EEOC Cites Separation Agreement Language as Basis for Resistance Claim

Posted by on Jan 28, 2015 in Severence Agreements

By: Felicity S. Hanks, Esq. (fhanks@hillwallack.com)

The employment world took notice last year when the U.S. Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit against CVS Pharmacy, Inc. (“CVS”) alleging that CVS’ standard separation agreement fails to adequately advise employees of their right to pursue or participate in certain non-discrimination processes.[1]  EEOC’s position left employers with questions as to how clear the language in separation agreements must be.

A separation agreement typically provides the employee with severance in the form of a monetary payout in exchange for an agreement not to sue the employer for damages related to the employee’s termination of employment with the company.  An employee’s waiver of such rights is limited, and an employer cannot require an employee to waive the right to file a charge with the EEOC or to assist in EEOC investigations under Title VII and other employment discrimination laws.  Separation agreements generally provide a carve-out in the waiver provision which clarify that the employee is not waiving such rights.  As evidenced by the EEOC’s position in EEOC v. CVS, these standard carve-outs may no longer be sufficient.

The EEOC has authority under Title VII of the Civil Rights Act of 1964 to bring lawsuits against entities which the Agency  reasonably believes are engaging in a “pattern or practice” of “resistance” to the full enjoyment of any rights guaranteed by Title VII and which are intended to deny the full exercise of such rights.  These “resistance” cases are typically based on acts of discrimination or retaliation prohibited by Title VII.  The EEOC recently sought to expand “resistance” cases to cover any effort to keep an employee from exercising his or her statutory rights.  In the CVS case, the EEOC alleged that CVS was engaged in such resistance by conditioning an employee’s severance payment at the time of termination on the signing of a separation agreement containing language that did not clearly or obviously carve out an employee’s right to file a charge or to assist in an employment discrimination investigation.  The specific language in CVS’s agreement was as follows:

[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.

EEOC alleged that this provision, which was set forth in just one sentence of the separation agreement, was “hidden.”

The Northern District of Illinois recently dismissed the CVS lawsuit on the procedural basis that EEOC failed to engage in conciliation procedures required by Title VII.  As such, the court did not address the substantive issue of whether CVS’s agreement adequately advised employees of their rights.

The EEOC’s position in CVS leaves employers with the question of whether to now revise their separation agreements to avoid scrutiny and potential charges from the EEOC.  Although the courts have not yet ruled on the validity of language like that in CVS’s separation agreement, the  EEOC made its position clear.  We suggest that employers revisit their standard form separation agreement to determine whether the agreement adequately and clearly advises employees of their continued right to file charges with the EEOC and to participate in EEOC investigations.  As always, it is recommended that employers consult with an employment attorney to advise on the legality of any employment agreement.

[1] EEOC v. CVS Pharmacy, Inc., Case: 1:14-cv-00863 (N.D. Ill.  2014).

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