BY MARC SHERIDAN
The U.S. Equal Employment Opportunity Commission (EEOC) is the agency responsible for enforcing federal laws prohibiting discrimination in the workplace. The EEOC has authority to investigate claims of discrimination and if necessary file lawsuits on behalf of individuals. The EEOC generally has jurisdiction over employers with at least 15 employees.
Last year, the EEOC filed 131 lawsuits alleging discrimination. One of those recently filed is a lawsuit against CVS in the U.S. District Court in Chicago over a severance agreement. So why does this one case matter?
This lawsuit shakes the foundation of severance agreements. It challenges the garden-variety severance terms that virtually every employer and their employment lawyer include in such agreements. An EEOC win could be monumental.
The EEOC alleges that the severance agreements CVS provided to three of its former employees unlawfully restricted their ability to file discrimination charges, cooperate and/or communicate with the EEOC, and hence constituted illegal retaliation.
In a Feb. 7 press release, the EEOC claims that “”¦CVS conditioned the receipt of severance benefits for certain employees on an overly broad severance agreement set forth in five pages of small print.” So what “fine print” did the EEOC take issue with in deciding to sue CVS?
According to the complaint:
Ӣ A cooperation clause that required employees to promptly notify CVSӪ general counsel by telephone and in writing when they received any inquiry regarding an administrative investigation (for example, an EEOC investigation);
Ӣ A nondisparagement clause that prohibited the employee from making any statements that disparaged the business or reputation of CVS or its officers, among others;
Ӣ A confidentiality clause that prohibited disclosure of personal information unless they received written authorization from CVSӪ chief human resources officer;
Ӣ A general release of all claims of discrimination;
Ӣ A covenant not-to-sue CVS, but included a carve-out of the employeeӪs right to participate in or cooperate with any state or federal agency discrimination investigation or proceeding; and
Ӣ An attorneyӪs fee provision requiring the employee to reimburse CVS should the employee breach the agreement.
The complaint further alleges that the use of this separation agreement as drafted interferes with an employee”™s right to file a complaint with the EEOC or fair employment agencies (FEPAs) and to participate and cooperate with an investigation conducted by the EEOC or FEPAs.
As explained by the EEOC”™s regional attorney John Hendrickson, the lead litigation counsel, charges and communication with employees play a critical role in the EEOC”™s enforcement process because they inform the agency of employer practices that might violate the law. For this reason, the 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.
Most if not all severance agreements contain the language similar to the six provisions challenged by the EEOC in this lawsuit. If the EEOC is successful, employers subject to the EEOC”™s jurisdiction will have to revamp these provisions in both their severance and settlement agreements. As employers are paying their ex-employees for certainty when an employee signs the general release, this case has the potential to not only turn these agreements on their heads, but the manner in which employers and employees approach the resolution of employment disputes.
New York business owners with fewer than 15 employees should also take notice of this case. New York state has its own human rights law that applies to even more employers (those with four or more employees). The New York Human Rights Law is distinguishable as to the potential recovery of certain damages and more expansive as to protected categories (for example, sexual orientation). In many instances, however, the New York State Human Rights Law follows the federal statutory framework regarding the burdens of proving discrimination, particularly with regard to retaliation claims like those in the CVS case. Thus, a decision favorable to the EEOC could have a direct and similar impact on many New York employers, too.
So what can employers do? It appears that the EEOC”™s concern is that the carve-out (the covenant not-to-sue) does not address all the challenged provisions in the agreement. For now, one option employers may consider is to modify their agreements to clarify that the protected-activity, i.e. cooperating or filing with the EEOC, does not breach the non-disparagement, confidentiality, and cooperation clauses of the agreement. Whether this modification will be acceptable to the EEOC and how this case plays out in federal court, bears monitoring. Stay tuned.
Marc Sheridan is an employment lawyer and mediator with Markus & Sheridan L.L.P. With offices in Mount Kisco and New York City, the firm focuses on employment, divorce, estate planning and collaborative law. The firm can be reached at (914) 241-6300 or via email at mslawny.com.
