United States: The EEOC Phoenix District Office Challenges Releases Waiving Future Financial Liability For Discrimination Claims

A recent settlement shows that the Equal Employment Opportunity Commission (EEOC) continues, from time to time, to take the position in litigation that an employee's private release may not waive the employee's right to receive future financial relief in an EEOC discrimination action.

In a February 6, 2018 Press Release, the EEOC's Phoenix field office announced a conciliation agreement between the EEOC and an employer, requiring the employer to (i) revise past severance agreements in order to allow former employees to file charges of discrimination; (ii) notify former employees that they could file charges of discrimination; and (iii) not object to timeliness. None of that is surprising.1

The Press Release goes on, however, to claim that the agreements also interfered with employees' right to "accept[ ] any relief obtained by the EEOC, should the agency take further action." In this regard, the EEOC Press Release cited a recent case, EEOC v. Montrose Memorial Hospital, 264 F.Supp.3d 1102 (D. Colo. 2017), where a federal district court in Colorado struck language in a settlement agreement that "limited an employee's right to [...] accept a share of any financial or other relief obtained by the EEOC."

Does this mean that an employee's private release of a right to individual recovery in a later EEOC proceeding is unlawful and worthless? We think not, but this is a somewhat unsettled area of the law, with the potential for litigation and unexpected results.

Does This EEOC Phoenix Office Settlement Indicate a Change in the Law?

No. This was a conciliation agreement between an employer and the EEOC that appears to have been driven by other problems with the release agreement, in particular that it purported to prohibit the employee from filing a charge of discrimination with the EEOC. It is uncertain whether the conciliation agreement actually addressed the question of awards of future individual relief, as the conciliation agreement is not public and the EEOC Press Release does not appear to claim that the issue was addressed in the conciliation agreement. Regarding the EEOC v. Montrose Memorial Hospital case cited in the Press Release, the employer in that case did not object to the EEOC's motion,2 similar to the instant matter in which the employer agreed to the relief the EEOC sought.

Is This EEOC Phoenix Office Position Consistent With Prior Published EEOC Guidance?

No, not at all. An EEOC enforcement guidance from 1997 (and not withdrawn) includes the following statement supportive of private releases of claims for individual relief in later EEOC litigation:

[T]he Commission notes that even though an individual who has signed a waiver agreement or otherwise settled a claim subsequently files a charge with the Commission based on the same claim, the employer will be shielded against any further recovery by the charging party provided the waiver agreement or settlement is valid under applicable law. This is true whether the EEOC or the private individual brings a subsequent action. See EEOC v. Astra USA, Inc., 94 F.3d [738] at 744 [(1st Cir. 1996)] (injunction prohibiting covenants preventing employees from assisting EEOC does nothing at all to promote further litigation between Astra and the settling employees or to disturb the finality of the negotiated settlement); EEOC v. Cosmair, Inc., 821 F. 2d [1085] at 1091 [(5th Cir. 1987)] (although an employee cannot waive the right to file a charge with EEOC, he can waive the right to recover in his own lawsuit as well as the right to recover in a lawsuit brought by the EEOC on his behalf); EEOC v. U.S. Steel Corp, 671 F. Supp. [351] at 358 [(W.D. Penn. 1987)] (where provision in a waiver agreement preventing employees from assisting EEOC is enjoined, employer may still assert the waiver as a bar to recovery on a claim of age discrimination brought by or on behalf of an individual who signed a valid waiver involving that claim).

EEOC Enforcement Guidance on Enforcement Guidance on Non-Waivable Employee Rights under Equal Employment Opportunity Commission (EEOC) Enforced Statutes, EEOC Notice Number 915.002 (Apr. 10, 1997). Furthermore, the EEOC in a July 15, 2009 Policy Document restated that pre-litigation releases and separation agreements could not infringe on an individual's right to file charges and participate in agency investigations, but did not take the extra step of claiming that waivers of relief in future litigation by the EEOC also may make the release or separation agreement overbroad. See Understanding Waivers of Discrimination Claims in Employee Severance Agreements, §III(4) (July 15, 2009).

Is This EEOC Phoenix Office Position Something New?

No. The EEOC has asserted this position in litigation from time to time over the years, and has even obtained some trial court rulings consistent with this position.3

Is the EEOC Phoenix Office Right?

We continued to believe that the better view of the law does not support the EEOC in this regard. See EEOC v. Waffle House, Inc., 534 U.S. 279, 304 (2002) ("If an employee signs an agreement to waive or settle discrimination claims against an employer, for example, the EEOC may not recover victim-specific relief on that employee's behalf") (dicta); EEOC v. Cosmair, Inc., 821 F. 2d 1085, 1091 (5th Cir. 1987) (employee "can waive not only the right to recover in his or her own lawsuit but also the right to recover in a suit brought by the EEOC on the employee's behalf"); EEOC v. Goodyear Aerospace Corp., 813 F.2d 1539, 1543 (9th Cir. 1987) (where back pay sought by the EEOC would go to employee "who has freely contracted away her right to back pay," the "public interest in a back pay award is minimal," and therefore "the EEOC's claim for back pay . . . is moot.").

Recommendations

It is not recommended at this time that employers change their release agreements to eliminate language prohibiting further financial recovery for otherwise released claims when the EEOC brings a claim on behalf of the employee. Littler plans to seek clarification from the EEOC. Employers should monitor future developments on this issue and watch for further updates.

It is recommended that releases should be clear that they do not limit an employee's ability to file a charge with a governmental entity or participate in a governmental investigation. It appears the EEOC's enforcement focus is on agreements that fail to make this clear, and thereby potentially interfere with the EEOC's ability to accept and investigate charges of discrimination.

The recent Press Release is from a single EEOC District Office. Because the EEOC's National Office did not issue the Press Release, it is not an interpretation that has nationwide scope. Further, it is possible, or even likely, that courts will not follow the Phoenix District Office's position on this issue, because of contrary legal authority and the historical interest of the court system in enforcing resolution of disputes. It is anticipated that many employers will be hesitant to offer severance pay in exchange for a release, if there continues to be a possibility that an employer may remain liable to pay a terminated employee a damage award in the future, essentially rendering meaningless the release of all claims. If the Phoenix District Office's position gains further traction, this could create a disincentive for employers to offer severance pay when taking group actions such as reductions-in-force, an action that employers commonly use to cushion the blow of layoffs and to reduce litigation risks.

Please note that the issue discussed here generally relates to releases signed before an individual files a charge or a lawsuit. The position that the EEOC announced in the Press Release should not affect the process necessary for obtaining settlements of pending charges or litigation.

Footnotes

1 It appears the thrust of the EEOC's challenge was that the employer's release agreement allegedly contained an overly broad clause "that interfered with employees' rights to file charges and communicate with the EEOC." Such a clause is unlawful under the EEOC's long-standing position, with which the courts have generally agreed. See EEOC Enforcement Guidance on Enforcement Guidance on Non-Waivable Employee Rights under Equal Employment Opportunity Commission (EEOC) Enforced Statutes, EEOC Notice Number 915.002 (Apr. 10, 1997).

2 EEOC v. Montrose Mem. Hospital, 264 F.Supp.3d 1102, 1105 (D. Colo. 2017).

3 E.g., EEOC v. DHL Exp. (USA), Inc., No. 10 C 6139, 2011 WL 1326941, at *5 (N.D. Ill. Apr. 7, 2011); EEOC v. Int'l Profit Associates, Inc., No. 01 C 4427, 2008 WL 485130, at *3 (N.D. Ill. Feb. 22, 2008).

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.

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Authors
Kerry E. Notestine
Terri M. Solomon
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