Tag Archives: severance agreement

October 21, 2014

EEOC’s Failure to Engage in Conciliation Dooms Its Separation Agreement Lawsuit Against CVS Pharmacy

Wiletsky_MBy Mark Wiletsky 

Chalk up a loss for the Equal Employment Opportunity Commission (EEOC) in its lawsuit against CVS Pharmacy’s separation agreements.  As we reported earlier, the EEOC sued CVS alleging that CVS’s separation agreements deterred employees from filing charges and communicating with the EEOC about discrimination and retaliation.  Dismissing the case, a federal judge recently ruled that the EEOC failed to engage in the required procedural steps, including conciliation, before filing its lawsuit. 

EEOC Dismissed Employee’s Charge, Then Went After Employer 

This lawsuit is an example of the aggressive, proactive nature of the EEOC in extending the protections of Title VII to new and novel claims.  The case arose after CVS terminated Tonia Ramos, a pharmacy manager.  Ms. Ramos signed CVS’s standard separation agreement, which included a release of claims and a covenant not to sue.  She then proceeded to file a charge with the EEOC claiming that her discharge was based on sex and race in violation of Title VII.  Almost two years later, the EEOC dismissed Ms. Ramos’s charge.  

The EEOC then contacted CVS asserting that based on the separation agreement, CVS was engaging in a pattern or practice of resistance to their employees’ full enjoyment of rights under Title VII.  In other words, the EEOC concluded that even though the individual employee did not have a valid discrimination claim against CVS, it would bring a pattern or practice case against CVS based on the language in its standard separation agreement used with potentially hundreds of former employees. 

No Conciliation, No Lawsuit 

Under Title VII enforcement procedures, the EEOC has the authority to investigate and act on a charge of a pattern or practice of discrimination, whether filed on behalf of an allegedly harmed employee or by the EEOC itself.  The procedures require that the EEOC try to resolve any alleged unlawful employment practices through informal means before filing a lawsuit.  Such means include conferences, conciliation and persuasion.  Although the EEOC and CVS discussed potential settlement by telephone twice before the EEOC filed suit, the EEOC failed to engage in conciliation, which proved fatal to its case.  Because an attempt at reaching a conciliation agreement is a prerequisite to the EEOC filing suit and it was undisputed that the EEOC did not engage in any conciliation process, the federal court dismissed the EEOC’s case against CVS. 

Judge’s Guidance is in the Footnotes 

The case was dismissed on procedural grounds, but the judge took the opportunity to offer his view on the merits of the EEOC’s arguments in several footnotes in the opinion.  First, the EEOC argued that the term “resistance” as used in Title VII should be interpreted broadly to extend to the language in CVS’s separation agreement even if that language did not amount to discrimination or retaliation under the Act.  The judge rejected that argument, stating that the term “resistance” requires some retaliatory or discriminatory act. 

Second, the judge discussed the “covenant not to sue” provision in CVS’s separation agreement.  Even though the provision stated that an employee could not “initiate or file . . . a complaint or proceeding asserting any of the Released Claims,” the release of claims (in another paragraph of the separation agreement) stated that it did not limit “any rights that the Employee cannot lawfully waive.” In addition, the agreement contained two carve out provisions specifying an employee’s “right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws” and that the agreement did not prohibit the employee from cooperating with any such agency in its investigation.  The judge wrote that these provisions would allow an employee to file an EEOC charge.  He went on to write that even if the separation agreement explicitly banned filing charges, those provisions would be unenforceable and could not constitute “resistance” under Title VII. 

One Case Down; One Still Pending 

The dismissal of the CVS lawsuit is good news for employers who use separation agreements, especially in light of the judge’s comments signaling that the EEOC’s arguments were without merit.  However, a similar case filed by the EEOC against College America is still proceeding through the federal court in the District of Colorado.  (We wrote about the College America case here.) Like CVS, College America has asked the court to dismiss the EEOC’s case.  We will let you know when the court rules on that motion.  In the meantime, employers should review their separation agreements to ensure they include a provision that the agreement does not prohibit employees from filing a charge, participating in an investigation or otherwise cooperating with an appropriate federal, state or local government agency that enforces discrimination laws.

Click here to print/email/pdf this article.

May 6, 2014

Separation Agreements Targeted By EEOC Again

Wiletsky_Mark_20090507_NM_crop_straightBy Mark Wiletsky 

The Equal Employment Opportunity Commission (EEOC) recently filed a lawsuit seeking to stop a Colorado employer from using its form separation and release agreement and to allow employees who have signed the form agreement to file charges of discrimination and participate in  EEOC and state agency fair employment investigations.  In its federal court complaint, the EEOC alleges that CollegeAmerica Denver violated the Age Discrimination in Employment Act (ADEA) by conditioning employees’ receipt of severance benefits on signing a separation and release agreement which, according to the EEOC, chills and interferes with the employees’ rights to file charges and/or cooperate with the EEOC and state fair employment practice agencies.  

As we wrote on this blog earlier, the EEOC has been scrutinizing employers’ separation agreements.  This is the second such lawsuit challenging language in the separation agreements that does not permit the filing of discrimination or retaliation charges with the EEOC or other government agencies.  As in the EEOC’s earlier complaint against a national pharmacy, the recent complaint against CollegeAmerica Denver targets numerous provisions in the separation agreement, including the release of claims, a non-disparagement clause and provisions in which the employee represents that he/she has not filed any claims, has disclosed to the company all matters of non-compliance and will continue to cooperate with and assist the company with any investigation or litigation.  

Many of the targeted provisions are standard clauses in form separation agreements.  Although it remains to be seen whether the courts will agree with the EEOC’s claims, it is always a good idea for organizations to review their agreements and ensure they do not raise any red flags for the EEOC while still protecting the company from future payouts for employment-related claims.  We will continue to provide updates as new developments arise.

Click here to print/email/pdf this article.

February 20, 2014

EEOC Challenges Separation Agreements

By Mark Wiletsky 

If you use standard separation agreements to secure a release and waiver of claims from employees who are laid off, fired, or who otherwise threaten a claim, you might want to review your agreement.  In a lawsuit filed recently in Illinois federal court, the EEOC alleges that a company with national operations interfered with its employees’ right to file charges with the EEOC and state fair employment practices agencies by conditioning the employees’ receipt of severance pay on signing an overly broad separation agreement. 

According to the EEOC, five separate paragraphs (which are commonly found in separation agreements) are improper: 

  • Cooperation: Employee agrees to promptly notify the Company’s General Counsel by telephone and in writing if the employee receives a subpoena, deposition notice, interview request or other process relating to any civil, criminal or administrative investigation or suit.
  • Non-Disparagement: Employee will not make any statements that disparage the business or reputation of the company or any of its officers or employees.
  • Non-Disclosure of Confidential Information: Employee agrees not to disclose to any third party or use for him/herself or anyone else Confidential Information without the prior written authorization of the company.
  • General Release of Claims: Employee releases company for any and all causes of action, lawsuits, charges or claims, including any claim of unlawful discrimination, that the employee may have prior to the date of the agreement.
  • No Pending Actions; Covenant Not to Sue: Employee represents that he/she has not filed or initiated any complaints prior to signing the agreement and agrees not to initiate or file any actions, lawsuits or charges asserting any of the released claims. 

Disclaimer Allowing Workers to Bring Claims to the EEOC Not Enough 

Recognizing that employers may not prevent workers from filing charges with the EEOC or participating in EEOC or state agency investigations, the paragraph containing the covenant not to sue contained a sentence stating “[n]othing 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 investigation.”  In its complaint, the EEOC says this disclaimer is insufficient as it is contained in only one of the paragraphs that contain limits on the employees’ rights. 

What does this mean for employers? 

It’s important to remember that the Court has not agreed with the EEOC’s allegations—and, in fact, it might reject them outright.  Regardless, the risk of such actions is enough to justify a closer look at your standard separation or release agreement.  Even an agreement that has been repeatedly reviewed and revised can likely be improved for clarity.  Make sure the agreement is understandable, does not contain excessive “legalese,” and it should not contain provisions that interfere with an employee’s right to file a charge with the EEOC or state agency.

Click here to print/email/pdf this article.