A recent employment law case recognizes that in certain circumstances, an employer does not violate federal law if it requires former employees to sign away their legal claims against it as a condition to rehiring them as independent contractors.
In 1999, Allstate Insurance Company decided to treat all of its sales agents as independent contractors. Accordingly, that November Allstate fired 6,200 sales agents and gave them four options: (1) return to work as an independent contractor and receive a $5,000 bonus and other benefits; (2) receive $5,000 and the right to sell the employee’s Allstate account in September 2000; (3) receive 12 months of “enhance severance” pay; or (4) receive 13 weeks of ordinary severance pay.
To accept any of the first 3 options, a sales agent was required to sign a release waiving any existing legal claims he or she had against Allstate. Most of the employees accepted one of those three options. The employees who refused to sign releases received only 13 weeks of severance pay.