$4.5 Million Settlement by Allstate in Age Bias Suit

Monday, September 14, 2009
The U.S. Equal Employment Opportunity Commission (EEOC) announced a major settlement of an age discrimination class lawsuit against Allstate Insurance Company, one of the nation’s largest insurers, for $4,500,000 to be paid to approximately 90 older former employees, in addition to significant remedial relief.

In its lawsuit, filed in October 2004 under the Age Discrimination in Employment Act (ADEA), the EEOC charged that in the year 2000 Allstate adopted a hiring moratorium for a period of one year, or while severance benefits were being received, that applied to all its employee-sales agents who were part of its Preparing For The Future Reorganization Program. The program was part of Allstate’s reorganization from employee agents to what the company considered independent contractors. The EEOC alleged that the policy had a disproportionate impact on Allstate’s employees over the age of 40 because more than 90 percent of the agents subjected to the hiring moratorium were 40 years of age or older. Allstate denies that its hiring moratorium violated the ADEA.

“Discrimination against older workers is counterproductive and wrong, and the EEOC has been taking a close look at ways to increase our law enforcement efforts in this area,” said EEOC Acting Chairman Stuart J. Ishimaru. “Corporate America must be more vigilant in guarding against job bias affecting older workers, or risk action by the EEOC. This settlement shows there is a high price to pay for discriminatory employment policies and practices that adversely impact older workers.”

In 2005, the U.S. Supreme Court held in Smith v. City of Jackson that a facially neutral policy, such as Allstate’s hiring moratorium, which disproportionately affected those age 40 and over violated the ADEA unless the policy was based on a reasonable factor other than age.

As provided in the Stipulated Order resolving the litigation, pending approval by U.S. District Judge E. Richard Webber in U.S. District Court for the Eastern District of Missouri (Civil Action No. 4:04CV01359 ERW), Allstate will pay former employees who sought employment -- or would have sought employment with the company in the absence of its policy -- a total of $4.5 million to be divided among the class via a settlement fund. The order, in effect for three years, also provides for discrimination prevention training, posting of notices, reporting and monitoring, and other relief designed to educate Allstate managers in order to prevent future violations of the ADEA.

In 2007, the parties settled claims of disparate treatment which were asserted for two individuals. Those claims were settled for $250,000 and are not covered by this settlement.

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