In its Sept. 30 opinion in Mitchell v. MG Industries , the U.S. District Court for the Eastern District of Pennsylvania addressed two frequently raised issues: when a cause of action accrues and whether everything that negatively impacts an employee rises to the level of an “adverse employment action” under the anti-discrimination laws.

Investment Opportunity Denied

According to the opinion, in 2001, MG was owned by a German industrial gas company, Messer Griesheim GmbH, which sold a portion of the company to two investment banks. Following this sale, MG offered a plan to select employees whereby they could invest in the company and, when the investment banks sold their stakes, the employees could realize a profit on their investment if the sale was successful. The most senior management of MG was offered the opportunity to participate in this investment and then certain lower level employees were selected to participate as well.

The investment plan (called the MIP) was entirely voluntary to the employees to whom it was offered and there was a substantial risk associated. If the investment banks did not profit, neither would the employees.

According to the opinion, the three plaintiffs, Edgar Mitchell, John Muller and Joseph Cherneski, all over 40, were not offered the chance to participate in the investment in 2001. Although the MIP was intended to be confidential, Mitchell and Muller complained to senior management about not being involved just days after the plan was offered to some of their co-workers. Cherneski, on the other hand, did not complain at the time.

The investment turned out to be profitable and, in 2004, shortly after the investment banks sold their stake, Mitchell, Muller and Cherneski filed Equal Employment Opportunity Commission charges claiming that their “nonselection” for the MIP was based upon their age. Muller also claimed that he was retaliated against by being denied severance benefits in retaliation for having filed his claim of discrimination.

At the close of discovery, MG filed for summary judgment on the grounds that Mitchell and Muller’s claims were outside of the Age Discrimination in Employment Act’s 300-day limitations period and that, even if their claims were timely, the exclusion of the employees from the investment opportunity did not rise to the level of an “adverse action” in order to support a claim under the ADEA or the Pennsylvania Human Relations Act.

Complaint Made Charges Untimely

The court first found that Mitchell and Muller’s complaints in 2001 evidenced that they were aware of their alleged injury (that is, their nonselection) at that time. The employees argued, however, that the limitations period should have been tolled because they did not realize at the time that age had (allegedly) played a role in the selection criteria. The court distinguished between the employee’s “actual” injury, their exclusion from the investment group, and their “legal” injury, alleged age discrimination, and found that “the equitable tolling doctrine cannot toll the statute of limitations beyond the date of a plaintiff’s actual knowledge of the injury giving rise to the claim.” As such, because Mitchell and Muller knew of their purported injury in 2001, their 2004 EEOC charges were well beyond the limitations period.

There was no evidence, however, that Cherneski had complained about his exclusion from the MIP in 2001. As such, the court found that the timeliness of his discrimination claim was an issue of fact — but then moved on to address whether the company’s actions could support a viable discrimination claim.

No Adverse Action

Specifically, MG argued that Cherneski could not establish the third element of his prima facie case — that he was “subject to an adverse employment action.” The court noted that the 3rd U.S. Circuit Court of Appeals has defined an adverse employment action as one that is “serious and tangible enough to alter an employee’s compensation, terms, conditions or privileges of employment.” In this light, MG equated the investment opportunity to a stock option program that had no effect upon an employee’s salary or job responsibilities.

While there is no direct 3rd Circuit precedent on this issue, other courts addressing the employer’s denial of discretionary income have consistently found that such action does not rise to the level of an adverse employment action. While Cherneski argued that the investment opportunity was much more than the receipt or denial of a discretionary bonus, the court noted that, while Mitchell and Muller knew that they had been denied the opportunity to participate in the program at its inception, Cherneski did not. “A benefit cannot be said to be ‘part and parcel’ of the employment relationship when the employee is unaware of its existence,” the opinion said. Of course, Cherneski could not claim that he had known of the program in 2001, or his claim would have been untimely.

Cherneski also argued that the amount of gain that he could have realized from the investment distinguished his claim from discretionary bonus or stock option cases. The court soundly rejected this argument, finding that the “magnitude of the discretionary benefit does not determine whether it is ‘part and parcel’ of the employment relationship.” As such, Cherneski’s claim was also dismissed.

Editing Release was not Retaliation

Finally, the court dismissed Muller’s retaliation claim — which was based upon the company’s denial of severance benefits when, after he had filed his charge of discrimination, he edited a proposed release (which was required in order to receive severance) to exclude his pending ADEA claim. The court found Muller was offered the same quid pro quo as similarly situated co-workers: “sign the full release or forfeit severance benefits.” That he refused to do so was not disparate treatment. 

Sid Steinberg is a partner in Post & Schell’s business law and litigation department.
He concentrates his national litigation and consulting practice in the field of employment and employee relations law. Steinberg has lectured extensively on all aspects of employment law, including Title VII the FMLA and the ADA.