In what appears to be a test case by the EEOC, CVS Pharmacy is facing a surprising attack on its use of a standard separation agreement. Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 1:14-CV-863 (N.D. Ill.).

The EEOC’s complaint—filed on February 7, 2014, in the Northern District of Illinois—accuses CVS of engaging in a “pattern or practice of resistance” to Title VII by requiring departing employees to sign the agreement in exchange for severance payments.

And what onerous terms amount to an insurgency against Title VII? The EEOC has zeroed in on several provisions, including:

  • former employees must notify CVS if they receive a subpoena or other discovery or investigatory requests
  • a prohibition on “any statements that disparage the business or reputation” of CVS
  • non-disclosure of confidential information
  • a general release
  • a covenant not to sue

The EEOC argues these clauses interfere with employees’ rights to file discrimination charges with the EEOC or other agencies.

Yet all of these are otherwise unremarkable terms, and the overwhelming majority of separation agreements in the US probably include provisions similar to some or all of these. To put it mildly, if the EEOC ultimately prevails, the repercussions will probably be felt on a national scale.

This suit has ramifications for other types of employment agreements too, as such clauses often appear in employment contracts or in settlement agreements following employment-related litigation.

The implications of this case may explain why CVS was targeted, as such a large employer has a greater incentive to defend the case through a dispositive motion, with the EEOC hoping the resulting judicial opinion will be useful precedent in future cases.

Perhaps giving the EEOC exactly what it wants, CVS fired back on Friday with a motion to dismiss, raising essentially three points:

  • the covenant not to sue provision contains a qualifier, disclaiming any intent to limit the former employee’s right to participate or cooperate in any proceeding or investigation by a government agency
  • even if the agreements do frustrate the exercise of Title VII rights, this merely makes them unenforceable, and does not rise to the level of repeated, intentional conduct that constitutes resistance to Title VII
  • the EEOC refused to engage in voluntary conciliation with CVS, which is arguably a prerequisite to bringing a pattern or practice suit

The court has set a briefing schedule, and the EEOC’s response to the motion is due on June 6. If the EEOC did plan this carefully as a test case, the agency has probably already considered its responsive arguments.

CVS will have an opportunity to reply by July 7. Given the significance of the case, it may be some months thereafter before the court issues a ruling.