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EEOC Claims Retaliation Over Garden-Variety Severance Terms

If the EEOC is successful in this lawsuit, employers will have to reconsider key provisions in their severance and settlement agreements.

February 12, 2014
Related Topics: Legal Compliance, Retaliation, Severance Pay, Miscellaneous Legal Issues, Policies and Procedures, Legal
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The Equal Employment Opportunity Commission announced that it has filed a lawsuit against CVS, claiming that a severance agreement it provided to three employees unlawfully restricted their rights to file discrimination charges or communicate and cooperate with the EEOC.

The EEOC claims that “CVS conditioned the receipt of severance benefits for certain employees on an overly broad severance agreement set forth in five pages of small print.”

What was the “fine print” that caused the EEOC to sue this employer? The EEOC did not specify in its news release, but the complaint the EEOC filed  took issue with the following provisions:

  1. A cooperation clause, which required the employees to notify CVS’s general counsel upon receipt of, among other things, an administrative complaint.

  2. A non-disparagement clause, which prohibited the employees from making any statements that disparage or harm CVS’s reputation. (I told you I don’t like these provisions.)

  3. A confidentiality clause, which prohibited the employee from disclosing any personnel information.

  4. A general release, which included any claims of discrimination.

  5. A covenant not to sue, which prohibited the employee from filing any complaints, actions, lawsuits, or proceedings against CVS, but which expressly carved out the employee’s right to participate in, or cooperate with, any state or federal discrimination proceeding or investigation.

  6. An attorneys’ fees provision, which required the employee to reimburse CVS for its reasonable attorneys’ fees incurred as the result of a breach of the agreement by the employee.

According to EEOC Regional Attorney John Hendrickson, the lead litigator in the case:

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. 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.

This case has the potential to be very significant, and warrants monitoring. Most (all?) of you reading this post have used agreements that contain language similar to each of the six issues the EEOC is challenging. If the EEOC is successful in this lawsuit, employers will have to reconsider key provisions in their severance and settlement agreements. Given that employers are paying ex-employees for certainty when an employee signs a release, this case has the potential to turn these agreements on their heads.

In tomorrow’s post, I will offer a potential solution for employer looking to maintain the vitality of a general release and covenant not to sue without walking into the EEOC’s enforcement crosshairs.

Jon Hyman is a partner in the Labor & Employment group of Kohrman Jackson & Krantz. Comment below or email editors@workforce.com.  For more information, contact Hyman at (216) 736-7226 or jth@kjk.com. Follow Hyman on Twitter at @jonhyman.

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