If you are like most employers, when you settle a lawsuit you like to have the plaintiff sign an agreement releasing all claims and potential claims and promising not to sue you again in exchange for some money.
The same holds true when you fire an employee for anything other than egregious wrongdoing. These agreements make sense. They promote harmony and buy off the uncertain risk of a lawsuit.
Indeed, employers do not write checks to litigants (or potential litigants) out of the goodness of their hearts. Employers settle lawsuits and pay employees severance in exchange for certainty.
To further achieve this greater good of harmony and certainty, many of these agreements contain other ancillary clauses that promote a clean break between employer and former employee, such as confidentiality and nondisparagement. These secondary promises are important to many employers, and are contained in most, if not all, settlement and severance agreements.
What then does one make of a recent lawsuit filed by the U.S. Equal Employment Opportunity Commission against pharmacy retail giant 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?
• A cooperation clause, which required the employees to notify CVS’ general counsel upon receipt of, among other things, an administrative complaint.
• A nondisparagement clause, which prohibited the employees from making any statements that disparage or harm CVS’ reputation.
• A confidentiality clause, which prohibited the employee from disclosing any personnel information.
• A general release, which included any claims of discrimination.
• 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.
• 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 the EEOC, each provision violates federal civil rights laws.
When you compare the standard inoffensiveness of the provisions challenged in this case to the EEOC’s hard-line position, you can see how this case could be the most significant piece of litigation the EEOC has filed in recent memory.
The anti-retaliation provisions of the employment discrimination laws prohibit employers from requiring that employees give up their statutory rights to file discrimination charges, cooperate in investigations or provide information to the EEOC. But, the CVS agreement that the EEOC is challenging did notcontain those requirements. It contained a carve-out that expressly protected the rights of the individual to file a charge with the EEOC. The EEOC, however, did not believe the carve-out went far enough.
Do not, however, shred your settlement and severance agreements just yet. I have a potential solution. Modify your agreements to bolster and clarify the protected-activity carve-out. In a separate provision, consider something like the following (modeled on the provisions in CVS):
Nothing in this Agreement is intended to, or shall, interfere with Employee’s rights under federal, state, or local civil rights or employment discrimination laws (including, but not limited to, Title VII, the Americans with Disabilities Act, Age Discrimination in Employment Act, Genetic Information Nondiscrimination Act, Uniformed Services Employment and Reemployment Rights Act, or their state or local counterparts) to file or otherwise institute a charge of discrimination, to participate in a proceeding with any appropriate federal, state, or local government agency enforcing discrimination laws, or to cooperate with any such agency in its investigation, none of which shall constitute a breach of the nondisparagement, confidentiality, or cooperation clauses of this Agreement. Employee shall not, however, be entitled to any relief, recovery or monies in connection with any such brought against any of the Released Parties, regardless of who filed or initiated any such complaint, charge or proceeding.
Given the EEOC’s position, prudence dictates the breadth of this carve-out. The alternative, however, is to omit these provisions altogether and draft agreements that looks like a Swiss cheese of risk.