The federal Equal Employment Opportunity Commission (“EEOC” or “Agency”) has been spending a fair amount of time in recent months challenging the validity and legality of employers’ separation agreements. This is apparently part of the EEOC’s core priorities, including “targeting policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or which impede the EEOC’s investigative or enforcement efforts.” Retail employers have not been exempted from the agency’s scrutiny. A summary of recent lawsuits follows:
EEOC v. Baker & Taylor
In a complaint filed last year in Illinois, EEOC v. Baker & Taylor, Civil Action No. 13-3729 (N.D. Ill. 2013), the EEOC alleged that a company violated Title VII of the Civil Rights Act of 1964 (“Title VII”) by conditioning severance on employees signing agreements that provided, in part:
- I further agree never to institute any complaint, proceeding, grievance, or action of any kind at law, in equity, or otherwise in any court of the United States or in any state, or in any administrative agency of the United States or any state, country, or municipality, or before any other tribunal, public or private, against the Company arising from or relating to my employment with or my termination of employment from the Company, the Severance Pay Plan, and/or any other occurrences up to and including the date of this Waiver and Release, other than for nonpayment of the above-described Severance Pay Plan (emphasis added).
- I agree that I will not make any disparaging remarks or take any other action that could reasonably be anticipated to damage the reputation and goodwill of Company or negatively reflect on Company. I will not discuss or comment upon the termination of my employment in any way that would reflect negatively on the Company. However, nothing in this Release will prevent me from truthfully responding to a subpoena or otherwise complying with a government investigation (emphasis added).
In its complaint, the EEOC asserted that the forgoing provisions interfered with the rights of employees. The EEOC’s position on the illegality of such provisions is consistent with its “Enforcement Guidance on Non-Waivable Employee Rights Under EEOC-Enforced Statutes,” published in 1997 (the “Guidance”), which provides that “[a]n employer may not interfere with the protected right of an employee to file a charge, testify, assist, or participate in any manner in an investigation, hearing, or proceeding under [Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act (“ADEA”), or the Equal Pay Act].” In the Guidance, the EEOC explained that its position is premised on the anti-retaliation provisions of the relevant statutes, as well as the concept that interference with such rights would be “contrary to public policy.”
The Baker & Taylor case was resolved. As part of the settlement, the employer agreed to revise its severance agreement to include a disclaimer that the agreement is not intended to limit an employee’s right or ability to file discrimination charges with the EEOC or its state and local counterparts as well as affirmative statements regarding these employee rights. Foreshadowing its later efforts, the EEOC, in its press release announcing the Consent Decree that was part of the settlement, stated that “the issue raised by this case and its resolution relate to a legal right that is of critical importance to all employees: the right to file a charge of discrimination and communicate with the EEOC and local Fair Employment Practices Agencies.”
EEOC v. CVS
More recently, in February 2014, the EEOC filed a complaint against CVS Pharmacy, Inc. (“CVS”), asserting violations of Title VII. Specifically, the complaint alleged that CVS had unlawfully conditioned the receipt of severance pay on employees signing “overly broad, misleading and unenforceable Separation Agreements” in violation of Section 707(a) of Title VII, which provides that when the U.S. Attorney General has reasonable cause to believe that any person or group of persons is engaged in a pattern or practice of resistance to the full enjoyment of any of the rights secured by Title VII, the Attorney General may bring a civil action seeking relief. The Agency alleged that these separation agreements interfered with employees’ rights to file charges with the EEOC or state fair employment practices agencies (“FEPAs”) and to communicate voluntarily with and participate in proceedings with the EEOC or state FEPAs.
The EEOC’s complaint highlighted the following allegedly improper separation agreement provisions:
- Cooperation clause requiring the employee to “promptly notify the Company’s General Counsel by telephone and in writing” upon receiving a subpoena, deposition notice, interview request, or other inquiry regarding among other things an administrative investigation.
- Non-Disparagement clause providing that the employee will not make statements that disparage the business or reputation of the company.
- Non-Disclosure of Confidential Information provision by which the employee agrees not to disclose confidential information, including “information concerning the Corporation’s personnel, including the skills, abilities, and duties of the Corporation’s employees, wages and benefit structures, succession plans, information concerning affirmative action plans or planning….”
- General Release of Claims which released, among other things, “charges” and included as released “any claim of unlawful discrimination of any kind.”
- No Pending Actions; Covenant Not to Sue provision in which the employee agrees “not to initiate or file or cause to be initiated or file, any action, lawsuit, complaint or proceeding asserting any of the Released Claims against any of the Released Parties….”
In its complaint, the EEOC found that the following disclaimer was insufficient: “Nothing in this paragraph is intended to or shall interfere with employee's right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this agreement prohibit employee from cooperating with any such agency in its investigations.”
What is notable is that the disclaimer language used by CVS essentially tracked language suggested by the EEOC in the Guidance. Similarly, a Consent Decree entered into by Kodak with the EEOC in EEOC v. Eastman Kodak Co., no. 06-cv-6489 (W.D.N.Y. 2006), included the following language:
Except as described below, you agree and covenant not to file any suit, charge or complaint against Releasees in any court or administrative agency, with regard to any claim, demand, liability or obligation arising out of your employment with Kodak or separation therefrom. You further represent that no claims, complaints, charges, or other proceedings are pending in any court, administrative agency, commission or other forum relating directly or indirectly to your employment by Kodak.
Nothing in this Agreement shall be construed to prohibit you from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency. Notwithstanding the foregoing, you agree to waive your right to recover monetary damages in any charge, complaint, or lawsuit filed by you or by anyone else on your behalf.
While the Kodak Consent Decree language had previously been acceptable to the EEOC and used by employers accordingly, the Agency apparently now wants more from employers.
EEOC v. CollegeAmerica
Most recently, on May 5, 2014, the EEOC filed a complaint asserting violations of the ADEA against CollegeAmerica Denver, Inc. (“CollegeAmerica”), in the U.S. District Court for the District of Colorado for conditioning an employee’s receipt of severance on an “overly broad, misleading, and unenforceable agreement.” Among other things, the EEOC took issue with the separation agreement’s “Release of All Claims,” which released, among other things, claims for discrimination” as well as the agreement’s provisions regarding cooperation, non-disparagement, and compliance disclosures. Perhaps the CollegeAmerica case can be distinguished from other circumstances, since the EEOC took particular umbrage with the fact that CollegeAmerica affirmatively sued its former employee for violating the non-disparagement clause of its separation agreement and then sought discovery on the governmental agencies with which the former employee had communicated regarding CollegeAmerica. In addition, unlike most agreements typically now used by employers, the agreement also allegedly lacked a “carve out” for filing charges with or cooperating with the EEOC or state and local FEPAs.
In light of the recent spate of EEOC separation agreement lawsuits, employers should strongly consider reviewing their form separation agreements. For some suggestions, please see our recent Act Now Advisory.