In April, we wrote “EEOC takes aim at CVS, examining common separation agreements”, which covered an important case pending in the US District Court for the Northern District of Illinois.Norton Rose Fulbright Global Workplace Insider - Update: CVS wins summary judgment on EEOC challenge to separation agreements, appeal pending

The EEOC had sued CVS Pharmacy, accusing CVS of engaging in a “pattern or practice of resistance” to Title VII by requiring departing employees to sign a standard separation agreement in exchange for severance payments.

It was apparent that the EEOC was hoping to win an important test case, one that would curtail the use of severance payments and separation agreements by employers as risk management tools.

Instead however, the Commission was handed a stinging defeat. Specifically, District Judge John Darrah agreed with CVS that the EEOC had an obligation to engage in conciliation procedures as a prerequisite to filling a “pattern or practice of resistance” suit under Section 707 of Title VII. This is in spite of the fact that formerly, when such actions were the province of the Attorney General, there was no such prerequisite.

Significantly, the EEOC and CVS did engage in two settlement negotiations before the EEOC filed suit. However, the district court found these negotiations did not satisfy the requirement for conciliation procedures. Apparently, the EEOC was only willing to resolve the case without litigation if CVS would accept a public consent decree, whereas Section 706 of Title VII, which governs EEOC actions generally, requires that employers first be given the opportunity to resolve charges confidentially, via “informal methods of conference, conciliation, and persuasion.” 42 U.S.C. § 2000e-5(b).

Because there was no dispute the EEOC had refused confidential conciliation, the court granted summary judgment to CVS on all claims. Interestingly, the court’s ruling was based on the third and final argument raised in CVS’ initial motion to dismiss, usually an indication the lawyers thought it was the weakest of their arguments.

However, the implications of Judge Darrah’s opinion go further than that. The EEOC took the position that Section 707 authorizes it to oppose practices beyond outright discrimination or retaliation (which are covered under Section 706). In a footnote, Judge Darrah found the  “term ‘resistance’ is encompassed by the anti-retaliation and discrimination provisions and requires some retaliatory or discriminatory act.” EEOC v. CVS Pharmacy, Inc., No. 14-cv-863, slip op. at 4 n.2 (N.D. Ill. Oct. 7, 2014).

In other words, the EEOC must be able to allege the occurrence of discrete acts constituting discrimination or retaliation, in order to bring a “pattern of resistance” claim. This limits the potential scope of Section 707 claims considerably.

However, the EEOC filed a notice of appeal to the Seventh Circuit on December 5. As such, this case is far from over, and it will be very interesting to see how the Court of Appeals will ultimately rule.

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