Employers frequently will use a “Severance Agreement and Release” when terminating an employee as a means to head off possible post-termination legal claims. Such agreements always have been subject to stringent requirements to be valid and enforceable. In a number of different cases recently, the EEOC has challenged what have been standard release of claims provisions and other terms in such agreements, saying they violate the Age Discrimination in Employment Act (ADEA) and Title VII.
One such recent case, EEOC v. CVS Pharmacy (N.D. Ill, October 7, 2014), was dismissed on procedural grounds, but the underlying challenges to the severance agreement and release were not ruled upon. That court gave some positive comments; however, on one key point, they did not, which is discussed below. A number of other cases and charges on these same issues remain pending, and the EEOC continues to try to invalidate releases based on these challenged terms. Employers need proactively to review their severance agreements, or have their counsel review them, to head off EEOC challenges.
Bases for EEOC Challenges
The EEOC has taken the position that several provisions of standard releases of claims contained in most severance agreements violate Title VII and the ADEA because those provisions interfere with the right of employees to pursue administrative charges, to communicate voluntarily (which could also raise NLRB concerns), and to participate in EEOC investigations. Clauses the EEOC has challenged include a general release of claims and pending actions, a covenant not to sue, and non-disparagement, cooperation, and non-disclosure of confidential information provisions. The EEOC also claimed in the CVS case that the standard separation agreement it used was five single-spaced pages, making it too long and complicated to be understood by an employee who would be reviewing the agreement.
Positive Comments by Judge in the CVS Case
The judge in the CVS case did include positive, pro-employer comments on key terms of the severance agreement, even though he did not rule directly on the validity of the releases. The judge noted that the general release at issue contained an exclusion for “any rights that the Employee cannot lawfully waive” and the covenant not to sue included a carve-out for the employee’s right to participate in administrative proceedings and to cooperate with such agency investigations. The court said EEOC’s argument that this exclusion allowing participation in administrative proceedings did not protect the right to file a charge was “not reasonable”.
The court went on to say that even if the agreement banned filing of charges, which it did not, those provisions would merely be unenforceable and not constitute actionable resistance to Title VII.
These comments give employers hope that the EEOC’s arguments on these points will not be upheld to invalidate separation agreements that include standard language such as CVS’s.
Recommendations for Employers
- Review your severance agreement and release forms to see if you need to strengthen provisions making it clear the employee may still file administrative charges and participate in agency investigations.
- Consider placing the statement of these protected rights in a separate paragraph of the severance agreement, and perhaps in bold type, to meet EEOC’s aggressive challenges on this issue.
- Continue to provide in severance agreements that, despite the employee’s retention of the right to file a discrimination charge, the employee is waiving the right to recover monetary damages or other individual relief in connection with any such charge. This provision has not been challenged and is a key part of the protection sought by obtaining the release.
In a number of different cases recently, the EEOC has challenged what have been standard release of claims provisions and other terms in such agreements, saying they violate the Age Discrimination in Employment Act (ADEA) and Title VII.