Unpacking the EEOC’s increased scrutiny of severance agreements

Actions against CVS and Baker & Taylor provide a guideline for the EEOC's increased scrutiny of severance agreements

The Equal Employment Opportunity Commission (EEOC) over the years has taken the position that severance agreements should not interfere with employees’ rights to file charges with the EEOC or other fair employment practices agencies (FEPAs). The EEOC in its Strategic Enforcement Plan for FY 2013-2016 warned employers that it was prioritizing this outlook, stating that it intended to “target 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. These policies or practices include … settlement provisions that prohibit filing charges with the EEOC or providing information to assist in the investigation or prosecution of claims of unlawful discrimination.”

True to its stated intentions, the EEOC has stepped up its enforcement efforts in the area of severance agreements. In February 2014, the EEOC sued CVS, the nation’s largest integrated provider of prescriptions and health-related services, alleging that CVS’s severance agreement — which was signed by over 650 employees — was overly broad and interfered with employees’ rights to file charges and/or communicate and cooperate with the EEOC under Title VII of the Civil Rights Act of 1964.

What was problematic with CVS’s severance agreement? The EEOC’s complaint cites a number of provisions in the agreement that it viewed as deterring the filing of charges and interfering with employees’ ability to communicate directly with the EEOC and FEPAs.

Of particular note, the EEOC in its complaint alleges that the covenant not to sue contained “a single qualifying sentence that is not repeated anywhere else in the Agreement” stating that “[n]othing 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.” The complaint contends that coupled with language requiring the employee to reimburse CVS for reasonable attorneys’ fees incurred in the event of an employee’s breach of the agreement and broad cooperation, non-disparagement, confidentiality, and release language, the severance agreement impermissibly limits employees’ rights to file charges and participate and cooperate with the EEOC. The EEOC further maintains that CVS’s use of this agreement constitutes a “pattern and practice” of resistance to the full enjoyment of rights secured by Title VII.

In mid-April 2014, CVS moved to dismiss the complaint arguing, inter alia, that the agreement was lawful because it “expressly stipulates that the former employees may participate in proceedings before anti-discrimination agencies and cooperate in their investigations” and that, even if the agreement were unenforceable, it would not constitute a pattern or practice of violating Title VII.

Prior to the CVS lawsuit, the Chicago District Office of the EEOC sued Baker & Taylor, Inc. in May 2013 similarly alleging that the company’s severance agreements impermissibly interfered with employees’ rights to file charges with the EEOC and other FEPAs. In a July 2013 consent decree, Banker & Taylor agreed to include the following language in its future release agreements:

Nothing in this Agreement is intended to limit in any way an Employee’s right or ability to file a charge or claim of discrimination with the … EEOC or comparable state or local agencies….. Employees retain the right to participate in such any [sic] action and to recover any appropriate relief. Employees retain the right to communicate with the EEOC and comparable state or local agencies and such communications can be initiated by the employee or in response to the government and is not limited by any non-disparagement obligation under this agreement.

What was particularly surprising to many in this consent decree was the seeming departure from language in a prior consent decree entered into by EEOC that had allowed individuals to waive any right to recover monetary damages in a charge, complaint or lawsuit filed by the individual or on his or her behalf.

Employers should take the time now to carefully review their severance agreements in light of the EEOC’s increased scrutiny of such agreements. Employers should ensure that the agreements contain separate, explicit language stating that individuals are not prohibited from filing a charge with or participating in an investigation or proceeding conducted by the EEOC or a comparable state or local agency. Employers may also want to extend the scope of such a provision to include other governmental agencies such as the National Labor Relations Board, and ensure that any non-disparagement, confidentiality or cooperation clauses do not take away from these fundamental guarantees. They also should keep in mind that courts will deny enforcement of releases that preclude employees from filing charges of discrimination with a governmental agency on the theory that private parties cannot abrogate important rights that these agencies have to enforce non-discrimination laws.

Contributing Author

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Jill Vorobiev

Jill Vorobiev is a member of Dykema's Labor and Employment Group, with an emphasis on labor and employment litigation. Her practice covers a broad-base, representing corporate clients...

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