In a long-awaited ground-breaking decision, the District of Columbia Court of Appeals today held that an employer engages in unlawful retaliation when it adds a new demand for a release as a condition for concluding a consulting agreement. The case is Propp v. Counterpart International and LeLaulu, No. 07-CV-988 (D.C. Mar. 8, 2012).

Counterpart International is a nonprofit development organization. Brian Propp worked for Counterpart from 1995 to 2004. In 2001, Propp was promoted to General Director of Counterpart’s Humanitarian Assistance Program (CHAP). His duties included fundraising.  He also led the Counterpart Communities initiative which became known as his "brainchild." Lelei LeLaulu became Counterpart’s President and CEO in 2002.

In 2004, LeLaulu proposed to the Board that Propp be terminated due to a budget deficit in Propp’s program in Muldova and CHAP’s overall budget reduction.  The Board approved of the termination. Propp was the only person laid off. Before anyone told Propp about his termination, Congress voted to give Counterpart $12 million. In a later meeting with Propp to tell him about his termination, LeLaulu offered him an opportunity to receive three months’ severance pay in exchange for a release of all claims.  Propp refused. Nevertheless, the parties agreed to have Propp continue working for Counterpart as a contractor. LeLaulu sent an email to all staff saying that Propp would now be working on Counterpart Communities and other initiatives, but not on CHAP. A week later, Propp’s attorney sent Counterpart a letter asserting that Propp was opposing practices he believed were discriminatory. Counterpart and LeLaulu then became non-responsive to efforts to conclude the negotiations for a new contract. Instead, they insisted that Propp sign a release, and even gave him a 48-hour deadline to do so. Counterpart also abandoned the $12 million earmark from Congress. On October 7, 2005, Propp filed his lawsuit alleging discrimination and retaliation.

During discovery Counterpart admitted that “Defendants never engaged or otherwise permitted [Propp] to concentrate on Counterpart Communities and other strategic opportunities for the organization because [Propp] refused to sign a separation agreement and release.” The DC Superior Court still dismissed the lawsuit on summary judgment. Propp appealed only the decision that dismissed his retaliation claim. He argued that Counterpart and LeLaulu added the requirement for a release only after Propp opposed unlawful discrimination. Today, the DC Court of Appeals agreed that adding the requirement for a release was retaliatory and unlawful.

Initially, the Court agreed with Propp that his lawyer’s letter was protected activity.  It clearly opposed unlawful discrimination.  Also, it mattered not that Propp declined to pursue the discrimination claim since he reasonably believed the employer’s action was discriminatory. See Manoharan v. Columbia Univ. Coll. of Physicians & Surgeons, 842 F.2d 590, 593 (2d Cir. 1988).

Next, the Court said Propp must demonstrate that “a reasonable employee would have found the challenged action materially adverse which . . . means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Quoting Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 68 (2006). Counterpart argued that the “requirement that Propp sign a release of claims prior to entering into a consulting agreement was not based on any retaliatory motive,” explaining that it “simply wanted Propp to agree not to sue the organization before committing to a continuing relationship with him. This is not retaliation; it is prudence in action.” Counterpart’s brief also argued that the release requirement was always a prerequisite for a consulting position, even prior to Propp’s complaint of discrimination.

Propp did not argue that requiring such a release would be unlawful. What he objected to is being required to sign a release as part of his termination, a new condition precedent to negotiating a consulting agreement imposed after he complained of discrimination.  The court, therefore, did not consider whether releases are generally lawful and enforceable.  In footnote 15, the Court said that requiring a release of the right to file or participate in a discrimination case filed with the EEOC. in exchange for severance pay or some other generally offered benefit has been held to be “facially retaliatory” and unenforceable. Citing EEOC. v. Lockheed Martin Corp., 444 F. Supp. 2d 414, 418-19 (D.Md. 2006) (citing EEOC v. Bd. of Governors of State Colls. & Univs., 952 F.2d 424, 430 (7th Cir. 1992)).

On pages 16-17, the court explains how this case is different than normal situations in which an employer requires a release as part of a settlement agreement:

[O]ne need not question whether obtaining a release was a prudent course for Counterpart under the circumstances. It is enough if retaliation was “a substantial factor,” even if not the only factor. … Accordingly, it is important to distinguish between requiring a release of claims as part of a negotiated consulting agreement, and imposing a release of claims related to Propp’s termination as a prerequisite for negotiating the consulting agreement that was contemplated when Propp was terminated. Stated otherwise, Propp’s claim is that, once he complained of discrimination, Counterpart refused to negotiate a consulting agreement as it had agreed to do when it terminated him, and effectively withdrew two of the termination options that did not include a release that had been offered before his complaint because he had complained of discrimination.

If proven, Counterpart’s refusal to negotiate with Propp for a consulting position, as it had previously agreed to do, unless Propp signed a release as part of his termination — a requirement imposed only after he complained of discriminatory treatment — would be an adverse action within the contemplation of the DCHRA’s retaliation provision. The Supreme Court has broadly defined what constitutes an “adverse action” to include (in addition to termination, denial of promotion, etc.) actions taken by employers which “a reasonable employee would have found . . . materially adverse, which . . . might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Burlington N., 548 U.S. at 77-78. Therefore, simply because Counterpart may have had a business-related reason (“prudence in action”) for conditioning negotiations for the consulting agreement on a release of claims, it could not require a release of claims in response to Propp’s complaint of discrimination. “The statute contains no safe harbor for otherwise lawful acts done for an improper retaliatory purpose.” Arthur Young, 631 A.2d at 367; see also Atlantic Richfield Co. v. District of Columbia Comm’n on Human Rights, 515 A.2d 1095, 1101 (D.C. 1986) (finding a threat to an employee that “she would never work in the District of Columbia again if she pressed her discrimination claim” to be retaliatory).

It was not necessary that Propp show that he would have received the consulting contract, or that he had any right to the consulting contract.  It was enough that Counterpart created a "Hobson’s Choice" in which he would have to either give up his discrimination claim, or give up hope of the consulting contract.  That is enough to discourage others from standing up for their rights.

Judge Ferrell wrote a separate concurring opinion to explain that the case would have been more difficult if Counterpart had admitted that it reassessed its position in response to the letter from Propp’s attorney.  It could have argued that the lawyer’s letter gave it a valid reason to require that Propp agree to a release as a condition for any consulting contract.  Since Counterpart actually argued that it had required the release even before getting the lawyer’s letter, and the evidence provides a basis for a jury to disagree, the Court had to reverse the summary judgment.  The other judges did not join in this concurring opinion.

Overall, the Propp decision is a good example of how the Burlington Northern doctrine should be applied.  Any action that might discourage employees from opposing discrimination should allow the victim to sue, even if it is a new demand for a release of claims.

Congratulations to DC attorney John Racin for representing Brian Propp in this landmark case.