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EEOC Takes Aggressive Position On Severance Agreements

On Behalf of | Apr 2, 2014 | Business Litigation

The Equal Employment Opportunity Commission (“EEOC”)
recently filed a lawsuit against one of the nation’s largest pharmacy chains, CVS,
claiming its separation agreements violate Title VII of the Civil Rights Act. This
action by the EEOC is surprising and significant, since the targeted provisions
are ones that are commonly found in severance agreements. According to the
lawsuit, the EEOC claims that CVS conditioned payment of severance benefits on execution
of severance agreements that contained overly broad, misleading, and
unenforceable language that unlawfully prevents employees from communicating
with the agency or filing discrimination claims. In its lawsuit, the EEOC
claims the following provisions of the agreement violate Title VII:

The EEOC is seeking a permanent injunction prohibiting CVS
from restricting the
rights of former employees to file charges or participate in agency proceedings,
reformation of CVS’s separation agreement, and for CVS to provide 300
additional days for any former employee who signed the agreement to file
administrative charges.

The EEOC claims that being able to bring charges and
communicate with employees plays a critical role in the EEOC’s enforcement policy
because it informs the agency of employer practices that may be unlawful. An
employee’s right to communicate with the EEOC is protected under federal law,
and therefore, the EEOC claims that when employers have language similar to
that found in CVS’s severance agreements, it has the effect of buying an
employee’s silence regarding discriminatory practices.
The EEOC’s claims are a departure from its prior position in
which it previously determined similar language was in compliance with Title
VII. In fact, CVS modeled its severance agreements with language the EEOC
previously found compliant in an earlier lawsuit. This can be rightly viewed as
an overreach by the EEOC to strike down provisions of severance agreements that
are used almost universally by employers and have been previously approved by
the agency.
If the EEOC is successful in this lawsuit, employers will
need to revisit their severance agreements and make any necessary changes to
comply with the court’s decision. However, unless the court strikes down the
provisions in the case, or another court acts otherwise, we are not currently recommending
a drastic departure from our prior severance agreements based on this lawsuit. While
we believe it is unlikely that the EEOC will be successful on all of its claims
against all provisions of CVS’s agreements, this new aggressive stance by the
agency is a good reminder to employers to always revisit severance agreements to
ensure they are legally compliant, and consider taking steps to avoid similar


Nick Johnson is an attorney with Washington, DCbusiness law firm Berenzweig Leonard.
He can be reached at [email protected]

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