The EEOC has challenged language in a recent severance agreement between three  former employees and its national headquarters. The agreement allegedly restricted the rights of three employees to work with the EEOC by filing discrimination charges.

According to the EEOC, the severance terms “conditioned the receipt of severance benefits for certain employees on an overly broad severance agreement set forth in five pages of small print.” In its complaint against CVS, the EEOC claimed that a cooperation clause unlawfully required employees to notify CVS lawyers when administrators complained. It also alleges that a non-disparagement clause kept employees from negatively speaking out about CVS in ways that would harm the company’s reputation.

In addition, the federal agency took issue with the agreement’s confidentiality clause, its general release and its covenant not to sue, which would prevent CVS employees from filing any complaints, actions, lawsuits or proceedings against CVS unless these were state or federal discrimination proceedings or investigations.

Legal Background for the EEOC v. CVS Pharmacy, Inc. Claims

The EEOC objected to the CVS severance agreement terms using Title VII of the Civil Rights Act of 1964. Section 707 of Title VII prohibits employer behavior that results in a pattern or practice of resistance to the rights granted employees in the statute. Under this section, unlawful employer practices or patterns like unfair severance terms can be addressed directly by the EEOC without the need for administrative processing.

The EEOC has stated in previous policy announcements that it would use Title VII to uphold its statutory mandate to enforce employment laws concerning severance agreements. In other words, the federal agency has indicated that Title VII, though devoid of express language on severance agreement terms, could be used to ensure that employers do not interfere with its government obligations to fairly and adequately extend equal employment opportunities to employees.

In addition, the EEOC Strategic Enforcement Plan (SEP), which established the federal agency’s priorities and assists with public, private and federal component integration through 2016, has addressed upholding an employee’s right to file a charge or participate in EEOC proceedings. Listed in the national priorities outlined in the SEP is the objective of “preserving access to the legal system,” by targeting “policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or that impede the EEOC’s investigative or enforcement efforts.”

So What’s the Problem with the CVS Severance Agreement Terms?

One of the main issues arising from the EEOC challenge to CVS Pharmacy’s severance agreement terms is the broad reach that the case could have on a widespread practice of using such terms among employers. Many employers had been following the direction of a previous case, EEOC v. Eastman Kodak Co., no. 06-cv-6489 (W.D.N.Y. 2006), in creating severance terms.

The Eastman Kodak Consent Decree required Kodak to use specific language in future severance agreements, and many employers followed suit thinking that doing so would help avoid costly liability and litigation. This language has since been included in a large number of severance agreements, some of which have even been approved after review by the EEOC.

The CVS Pharmacy case, in which language similar to that advised and approved in the Eastman Kodak case was used, reveals the EEOC’s perceived efforts to raise the standards on severance agreement terms, thus affecting a great number of current severance agreement policies among employers.

What the EEOC Challenge Means to You

According to EEOC guidelines, it is unlawful for an employer to limit an employee’s right to sue, file a charge or claims, or participate in EEOC proceeding or other court proceedings involving discrimination based on any of the characteristics outlined in Title VII. Every employee has the right to file EEOC claims or to testify in discrimination lawsuits or proceedings regardless of the presence of a severance agreement in which these rights have been waived.

The EEOC is adamant in its guidelines that any severance agreement term that would preclude an employee from filing a charge or testifying in an an EEOC proceeding is invalid and unenforceable. The agency has also informed the public that severance pay need not be returned after signing such agreements and interacting with the EEOC for this reason.

In light of the CVS Pharmacy case, employers are on alert about any content in company severance agreements that may limit the rights of employees unlawfully. Courts are well-known for denying the enforcement of otherwise contractually sound severance agreements which interfere with government mandates to enforce statutes. In other words, courts are likely to continue placing importance on the EEOC’s obligation to enforce it’s statutes over and above terms within severance agreements which would prevent an employee from suing or filing an EEOC charge.

The EEOC and Lawful Severance Agreement Terms

As terminations and discharges continue in the labor force, employees are likely to see severance agreements offered which could unlawfully limit rights protected under current employment law. Employees must keep in mind that these rights cannot lawfully be terminated just because they have signed a severance agreement that is otherwise contractually sound. The EEOC has a government mandate to carry out its duty to enforce employment laws and courts are likely to uphold this obligation despite severance agreement content that places limits on an employee’s right to file a charge or participate in EEOC proceedings.