Karla Gerner, a human resources director for the County of Chesterfield, Virginia, was terminated after her position was eliminated as part of a budget-driven reorganization. After she was told that her position no longer existed, she was offered the opportunity to sign a separation agreement which included a voluntary resignation and three months’ severance pay with health benefits. She refused the deal. She quickly brought a claim under Title VII of the Civil Rights Act of 1984 after discovering that male colleagues who were also terminated were receiving sweeter severance offers.   This case, Gerner v. County of Chesterfield, Virginia,  2011 U.S. Dist. LEXIS 15685 (E.D. Va. Feb. 16, 2011), was recently dismissed by Judge Henry Hudson.

The court held that Gerner failed to set forth facts sufficient to allege each element of her claim. To bring a claim of racial or gender discrimination under Title VII, one must show adverse employment action, which she neglected to do.

The court distinguished this case from McGuinness v. Lincoln Hall, where the plaintiff was offered a less desirable severance package then her male colleague. The court held that the plaintiff had successfully stated a prima facie case under Title VII, because she had been entitled by pre-existing agreement with her employer to a layoff package. 263 F.3d 49 (2^nd Cir. 2001).

The difference in the present case is that the offer of the severance package was made after Plaintiff had been terminated, not as a term or condition of separation, and there were no pre-existing terms of a severance package before she was terminated. Therefore, Gerner was not entitled to any severance benefits. Where severance benefits are a contractual entitlement, disparate treatment may constitute an adverse job action. But this is not the case when an employer offers them as a voluntary benefit.

The court went on to clarify that “a benefit that is part and parcel of the employment relationship may not be doled out in a discriminatory fashion, even if the employer would be free under the employment contract simply not to provide the benefit at all.” Op. at 7, quoting Hishon v. King & Spalding, 467 U.S. 69, 75 (1984). A negotiation of the terms of a release from employment under a contract providing for severance benefits is an example of a benefit that is part and parcel of the employment relationship. See EEOC v. Lockheed Martin Corp., 444 F. Supp. 2d 414 (D. Md. 2006). Gerner’s benefit was not part and parcel of the employment relationship because it was offered voluntarily after her position was eliminated. “When an employer gives severance pay or related benefits to employees as part of a plant closing, no relationship exists between the value of the job given up and the value of the benefit.” Op. at 7, quoting Britt v. E.I. Du Pont de Nemours & Co., 786 F.2d 593, 595 (4^th Cir. 1985).

Because the offer of a less-favorable severance package did not constitute an adverse employment action, plaintiff’s claim failed. The court noted that plaintiff’s complaint lacked the basic pleading requirement – a factual basis for the adverse employment element – because it merely cited the benefits received by four male directors also terminated, and does not provide facts describing the circumstances under which they were terminated, the time of such action, the County personnel involved in the decision to terminate them, or the economic climate at the time.

Although the question of whether a severance package should be considered a type of employment action is still an open question, employers may mitigate potential disparate treatment claims by offering severance packages only after employees are terminated. It is also a good idea for Employers to avoid defining a company policy toward severance plans in an employee handbook or any other firm publication.