EEOC Files Suit Against Book Distributor For Overbroad Severance Agreement Language

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Just weeks after settling its first ever Genetic Information Nondiscrimination Act (“GINA”) discrimination lawsuit and filing its first ever class action lawsuit under GINA, the Equal Employment Opportunity Commission (EEOC) continued its flurry of litigation this year by filing suit against national book distributor Baker & Taylor in the Northern District of Illinois.  The EEOC’s Complaint accuses the North Carolina-based company of violating Title VII by forcing departing employees to sign unlawfully “broad, misleading and unenforceable” agreements to receive severance payouts.  Absent from the Complaint is any indication that Baker & Taylor actually interfered with any employee’s rights.

According to the EEOC’s Complaint, Baker & Taylor has since 2011 required approximately 25 terminating employees to sign a waiver and release agreement that included waivers of the employees’ rights to “institute any complaint, proceeding, grievance, or action of any kind,” including before the EEOC related to their employment or termination.  As the EEOC’s Complaint observes, courts have long held that prohibitions on filing charges with the EEOC are void and unenforceable as against public policy. In the seminal case on this issue, EEOC v. Cosmair, the Fifth Circuit decided in 1987 that while employees could waive the right to recover in a lawsuit, they could not waive the right to file a charge with the EEOC.

Notably, however, the EEOC also cites a second clause in the Baker & Taylor release as problematic.  That clause requires terminated employees who sign the agreement to agree not to “make any disparaging remarks” about the company or their terminations that could “damage the reputation and goodwill” of the company or otherwise “reflect negatively” on it.  Even though the provision also expressly permitted those employees to truthfully respond to a subpoena or to “otherwise comply[] with a government investigation,” the EEOC found that these terms reflected “resistance to the full enjoy of rights secured by Title VII” and unlawfully interfered with employees’ rights to cooperate with the EEOC in administrative investigations.

The EEOC also alleged that severance agreements containing terms like those in the Baker & Taylor agreement “run afoul of the anti-retaliation provisions” in Title VII, as the agency expressed in one of its enforcement guidelines released in 1997.  In past cases, courts have rejected similar arguments.  For instance, in 2007, the Sixth Circuit found that the agency’s enforcement guidelines were not entitled to the same deference as its regulations and rejected the EEOC’s argument that a company that offered its employees agreements with similarly overbroad terms engaged in retaliation by doing so.

The EEOC’s Complaint seeks a permanent injunction enjoining Baker & Taylor from using the current version of its severance agreement or otherwise prohibiting its employees from filing charges or cooperating with the EEOC or any other employment agency.  It also seeks costs.  The EEOC’s decision to attack a non-disparagement clause bears watching, but the case should also serve as a reminder to employers that overbroad language in a severance agreement, particularly in the waiver and release provisions, may unintentionally increase the risk of unwanted litigation. We will keep you apprised of any developments in the case.