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Recent EEOC Action May Require Employers to Revise Separation Agreements

Posted | by Devon D. Williams Devon D. Williams

When an employer terminates an employee, the employer often will offer some amount of severance pay to the departing employee. In exchange for severance pay, the employee typically will be asked to sign a separation agreement, in which the employee waives his or her right to file suit against the employer for anything arising out of or connected with the employment relationship. The employer also may seek assurances regarding other issues, such as that the employee will not disparage the employer and will keep certain matters confidential. 

For years, employers have found comfort in these separation agreements and releases, especially if they have suspicions that a particular employee might file a discrimination claim or other action. In recent years, however, the Equal Employment Opportunity Commission ("EEOC") has been scrutinizing these separation agreements and releases with a fine-tooth comb. 

Earlier this year, the EEOC filed suit against CVS Pharmacy, Inc. ("CVS"), alleging that CVS's separation agreements unlawfully restricted employees' rights under Title VII. Specifically, the EEOC brought suit under section 707(a) of Title VII on the grounds that CVS had "engaged in a pattern or practice of resistance to the full enjoyment of the rights secured by Title VII."

In CVS's case, the alleged unlawful pattern or practice was the fact that CVS offered employees' severance pay in exchange for the employee executing an "overly broad" release. According to the EEOC, the release language of the CVS separation agreement violated Title VII because it "deters the filing of charges and interferes with employees' ability to communicate voluntarily with the EEOC."

The following language is a sampling of some provisions in the CVS separation agreement with which the EEOC took issue:

  • "In the event Employee receives a subpoena . . . relating to any civil, criminal or administrative investigation . . . Employee agrees to promptly notify the Company's General Counsel by telephone and in writing."
  • "Employee hereby releases and forever discharges CVS . . . from any and all causes of action, lawsuits, proceedings, complaints, charges . . . whether known or unknown . . . . The Released Claims include . . . any claim for unlawful discrimination of any kind . . . ."
  • "Employee agrees not to initiate or file, or cause to be initiated . . . any action, lawsuit, complaint or proceeding asserting any of the Released Claims . . . Employee agrees to promptly reimburse the Company for any legal fees that the Company incurs as a result of any breach . . . ."

Although the EEOC found violations in other sections of the CVS separation agreement, including provisions concerning non-disparagement and non-disclosure of confidential information, the overall gist of the EEOC's complaint was that the CVS separation agreement limited, interfered with, and hindered employees' right to file charges with the EEOC, to communicate with the EEOC, and to participate and cooperate in investigations conducted by the EEOC.

The CVS case is not the first time that the EEOC has flexed its muscles against employers and their "overly broad" release provisions. However, the CVS case should raise red flags for employers and prompt them to have legal counsel review their separation agreements and releases to ensure compliance. The language in the CVS separation agreement is not novel or extraordinary; in fact, many employers probably have used similar language in their own agreements and releases. Until the court renders a decision in this case, at the very least, employers should make certain that their separation agreements and releases do not restrict employees' rights to file a charge or communicate voluntarily with the EEOC. 

Now, more than ever, employers need to review their separation agreements and releases to ensure they do not unlawfully restrict or hinder employees' rights under equal employment opportunity laws, such as Title VII of the Civil Rights Act of 1964 ("Title VII"), Americans with Disabilities Act, and the Age Discrimination in Employment Act, to name a few.

Ward and Smith, P.A. will continue to keep you informed and updated on these issues as they develop. 

This post is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this post without obtaining the advice of an attorney. If you have questions concerning this post, please contact Devon D. Williams at ddwilliams@wardandsmith.com.

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