EEOC sues over typical severance provisions

Employers Beware: EEOC Takes Aim at Severance Agreements and Seeks Right to File Charges for more than 650 Employees Who Signed Releases and received Severance Payments.

By Hope B. Eastman, Esq.

Take Away:  The EEOC’s most recent challenge to several typical provisions in severance agreements should cause employers to review their own severance agreements and consider making changes to avoid EEOC scrutiny and challenges.

In a move that will be a major shock to employers, the Equal Opportunity Commission (EEOC) has sued CVS in federal court in Illinois, claiming that typical provisions in severance agreements used to end discrimination and other employment disputes unlawfully violate employees’ rights to communicate with the EEOC. The case has a long way to go before any decision is reached. But, employers would be wise to compare their agreements with those challenged in the suit and make some changes to minimize the risk of EEOC challenges when they settle disputes or offer severance agreements to separating employees.

Among the provisions used by CVS, many are very typical in severance agreements, and the EEOC is challenging the following:

  1. Paragraph 7, General Release, which includes language that “any claims of unlawful discrimination;”
  2. Paragraph 8, Covenant Not to Sue, which prohibits the employee from filing any complaints, actions, lawsuits, or proceedings against CVS, even though it expressly carves out the employee’s right to participate in, or cooperate with, any state or federal discrimination proceeding or investigation;
  3. Paragraph 13a, Non-Disclosure, which prohibits the employee from disclosing any personnel information;
  4. Paragraph 13d, Non-Disparagement, which prohibits the employees from making any statements that disparage CVS’s business or reputation;
  5. Paragraph 13e, Cooperation, which requires the employees to notify CVS’s general counsel upon receiving subpoenas, requests for interviews or other inquiries that, in language put into italics in the complaint, relate to any “administrative investigation,” from “any investigator;”
  6. Paragraph 14, Breach of Employee Covenants, which includes an attorneys’ fees provision requiring the employee to reimburse CVS for its reasonable attorneys’ fees incurred where a court determines that the employee has breached the agreement.

In addition to the EEOC’s challenge to the various provisions of CVS’s severance agreement, employers should be concerned about the remedies the EEOC is seeking. After stating that more than 650 employees had signed this standard agreement, the EEOC is demanding that each be advised that they have 300 days to file a complaint despite signing a general release as part of the agreement. Also, beyond standard injunctive relief, the EEOC seeks to require CVS to inform all employees that (1) they retain the right to file a charge of discrimination and to initiate or respond to communications with the EEOC or a state fair employment practice agency (FEPA), (2) they are not bound to keep personnel information confidential in those communications, and (3) they are not required to notify CVS’s Human Resources or the General Counsel about such communications.

In its press release, the EEOC described CVS’s agreement as a “pattern or practice of resistance to the full enjoyment of rights secured by Title VII.” It went on to state that: “The right to communicate with the EEOC is a right that is protected by federal law. When an employer attempts to limit that communication, the employer effectively is attempting to buy employee silence about potential violations of the law.” From these statements, it is unclear how the EEOC plans to address the express carve out in CVS’s agreement – and many severance agreements – that employee retain the right to participate in, or cooperate with, any state or federal discrimination proceeding or investigation.

Stay tuned for developments.

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