900 F.3d 297
6th Cir.2018Background
- McClellan, an inside-sales employee, was terminated shortly after announcing her pregnancy and was presented a severance/release agreement she signed under pressure; she received $4,000 in eight installments.
- She later filed an EEOC charge, received a right-to-sue letter, and sued under Title VII (pregnancy discrimination) and the Equal Pay Act (among other claims).
- After suit was filed, McClellan (through counsel) mailed a letter rescinding the severance agreement and enclosed a $4,000 check; Midwest returned the check asserting no basis for rescission.
- The district court found genuine fact disputes about voluntariness of the release but granted summary judgment to the employer based on common-law release and the tender-back doctrine (holding McClellan failed to tender back consideration before filing suit).
- The Sixth Circuit reversed, holding the common-law tender-back doctrine does not apply as a precondition to bringing Title VII and EPA claims, and alternatively that McClellan effectively tendered back within a reasonable time.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the common-law tender-back rule is a prerequisite to filing suit under Title VII and the EPA | McClellan: tender-back should not bar suit because applying it would frustrate remedial aims and economically burden claimants | Midwest: ordinary contract/tender-back rules apply to releases of federal claims; plaintiff failed to return consideration before suing | Court: Tender-back doctrine does not apply as a precondition to Title VII or EPA suits; funds may be credited against any award instead |
| If tender-back were required, whether plaintiff tendered back the consideration in a timely manner | McClellan: she offered to rescind and mailed full repayment soon after counsel learned of the release; offer was within a reasonable time | Midwest: plaintiff did not tender back prior to filing suit and thus ratified the release | Court: Even if required, plaintiff’s attempt to return the $4,000 within a reasonable time (before discovery and before defendant’s responsive pleading) was effective; district court erred |
| Whether federal or state common law governs validity of releases of federal claims | McClellan: federal law governs release validity and remedial statutory purposes counsel against tender-back | Midwest: common contract principles (state law) should control; no federal displacement | Court: federal principles and Supreme Court precedent (Hogue/Oubre) guide analysis for remedial statutes like Title VII and EPA; federal policy concerns dispositive |
| Remedy effect of an invalid or voidable release (i.e., deduction or offset) | McClellan: even if release voidable, the severance should not bar suit; any paid sum can be deducted from recovery | Midwest: release and ratification/tender-back can bar litigation entirely | Court: Instead of a strict precondition to suit, the appropriate approach is to allow suit and deduct the severance from any recovery (consistent with Hogue) |
Key Cases Cited
- Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998) (Supreme Court refused to allow tender-back doctrine to bar ADEA suits where statute set waiver standards)
- Hogue v. Southern R.R. Co., 390 U.S. 516 (1968) (Supreme Court held tender-back not required as a prerequisite to FELA suit; rule incompatible with remedial statute)
- Raczak v. Ameritech Corp., 103 F.3d 1257 (6th Cir. 1997) (Sixth Circuit held tender-back not required for ADEA suits; relied on Hogue)
- McKennon v. Nashville Banner Publ'g Co., 513 U.S. 352 (1995) (Supreme Court discussing common purposes of remedial employment statutes)
- Long v. Sears Roebuck & Co., 105 F.3d 1529 (3d Cir. 1997) (Third Circuit applied Hogue/Oubre reasoning to reject tender-back for ADEA and similar remedial statutes)
- Jakimas v. Hoffmann-La Roche, Inc., 485 F.3d 770 (3d Cir. 2007) (Third Circuit extended Hogue/Oubre rationales to ERISA claims)