Beware! “Standard Terms” in Your Company’s Separation Agreement Might Trigger a Lawsuit: EEOC Says Common Provisions Are Unenforceable

by Obermayer Rebmann Maxwell & Hippel LLP

Recently, the EEOC filed two separate actions in federal court challenging form separation agreements given to employees as part of reductions in force. The agency takes issue with provisions that impact an individual’s rights to participate in the EEOC process, including filing a Charge of Discrimination and participating in an agency investigation. While both cases are still in the early stages of litigation, the EEOC has made clear that it intends to re-energize its 1997 enforcement guidelines, which state that an employer may not interfere with an employee’s rights to participate in an EEOC proceeding. The EEOC’s Regional Attorney leading the case filed in the Northern District of Illinois, John Hendrickson, stated that: “[w]hen an employer attempts to limit that communication [with the EEOC], the employer effectively is attempting to buy employee silence about potential violations of the law. Put simply, that is a deal that employers cannot lawfully make.”

The lawsuits (which are against CVS Pharmacies, Inc. and CollegeAmerica Denver, Inc.) seek to enjoin the companies from utilizing separation agreements that “chill” an employee’s right to file a Charge of Discrimination or ability to participate in the agency process. The EEOC’s concern is not limited, however, only to provisions that bar an employee from filing a Charge of Discrimination. In the CVS lawsuit, the EEOC takes issue with a provision requiring an employee to notify the General Counsel if the employee receives a request to participate in an EEOC investigation. In the CollegeAmerica lawsuit, the EEOC challenges non-disparagement clauses that it alleges could impact an employee’s participation in an agency investigation. The EEOC has pursued the case against CVS even though CVS’s agreement contained a “clarifying clause” telling employees they have the right to contact the EEOC and file charges. The EEOC takes issue with CVS’s agreement despite the clause, claiming that the clause is buried in the middle of a dense, five-page agreement, which only a lawyer conducting a “sophisticated contractual analysis” might understand.

At this early stage, neither court has made a ruling about whether the EEOC’s claims are viable under Title VII or the ADEA. Nevertheless, the EEOC seems intent on creating new law that will scale back what consideration an employer is permitted to receive in a separation agreement.

What does this mean for your organization? Review your separation agreements to make sure that you stay ahead of the curve and minimize your risk. Consider revising form agreements that contain language that arguably prohibits or discourages employees from participating in an agency investigation or filing a Charge of Discrimination. Specific clauses that should be scrutinized include those relating to non-disparagement and overbroad representations that the employee will not file a claim or charge with an agency. Agreements should also avoid provisions that require an employee to provide notice to the company prior to talking with an agency or participating in an agency investigation.

Your organization can still benefit from the protections of separation agreements, and we strongly recommend their continued use. In these lawsuits, the EEOC has not objected to an employee waiving his or her rights to monetary recovery, agreeing to confidentiality, or even a waiver of filing a lawsuit in court. Ultimately, in an effort to reduce risk, all agreements should contain express language, set off from other provisions, that nothing in the agreement is intended or should be construed to limit an individuals’ ability to file a Charge of Discrimination or participate in an agency proceeding. Taking these steps could save you trouble down the road if the EEOC’s position gains traction in court.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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