EEOC Attacks Common Severance Agreement Language

By Bryan E. Pieper The U.S. Equal Employment Opportunities Commission (“EEOC”) has filed a lawsuit against CVS Pharmacy, Inc., claiming that a severance agreement CVS has employees sign violates the employees' rights to communicate with the EEOC and to participate in EEOC investigations. Click here for the full lawsuit. Many of the provisions targeted by the EEOC are considered fairly typical in employee severance agreements. As is common in severance agreements, the employer, CVS, agrees to give the employee severance benefits, conditioned on the employee making certain promises in exchange. The EEOC takes issues with those required promises, specifically identifying the following provisions:
  • The employee releases any and all claims he or she may have against CVS;
  • The employee agrees not to file any claims again CVS in any court or agency;
  • The employee agrees not to make any statements that disparage CVS or its business;
  • The employee agrees not to disclose to any third party any of CVS's confidential information, which is defined to include personnel information;
  • The employee agrees to cooperate with CVS by notifying CVS promptly if the employee is contacted regarding any lawsuit or administrative proceeding against CVS; and
  • If the employee breaches the severance agreement, CVS will be entitled to an immediate injunction, and the employee will reimburse CVS for any attorneys’ fees incurred enforcing the agreement.
In its Complaint, the EEOC asserts that the combination of the above provisions deprives an employee of his Title VII right to participate in and cooperate with an EEOC investigation and enables an employer to conceal a pattern of discrimination by thwarting the EEOC's ability to learn about and investigate employment discrimination. The EEOC alleges that in 2012, more than 650 individuals signed the CVS severance agreement. "Charges and communication with employees play a critical role in the EEOC's enforcement process because they inform the agency of employer practices that might violate the law," explained the EEOC’s lead attorney on the case. "For this reason, the right to communicate with the EEOC is a right that is protected by federal law. When an employer attempts to limit that communication, the employer effectively is attempting to buy employee silence about potential violations of the law. Put simply, that is a deal that employers cannot lawfully make." Click here to read the EEOC's full press release. The EEOC asked the court to do the following:
  • • Enjoin CVS from continuing to use the current version of the severance agreement;
  • • Reform the agreement to comply with Title VII, both for individuals who have already signed it and for those who sign it in the future;
  • • Require CVS to issue a corrective communication informing its workforce of its right to file an EEOC charge and to initiate and respond to communication with the EEOC;
  • • Require CVS to provide its management with additional training regarding an employee's Title VII right to file charges and participate in EEOC investigations; and
  • • Provide a window of 300 days for any former employee who has signed the severance agreement to file a charge of discrimination with the EEOC.
Because employers typically enter into severance agreements and pay severance pay in order to get the peace of mind that they have made a clean break with an employee, the agreement provisions discussed above are rather common. This clean break is often essential to an employer’s willingness to provide non-mandatory severance benefits in the first place. However, the EEOC contends this lawsuit is part of its new emphasis on attacking systemic patterns of discrimination and the methods employers use to protect and hide them. This is consistent with the EEOC's practice of using investigation of an individual charge of discrimination as an opportunity to look for class or group claims, which would be difficult if all former employees are bound to silence. Employers are encouraged to have their current severance agreements reviewed by counsel and to keep an eye on this case as it progresses through the courts.