Aug 05, 2014

The Equal Employment Opportunity Commission (“EEOC”) has filed a lawsuit in the U.S. District Court for the Northern District of Illinois against CVS Pharmacy, Inc. (“CVS”) challenging the legality of the severance agreement CVS often offers to departing employees. 

According to the EEOC, certain language in the CVS severance agreement – including a non-disparagement clause, a non-disclosure of confidential information provision, a requirement that the employee notify CVS if he or she is contacted in connection with legal proceedings, a general release of all claims, a covenant not to sue, and a clause warning the employee of the penalties for a material breach of the agreement – inhibits employees from filing EEOC charges or freely participating in an EEOC investigation.  This contention echoes the language in the EEOC’s Strategic Enforcement Plan for FY 2013-2016 stating that it intends to “target policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or that impede the EEOC's investigative or enforcement efforts.”

The EEOC maintains the position that the agreement is inhibitory despite the inclusion of a “clarifying clause” that states that nothing in the agreement 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 EEOC believes that this “clarifying clause” is insufficient to cure the agreement’s overall “resistance” to employees’ rights because it appears in the middle of a dense, multipage agreement that a lay employee is not likely to be able to understand. This is not the first time the EEOC has challenged severance agreement language restricting employees’ right to sue. Previously, the EEOC unsuccessfully challenged as “facially retaliatory” severance agreement language that claimed to outright prohibit the right to file an EEOC charge. EEOC v. SunDance Rehabilitation Corp., 466 F.3d 490 (6th Cir. 2006).

Most concerning for employers is that the language of the “clarifying clause” contained in the CVS severance agreement has previously been approved by the EEOC itself. EEOC Notice No. 915.02 (1997). Relying on this approval, such language is commonly used by employers across the country.  The EEOC’s actions in this case have called into question just what language an employer may properly include in a severance agreement that will strike the proper balance between obtaining an effective release of all claims and ensuring that a lay employee is capable of understanding his or her rights under the agreement.

Pending the outcome of this lawsuit, employers may wish to review their severance agreements and consider whether the provisions setting forth the employee’s right to file administrative charges and participate in investigations are sufficiently clear, or they may just want to wait and see if the EEOC’s arguments will ultimately fail.