Recent EEOC Attacks on Employee Severance Agreements and Implications for Employers

06/11/2014 / Andrew Moran

In its strategic enforcement plan for 2013-2016, the United States Equal Employment Opportunity Commission (EEOC) announced that it would “target policies or practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or that impede the EEOC’s investigative or enforcement efforts.” According to the EEOC, such policies or practices include “overly broad waivers [and] settlement provisions that prohibit filing charges with the EEOC or providing information to assist in the investigation or prosecution of claims of unlawful discrimination.” Keep in mind, the EEOC is not a court of law, and does not have the authority to declare any practice, ‎or agreement, unlawful.  It can, however, file lawsuits seeking to have a federal court declare practices ‎unlawful, or the waivers of a settlement agreement declared unenforceable.   ‎

True to its word, the EEOC has filed two recent lawsuits claiming that “overly broad” provisions in severance and separation agreements interfere with employee rights under anti-discrimination statutes. In February 2013, the EEOC filed a lawsuit against CVS Pharmacy, Inc. (CVS), alleging that CVS conditioned certain employees’ severance pay on an “overly broad, misleading, and unenforceable” separation agreement that interferes with employees’ right to file charges with the EEOC and other fair employment practices agencies in violation of Title VII of the Civil Rights Act of 1964. 

The EEOC alleges that the “five-page single spaced” separation agreement used by CVS deters the filing of discrimination charges and interferes with employees’ ability to communicate with the EEOC and other agencies. Specifically, the EEOC attacked the following provisions, many of which are commonplace in separation agreements:

  • Cooperation: Requiring employees to notify CVS’s General Counsel of a legal proceeding, including an administrative investigation, by any investigator, attorney, or third party.
  • Non-Disparagement: Prohibiting employees from making disparaging statements about CVS and its officers, directors, or employees.
  • Non-Disclosure of Confidential Information: Prohibiting employees from disclosing confidential information without written authorization from CVS’s Human Resources Officer.
  • General Release of Claims: Requiring employees to release CVS from all claims and lawsuits, including “charges” and “any claim of unlawful discrimination of any kind.”
  • No Pending Actions; Covenant Not to Sue: Requiring employees to confirm that they have no pending complaints or lawsuits in any court or agency and agree not to file “any action, lawsuit, complaint or proceeding” asserting the claims released in the agreement.
These allegations have created uncertainty for employers who use separation agreements, as the “No Pending Actions” provision discussed above also contains the following disclaimer language:  “[N]othing in this paragraph is intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with any such agency in its investigation.”  Although disclaimers of this type are commonly used in separation agreements, the EEOC apparently does not view this disclaimer language as sufficient to save the other “overly broad” provisions of CVS’s separation agreement.

In a more recent lawsuit filed against CollegeAmerica, the EEOC leveled similar allegations against a severance agreement used by the college, namely that it interferes with employees’ rights to file age-discrimination charges. The separation agreement used by CollegeAmerica included a nondisparagement clause which, according to the EEOC, interfered with an employee’s right to file discrimination charges or cooperate with the EEOC and other agencies. 

Although it remains to be seen how these cases will play out, the EEOC has made it clear that it will closely scrutinize and, when necessary, file lawsuits concerning language in employee separation and severance agreements. Employers are well-served to monitor these cases closely, as the language under attack by the EEOC is similar to agreements used by many employers across a broad range of industries.  In light of the EEOC’s current enforcement activity, employers should have ‎separation ‎agreements that are used as part of a group severance plan reviewed by legal counsel, ‎and secure current legal advice on the level of risk posed by ‎language they intend to use. Separation agreements are not boilerplate documents to be used without ‎review ‎and careful consideration. ‎ Although it is difficult to predict how the EEOC’s current ‎enforcement efforts will be treated by the courts, having an employment attorney review and modify ‎separation agreements can greatly reduce the risk of unwanted, and potentially expensive, attention ‎from the EEOC. Perhaps more importantly, it may reduce the risk of having a separation agreement ‎declared invalid or unenforceable.  ‎