Third Circuit Holds Option to Convert Terminated Employees into Independent Contractors Sufficient Consideration to Support Release

In connection with a wholesale reclassification of certain sales agents from employees to independent contractors, Allstate Insurance Company terminated the employees and offered them the opportunity to work as independent contractors in exchange for the execution of a release of all claims arising prior to the conversion. On February 13, 2015, the Third Circuit Court of Appeals held that Allstate’s offer to permit terminated employees to convert to independent contractors was sufficient consideration to support the employees’ corollary release of discrimination claims. EEOC v. Allstate Ins. Co., ___ F.3d___ 2015 WL 619616 (3d Cir. 2013).

The Third Circuit noted that offering terminated employees the option to convert to independent contractors was adequate consideration for signing the release agreement because the employees were not entitled to continued employment, severance pay, or the right to be independent contractors. As such, the offer represented a benefit to which they were not otherwise entitled.

Finally, the court held that an employee’s refusal to sign the release did not constitute protected activity because it did not communicate opposition sufficiently specific to qualify as protected employee activity.