Oct 17, 2014

On October 7, 2014, a judge for the U.S. District Court for the Northern District of Illinois issued an order dismissing the Equal Employment Opportunity Commission’s (“EEOC”) suit against CVS Pharmacy, Inc. (“CVS”) challenging the legality of the severance agreement CVS often offers to departing employees.   As we explained in our post on August 5, 2014, the EEOC argued that certain language in the CVS severance agreement unlawfully inhibited employees from filing EEOC charges and/or freely participating in an EEOC investigation.

The court dismissed the EEOC’s suit on procedural grounds, indicating that the EEOC failed to satisfy the prerequisite to filing suit of attempting to conciliate with CVS.  Accordingly, the court did not reach the merits of the case, leaving the legality of the severance agreement language an open issue.  Specifically, it remains unclear whether 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” is sufficient to overcome the inhibitory effect of other language in the agreement.  This includes language such as a:

• non-disparagement clause;
• non-disclosure of confidential information provision;
• requirement that the employee notify CVS if he or she is contacted in connection with legal proceedings;
• general release of all claims;
• covenant not to sue; and
• a clause warning the employee of the penalties for a material breach of the agreement.

In light of the court’s dismissal of this case prior to addressing its merits, employers may still 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.