EEOC Challenges Separation/Release Agreements

It is common practice for employers in the process of terminating employees to present separation agreements that offer the employees severance benefits in exchange for a general release of claims. On February 2, 2014, the Equal Employment Opportunity Commission (“EEOC” or “Commission”) filed suit in federal court in Chicago against the CVS drugstore chain, alleging that, since August 2011, CVS has engaged in a pattern or practice of discrimination in violation of Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e-1 et seq.) by using separation agreements for their non-store employees that unlawfully interfere with the rights of these employees to file charges of discrimination with the Commission.

Release provisions that preclude an employee from filing a charge of discrimination with the EEOC are generally unenforceable as against public policy. What makes this lawsuit of concern to employers is that some of the provisions of the CVS separation agreement that the EEOC is challenging are standard terms that one sees in most separation agreements, such as (1) a requirement that the employee notify the company if he or she receives legal process relating to “any civil, criminal or administrative investigation” regarding the company (2) the employee’s agreement not to disparage the company (3) a release of “any claim of unlawful discrimination of any kind” and (4) a provision allowing the company to seek injunctive relief upon the employee’s breach of any of his or her obligations under the separation agreement.

What may be of particular concern to the EEOC in this case is that the release of claims provision included the release of “charges” and the covenant not to sue provision required the employee (a) to acknowledge that he or she had not instituted any complaint with any court or agency and (b) would not to initiate any “action, lawsuit, complaint or proceeding” against the company. The EEOC also takes issue with a confidentiality provision in the CVS separation agreement that defines confidential information to include the company’s personnel data, wage and benefits structure and affirmative action plans. Noteworthy is the Commission’s position that the separation agreement’s allegedly unlawful provisions are not mitigated by language in the agreement stating that nothing therein “is intended to interfere with the employee’s right to participate in a proceeding with any federal, state or local government agency enforcing the discrimination laws, nor shall the agreement prohibit employee from cooperating with any such agency in its investigation.”

It must be noted, contrary to the position taken by the EEOC and private litigants in prior cases, courts have not voided separation agreements simply because they contain an unenforceable provision purporting to preclude the employee from filing a charge with the EEOC. These courts have held that the unenforceable provision is severable from the remainder of the agreement and have permitted employers to assert the agreement’s release provisions against employees who have brought litigation based on claims encompassed by the release. See, e.g., EEOC v. Sundance Rehab. Corp., 466 F.3d 490 (6th Cir. 2006); Wastak v. Lehigh Valley Health Network, 342 F.3d 281 (3d Cir. 2003).

Nevertheless, the EEOC’s recent lawsuit bears close scrutiny, and employers would be wise to review their current separation agreement templates to insure their compliance with the relevant statutes and regulations.

For answers to any questions regarding this blog or with regard to separation/release agreements generally, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Richard S. Zackin is a Director in the Gibbons Employment & Labor Law Department.
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