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EEOC Puts Severance Agreements In Its Crosshairs

It may be time to reassess what are widely considered to be standard provisions in your severance agreements. One of the EEOC’s latest initiatives is to target fairly routine provisions in severance agreements, including non-disparagement, non-disclosure, and general release clauses.

The EEOC recently announced in its strategic enforcement plan 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.” This, according to the EEOC, includes 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. Any provisions that infringe on these rights are subject to EEOC scrutiny.

As part of its enforcement efforts, the EEOC has begun filing lawsuits to attack what it considers to be “overly broad” provisions in severance agreements. The lawsuit receiving the most attention was filed in February 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’ rights to file charges with the EEOC in violation of Title VII.  Specifically, the EEOC took umbrage with the following provisions, many of which are commonplace in separation agreements:

  • 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.
  • Cooperation: Requiring employees to notify CVS 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.

The common theme with all of these provisions is that they could be interpreted as infringing on or impeding an employee’s ability to pursue claims under employment statutes.  The EEOC alleges that the “five-page single spaced” separation agreement used by CVS deters the filing of discrimination charges and interferes with employees’ abilities to communicate with the EEOC and other agencies. The EEOC is seeking to invalidate the severance agreements, even though CVS’s agreements contain a disclaimer that states, “[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.

The CVS case is pending on no rulings on the outcome have been made, but employers should monitor the CVS case and the EEOC’s other enforcement activities given that the language under attack by the EEOC is similar to agreements used by many employers.  Employers should also have ?separation ?agreements reviewed by legal counsel, ?and secure current legal advice on the level of risk posed by ?language they intend to use in such agreements. Taking these preventative measures can reduce the risk of EEOC scrutiny, as well as potentially having executed severance agreements ?declared to be invalid or unenforceable.