More on the EEOC’s position on retaliation in severance agreements: A proposed solution

Yesterday, I reported on a lawsuit the EEOC has filed, claiming that some fairly generic terms in an employee severance agreement constitute illegal retaliation. In EEOC v. CVS, the agency claims that an agreement that attempts to limit an employee’s communication with the EEOC unlawfully attempts to buy employee silence about potential violations of the law.

I try to shy away from hyperbole, but OH MY GOD, THIS CASE COULD BE RUINOUS!!!

When you compare the inoffensiveness of the provisions challenged in CVS to the hard-line position put forth by the EEOC, you begin to understand why this case has the potential to be most significant piece of litigation the EEOC has filed in recent memory.

Employers settle lawsuits and pay employees severance in exchange for certainty. Employer don’t write checks to litigants (or potential litigants) out of the goodness of their hearts. They do so because they want to get rid of claims and potential claims. The provisions with which the EEOC has taken issue — a general release, a covenant not to sue, cooperation, confidentiality, non-disparagement, and the payment of attorneys’ fees upon a breach — are crucial for employers. You’d be hard pressed to find an agreement that does not contain some combination of most, if not all, of these provisions.

Yes, the anti-retaliation provisions of the employment discrimination laws prohibit employers from requiring that employees give up their statutory rights to file discrimination charges, cooperate in investigations, or provide information to the EEOC. But, the CVS agreement that the EEOC is challenging did not contain those requirements.

Instead, the challenged agreement expressly protected the employees’ statutory rights:

Moreover, nothing 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. Employee shall not, however, be entitled to any relief, recovery, or monies in connection with any Released Claim brought against any of the Released Parties, regardless of who filed or initiated any such complaint, charge, or proceeding.

In re-reading the EEOC’s complaint, the agency seems to take issue with two key facets of the challenged agreement:

1. The carve-out existed as a “single, qualifying sentence” in the “Covenant Not to Sue” section of the Agreement.
2. The carve-out did not expressly touch all of the challenged provisions in the Agreement.

Don’t shred your settlement and severance agreements just yet. As a I promised yesterday, I have a potential solution. Modify your agreements to bolster and clarify the protected-activity carve-out. In a provision separate and distinct from the release, waiver, or covenant not to sue, consider something like the following (modeled on the provisions in CVS).

Nothing in this Agreement is intended to, or shall, interfere with Employee’s rights under federal, state, or local civil rights or employment discrimination laws (including, but not limited to, Title VII, the ADA, the ADEA, GINA, USERRA, or their state or local counterparts) to file or otherwise institute a charge of discrimination, to participate in a proceeding with any appropriate federal, state, or local government agency enforcing discrimination laws, or to cooperate with any such agency in its investigation, none of which shall constitute a breach of the non-disparagement, confidentiality, or cooperation clauses of this Agreement. Employee shall not, however, be entitled to any relief, recovery, or monies in connection with any such brought against any of the Released Parties, regardless of who filed or initiated any such complaint, charge, or proceeding.

Given the EEOC’s position, prudence dictates the breadth of this carve-out, which is more expansive than what I traditionally use. The alternative, however, is to omit these provisions all together, and draft agreements that looks like a Swiss-cheese of risk.

I cannot understate the potential significance of the EEOC’s position in CVS. This case bear monitoring, and I will continue to update you as the case proceeds. In the meantime, consider adopting changes to your stock separation and settlement agreements; the EEOC is definitely watching.