STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

DEBORAH LYNCH, Complainant

ZALK JOSEPH'S FABRICATORS INC, Respondent

FAIR EMPLOYMENT DECISION
ERD Case No. 9401181

An administrative law judge (ALJ) for the Equal Rights Division of the Department of Workforce Development (Department of Industry, Labor and Human Relations prior to July 1, 1996) issued a decision 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 evidence submitted to the ALJ. Based on its review, the commission agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own.

DECISION

The decision of the administrative law judge (copy attached) is affirmed.

Dated and mailed: July 17, 1996
lynchde.rsd : 125 : 0

Pamela I. Anderson, Chairman

Richard T. Kreul, Commissioner

David B. Falstad, Commissioner

MEMORANDUM OPINION

The complainant, a female, was apparently told by the respondent that her employment was being terminated due to a restructuring of the company and the elimination of her position as shipping coordinator. On October 27, 1993, the complainant signed an Employee Resignation and Release Agreement stating that her employment would terminate on November 5, 1993. The release further provided, in part, as follows:

3. Company agrees to pay (less withholding required by law), those items listed and payable in accordance with Exhibit A. (The items listed in Exhibit A included, among other things, "Severance pay of 4 weeks-- $1,980.76") The payments outlined in this paragraph and Exhibit A represent all financial obligations from Company to Employee, including without limitation accrued wages, commissions, vacation, severance and any other form of compensation or benefits...
...
7. Employee, on behalf of self, heirs, executors, attorneys, administrators, successors and assigns, hereby fully and forever releases and discharges the Company...from any and all claims, demands, agreements, actions, suits, causes of action, damages, injunctions, restraints and liabilities, of whatever kind or nature, in law, equity or otherwise, whether now known or unknown or which has ever existed or which may now exist (except to enforce the terms of this Agreement), including, but not limited to, any and all claims, liabilities, demands or causes of action relating to or arising out of Employee's recruitment, hiring, employment, or separation from employment, such as claims under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. 2000e et seq., 42 U.S.C. 1981, the federal and state (including, without limitation Illinois) statutes or common law...for violation of any other federal, state or local statute, ordinance or regulation or common law dealing in any respect with discrimination in employment...
...
The following provisions are applicable to and made a part of this Agreement and the foregoing releases and waivers:

... (ii) In exchange for this general release and waiver hereunder, Employee hereby acknowledges that he/she has received separate consideration beyond that which he/she is otherwise entitled to under Company policy or applicable law.
(iii) The Company has previously advised, and does hereby expressly advise, Employee to consult with an attorney of his/her choosing prior to executing this Agreement which contains a general release and waiver.
(iv) Employee has twenty-one (21) days from the date of presentment to consider whether or not to execute this Agreement. In the event of such execution, Employee has a further period of seven (7) days from such date in which to revoke said execution.

8. To the maximum extent permitted by law, Employee covenants not to sue or to institute or cause to be instituted any kind of claim or action (except to enforce this Agreement) in any federal, state or local agency or court against any of the Released Parties arising out of, in the course of, from or attributable to his employment by the Company or his separation from the Company....Employee understands and acknowledges the significance and consequences of this release and this Agreement.
...
12. 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, and that he (sic) KNOWINGLY and VOLUNTARILY enters into this Agreement.

PLEASE READ CAREFULLY. THIS EMPLOYEE SEVERANCE AND RELEASE AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

Approximately six months after signing the Release Agreement the complainant alleged in an initial and amended complaint filed with the division that the respondent had discriminated against her on the basis of her sex and handicap with respect to her terms or conditions of employment and termination of employment. These charges involve claims that she was harassed about her health condition (bipolar disorder) and subjected to foul language, and that her employment was terminated because of her sex and handicap.

Prior to a scheduled hearing on the complainant's claims of discrimination, the respondent filed a motion seeking dismissal of the claims based on the Employee Resignation and Release Agreement executed by the complainant. After considering written arguments by the parties the ALJ concluded that the complainant was barred from pursuing her discrimination claims based on the Release Agreement, and dismissed her complaint. In reaching this decision the ALJ rejected arguments by the complainant that the release was invalid because she had not knowingly and voluntarily waived her right to file an action against the respondent and that a hearing was required in order to determine whether a knowing and voluntary waiver had been made under the "totality of the circumstances test."

The commission adopted the "totality of the circumstances" test as the appropriate test to determine whether there has been a knowing and voluntary waiver of rights under the Wisconsin Fair Employment Act in Grahl v. Mercury Marine, (LIRC, 12/4/92). Under this standard the following factors were identified as criteria to be examined: 1) the complainant's education and business experience; 2) the amount of time the complainant had to examine the agreement before signing it; 3) the complainant's role in deciding the terms of the agreement; 4) the clarity of the agreement; 5) whether the complainant was represented by or consulted with an attorney; 6) whether the consideration given in exchange for the waiver exceeded employee benefits to which the employee was already entitled by contract or law; and 7) whether the complainant was encouraged to consult an attorney and whether the complainant knew or should have known his or her rights upon execution of the release.

The ALJ determined that she had sufficient information to decide whether the complainant made a knowing and voluntary waiver of her rights. The ALJ found the complainant's primary argument as to why there had been no knowing and voluntary waiver, her claim that she was led to believe that she was discharged due to a restructuring of positions and because her position had been eliminated when in fact her position had not been eliminated but assumed by a male, unpersuasive. (1) The ALJ found this claim unpersuasive because in Grahl, the commission had rejected the argument that a claim could not be waived because the employe did not know at the time he signed the release whether discriminatory motives may have prompted his termination, because any alleged discriminatory conditions of employment and the decision to terminate the complainant's employment had occurred before the complainant signed the release agreement, and because the release agreement signed by the complainant stated that she was giving up her right to file any "known or unknown" claims against the respondent.

The ALJ also disagreed with the complainant's contention that in signing the release agreement she did not receive any benefit to which she was not otherwise entitled because the respondent's Severance Pay Policy states that "Employees may receive a severance pay allowance...at the discretion of the Company President..." and that "No severance pay will be paid where: a) The employee refuses to sign the Employee Resignation and Release Agreement...."

Further, the ALJ noted that unlike in Grahl, the complainant was not asserting that she was under duress at the time she signed the release agreement or that she did not understand that she was waiving her right to file a discrimination complaint, nor was she contending that she has a limited educational background that inhibited her ability to assess the terms of the release agreement. The ALJ noted that moreover, the respondent had explicitly advised the complainant to consult an attorney before executing the release agreement, that she was allowed a three week period in which to decide whether she wanted to sign the release, and then allowed one week following execution of the release to change her mind and rescind the release agreement.

On appeal, the complainant argues that the release agreement which she signed was an unconscionable contract, citing Discount Fabric House of Racine, Inc. v. Wisconsin Telephone Company, 117 Wis.2d 587, 600-602, 345 N.W.2d 417, 424 (1984). In Discount Fabric House, the Wisconsin Supreme Court agreed that two inquiries determine unconscionability: 1) relative economic strength in terms of practical options; and (2) substantive reasonableness of the contract. The court stated that, generally, unconscionability means the absence of a meaningful choice on the part of one party, together with contract terms that are unreasonably favorable to the other. Id. The court adopted the factors of procedural and substantive unconscionability. Id. at 602, 345 N.W.2d at 424-425. Procedural unconscionability relates to factors bearing on the meeting of the minds; substantive unconscionability pertains to the reasonableness of the terms themselves. Id.

The complainant argues that on the procedural criterion the parties did not enjoy equal footing. Basically, her claim on this point is that she did not know the alleged "real reason" for her discharge. She argues that at the time of the signing of the Release Agreement the respondent knew that it was firing her (ostensibly for discriminatory reasons) but she only knew what she had been told--that restructuring had eliminated her job-- only to find out several weeks later after she had signed the Release Agreement that there had been no restructuring and that her position still existed and was filled by a male. She apparently argues that the respondent's granting of four weeks severance pay to her further led her not to suspect that she had been "fired" since "Severance packages were routinely given to employees who were not fired." Additionally, she argues that substantive unconscionability exists because the terms of the Agreement were hardly reasonable given that she had waived her rights to sue for both known and unknown claims against the respondent. She argues that she did not have a meaningful choice when handed the severance package agreement since she had been fired and needed whatever money was given her.

Citing Riley v. American Family Mutual Insurance Co., 50 FEP Cases 668, 881 F.2d 368 (7th Cir. 1989)(the court may need to inquire beyond the state law requirements for a valid contract to fulfill the remedial policy of Title VII and prevent the involuntary or uninformed compromise of federal rights where a plaintiff was not represented by counsel, possessed a limited education, executed a standard general release form prepared by the employer, or was otherwise unable to appreciate the consequences of the release), the complainant argues that similarly in order to fulfill the remedial policy of the Wisconsin Fair Employment Act, an inquiry into her subjective intent needs to be conducted by the division. In support, she cites reasons therefore, including, that she was not represented by counsel and had no input in deciding the terms of the Agreement, that she did not know that signing the Release Agreement was anything more than an acknowledgment for receiving her severance package, and because she did not read the Release Agreement but had merely signed it as she had been asked to do. Further, the complainant apparently also asserts that her handicap (bipolar disorder) caused her to become "hysterical and not to read the severance package and not to appreciate the consequences of the Release Agreement" when she learned of the termination of her employment.

The arguments made by the complainant fail to show that she had not made a knowing and voluntary waiver of her rights against the respondent, or that there is need for an inquiry into her subjective intent when signing the Release Agreement. First of all, with respect to the complainant's alleged lack of knowledge as to the "real reason" for her discharge, the Release Agreement that she signed clearly and emphatically noted that it was a release for all "known and unknown" claims against the respondent. This language was an unequivocal reference both to claims against the respondent then known about by the complainant, as well as any other claims against the respondent which she might have discovered through further investigation but then did not have knowledge of. Thus, her claim that she did not know the "real reason" for her discharge at the time she signed the Agreement is immaterial. The complainant's assertion that payment of severance pay had caused her not to realize that she had been "fired" must fail for the same reason. Moreover, the record shows that the respondent's severance pay policy, of which the complainant was apprised, provided that severance pay was given at the discretion of the company president, and that no severance pay was given to any employe who had not signed the Employee Resignation and Release Agreement. Additionally, contrary to argument by the complainant that waiver of her right to both known and unknown claims against the respondent was not reasonable and thus constituted substantive unconscionability, the courts have repeatedly found release agreements containing this very language to constitute a valid and binding waiver of the right to bring a subsequent claim of alleged discrimination. See, for example, Seward v. General Motors Corp., 60 FEP Cases 373, 605 F.Supp. 623 (N.D. Ill. 1992); Fay v. Petersen Pub. Co., 52 FEP Cases 1531 (S.D. N.Y. 1990); Harrison v. Arlington Independent School Dist., 50 FEP Cases 651, 717 F.Supp 453 (N.D. Tex. 1989). Further, the fact that the Agreement expressly advised the complainant to consult with an attorney of her choosing prior to executing the Agreement, and gave her three weeks to consider whether or not to execute the release, plus an additional week in which to revoke the Agreement in the event she decided to execute it, clearly establishes that she had a meaningful choice when handed the Release Agreement. 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.

The complainant has failed to show reason for the need to conduct an inquiry into her state of mind when executing the Release Agreement. The Release Agreement stated in clear and simple language that the complainant was forever releasing the company from any and all claims, whether now known or unknown, relating to or arising out of her employment or separation from employment, such as Title VII or state statutes dealing with discrimination in employment; that in exchange for this general release and waiver, complainant acknowledges that she had received separate consideration beyond that which she was otherwise entitled to under company policy or applicable law. In bold print just above the place where the complainant signed the Agreement was the language, "PLEASE READ CAREFULLY. THIS EMPLOYEE SEVERANCE AND RELEASE AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS." Further, as noted above, the Release Agreement expressly advised the complainant to consult an attorney prior to executing the release, and afforded her an opportunity to consider whether or not to execute the release for a period of three weeks and an additional opportunity to rescind the agreement within one week after executing the Agreement. That the complainant chose not to consult an attorney does not undermine a finding that the release was signed knowingly and voluntarily. "While lack of professional counseling may be a relevant consideration even in a situation where it has been encouraged by an employer, an employee can not be required to hire a lawyer before signing a waiver and it should normally suffice for the employer to suggest that the employee may wish to consult an attorney." Cirillo v. Archo Chemical Co., 48 FEP Cases 678, 862 F.2d 448 (3rd Cir. 1988). As far as input into the terms of the Agreement, the complainant has made no claim that she requested to negotiate the terms of the release and that such request was refused by the respondent. Moreover, the fact that the complainant did not have the opportunity to negotiate the terms of the waiver alone does not require a trial on voluntariness. Bormann v. AT&T Communications, 49 FEP Cases 1622, 1625 n. 1, 875 F.2d 399 (2d Cir. 1989). The plain language and terms stated in the Agreement make clear that the complainant was not "merely asked to sign" the Agreement without reading it. Finally, the complainant has presented no evidence to show that she was in such a state of "hysteria" during the entire time from the point the respondent informed her of the termination of her employment through the time when she signed the Agreement and for the additional one week the respondent afforded her to rescind the agreement, that she was unable to read and understand the consequences of signing the Release Agreement. Even a casual reading of the release should have alerted the complainant to the fact that by signing the Agreement she was waiving all rights to any claims or causes of action against the respondent relating to her employment with the respondent.

The complainant has further argued that the Release Agreement should be declared void as against public policy, or because it was induced by fraudulent misrepresentation. The elements of fraudulent misrepresentation rendering a contract voidable are: (1) there must be a statement of fact which is untrue; (2) the false statement must be made with the intent to defraud and for the purpose of inducing the other party to act upon it; and (3) the other party must rely on the false statement and must be induced thereby to act to his injury or damage. Merten v. Nathan, 108 Wis.2d 205, 321 N.W.2d 173 (1982). Here, the complainant argues that the respondent intentionally misrepresented its representations that her position had been eliminated and "gave her a severance package to complete their representations to her that her job had been eliminated..." She argues that the respondent's alleged misrepresentation was a material misrepresentation reasonably relied upon by her and which induced her into signing the Agreement. She argues that without a hearing the ALJ could not and did not evaluate if the Release Agreement was voidable.

The difficulty with the complainant's argument, however, as noted by the respondent, 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.

Moreover, even if it could be concluded that there was reason to believe there had been no valid waiver of her claims against the respondent, the complainant has not satisfied the condition precedent to challenging the validity of the waiver. The complainant was required to tender back the consideration received in exchange for the waiver of her rights as a condition precedent to challenging the validity of the waiver. Giese and Field v. Wausau Insurance Companies, (LIRC, 10/25/88). "...where an individual is simply induced by some fraudulent representation to execute the release (as opposed to fraud in the execution of the release), the release is only voidable and requires restoration or tender of the consideration before the validity of the release may be attached (sic)." Id. at p. 9. (emphasis in original) The complainant has never returned or offered to return the benefit of the bargain which she received when she executed the release. She was paid $1,980.76, to which she was not otherwise entitled. In an effort to show that she had offered to return the severance pay, she points to her July 17, 1995 affidavit statement that, "Should Respondent prove that the severance pay was not a `financial obligation from Company to Employee' given her employment status, Complainant will return the four (4) weeks of severance pay of $1,980.76 over a period of time designated by the court." As noted by the respondent, however, the subject of this affidavit was an attempt by the complainant to prove that the severance pay she received was something that she was entitled to upon her discharge. It did not fulfill her obligation to offer tender as a condition precedent to this action, as its return was offered only if the respondent proved that it was not owed to her as a regular payment upon her being discharged. As previously noted above, the severance pay provided the complainant was not regular pay owed her upon being discharged.

For all of the above-stated reasons, the commission has affirmed the ALJ's decision dismissing the complainant's complaint filed in this matter.

NOTE: The commission notes that the complainant has also indicated that she has filed a complaint of discrimination against the respondent charging the respondent with retaliation for allegedly threatening her with a breach of contract suit if she did not dismiss, with prejudice, her request to have the ALJ's decision reviewed, and ultimately filing an action against her for breach of contract based on the Release Agreement. The commission does not reach this issue as it is not properly before the commission.

cc:
JOAN I. SCHWARZ
JOHN D. HYLAND

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Footnotes:

(1)( Back ) The respondent acknowledged that the complainant had been told that her position was being eliminated in its response to her charge of discrimination. In this response, the respondent states that due to economic conditions and related management/office restructuring, a decision was made in 1993 to eliminate the shipping coordinator position and to reassign the responsibilities of that position to other management personnel. The respondent identified one Donald L. Klubertanz as the individual assuming the shipping coordinator duties. Klubertanz was stated to be 50 years old, having been with the company since shortly after it opened in 1976 and responsible for shop purchasing, steel purchasing, personnel work, in addition to being Air Quality and Hazardous Waste Removal Manager. The respondent stated that Klubertanz retained shop purchasing and air quality/hazardous waste management duties when assuming the shipping coordinator duties, while his steel purchasing responsibilities were reassigned to the company's executive vice- president and the assistant purchasing manager, and his personnel duties were taken over by the account manager.