Agreements

prima facie case of discrimination. Wright clearly met the first two prongs because she is African American, and therefore a member of a protected class, and she was terminated, meaning she suffered an adverse employment action. Wright successfully alleged that the action gave rise to an inference of discrimination because the Foundation did not defame her predecessor, a white man who was also separated from the company, nor any other non-African American employee. Additionally, the CEO praised Wright’s performance during her first year, indicated that Wright’s communication and relationship with her team was improving, and gave Wright a raise. The praise was specific and detailed. The CEO’s criticism, on the other hand, was vague and subjective, stating that Wright was “too busy in the weeds,” and terminating Wright without notice or warning, inconsistent with her performance record.

The Court of Appeals then considered the defamation claim. The Foundation and CEO argued that Wright’s defamation claim failed because the CEO’s statements were protected by the common interest privilege because the CEO and other non-profit leader were leaders of the same non-profit organization at the time the statements were made. The Foundation and CEO also argued that the statements were opinions and therefore not capable of defamation.

For the common interest privilege to apply, the statements must be made in good faith, on a subject in which the party communicating has an interest, to a person who has a corresponding interest. The Court of Appeals found that the common interest privilege did not apply because the statements were made in malice. Wright had a favorable performance evaluation and a raise, and the CEO acknowledged that Wright had been working on her communication. The CEO had raised Wright’s performance to the other nonprofit leader unprompted because the CEO was feeling backlash over the firing. The CEO used unprofessional language to describe Wright, calling her toxic and claiming that two-thirds of the staff would quit if Wright remained. The Court of Appeals also found the statements were not opinions because they had an implicit factual basis.

The Court of Appeals reversed the trial court’s decision to dismiss the three claims.

Wright v. Eugene & Agnes E. Meyer Foundation (D.C. Cir. 2023) __ F.4th __ [2023 WL 3589084.

Note:

This case is an important reminder that mutual nondisparagement clauses can create risk for an organization because a court may hold the organization accountable for anything employees say, even those who are unaware of a settlement agreement.

Severance Agreement Was Valid Because It Did Not Actually Release Employer From Unknown, Future Claims.

Elizabeth Castelo worked for Xceed Financial Credit Union as its Controller and Vice President of Accounting. In November 2018, Xceed informed Castelo she would be terminated effective December 31, 2018. On November 19, 2018, the parties entered into an agreement entitled “Separation and General Release Agreement,” in which Xceed agreed to pay Castelo a severance in exchange for a full release of all claims, including “a release of age discrimination claims that she has or may have under federal and state law, as applicable.”

The release extended to all claims known and unknown “arising directly or indirectly from Employee’s employment … [and] the termination of that employment” including claims for wrongful discharge, violations of public policy, and violation of FEHA.

Castelo and Xceed signed the Separation Agreement on November 19, 2018. Castelo continued to work through the date of her separation, which was December 31, 2018. The parties intended that Castelo would sign another release covering this extra period of employment on the date of her separation. However, Castelo mistakenly signed the extension release the same day she signed the Separation Agreement.

The following year, Castelo filed a complaint against Xceed alleging age discrimination and wrongful termination in violation of FEHA. The parties stipulated the action would be submitted to binding arbitration.

The arbitrator decided that, despite Castelo signing the extended release prior to her last day of employment, the release was valid throughout Castelo’s employment. The arbitrator also examined California Civil Code Section 1668, which prohibits a person from releasing future violations of law. The arbitrator decided that the release did not violate California Civil Code Section 1668. The Arbitrator declined to permit Castelo— who accepted the benefits under the Separation Agreement—to use her mistakenly-premature signing of the second release to leverage Section 1668 as a weapon against Xceed.

Castelo asked the trial court to vacate the arbitration award. The trial court denied to do so. Castelo asked the Court of Appeal to further examine whether the release for the final month of Castelo’s employment violated California Civil Code Section 1668. The Court of Appeal noted that “… courts have interpreted Section 1668 as precluding releases of liability only for future violations of law, … [when] the facts giving rise to the offense have not yet occurred.” The Court