A pattern or practice lawsuit has been filed by the Equal Employment Opportunity Commission ("EEOC") against CVS Pharmacy contending that what most consider to be standard severance provisions in a release agreement are actually violations of Title VII. EEOC v. CVS Pharmacy, Inc., No. 1:14-CV-863-JWD (E.D. Ill.). The release provisions primarily pertain to cooperation, non-disparagement, non-disclosure and covenant-not-to-sue clauses in the release. The challenge has been made by the EEOC despite the fact that the EEOC does not claim that anyone has been discriminated against, retaliated against, or that a specific employee has been "chilled" by the release provisions. Further, the settlement agreement specifically states that it does not "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."
In challenging the "communications" portion of the release, the release requires the employee to release the company from all "charges," which were also covered by the "covenant-not-to-sue" provision. The EEOC contends that these provisions preclude the employee from filing "charges," as the statute specifically allows, and by using "clarifying" language the employer itself illustrates the document's broad prohibitions plausibly require clarification. Further, the EEOC contends that the "clarifying" provisions are not specific enough and do not actually undo the limitations on the charge filing imposed by the other provisions.
The EEOC also contends that the communication provisions limits communications with the EEOC, whether to support one's own charge or in connection with other employees' claims, by barring the sharing of "confidential" information. Similarly, the "non-disparagement" provision arguably limit comments by employees telling the EEOC about wrongdoing by company officials, and requires the employee to promptly notify the company if the employee receives any inquiry or request relating to any administrative investigation. The EEOC claims the "clarifying" language that purportedly corrects these provisions do not parallel what the provisions prohibit. None of the provisions allow an employee to simply respond voluntarily to an inquiry from the EEOC in the absence of a formal legal proceeding compelling a response, and even then only after notify the employer so that it may take steps to prevent the employee from responding at all, according to the EEOC.
The EEOC contends that these settlement or release provisions are contrary to the statutory right to "assist or participate in any manner" in an EEOC investigation, and have a chilling effect on the exercise of Title VII rights because they are unreasonably broad and ambiguous. Further, the "rights secured" by Title VII are not limited to the substantive rights to be free from discrimination because of race, color, religion, sex, and national origin, but also include rights to file charges and to assist and participate in Title VII investigations and other proceedings. Generally, according to the EEOC, the statute is addressed broadly to a "pattern or practice of resistance," not simply a "pattern or practice of violating Title VII."
To the reader, many of these contentions made by the EEOC may sound like similar contentions made by the National Labor and Relations Board ("NLRB") involving workplace rules that might "chill" the right of employees in the exercise of their rights guaranteed by Section 7 of the Labor Act. The NLRB has held, sometimes with court approval, that workplace rules susceptible to an overly broad interpretation that would unlawfully infringe employees' rights can violate the Labor Act. The EEOC argues that, if employees may be deterred from exercising Section 7 rights by overly broad workplace rules, it is possible that the same employees could likewise be deterred by severance terms that are susceptible to an interpretation that limits the full exercise of Title VII rights.
In response, the employer, CVS, contends that even if some of the substantive provisions of the release are ambiguous, the agreement expressly and specifically says, in terms any employee would easily understand, that it does not interfere with the employee's right to participate in discrimination agency proceedings or prohibit the employee from cooperating with any such agency in its investigation. Further, CVS contends that the case law is clear that if an employer purports to use a contract to block employees from working with the EEOC, that the appropriate remedy is to strike such provisions as contrary to public policy – not to hold the employer liable for violating Title VII. CVS contends that the EEOC cannot cite a single case in the history of Title VII that even suggests that the pattern-or-practice provisions forbids any conduct that may "discourage" ex-employees from talking to the EEOC.
CVS filed a motion to dismiss or, in the alternative, for summary judgment, on April 16, 2014, and the EEOC filed its memorandum of opposition on June 6, 2014. An amicus brief has been filed by an employer association, but no rulings have been made on the pending motions as of this writing.
There is a separate issue in the case as to whether the EEOC exhausted its administrative remedies by failing to conciliate its claims before filing suit. The EEOC contends that, in contrast to the provisions under Section 706, it need not conciliate Section 707 pattern-or-practice claims.
Wimberly & Lawson Comments:
There is no question that some, if not most, of the provisions challenged by the EEOC are contained in many standard-form separation agreements. The writer does not recall or know of a case in which an overly broad separation agreement has itself been held to be a violation of Title VII. If anything, the courts have traditionally held that overbroad settlement provisions are simply unenforceable, not law violations in themselves. Further, public policy would argue in favor of enforcing private severance agreements, rather than setting forth various subjective standards regarding their enforceability and/or legitimacy. The EEOC's approach thus would arguably make it more difficult to settle a case to the disadvantage of both the employers and plaintiffs. In addition to a rather undefined standard of what would be a lawful settlement agreement, such agreements would have the potential consequences for noncompliant agreements to include the "sword" of Title VII enforcement actions brought by the EEOC or possibly by private plaintiffs. Indeed, should a private claimant settle the case, he or she could then turn around and sue the employer again contending that the settlement agreement was overly broad.
In light of this pending and as yet unresolved litigation, what are employers to do about their "standard-form" settlement or release agreements? Some employers are reacting by considering the EEOC position to be so outlandish that no revisions are necessary. While this writer understands those sentiments, it is suggested that such settlement agreements or releases be reviewed by competent labor and employment counsel to ensure that the most controversial provisions are modified, and that broader and more specific "disclaimers" are included expressly indicating that the releases do not prohibit an employee from filing EEOC charges or participating in EEOC investigations.