United States District Court, E.D. Pennsylvania
March 30, 2004.
GENE R. ROMERO, et al.
ALLSTATE INSURANCE COMPANY, et al. GENE R. ROMERO, et al. v. THE ALLSTATE CORPORATION, et al.; EQUAL EMPLOYMENT OPPORTUNITY COMMISSION v. ALLSTATE INSURANCE COMPANY, et al.
The opinion of the court was delivered by: JOHN FULLAM, Senior District Judge
MEMORANDUM AND ORDER
The three above-captioned actions arise from a common set of facts,
and have, in effect, been consolidated. Civil action 01-3894 will be
referred to herein as "Romero I"; civil action 01-6764 will be referred
to as "Romero II," and civil action 01-7042 will be referred to as
"EEOC." This opinion deals with pending motions in all three cases.
I. FACTUAL BACKGROUND
For many years, Allstate Insurance Company hired, as its employees, all
of the agents who sold its insurance policies, handled claims, etc.
Management apparently came to believe that its interests would be better
served by agents who were independent contractors, rather than employees.
All newly-retained agents thereafter were deemed to be independent
contractors. The employee-agents operated under one or the other of two
types of employment contracts, designated the R830 and the R1500. The
independent-contractor agents operated under R3001 contracts (after a
brief period of actual employment, as trainees, under an R3000 contract).
Beginning in 1991, Allstate amended its pension plan, allegedly in
order to comply with the Tax Reform Act of 1986 and implementing IRS
regulations, to make clear that service as an independent-contractor
agent under an R3001 contract would not be credited toward pension
entitlements or calculations. The amendments also made it more difficult
for covered employees to qualify for early retirement benefits and
phased-out certain particularly favorable features of the early
retirement benefits (which had enabled some employees to retire at age
55, but have their retirement benefits calculated as if they had
continued to work until age 63).
After having adopted the policy of hiring only independent contractors
in the future, Allstate also embarked upon a plan to persuade employee
agents to switch to independent-contractor status, by offering financial
inducements (e.g., a payment of $5,000, and more generous commissions on
sales). Although some employee-agents made the switch, many others did
By 1999, the situation was as follows: of the approximately 15,000
agents nationwide, approximately 6,200 continued as employee-agents,
under either the R830 or the R1500 contract. In November 1999, Allstate
announced its "Preparing for the Future" Reorganization Plan, under which
the employment of all employee-agents would be terminated as of June 30,
2000. Each such employee-agent was offered a choice: if the agent signed
a comprehensive release, he or she could (1) sign an R3001 contract and
continue in the service of Allstate, (2) serve as an R3001
independent-contractor for a brief period, and then sell his or her
interest in their book of business to a buyer approved by Allstate
(frequently, another Allstate agent), or (3) sign an R3001 contract but
then immediately resign, in exchange for severance pay amounting to one
year's earnings, to be paid monthly over a period of two years. Agents
who refused to sign the release were simply discharged as of June 30,
2000, with little or no severance pay.
Confronted with these choices, most of the employee-agents (99.7%)
signed releases. Only 19 agents did not sign, and several of their cases
have been disposed of in the interim. As of the present date, the parties
estimate that there are 16 potential claimants who did not sign releases.
In Romero I, the 29 named plaintiffs seek to represent a class which
includes the 6,200 former employee-agents, to nullify all of the
releases, and to pursue a wide range of claims: for breach of contract,
for violations of the ADEA, ADA, Title VII and ERISA. As can readily be
seen from the foregoing recital, the proposed class includes persons who
did not sign the release, persons who signed the release and continue in
the service of Allstate as independent contractors, persons who sold
their blocks of business to other agents and then resigned, and persons
who not only continue in the service of Allstate as independent
contractors, but who have purchased blocks of business from retiring
former agents. The class-action issues will be addressed below.
In Romero II, plaintiffs seek to represent a class of persons whose
rights under ERISA were allegedly violated by the changes in the pension
plan, and by their changes in status.
In its case, the EEOC contends that requiring the employee-agents to
release all their claims under the ADEA, the
ADA and Title VII in order to continue working as sales agents
constituted retaliation in violation of § 4d of the ADEA, § 503a
of the ADA, and § 704a of Title VII, and also constituted
interference, coercion, and intimidation in violation of § 503b of
the ADA. Attached to the EEOC complaint is a list of the 300-odd persons
who filed charges with the EEOC on whose behalf, presumably, the
EEOC brought its lawsuit.
A. Validity of the Releases
An overarching issue in all of these cases is the validity and
enforceability of the releases signed by most of the affected
employee-agents. Obviously, if the releases are enforceable, only the 16
remaining agents who did not sign the releases could possibly prevail in
this litigation. Defendants contend that this issue is not appropriate
for class treatment, because of the conflicting interests of the putative
class members, many of whom have no desire to be restored to the
status quo ante. I believe, however, that the issue can properly
be addressed on a class-wide basis by way of a declaratory judgment. That
is, if the releases are found to be unenforceable, a declaratory judgment
to the effect that they are voidable at the option of each class member
would benefit those who wish to sue Allstate, without harming those who
choose not to do so.
I conclude, further, that the releases should indeed be voidable at the
option of the employee-agent. In the first place, the releases, on their
face, violate § 626 of the Older Workers' Benefit Protection Act,
29 U.S.C. § 626 ("OWBPA") and 29 C.F.R. § 1625.22 (i)(2), which
provides "no waiver agreement may include any provision prohibiting any
individual from . . . filing a charge or complaint, including a
challenge to the validity of the waiver agreement, with EEOC."
Allstate contends that it had no intention of precluding the filing of
charges, and notes that more than 300 employee-agents did file charges
with the EEOC, without any repercussions. The difficulty with this
argument, however, is that we have no way of knowing how many other
employee-agents failed to pursue charges before the EEOC simply because
they accepted the release language at face value.
Moreover, as the EEOC points out, it is illegal to either retaliate, or
threaten to retaliate, against an employee to prevent him from exercising
rights under the EEOC, Title VII, ADEA, ADA, etc. Those employees who did
not sign releases were in fact treated less favorably than those who did
sign, and the signers had all been threatened with such an outcome if
they exercised their right to refuse to sign the proposed release.
I conclude, therefore, that the releases are voidable. Defendants'
motion for summary judgment with respect to all
claims by persons who signed releases will therefore be denied, and
plaintiffs' motion for partial summary judgment on that issue will be
granted, to the extent of a declaratory judgment as discussed above.
B. Substantive Issues
Entering declaratory judgment to the effect that the signed releases
are voidable at the option of the signing employee does not, of course,
signify that any of the employees actually have valid claims to assert.
It is therefore appropriate to consider whether any of the claims
asserted in the various complaints are subject to summary dismissal. I
have concluded that some of them are indeed vulnerable to dismissal.
1. ADEA Claims
I have concluded that, on the undisputed facts of record,
there is no basis for claims of age discrimination, for the simple reason
that employees of all ages were treated alike. An employer who visits
adverse consequences upon all employees, irrespective of age, cannot be
held liable for age discrimination. The fact, if it is a
fact, that many of the affected employees, or even a majority,
are within the protected age group, is irrelevant. On this point, I agree
with the November 25, 2003 decision of Judge Herndon in the related case
of Isbell and Schneider v. Allstate Insurance Co., (U.S.B.C.
Southern District of Illinois, No. 01-cv-00252).
2. The Claims in Romero II
To the extent that the plaintiffs in Romero II complain about the
amendments to the pension plan made in 1991, 1994, and 1996, their
complaint, filed December 20, 2001 is, on its face, time-barred. To the
extent that they lost pension entitlements when they became independent
contractors or former employees, that consequence would be an element of
damages if they establish that their change of status was a breach of
contract or otherwise illegal claims which are being asserted in
Romero I and the EEOC action. I conclude that Romero II should be
dismissed in its entirety.
3. Breach of Contract
If, as Allstate contends, the employment of all employee-agents was
terminable at will, then Allstate's action in terminating all those
contracts on June 30, 2000 was entirely permissible. Plaintiffs contend,
on the other hand, that the R830 and R1500 contracts were not at-will,
but only terminable for cause. They note that the review procedures
specified in the R830 contract clearly prevents at-will terminations, and
that the same provisions were included in the manual which accompanied
the R1500 contracts. The present record does not permit resolution of
this issue on summary judgment. Although the language of the two forms of
contract was drafted by Allstate, and ambiguities should be resolved in
favor of the employees, it is also possible
that parol evidence not yet in the record may shed light upon the
4. Allstate's Counterclaim
In its counterclaim, Allstate seeks damages against the persons who
signed releases, to the extent that they have, or may in the future, sue
Allstate, contrary to the terms of the releases. Inasmuch as I have
determined that the releases are voidable, plaintiffs' motion for summary
judgment dismissing the counterclaim will be granted. Allstate's later
motion for leave to amend its counterclaim will be dismissed as moot.
C. Class Action Issues
In accordance with the foregoing discussion, I will certify a class
under 23(b)(2) with respect to the voidable releases, so that any former
employee-agent who signed such a release may, by notifying Allstate in
writing within 90 days, effectively rescind the release (including, of
course, repayment of all sums received in exchange for the release). If a
sufficiently large number of agents rescind their releases, plaintiffs
may apply for certification of a Rule 23(b)(3) class, when the contours
of such a putative class will have been clarified.
A class consisting of the 16 remaining persons who did not sign
releases will be certified, under Rule 23(b)(3), with respect to all
issues not summarily disposed of herein. In all
other respects, plaintiffs' applications for class certification
will be denied without prejudice to a later motion for class
certification, in accordance with the views expressed above.
The accompanying Order is intended to implement the views expressed
AND NOW, this day of March 2004, IT IS ORDERED:
1. Civil Action No. 01-6764 ("Romero II") is
dismissed with prejudice.
2. In all other respects, defendants' motion for
summary judgment is denied.
3. The motions for partial summary judgment filed
by plaintiffs in Civil Action NO. 01-3894
("Romero I") and the EEOC in Civil Action No.
01-7042, are granted, to
the extent of the declaratory judgment
being entered as a separate document.
4. Plaintiffs' motion to dismiss defendant's
counterclaim is granted. Defendant's
counterclaim is dismissed with prejudice.
5. Defendant's motion for leave to file an
amended counterclaim is dismissed as moot.
6. Counsel for plaintiffs shall submit a proposed
order certifying a Rule 23(b)(3) class
consisting of those former employee-agents who
did not sign releases.
7. Except as above set forth in this Order, all
pending motions are dismissed.
AND NOW, this day of March 2004, IT IS ORDERED, ADJUDGED AND DECLARED
1. The releases signed by the former employee-agents of Allstate
Insurance Company pursuant to the "Preparing for the Future"
Reorganization Plan are voidable at the option of the persons who signed
2. Each employee-agent who signed such a release may rescind the
release by taking the following action: within 90 days after
receiving notice of this Order, notifying Allstate Insurance Company, in
writing, of his or her wish to rescind the release, and, within 30 days
thereafter, tendering to Allstate Insurance Company repayment of any and
all benefits received by the signer in exchange for signing the release.
3. Counsel for plaintiffs in the above-captioned actions shall submit
to this Court for approval a proposed form of notice implementing the
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