Warning: Employers should take a closer look at the severance packages offered to people on the way out the door — someone who thinks he or she got a raw deal could drag you into court on a Title VII discrimination claim.

That’s the issue playing out right now in federal appellate court in Virginia (Gerner v. County of Chesterfield, VA), where a Human Resources manager is suing because she said men got a better severance package than she did.

Claims of disparate treatment based on gender can be filed by “potential, current and past” employees — even if the employer was under no obligation to offer severance in the first place.

How this case unfolded: An employee was told her job was being eliminated, and she was offered an agreement giving her three months of pay and health benefits.

She refused to sign the severance agreement — and was let go without any pay or benefits.

She sued, claiming disparate treatment because men received a better severance package than she did.

The company argued that someone needed to have a “contractual entitlement” for something like denying benefits to qualify as a Title VII violation.

Her legal action fell short when district court dismissed her claim.

But that decision was overturned.

Federal court said it didn’t matter if she had a contract with the employer or not, or if the employer was required to offer severance benefits.

Just the allegation that her severance package was less than offered to male employees was all the judge needed to know. The federal court said the law had been misapplied and reversed the lower court decision.

Three takeaways from this situation, to help avoid being accused of discrimination:

  • Severance benefits offered to similarly situated employees must be comparable — including what’s been done in the past.
  • Don’t count on confidentiality clauses to keep severance terms under wraps. If an employee doesn’t sign — like this case — he or she is free to discuss the terms with others.
  • There may be times an employer will offer different severance packages to different employees, but be sure there’s solid documentation of the differences and the circumstances of the termination — layoff, position eliminated, etc.

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