EEOC Continues Its Aggressive Stance Against Severance Agreements

by Franczek Radelet P.C.

Last Friday, the Equal Employment Opportunity Commission filed suit against CVS Pharmacy in the Northern District of Illinois alleging that standard separation agreements used by CVS unlawfully deter employees, who sign these agreements in order to receive severance pay, from exercising their right to file charges of discrimination and participate in EEOC investigations.

The EEOC has long taken the position that any separation agreement that requires an individual to refrain from filing an EEOC charge or participating in an EEOC investigation in order to receive severance benefits is unlawful. Indeed, just last July we discussed another Section 707(a) suit against a national book distributor, Baker & Taylor’s, separation agreements filed in the same Northern District of Illinois court (it settled).

In this latest lawsuit, the EEOC takes an even more extreme position suggesting that a separation agreement may be unlawful if it could be read to “deter” an employee from filing a charge even if the agreement does not explicitly prohibit the filing of charges or condition severance benefits on an agreement not to file a charge.

The EEOC contends that the CVS agreements violate Title VII even though they contain an explicit provision which states that nothing in the agreement is intended to prevent the employee from participating in any proceeding with any appropriate federal, state or local government agency enforcing discrimination laws. The EEOC dismisses this language as a “single qualifying sentence that is not repeated anywhere else in the agreement.”

The EEOC contends that this explicit disclaimer is not sufficient to overcome the deterrent impact of the following standard clauses, variations which can be found in most employer separation agreements:

  • Cooperation Clause – employee agrees to promptly notify CVS’s general counsel if the employee receives a subpoena, deposition, or interview request by an investigator for an administrative investigation;
  • Non-Disparagement Clause - employee agrees not to make any statements that disparage the business or reputation of CVS;
  • Non-Disclosure Clause - employee agrees not to disclose to any third party or use for himself confidential information without prior written approved from CVS;
  • General Release Clause - employee releases CVS from all causes of action, complaints, charges and any claim of unlawful discrimination of any kind;
  • Convent Not To Sue Clause – employee represents s/he has not filed or caused to be filed any complaint, claim or action, and agrees not to initiate or file, caused to be filed any action, complaint or proceed, and agrees to reimburse CVS for any legal fees incurred by the employer as a result of any breach of the agreement.

Notably, many employers  include similar provisions in separation agreements for legitimate business reasons (such as ensuring that confidential business information is not leaked to competitors) that have nothing whatsoever to do with an employee’s right to file a charge of discrimination or a desire of the employer to curtail that right.

The EEOC seeks to permanently enjoin CVS from using the current version of its separation agreement, require the reformation of current and future separation agreements, corrective communication to the workforce informing them of their right to file a charge, and attorney’s costs. It also seeks a 300 day window for former non-store employees who signed a separation agreement with CVS in 2012 to file a charge of discrimination.

Employers looking for guidance as to what separation agreement language the EEOC will find acceptable may refer to the consent decree entered in the Baker & Taylor matter mentioned above. As part of the settlement of that case, Baker & Taylor agreed to include express language in future severance agreements preserving the right of an employee to file an EEOC or equivalent state agency charge and to obtain relief from that charge. The decree also required Baker & Taylor to include language exempting any communications with the EEOC from general confidentiality and non-disparagement provisions in the agreement. Because the EEOC obtained this decree through settlement rather than a judicial ruling, it remains to be seen whether a court will agree with the aggressive position taken by the EEOC. However, for now employers should be aware that separation agreement terms will continue to be closely scrutinized by EEOC and may subject the employer to unwanted EEOC scrutiny and possible litigation. 

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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