). Here, complainant has not returned the severance payment, and did not offer to return it until she filed her petition for commission review. In fact, during the period of time this matter was before the ALJ, complainant indicated she did not intend to return the payment. However, complainant's recent offer to return the severance payment, self-serving though it may be at this point in time, may be sufficient under Grahl to enable complainant to challenge the validity of the underlying agreement.
The next issue then is whether complainant made a knowing and voluntary waiver of her right to pursue an employment discrimination claim against respondent under the Wisconsin Fair Employment Act. In Grahl, the commission, citing federal case law precedent, held that the following factors (in italics) should be applied as part of a "totality of circumstances" test (the commission's application of these factors to the circumstances present here are indicated in regular type):
(1) Complainant's education and business experience. Here, complainant held a responsible supervisory position, has an A.A. degree in business management and expects to obtain a B.A. degree in accounting in 2004, and demonstrated research and writing skills in preparing her filings for this case.
(2) The amount of time the complainant had to examine the agreement before signing it. Complainant had 21 days to review the agreement, and an additional 7 days to revoke it after signing.
(3) Complainant's role in deciding the terms of the agreement. Complainant apparently did not play a role in deciding the terms of the agreement, nor did she try to negotiate any of the terms of the agreement.
(4) The clarity of the agreement. The agreement here was written clearly and reasonably informed the reader of the nature and importance of the agreement.
(5) Whether the complainant was represented by counsel or consulted with an attorney. The complainant was not represented by an attorney and apparently did not consult an attorney at the time she entered into the agreement.
(6) Whether the consideration given in exchange for the waiver exceeded employee benefits to which the employee was already entitled by contract or law. Complainant does not allege that she was entitled to any severance or other benefit upon separation, and does not dispute that she was awarded severance pay solely as consideration for her release of claims.
(7) Whether the complainant was encouraged to consult an attorney and whether the complainant knew or should have known her rights upon execution of the release. Complainant was encouraged and advised by the terms of the agreement itself that she should consult with an attorney before entering into the agreement.
Factors (1), (2), (4), (6), and (7) all operate in respondent's favor here. In regard to (5), complainant was encouraged to consult an attorney and chose not to. That a complainant chooses not to consult an attorney does not undermine a finding that a release was signed knowingly and voluntarily, i.e., it should normally suffice for the employer to suggest that the employee may want to consult an attorney. Lynch, supra, citing Cirillo v. Archo Chemical Co., 862 F.2d 448, 48 FEP Cases 678 (3d Cir. 1988). In regard to (3), complainant did not play a role in deciding the terms of the agreement and made no attempt to negotiate the terms of the agreement. However, this is not a sufficient basis in and of itself upon which to conclude that her waiver was not knowing and voluntary. Grahl, supra, citing Bormann v. AT&T Communications, Inc., 49 FEP Cases 1622, 1625 n.1 (2nd Cir. 1989) ("Although appellants apparently did not have an opportunity to negotiate the terms of the waiver, which is one of the issues relevant to whether the release was signed knowingly and wilfully, we do not believe that this fact alone requires a trial on `voluntariness.' ") Complainant also argues here that she had no choice given her financial circumstances but to accept the severance agreement, i.e., that her entry into the agreement was not voluntary because her financial circumstances provided her no choice but to accept it. However, in Lynch v. Zalk Joseph's Fabricators, Inc., supra, the commission, considering this argument in a case with a closely parallel fact situation, stated that, "While her particular financial circumstances may have created pressure for her to execute the agreement, she nevertheless had a meaningful choice in that she could have consulted an attorney and elected to pursue her legal rights rather than execute the Release Agreement." For these reasons, it is concluded that complainant's release of her claims was knowing and voluntary.
The final issue is whether complainant's allegations of fraud would be sufficient to void the severance agreement. In Lynch v. Zalk Joseph's Fabricators, Inc., supra, the commission decided this issue in a case with nearly identical facts. In Lynch, the complainant alleged that, at the time she signed her severance agreement, which released all known and unknown claims against respondent, she had been told by respondent that her position was being eliminated due to a restructuring of the company, but she learned, after the expiration of the agreement's revocation period, that her former position had actually been assumed by a male employee. In Lynch, the commission stated:
The difficulty with the complainant's argument, however, . . . is that the offer of a severance package was a separate issue from the termination itself. Her signature on the agreement was not obtained by fraud because the fraud, if any, was not a part of the bargain the parties made. It was not material to the bargain given the terms of the release. There are no references or representations within the Agreement to any reason for the termination. Further, paragraph 12 of the Agreement provided that "Employee acknowledges that he/she has read and fully understands this Agreement, that it fully reflects the entire agreement between the parties, that no representation or inducement has been made to him/her by or on behalf of Company, except as set forth herein . . ." She was also advised to consult an attorney before executing the Agreement. Accordingly, any alleged misrepresentation or fraud is not fraud in the inducement to enter into the contract. The alleged misrepresentation was not material to the contract, and under the contract's very terms it could not have been relied upon by the complainant to her injury.
Here, the facts supporting this conclusion are even stronger in that, unlike in Lynch, where the complainant apparently did not suspect and had no reason to suspect at the time of separation that she may have been the victim of discrimination, the complainant here states in her petition that she suspected at the time of separation that she had been the victim of race discrimination and yet entered into the severance agreement despite this suspicion. The commission concludes that complainant's allegations of fraud would be insufficient to void the severance agreement.
The commission has consistently held that it will not disturb an agreement into which a complainant has knowingly and voluntarily entered simply because he or she has had second thoughts about the wisdom of entering into such an agreement, i.e., that the fact that a complainant has changed his or her mind about the wisdom of what they had done does not change the binding nature of the agreement. Gahan v. J. H. Findorff & Son, ERD Case No. 9353693 (LIRC March 29, 1996); Hunstock v. Perlstein, ERD Case No. 9355018 (LIRC Dec. 8, 1994); Lynch, supra.; Grahl, supra. The result reached here is consistent with those reached in these earlier decisions.
cc: Attorney Ely A. Leichtling
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