Remember 2010? Not that long ago, yet as of that year, employers
could rest pretty comfortably at night knowing that their
garden-variety workplace rules would instill peace and control at
the plant, store, or office, not subject them to monetary
penalties, governmental oversight, and a not-so-coveted spot on a
federal agency's website list of settlements.
In 2014, many employers, and certainly employment lawyers, are well
aware of the forceful effort of the National Labor Relations Board
to infiltrate even nonunionized workplaces, by peppering attacks on
provisions found in almost any employee handbook: provisions
governing at-will employment, employee confidentiality, and
employees' use of social media. Words commonly used by
management lawyers about the Board's new approach include
"assault," "aggressive," and
"war."
Now joining the attack, the EEOC has made recent headlines by
filing two lawsuits – one under Title VII and one under the
Age Discrimination in Employment Act (ADEA) – against
companies based on fairly generic severance agreements with
employees. In EEOC v. CVS, the agency alleges that the
severance agreement unlawfully violates employees' right to
communicate with the EEOC and file discrimination charges.
On the heels of the CVS litigation, the EEOC brought suit against a
second company, CollegeAmerica Denver, with similar allegations
relating to that employer's severance agreement. With
these two lawsuits pending, the message to employers across the
country is clear: take a close look at your severance
agreements.
So What's The Problem?
From any employer's perspective, the terms that trouble the
EEOC are truly "garden variety." In fact, a review
of the agreements at issue in those two cases will likely induce a
reaction for most of us along the lines of "looks pretty
standard to me." A closer look at the complaints in both
of the lawsuits clarifies what the EEOC considers problematic and
may inform employers' strategy for drafting severance
agreements going forward.
In the CVS lawsuit, the EEOC alleges that CVS "engaged in a
pattern or practice of resistance to the full enjoyment of the
rights secured by Title VII" by "conditioning receipt of
severance benefits on FLSA exempt non-store employees'
agreement to a Separation Agreement that deters the filing of
charges and interferes with employees' ability to communicate
voluntarily with the EEOC" and state fair employment practice
agencies.
The EEOC found the sheer length of the agreement (five-pages,
single spaced) noteworthy. But it honed in on phrasing in standard
cooperation, nondisparagement, nondisclosure, release-of-claims,
and covenant-not-to-sue clauses, to allege that the agreement
interferes with an employee's right to file a charge with the
EEOC or a state agency (sometimes referred to as a Fair Employment
Practices Agency or FEPA), and to participate and cooperate with an
investigation conducted by the EEOC or FEPAs.
The EEOC's allegations against CollegeAmerica echo the same
views. In that case, the EEOC alleges that a separation agreement
"chills and interferes with employees' rights to file
charges and/or cooperate with the Commission and state [FEPAs] in
violation of [the ADEA] and/or assist others pursuing
discrimination claims against CollegeAmerica . . . ."
Like the CVS separation agreement, the CollegeAmerica agreement
included rather standard cooperation and nondisparagement
provisions. But the "no claims" provision purportedly
prohibits employees from even contacting any governmental or
regulatory agency for the purpose of filing a complaint or
grievance. The agreement also stated "[e]xcept as compelled by
law, Employee will not assist any other private person or business
in their pursuit of claims against the Company." Unlike
the CVS agreement, the CollegeAmerica agreement did not include a
specific carve-out provision that makes exception for any claim
that an employee cannot lawfully waive.
Despite key differences in the two agreements, the common thread in
both lawsuits is the EEOC's view that if a separation agreement
can be read to deter an employee from filing a charge, it is
unlawful, even if it does not explicitly prohibit the
employee from filing a charge. This is true even where, as in the
case of CVS, the agreement contains an explicit carve-out provision
making clear that nothing in the agreement prohibits the employee
from participating in any federal, state, or local agency
proceeding.
The Bigger Picture
The lawsuit against CVS is by no means the EEOC's first
lawsuit over a severance agreement. Back in 2006, the EEOC sued
Kodak over its standard separation agreement. The resulting consent
decree required Kodak to include specific language in any future
release agreement. That language included the following
disclaimer:
Fast forward seven years to 2013: the EEOC now makes clear
that it intends to "target policies and practices that
discourage or prohibit individuals from exercising their rights
under employment discrimination statutes, or which impede the
EEOC's investigative or enforcement efforts." Those
policies and practices include retaliatory actions, overly broad
waivers, and settlement provisions that prohibit filing charges
with the EEOC or providing information to assist in the
investigation or prosecution of claims of unlawful
discrimination.
Sure enough, in May 2013, the EEOC's Chicago District Office
filed suit against Baker & Taylor, Inc. alleging that the
employer's severance agreements interfered with employees'
rights to file charges. In the 2013 consent decree, the EEOC again
required the employer to include specific language in any future
release agreement. But while the EEOC may have been content with
the above language back in 2006, this time it added a statement
that "[e]mployees retain the right to participate in such any
[sic] action and to recover any appropriate
relief," despite that the EEOC had expressly agreed
that an employer may require an employee to waive any right to
recover monetary damages in a release agreement in any
post-settlement EEOC action.
Where Do We Go From Here?
Given the recency of the two lawsuits (one filed in February of
this year, the second in April), it is too early to know their
significance. CVS has filed a motion to dismiss and the court
recently allowed the Retail Litigation Center to file an amicus
brief in support. CollegeAmerica may well follow the same course.
The only clear message from the litigation is that the EEOC has
joined forces with the NLRB to dissect common employment
documentation and attempt to further curtail employers'
rights.
Perhaps for now the best approach is to modify your existing
severance agreements to include a stand-alone (i.e., conspicuous)
provision that leaves no doubt that nothing in the agreement is
intended to interfere with an employee's rights under federal,
state, or local civil rights or fair employment practice laws to
file or institute a charge of discrimination, participate in any
such agency proceeding, or cooperate in an investigation by any
such agency. The provision could also state that any such action is
not a breach of the agreement's confidentiality,
nondisparagement, or cooperation provisions.
But despite the EEOC's inclusion of language purporting to
allow an employee to "recover any appropriate relief" in
the Baker & Taylor consent decree, it seems unnecessary, at
least for now, for employers to go this far, particularly in light
of the Kodak consent decree language. This approach represents a
balance between the important interests in including
confidentiality, non-disparagement, and cooperation clauses in
severance agreements with the risk that these clauses may be found
to violate employees' rights.
Stay tuned.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.