When providing a departing employees with severance pay, most employers require that the employee sign a separation or severance agreement, which, among other things, contains a general release of claims. The payment of severance is given in exchange for the employee’s agreement not to raise any claims against the employer. The Equal Employment Opportunity Commission (“EEOC”) does not have a problem with this type of exchange; otherwise, cases could never settle. The EEOC does, however, take issue with provisions that have become standard in most separation agreements. Earlier this month the EEOC filed an action in an Illinois federal court against CVS Pharmacy, Inc., alleging that CVS’s severance agreements violate Title VII of the Civil Rights Act of 1964, as amended, because they constitute a “pattern or practice of resistance to the full enjoyment of any rights secured by Title VII.” The EEOC believes that these provisions violate the retaliation protections contained in Title VII.
According to the Complaint filed in EEOC v. CVS Pharmacy, Inc., certain provisions of the form severance agreement at issue prohibit employees from filing charges of discrimination, and interfere with an employee’s right to participate and cooperate with investigations conducted by the EEOC and state fair employment practices agencies. The alleged offending provisions included a non-disparagement clause, a confidentiality provision, a cooperation provision that requires the releasee to notify CVS if they are compelled to provide information about the company, and an agreement not to sue.
As most attorneys who practice in the area of employment discrimination law are aware, the clauses challenged by the EEOC are contained in virtually every separation/severance agreement. If the EEOC prevails, employers may have to give up some of the guarantees and assurances that they have taken for granted. Although some argue that prohibiting these types of provisions will make employers less likely to pay severance or settle claims of discrimination, the concern is overstated. Employers will likely continue to pay severance in exchange for general releases because at the very least they will have secured an agreement that the particular claim at issue will not come back, or continue, to haunt them.