United States: Alabama Federal Court Finds That Severance Practices Could Support Discrimination Claims

Seyfarth Synopsis: In Johnson v. Airbus Defense & Space Inc., No. 5:17-CV-2150, 2020 WL 1675776 (N.D. Ala. Apr. 6, 2020), the U.S. District Court for the Northern District of Alabama recently granted an employer's motion for summary judgment on claims brought by plaintiffs alleging they were discriminated against when they were not offered severance packages following separation. Though the Court dismissed the plaintiffs' claims, it left open the possibility that a denial of severance benefits could serve as the basis for discrimination suits.  Particularly in the uncertain landscape of the COVID-19 pandemic, the ruling is an important reminder for employers to keep a watchful eye on their severance practices.

Case Background

In Johnson, three former female employees filed claims of sex discrimination after they were separated from employment but not offered severance packages. Plaintiffs had been working for Airbus pursuant to a ten-year contract with the U.S. military. After the expiration of the contract, Airbus endeavored to transfer as many affected employees as possible to its other facilities and offer them positions substantially equivalent in terms of pay, status, position, and location. Employees who were not offered such positions were instead offered severance packages.

The plaintiffs were all offered transfer positions that the company believed to be equal in terms of pay, status, and location. However, there was a possibility that the new positions could require a transfer to a different location in the future. One of the plaintiffs immediately rejected the position, disagreeing that it was equivalent in terms of pay and status. The other two plaintiffs first accepted the new positions, but ultimately rejected them after they found out they would need to transfer to new locations down the road. After their employment terms expired, the plaintiffs were not offered severance packages. When the plaintiffs learned that other, male employees were offered severance pay, they filed a lawsuit alleging claims of discrimination.

The Court's Decision

In assessing whether the plaintiffs met their burden in establishing a prima facie case of sex discrimination, the Court analyzed whether a denial of severance benefits could serve as an adverse employment action to support discrimination claims. The Court determined that "a denial of severance could be considered a material change to the terms and conditions of employment" and that plaintiffs could bring discrimination claims on such basis. Id. at *5.  Even though the denial of severance pay could serve as the foundation for discrimination claims, the Court reiterated that the plaintiffs still need to meet the additional prima facie criteria to bring a viable discrimination claim.

To support their claims, the plaintiffs pointed primarily to the male employees who had received severance packages following the expiration of their employment terms. The Court reasoned that for the male employees to be appropriate comparators to the plaintiffs, the employees needed to meet specific criteria, including: (i) they were offered an equivalent transfer position; (ii) they rejected the offer; and (iii) they were then offered a severance package. The plaintiffs did not describe any male comparators who met the Court's criteria, so they were not able to use the alleged comparators to support their claims.

The plaintiffs were also unable to produce any other compelling evidence to suggest that Airbus's legitimate, non-discriminatory reasons for distributing the severance packages were pretextual. Airbus established that the male employees who received severance packages did so because they were not offered transfer positions or because the transfer positions were "materially lesser [in] status and pay." Id. at *6.  Though the plaintiffs believed that Airbus's reasons were pretextual because they disagreed they were ineligible for severance, the Court emphasized that "[t]he employer determined the triggers for severance, and the employees' beliefs about what situation triggered severance do not matter concerning pretext." Id. at *7. As a result, the Court granted Airbus's motion for summary judgment and dismissed the plaintiffs' claims.

Implications for Employers

While the Court dismissed the plaintiffs' claims in this case, it left open the possibility that the denial of severance benefits could support claims of discrimination. Accordingly, employers should ensure that their decisions regarding severance pay do not result in a disparate impact on (or constitute disparate treatment of) a particular group of employees and that reasons for offering severance pay to some employees and not others are well-documented, particularly in group termination situations. As employers are navigating the difficult waters of the COVID-19 pandemic, it is important that they remain vigilant in all aspects of separation decisions, including the payment of severance benefits.

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