Age Discrimination and Severance Claims Sustained Against Quest Diagnostic Corporation

In a case claiming age discrimination and interference with severance benefits, plaintiff Theresa Seibert recently defeated Quest Diagnostics’s motion for summary judgment.

The New Jersey District Court action alleges that, after more than twenty-five years as a member of the company’s sales force, Quest terminated Ms. Seibert based on her age in violation of the New Jersey Law Against Discrimination (“LAD”). Ms. Seibert also claims that her termination was part of larger pattern and practice of unjustifiable terminations based on poor performance designed to deny Quest’s older employees severance benefits
in violation of Section 510 of the Employee Retirement Income Security Act (“ERISA”).

With respect to the Section 510 claim, which plaintiff is pressing on behalf of a class of more than 100 other similarly situated former Quest employees, the company argued that Ms. Seibert “has simply no evidence to prove that interference with her eligibility for severance benefits. was a motivating factor in the decision to terminate her employment.”

The Court disagreed. Relying on the Third Circuit decision in Eichorn v.AT&T Corp., 248 F.3d 131 (3d Cir. 2001), the Court was persuaded that, at the time Ms. Seibert was terminated for cause, Quest was concerned about its financial condition and was motivated to reduce or eliminate severance costs. The evidence supporting the Court’s findings is compelling.

For example, after Quest lost revenue sources in and around 2007, its Chief Financial Officer said on an earnings calls that “a significant piece” of its planned cost reductions was going to come “from reduced people costs.”¬† However, a reduction of “people costs” through a reduction in force (“RIF”) would have made many of the terminated employees eligible for severance benefits under Quest’s benefits plan. A former Human Resources director testified that Quest did not use a RIF, “[b]ecause there were other ways that would be better for the business,” and that terminating an employee for poor performance is less expensive than doing so through a RIF.

To avoid using a RIF, John Nosenzo, then-Vice President of Sales and Marketing for Ms. Seibert’s organization, planned to “consolidate some open positions” and then “not fill[] some positions as they became open (either forced or unforced turnover).” According to the testimony of a long-time District Sales Manager at Quest, Mr. Nosenzo introduced an evaluation system that “ignored the realities of the marketplace to value only the achievement of sales quotas, even though those numbers became unrealistic to reach” and
was designed “to create as much pressure on the manager as possible to give as many representatives as possible who did not meet their attainment numbers, for whatever reason, an unsatisfactory rating.” Employees receiving an unsatisfactory rating were placed on performance improvement plans (“PIPs”), which were “a figurative death sentence to the [sales] representative, used to create an appearance of fairness.”

In Ms. Seibert’s case, her immediate supervisor testified that she could “[p]robably not” have met her total sales attainment goals, that the loss of many accounts in her territory “were probably uncontrollable” and that “[i]t was probably unlikely” that she could have met the sales quota he had established in her PIP.

Based on these and other facts in the record, the Court denied Quest’s motion for summary judgment, concluding that a factfinder could find that Mr. Nosenzo’s evaluation system “consciously provided management with a tool to push some employees into ‘voluntarily’ leaving the company” and “could operate as cover for a reduction in the number of employees that would otherwise trigger benefits like severance.”

The Court also rejected Quest’s motion for summary judgment on Ms. Seibert’s age discrimination claim. Plaintiff adduced testimony revealing that executives in Quest’s sales organization stated that the company “should be hiring these young and talented people from Pharma” and that the “people from Pharma were younger and more educated and therefore would be a big advantage over the representatives they replace.” In fact, Quest’s then-Chief Executive Officer, Surya Mohapatra, stated during an 2010 investor conference call that the company was actively “hiring some young people who are coming from other industries” and that, in order to address the downturn in the economy at that time, Quest needed “to have a very engaging sales organization.”

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm with more than a decade of experience litigating employment class actions.