How to Avoid Being the Next Casualty in the EEOC’s War on Employee Separation Agreements

by Cranfill Sumner & Hartzog LLP

In its current Strategic Enforcement Plan, the U. S. Equal Employment Opportunity Commission says that it is fed up with and will target employer “policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or which impede the EEOC's investigative or enforcement efforts.”  The EEOC goes on to say that such policies and practices include those that “prohibit filing charges with the EEOC or providing information to assist in the investigation or prosecution of claims of unlawful discrimination.”

[Translation:  Hey, employers, we don’t like your separation agreements and we’re going to make you water them down to the point that they’re meaningless.]

True to its word, the EEOC has now filed lawsuits against several employers, including CVS Pharmacy, Inc., alleging that the separation agreements used by the businesses are unlawfully restrictive.  The CVS case is receiving especially close attention because many of the provisions at issue in the CVS agreement are pretty standard stuff and are used in similar agreements by employers nationwide.

The CVS agreement is straightforward: by signing the document, the employee waives and releases all claims, agrees not to sue CVS for anything that may have happened prior to the date of signing, and thus becomes eligible to receive severance and other benefits that CVS was not otherwise obligated to pay.  Sounds simple enough, right?  Not so fast, says the EEOC.

The agreement contains a clause prohibiting the filing of any actions, lawsuits, proceedings, complaints, or charges against CVS, including any claim of unlawful discrimination of any kind.  Also, the employee is to notify CVS if he/she becomes part of an investigation by the EEOC or some other administrative agency.  The EEOC contends that these provisions are intended to prevent employees from fully exercising their rights, particularly their right to file a charge of discrimination with the EEOC.

The CVS agreement actually does contain an affirmative provision that specifically acknowledges the employee’s right to participate in or cooperate with any federal, state, or local investigation or proceeding.  However, the EEOC claims that this statement is insufficient to offset the fact that the agreement appears calculated to interfere with employees’ full enjoyment of federally-secured employment rights, specifically the right to file a discrimination claim.

There are other provisions in the agreement that the EEOC finds offensive.  For example, one clause forbids the employee from making statements that disparage the company, its officers, directors, or employees. The EEOC claims that such a clause might deter employees even from making a negative statement in conjunction with filing a charge with the EEOC or participating in an EEOC investigation.

The EEOC has similar concerns regarding the agreement’s provision prohibiting the disclosure of personnel-related information without written permission from CVS.   The agency takes the position that the restriction could be interpreted to mean that employees are prohibited from sharing pertinent information even during the course of an EEOC investigation.

To many observers, the EEOC’s lawsuits are nothing less than an assault on the fundamental purpose of separation agreements, which is to create a contract whereby one party receives something of value in exchange for an agreement not to take action against the other party.  This time-honored contractual arrangement has been blessed (i.e., enforced) by countless courts, so the cases, particularly the CVS lawsuit, will continue to attract close attention until they are either settled or decided.

In the meantime, there are several practical things employers can do to avoid becoming the next target of the EEOC’s crusade in this area:

It has long been the law that even employees who enter into separation agreements that waive and release all legal claims against an employer nonetheless have a right to file administrative charges with governmental agencies.  They may not be able to ultimately recover anything for themselves from the employer, but their right to file the charge and cooperate in any subsequent investigation is clearly established.  Thus, employers should remove any language that suggests otherwise from their separation agreements and should include language that affirmatively acknowledges the employee’s right to file and cooperate but that also expressly disclaims any right of individual recovery.

As far as the non-disparagement clause is concerned, employers should ensure that the agreement they use clearly states that it is not intended to prevent the employee from cooperating in an EEOC or other administrative investigation and that the employee has a right to provide truthful information to government investigators, even if that information is critical of the employer.   Likewise, any confidentiality clause contained in the agreement should clearly identify the specific confidential information that is to be kept secret (e.g., trade secrets, customer lists, pricing information, etc.).  In fact, it would be a good idea to specifically acknowledge that the confidentiality obligation does not extend to information provided to government investigators. 

A review by a legal professional may likewise be in order, particularly since some of these same concerns implicate similar rights under Section 7 of the National Labor Relations Act and have been triggered close scrutiny by the National Labor Relations Board.  HR professionals should take these recent lawsuits as a wake-up call to determine whether the language in their company's severance agreement could be considered unlawful by any of the many federal and state agencies charged with overseeing and protecting employee rights.

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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