Legal

EEOC Continues Fight Against Severance Agreements and Employers Fight Back

By Jon Hyman

May. 9, 2014


Earlier this year, I reported on a groundbreaking lawsuit the Equal Employment Opportunity Commission filed against CVS challenging as retaliatory some garden-variety provisions in employee separation agreements (here and here). 

Earlier this week, the EEOC reported that it has filed a similar lawsuit in Colorado, against CollegeAmerica. From the EEOC’s news release:

Debbi D. Potts, the campus director of CollegeAmerica's Cheyenne, Wyo., campus, resigned in July 2012 and signed a separation agreement in September 2012 that conditioned the receipt of separation benefits on, among other things, her promise not to file any complaint or grievance with any government agency or to disparage CollegeAmerica. These provisions would prevent Potts from reporting any alleged employment discrimination to the EEOC or filing a discrimination charge.…

The EEOC also claims that provisions which similarly chill employees’ rights to file charges and cooperate with the EEOC exist in CollegeAmerica’s form separation and release agreements, routinely used with its employees.…

“Rights granted to employees under federal law, like the right to file charges of discrimination and participate in EEOC investigations into alleged discrimination in the workplace, cannot be given up in agreements between private parties,” said Mary Jo O’Neill, Regional Attorney for the EEOC’s Phoenix District Office…. “Otherwise, employers could easily do an end run around the law, employees would not be free to complain about discrimination, and the EEOC would never learn about violations of the law or have an opportunity to enforce it.”

Meanwhile, CVS is fighting back against the EEOC in its lawsuit. CVS has asked the district court to dismiss the complaint in its entirety, cap arguing that the mere inclusion of terms in a severance agreement does not violate Title VII. Business groups are also weighing in, the court has granted permission to the Retail Litigation Center to file a brief in support of CVS’s motion to dismiss. 

I continue to believe that this issue is the most important issue to employers that the EEOC is currently litigating. 

It is becoming clear that the CVS lawsuit was not an anomaly, and that challenging these types of provisions in severance agreements is high on the EEOC’s radar. For now, however, I think employers should take a wait-and-see approach. This issue is too important for employers to knee-jerk pull these key clauses from their agreements.

For now, what I wrote in February (which includes a draft carve-out) still holds true:

Don’t shred your settlement and severance agreements just yet.… Modify your agreements to bolster and clarify the protected-activity carve-out.… Given the EEOC’s position, prudence dictates the breadth of this carve-out, which is more expansive than what I traditionally use. The alternative, however, is to omit these provisions all together, and draft agreements that looks like a Swiss-cheese of risk.

Jon Hyman is a partner in the Employment & Labor practice at Wickens Herzer Panza. Contact Hyman at JHyman@Wickenslaw.com.

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