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EEOC Continues Assault On Severance Agreements

[March 28, 2014] Continuing its crusade against common provisions in severance agreements, the Equal Employment Opportunity Commission (“EEOC”) filed a suit in February against CVS Pharmacy, Inc. (“CVS”) in an Illinois federal district court.  The EEOC claims that a severance agreement used by CVS violates Title VII because it is “overly broad, misleading and unenforceable.”

Specifically, the EEOC claims that CVS’s severance agreement interferes with employees’ rights to file charges with the EEOC and other agencies or to cooperate with an investigation.  The EEOC seeks, among other relief, reformation of the agreement and additional time for employees who signed the agreement to file administrative charges.

The challenged provisions of CVS’s agreement include:  a notification clause (requiring the employee to notify CVS of any investigation by a state or federal agency); a non-disparagement clause (prohibiting the employee from disparaging CVS); a covenant not to sue clause (prohibiting the employee from filing any charge); and a confidentiality clause (prohibiting the employee from disclosing confidential information without CVS’s consent).

The EEOC is challenging the agreement despite language in the covenant not to sue paragraph stating that nothing in the provision shall interfere with an employee’s right to participate in a proceeding with any agency or to cooperate in any investigation.   Noting that the agreement is five pages long and that the reservation of employee rights is only one sentence, the EEOC contends that this language is not sufficient.

This action follows the EEOC’s filing of a lawsuit in May 2013 challenging severance agreements obtained by Baker & Taylor, Inc.  That suit was resolved by a consent decree in which the company agreed to specify, in future release agreements, that the release did not limit the employee’s right to file a charge with the EEOC or state agency, to participate in any such action, or notably, to recover any appropriate relief.  While the consent decree is not binding on other parties, it reveals the broad language the EEOC favors.

In light of the EEOC’s recent litigation activity, we recommend that employers review their severance agreements and consider whether to strengthen language concerning the employee’s right to file administrative charges and participate in agency investigations.  For example, employers may wish to clearly state, in a separate provision of the agreement, perhaps highlighted in bold, that nothing in the agreement interferes with the employee’s right to participate in or cooperate with any proceeding or investigation.