Recently, a federal judge dismissed an action the EEOC filed against CVS Pharmacy, Inc, in which the EEOC challenged several terms in CVS’s standard separation agreement. (See Mem. Op. & Order, Equal Emp’t Opportunity Comm’n v. CVS Pharmacy, Inc., No. 1:14-CV-863 (N.D. Ill. Oct. 7, 2014)). 

The EEOC asserted that the terms in CVS’s standard agreement were unlawful restraints on departing employees’ rights under Title VII of the Civil Rights Act of 1964.

Although the dismissal marks a victory for CVS, the court’s decision offers little solace for employers concerned about the continued validity of common terms in separation agreements.

Background on the CVS case

The EEOC filed its complaint against CVS in February 2014, alleging that CVS’s standard separation agreement—which 650 employees allegedly entered into—amounted to a pattern or practice of interfering with employees’ rights to file discrimination charges or communicate with the EEOC regarding unlawful employment practices.

The EEOC took issue with the separation agreement’s terms regarding non-disparagement, non-disclosure of confidential information, and cooperation in the event an employee received a subpoena or similar inquiry.

The EEOC also challenged the scope of the separation agreement’s general release of claims and its covenant not to sue, even though the EEOC acknowledged a “single qualifying sentence” that expressly preserved an employee’s right to cooperate with federal, state, or local agencies in enforcing anti-discrimination laws.

CVS moved to dismiss the EEOC’s lawsuit, asserting, in part, that the EEOC’s position failed because the separation agreement was a valid contract with an express disclaimer that preserved a departing employee’s rights to bring discrimination claims to the EEOC or a state or local employment agency.

Potential implications for other employers

The disclaimer in CVS’s separation agreement is commonplace in the US, and until recently, employers believed such a provision was consistent with federal law.

But the EEOC’s claims against CVS, and a similar lawsuit the EEOC filed in May 2014 against a private college, raise questions about whether including a disclaimer is sufficient to guard against alleged violations of anti-discrimination laws. (Equal Emp’t Opportunity Comm’n v. CollegeAmerica Denver Inc., No. 1:14-CV-01232 (D. Colo.)).

The court’s decision

For employers hoping to receive substantive guidance from the court’s decision in the CVS case, the recent dismissal was unsatisfying.

The court dismissed the EEOC’s lawsuit on purely procedural grounds, holding that the EEOC failed to satisfy its obligation to attempt to resolve its claims against CVS outside of court before bringing a lawsuit.  

Aside from a footnote tangentially addressing the general release of claims and covenant not to sue in CVS’s separation agreement, the court avoided analyzing the terms in the agreement and whether they were consistent with Title VII.

Take away lesson

So what is a conscientious employer left to do? 

Until the courts provide a more definitive answer, one option an employer may consider is increasing the prominence of a disclaimer concerning an employee’s rights to cooperate with the EEOC.

Rather than including the disclaimer as single sentence within a paragraph concerning a covenant not to sue, an employer could make the disclaimer a stand-alone paragraph and explicitly cross-reference that paragraph elsewhere in the agreement using “except as provided in” statements.

By doing so, the employer would repeatedly inform the employee that various provisions in the separation agreement are undoubtedly subject to the employee’s right to communicate with federal, state, or local employment agencies.

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