The EEOC recently filed a lawsuit challenging CVS Pharmacy’s (the “Company’s”) separation agreement, which, it asserts, was distributed to more than 650 employees in 2012. EEOC v. CVS Pharmacy, Inc., Case No. 1:14-cv-00863 (N.D. Ill.). The agency alleges that the separation agreement had the effect of interfering with Title VII rights by purportedly failing to clearly state that employees could still initiate charges and cooperate with investigations by the EEOC and state agencies.
Restrictions in the Separation Agreement
According to the complaint, the separation agreement includes the following restrictions: the individual must notify the Company if contacted regarding agency proceedings or other investigations; the individual may not make disparaging comments about the Company or its employees, directors and officers; and the individual may not disclose confidential information regarding the Company without prior written permission from a designated Company official. It also requires: a release of all claims, including charges, and “any claim of unlawful discrimination;” includes a covenant not to sue; an affirmation that the individual has no actions pending against the Company in court or before agencies. And, it provides that the Company could obtain injunctive and other relief if the individual materially breached the terms of the agreement.
Notably, the EEOC maintains that the language in the separation agreement carving out an employee’s right to participate in an agency proceeding enforcing anti-discrimination laws or cooperating with an agency investigation did not adequately inform employees of their Title VII rights because it only applied to the restrictions regarding pending actions and a covenant not to sue contained in the same paragraph—i.e., not to the other restrictions throughout the Agreement.
Relevant Legal Background
The current EEOC requirements related to release agreements largely developed from a consent decree between the EEOC and Eastman Kodak in 2006. See EEOC v. Eastman Kodak Co., Case No. 06-cv-6489 (W.D.N.Y. 2006). Earlier that year, the EEOC filed a lawsuit challenging a release agreement Eastman Kodak used, asserting that the terms violated Title VII and the ADEA by prohibiting employees from assisting other employees with their claims of discrimination. The parties entered into a consent decree setting forth the terms of the template agreement Eastman Kodak would use in the future, including a covenant not to file suit or initiate charges and complaints against the employer, and a representation that the individual has no claims currently pending against the employer. Importantly in the context of EEOC v. CVS Pharmacy, the template agreement also contained a clear carve-out providing that the release did not affect an individual’s ability to file a charge or participate in an investigation, but requiring that the individual waive any monetary recovery therefrom.
The Company’s Response
On April 18, 2014, the Company moved to dismiss or, in the alternative, for summary judgment. Among other things, it asserted that the severance agreement did not interfere with individuals’ abilities to file charges or cooperate with governmental agencies, and that inclusion of contractual terms in an agreement without more does not violate Title VII. The Company also presented the argument that the EEOC’s complaint fails because the agency failed to discharge its responsibility to conciliate before filing suit.
Many of the terms in the release the EEOC is now challenging are fairly common and a review of the complaint suggests that the EEOC appears to now seek to require more of the employer than it did in the Eastman Kodak case. Employers will be closely watching how this case unfolds and, in the meantime, are well served by ensuring that severance agreements are straightforward and adequately advise employees of their rights under Title VII and other laws prohibiting discrimination.