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Separation/ Severance Agreements and the EEOC

Added by Hawley Troxell in Articles & Publications, Employment Law on March 24, 2014

A lawsuit recently filed by the EEOC with respect to separation agreements has caught the attention of employers. An employer offering severance pay to a departing employee generally requires that the employee sign a separation or severance agreement. Such agreements typically require the employee to release claims against the employer and to avoid actions detrimental to the employer, such as disparaging the company or disclosing the company’s confidential information to a third party.

In February 2014, the EEOC filed a lawsuit against CVS Pharmacy and took issue with several terms in CVS’s standard separation agreement. The EEOC alleged that CVS had “been engaged in a pattern or practice of resistance to the full enjoyment of the rights secured by Title VII” of the Civil Rights Act. The EEOC specifically asserted that six provisions in CVS’s standard separation agreement violated Title VII:

  • A cooperation clause, requiring the employee to “promptly notify [CVS’s] general counsel by telephone and in writing” of contacts relating to legal proceedings, including an “administrative investigation.”
  • A non-disparagement clause, in which the employee promised to “not make any statements that disparage the business or reputation of [CVS] and/or any officer, director or employee of [CVS].”
  • A non-disclosure of confidential information clause, requiring the employee not to disclose CVS’s confidential information without prior written authorization, including “information concerning [CVS’s] personnel, including the skills, abilities, and duties of [CVS’s] employees, wages and benefit structures, succession plans, [and] information concerning affirmative action plans or planning.”
  • A general release of claims, including a release of “any claim of unlawful discrimination of any kind” by CVS.
  • A covenant not to sue, in which the employee agreed “not to initiate or file . . . any action, lawsuit, complaint or proceeding” against CVS.
  • An attorneys-fees clause, requiring the employee to “promptly reimburse [CVS] for all reasonable attorneys fees incurred by” CVS following a breach of the separation agreement by the employee.

According to the EEOC’s press release regarding this case, the EEOC’s concern is that the “agreement interfered with employees’ right to file discrimination charges and/or communicate and cooperate with the EEOC.” The EEOC also expressed that limitations on an employee’s ability to communicate with the EEOC violate the law:

“[T]he 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.”

What is significant about the CVS lawsuit is that provisions similar to those specifically challenged by the EEOC are used relatively routinely by many employers in their standard separation or severance agreements. Thus, the course of this litigation will be of interest to many employers.

If you have any questions regarding the use of severance / separation agreements, please contact a member of our employment group or call 208.344.6000.