Not Settling for Less: The EEOC’s Latest Challenge to Employee Releases

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The Equal Employment Opportunity Commission (“EEOC”) recently filed a “pattern or practice” lawsuit against CVS Pharmacy, Inc., alleging that CVS uses an “overbroad, misleading and unenforceable Separation Agreement” that deters its employees from filing EEOC charges and interferes with employees’ ability to communicate with the EEOC and state fair employment practice agencies.

According to the Complaint, the EEOC is targeting six clauses in the “five-page single spaced” Separation Agreement which it contends interfere with employee rights under Title VII:

Cooperation: The Employee must promptly notify CVS’s General Counsel by telephone and in writing if he/she “‘receives, a subpoena, deposition notice, interview request, or another inquiry, process or order relating to any. . . administrative investigation. . . or other legal matter relating to the Corporation from any investigator. . . .’” (emphasis in Complaint)

Non-Disparagement: The Employee agrees not to “‘make any statements that disparage the business or reputation of the Corporation, and/or any officer, director, or employee of the Corporation.’”

Non-Disclosure of Confidential Information: The Employee agrees not to disclose Confidential Information “‘without the prior written authorization of CVS,’” where Confidential Information is defined to include CVS personnel information and information concerning affirmative action plans.

General Release of Claims: The Employee releases all “‘charges’” and “‘includ[ing]. . . any claim of unlawful discrimination of any kind. . . .’” (emphasis in Complaint).

No Pending Actions; Covenant Not to Sue: The Employee “‘represents that as of the date Employee signs the Agreement, Employee has not filed,’” among other things, “‘any complaint” in any “‘agency,’” and agrees not to file “‘any action, lawsuit, complaint or proceeding,’” and “‘agrees to promptly reimburse the Company for any legal fees that the Company incurs as a result of any breach’” of this provision. (emphasis in Complaint).

The No Pending Actions clause contained a disclaimer addressing the possibility that the Agreement might be read to bar the employee’s right to cooperate with the EEOC:

“‘Nothing in this paragraph is intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with any such agency in its investigation.’”

However, according to the EEOC, this disclaimer does not save the Agreement because it was only a single sentence in the Covenant Not to Sue section and not repeated in the Cooperation, Non-Disparagement, and other clauses of the Agreement which contained limitations on the Employee.

Remedies: In the event that a court issues an injunction against the Employee or “‘awards CVS any damages due to Employee’s breach’” of the Agreement, “‘Employee agrees to promptly reimburse the Company for all reasonable attorneys [sic] fees incurred by CVS. . . .’”

The CVS lawsuit is part of the EEOC’s ongoing attack on what it deems overbroad waivers sought by employers. As far back as 1997 in its Enforcement Guidance, the EEOC warned employers about expansive language in releases that employees could interpret as barring their right to file a charge or cooperate with the EEOC. Since then, the EEOC has filed several suits challenging the language of specific employer agreements that it considers overbroad.

Regardless of the outcome in the CVS lawsuit, the EEOC can be expected to continue its proactive drive to eliminate expansive release language. Because the challenged clauses in the CVS agreement are similar to standard language likely found in separation agreements and release forms that employers around the country use, employers should review these documents to anticipate the kind of language parsing the EEOC is employing in the CVS case. To this end, employers should be particularly cautious of broad language that might be interpreted as limiting access to the EEOC. If broad release and confidentiality language is used, consider a free-standing disclaimer, clearly specifying that the entire agreement (including the confidentiality and other potentially problematic clauses) is not intended to interfere with an employee’s access to the EEOC. For example, an employer could include the following explicit disclaimer language:

Nothing in this Agreement shall be construed to prohibit you from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency.  Notwithstanding the foregoing, you agree to waive your right to recover monetary damages in any charge, complaint, or lawsuit filed by you or anyone else on your behalf.

The covenant not to sue, confidentiality, and non-disparagement provisions should either specifically refer to the separate disclaimer language (i.e., “except as provided in Section ___ below. . .”) or repeat the disclaimer language in full. Careful drafting will help ensure that the employer gets the benefit of the bargain (avoiding litigation with its departing employee) without triggering litigation with the EEOC over its meaning.