On the one hand a separation agreement can be a fair and amicable way to end an employment relationship. It benefits the departing employee who receives some form of compensation. It also gives the employer peace of mind because the agreement, if written concisely and in detail, will greatly reduce the likelihood of post termination lawsuits.

However, on the other hand, upon signing a separation agreement, an employee may be waiving or resolving valuable claims for substantially less than what he or she is owed. Alternatively, an employer who has entered into an employee separation agreement without legal counsel might find that the separation agreement resulted in   severance compensation for the employee that was unnecessarily generous.

I often consult and represent clients who either voluntarily or involuntarily end their employment and subsequently receive a severance or separation agreement. Below are five (5) considerations all parties should take into account before entering into a Separation and Release Agreement:

• Employee’s Employment Status
  1. In Tennessee, most employees are considered “at-will” meaning that generally they can be fired at any time for any nondiscriminatory reason. Therefore, the general rule is that employees are not entitled to receive any sort of severance or separation pay.
  2. It is important for employees and employers alike to ascertain the classification of the status of each employee and the potential benefits that are associated with each classification.
• Employee Benefits
  1. If an individual has an employment agreement with their employer, then that person may not be considered an “at-will” employee, but an employee with certain benefits and protections. An employee may also be entitled to receive additional benefits depending on whether separation from the Company was voluntary, for cause, or without cause.
  2. Individuals can also be “at-will” employees and still be entitled to certain benefits. For example, an employee may receive commissions as a salesperson, an annual performance bonus, be entitled to recover unpaid time off, or be legally entitled to benefits under the Fair Labor Standards Act or Americans with Disabilities Act. Many times these additional benefits are contained in employment agreements, offer letters, or in the Employment Handbook.
• Potential claims Against the Employer.
  1. Depending on the factors surrounding an employee’s termination, the employee could have certain claims against the Company. For example, if the Company refuses to compensate a salesperson for unpaid commissions, the salesperson may have a breach of contract claim against the Company.
  2. Furthermore, if an employee is terminated for what that individual alleges is an unlawful reason for termination, such as discrimination, then the employee may have a meritorious legal claim against the Company.
  3. It can be beneficial for employers to spot these issues prior to the termination of an employee so the matter is resolved amicably rather than after costly litigation.
• Restrictive Covenants
  1. It is very important for employees to understand and review all clauses contained in a severance or separation agreement. Employers will often include restrictions on an employee’s ability to work that may include a non-competition or non-solicitation agreement.
  2. It is also important for employers to consider adding restrictive covenants to Employee Separation Agreements in order to protect company trade secrets and prevent unfair competition.
•    Employment Litigation

Employment litigation can have unintended consequences for both employees and employers. For employees, employment litigation can be a long process that may inadvertently impact their ability to procure a new job. For employers, it may make economic sense to resolve meritorious claims earlier in litigation rather than fund a costly defense.

Both employers and employees should seek experienced legal counsel before entering into an employee separation agreement. If you would like documents reviewed and require legal assistance, please call Cole Law Group at 615-490-6020 for an appointment with one of our business lawyers in Brentwood. We will be happy to assist you.

With over 1,600 home-based businesses operating in the city of Nashville, Tennessee, could it be true that many of them are illegal?¹ Section 17.16.250 of Title 17 of the Metropolitan Code of Laws that governs residential zoning ordinances contains a provision regarding “home occupations”.² The term home occupations refers to the practice of individuals operating small businesses from their residential homes. The provision prohibits the home occupations, or home businesses, from performing services for customers on their residential property. For many home businesses, customers and customer interaction are the sole source of profit. In “Music City,” a community full of artists, musicians, and other creative professionals, this ordinance presents several problems for those wanting to teach music and art or even to create music and art with other professionals in the industry.  

This exact zoning ordinance presented an issue for a local Nashville music producer, Lij Shaw. Since 2015, Mr. Shaw has been in a battle with the City of Nashville to shut down the prosperous music studio located in his residential home. Mr. Shaw first received a letter from the city demanding his home music studio be closed and no longer open for business. Two years later, Mr. Shaw partnered with Pat Raynor, an individual running a hair salon out of her home and protested the residential zoning ordinance in court. The legal battle between Mr. Shaw and the City of Nashville was recently heard by the Supreme Court of Tennessee. The decision of the Supreme Court of Tennessee will not be released for several months.  

Can Owners Conduct Business From Their Home During Covid-19?  

As the COVID-19 pandemic persisted, the Nashville Metropolitan community was afforded the opportunity to operate small businesses from their residential homes, with a newly added benefit. On July 7, 2020, Nashville Metro Council approved the Home Occupation Modernization Bill (bl2019-48) in order to allow small business owners to continue to profit from their businesses in the safety and security of their own homes. This ordinance additionally allows business owners in Davidson County, for the very first time in the county’s history, to engage with customers in the business owner’s home legally. However, the Bill contains several restrictions as follows: a restriction that no more than five employees may reside within the dwelling at a home occupation location;  a restriction that no more than one part-time or full-time employee not living within the dwelling may work at the home business; that there can be a maximum of six visits by customers per day; and no more than three customer trips per hour are allowed at the site of the home business.  

Why Should Nashville Small Business Owners Care? 

In the current COVID-19 landscape, the opportunity to run a business out of your home and be able to serve customers at that business is highly valuable. Businesses based in a residential home afford individuals with an easily attainable avenue to entrepreneurship. It also presents small business owners with a much more cost-effective way to conduct business, avoiding the expenditure of renting or purchasing a commercial space. Reducing the cost to start up a business can be a great asset to the longevity of the business and help reduce the risks associated with starting a business.  

The Home Occupation Modernization Bill is set to expire in January of 2023. Upon expiration, it will again be illegal for home businesses to serve customers on site in a residential home. However, with the help of Mr. Shaw, Mrs. Raynor, and other like-minded individuals, the residential zoning ordinance prohibiting customers to enter and to be served by home businesses may no longer exist.  

If you are thinking about starting a business, we can help. Just call an Entrepreneurial Business Attorney at Cole Law Group in Brentwood (615-490-6020) and we will be happy to speak with you about your new business venture.  

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1 https://ij.org/report/finding-american-dream-home; see also http://www.tnledger.com/editorial/article.aspx?id=52959. 

2 Metro. Code § 17.16.250(D)(1).

Disclaimer: This article is not legal advice and is only intended to give a bit of background information about employment discrimination law under Federal and Tennessee statutes. Each employment discrimination case is different, and there are tactical considerations about when to sue and what claims to bring. For legal advice applicable to your specific situation, always contact an attorney licensed in your state.

What Is Employment Discrimination in a Nutshell?

Employment Discrimination Law is the body of law that applies to lawsuits based on unlawful discrimination that occurs in the workplace. As many of you already know, most employment arrangements in the United States have been termed At Will employment. At Will employment means that in the absence of a contract stating otherwise, employers are free to fire an employee for any reason, or for no reason. Similarly, employees are free to terminate their employment for any reason and seek opportunities elsewhere.

Employment Discrimination Law is comprised of statutorily created exceptions to the common law employment At Will doctrine. The most well-known Employment Discrimination statute in the United States is Title VII of the Civil Rights Act of 1964. The Civil Rights Act of 1964 prohibits discrimination in employment against five protected classes: “race, color, religion, sex, or national origin.” 42 U.S.C.A. § 2000e-2. In general, employment discrimination laws protect employees against employers that commit an adverse employment action against an employee because of, or motivated by, that employee’s protected status.

What protected classes exist under Federal and Tennessee Law?

As stated above, Title VII of the 1964 Civil Rights Act allows claims for employment discrimination because of, or motivated by, an employee’s race, color, religion, sex, or national origin. There were significant amendments to Title VII in the 1991 Civil Rights Act. 42 U.S.C. § 1983 today allows for suits based on race, color, and alienage in some circumstances. The 1967 Age Discrimination in Employment Act prohibits discrimination on the basis of age if the employee is over 40 years. 29 U.S.C. § 621. The 1978 Pregnancy Discrimination Act prohibits discrimination based on pregnancy, childbirth, and related medical conditions. The 1993 Family and Medical Leave Act requires employers in certain circumstances to allow an employee up to 12 weeks of unpaid leave for medical reasons. 29 U.S.C. § 2901. The 1963 Equal Pay Act prohibits discrimination in pay on the basis of sex. 29 U.S.C. § 206(d). The Americans with Disabilities Act prohibits discrimination on the basis of a recognized disability. 42 U.S.C. § 12111. There are also several other statutes that apply in less common circumstances; however, the list above includes the federal causes of action under which most employment discrimination claims are litigated.

The Tennessee Human Rights Act is similar to many of the Federal employment discrimination statutes. Tenn. Code. Ann. § 4-21-101; see also Wilson v. Rubin, 104 S.W.3d 39, 48 (Tenn. Ct. App. 2002). One of the stated purposes of the Tennessee Human Rights Act is to “safeguard all individuals within the state from discrimination because of race, creed, color, religion, sex, age or national origin in connection with employment…” Tenn. Code Ann. § 4-21-101. Because the purpose of the Tennessee Human Rights Act and several federal acts are similar, “Tennessee’s courts regularly consult the decisions of their federal counterparts for guidance when called upon to construe and apply the Tennessee Human Rights Act.” Wilson v. Rubin, 104 S.W.3d 39, 48 (Tenn. Ct. App. 2002).

A Prima Facie Claim for Employment Discrimination

In general, for a plaintiff to assert a claim of employment discrimination, a plaintiff must show: 1) the Plaintiff is a member of a protected class; 2) the employer engaged in an adverse employment action; 3) the Plaintiff was qualified for the job; and 4) under circumstances which give rise to an inference of unlawful discrimination. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973). Adverse employment actions are generally interpreted as any action that changes the terms and conditions of employment, such as discharge, demotion, suspension, and a reduction in pay. Qualification is usually shown through education and experience. The best way to show the fourth element is through a similarly situated comparator. A similarly situated comparator is someone who is similar in all material aspects to the plaintiff except is not a member of the protected class and was treated more favorably by the employer.

Special Considerations for an Employment Discrimination Lawsuit

There are several special considerations that employment discrimination attorneys are cognizant of, but the average person may have never read. Some special considerations include the following:

• A requirement to exhaust administrative remedies – This does not apply under every statute and these rules change in different jurisdictions over time. However, most employment discrimination statutes do require exhaustion of administrative remedies before bringing a lawsuit. Today, for example, if you wish to file under Title VII of the Civil Rights Act of 1964, you must first file a charge with the federal or state equivalent Equal Employment Opportunity Commission (EEOC) and obtain a right to sue letter. The full EEOC process includes filing a charge, an investigation by the EEOC, and perhaps mediation. The EEOC may determine to litigate the case on behalf of the public interest. However, today the EEOC is understaffed and overworked, which means that most charges filed receive little individualized attention and the EEOC will issue a notice of right to sue letter to the filer at the end of the investigatory period.
• The number of employees – If you work for a really small employer (less than 15 employees), then Title VII of the Civil Rights Act of 1964 does not apply.
• Government employment – The rules are different for government employees. For example, federal employees may only sue for employment discrimination under Title VII according to the Equal Employment Opportunity Act of 1972.
• Retaliation – Have you been retaliated against for participating or encouraging protected behavior? Under certain circumstances this may also allow for a claim.
• Defenses to the Lawsuit – Your employer may assert various defenses to the lawsuit. For example, The Same Decision Defense asserts that the employer would have made the decision to engage in the adverse employment action in the absence of the plaintiff being a member of the protected class. See Price Waterhouse v. Hopkins, 490 U.S. 228, 242 (1989). The Stray Remarks doctrine asserts that a small number of inappropriate comments are insufficient to establish liability.

Conclusion

I hope this article has communicated the basics of an employment discrimination claim and helped you to understand the conditions under which you might have a claim. Employment discrimination laws protect employees against employers that commit an adverse employment action against an employee because of, or motivated by, that employee’s protected status. Employment discrimination is a complex area of the law that is constantly changing as statutes are added or amended and court decisions interpreting the laws modify existing understanding. If you think you possibly have a claim, I would encourage you to speak with an attorney licensed in your state soon. Remember, the law aids the vigilant, not those that sleep on their rights. See Brown v. Ogle, 46 S.W.3d 721, 726 (Tenn. Ct. App. 2000).

About the Author:

Paul Tennison is a 3rd year law student at Vanderbilt University with over seven years of management, human resources, and leadership experience in the United States Army. Paul continues to serve our country in the Tennessee Army National Guard. Paul is a 2010 West Point graduate and served on active duty for 5 years as a Field Artillery officer, including time overseas in South Korea and Germany. He has held the position of law clerk at Cole Law Group for the past eighteen months and looks forward to joining the firm as a licensed attorney.

The Plaintiff was the lab supervisor for Smyrna’s wastewater treatment plant. His work duties included ensuring that the plant met governmental regulations and quality-control standards. The Plaintiff reported to the plant manager that one of the supervisors was engaging in questionable conduct regarding water sample evaluations and hindering the Plaintiff’s ability to perform his work duties. Eventually, the supervisor was promoted to plant manager and, after different dialogues, including the Plaintiff complaining about the promotion process and a meeting about the Plaintiff’s ability and willingness to work with the new plant manager, the Plaintiff’s employment was terminated. The Plaintiff filed a Tennessee Public Protection Act claim, which was eventually refiled in Tennessee state court, and a First Amendment claim, which the district court ruled on in favor of the Defendant pursuant to summary judgment and the Sixth Circuit reviewed on appeal.

The Sixth Circuit set forth the legal framework for a First Amendment free speech analysis for public employees. Three elements must be met in order for speech by a public employee to have possible First Amendment protection. The employee must: (1) speak on matters of public concern, (2) speak as a private citizen and not as an employee, and (3) have individual speech interests that outweigh the state’s interest in promoting efficient public services (Opinion, p. 6).

In Mayhew, the Plaintiff’s speech about the water testing concerns likely constituted speech regarding a matter of public concern. This speech, however, fell within the Plaintiff’s “ordinary job responsibilities” because his duty was to oversee all water-sample testing and report “situations and accidents immediately to management” (Opinion, p. 10). Therefore, the Plaintiff’s complaints about the then-supervisor’s questionable conduct regarding the water sample evaluations was not protected by the First Amendment because this speech was made in the Plaintiff’s employment capacity.

The Sixth Circuit then decided whether the Plaintiff’s complaints about the promotion process could be considered protected speech. The Court found that the Plaintiff’s complaints about the promotion of the supervisor to plant manager could constitute protected speech because the Plaintiff’s complaints referred to the supervisor’s alleged past misconduct and stated that the normal hiring procedures were not followed. Promoting someone who may have or may be engaging in misconduct in the water-safety context could constitute a matter of public concern. The Sixth Circuit mentioned in a footnote that the Defendants did not contest whether the alleged misconduct constituted a matter of public concern, the Plaintiff’s promotion process complaints were made in a private capacity, or governmental interests would outweigh private speech interests. Thus, the Sixth Circuit remanded the case to the district