Employees Need Not “Tender Back” Severance Pay Before Suing Under Title VII or EPA

In McClellan v. Midwest Machining, Inc., the U.S. Court of Appeals for the Sixth Circuit addressed a question of first impression before the federal appellate courts – whether employees must return a severance payment made in exchange for a release of claims before bringing suit under Title VII and the Equal Pay Act (EPA).

The U.S. Supreme Court in Oubre v. Entergy Operations, Inc. has previously stated that employees need not tender back such payments in the context of the Age Discrimination in Employment Act (ADEA). The Supreme Court found that ADEA’s enforcement measures are effectuated in part through private lawsuits, and a tender back rule would undermine that feature of the statute as in many instances, the employee is not in a position to return the monies. This may enable the non-compliance with the law of employers who rely on the employee’s financial difficulties and consequent ratification of the release to avoid liability.

The Sixth Circuit found that the reasoning of the Supreme Court with regard to ADEA applied equally to Title VII and the EPA. Accordingly, employees are not required to tender back payments received before filing Title VII and EPA claims.