In 2006, the Equal Employment Opportunity Commission (“EEOC”) entered into a consent decree with Eastman Kodak Company in which the agency agreed to specific language Eastman Kodak would use in separation agreements — language that became the standard for many employers — that allowed an employer to obtain a release of discrimination claims while maintaining the employee’s right to file a charge or cooperate with the EEOC or a similar governmental agency. Equal Employment Opportunity Commission v. Eastman Kodak Co., No. 06-cv- 6489 (W.D.N.Y. 2006).
Fast-forward to 2014, when the EEOC filed two separate lawsuits alleging that the separation agreements at issue violated anti-discrimination laws by placing conditions on severance pay and other separation benefits and thus improperly interfered with the agency’s investigative mission. Although both cases were dismissed on technical grounds that did not reach the merits, they demonstrate that the EEOC is again focusing on this issue and will likely continue to seek to redefine the law.
In Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 1:14-cv-00863 (N.D. Ill. Feb. 7, 2014), the EEOC claimed that the company’s standard separation agreement violated Title VII of the Civil Rights Act of 1964 because certain provisions impeded the employee’s right to file an administrative charge and cooperate in investigations with governmental agencies. The EEOC pointed to clauses regarding cooperation, non- disparagement, non-disclosure of confidential information, a general release of claims (including pending actions) and the covenant not to sue. Although the case was dismissed because the agency failed to participate in conciliation procedures required by Title VII prior to filing the lawsuit, Judge John Darrah, of the Northern District of Illinois, noted in dicta that the agency had failed to show actual discrimination or retaliation, and that the carve-out provision allowing an employee to participate in and cooperate with administrative proceedings and/ or investigations included the right to file a charge. In addition, the court stated that if the agreement in fact had attempted to ban the filing of a charge, which it did not, then that provision would be unenforceable.
In a second case, Equal Employment Opportunity Commission v. CollegeAmerica Denver Inc., No. 14-cv-01232 (D. Colo. Apr. 30, 2014), the EEOC brought a suit to challenge CollegeAmerica’s separation agreement. The EEOC asserted that provisions of the agreement requiring a release of claims, cooperation with the company, and nondisparagement violated the Age Discrimination in Employment Act because those provisions allegedly impeded the rights of individuals to file charges of discrimination and participate in governmental investigations. In this case too, however, the EEOC suffered a setback when the claims regarding the separation agreement were dismissed due to (1) CollegeAmerica previously agreeing to not enforce the provision or interfere with the right to file a claim or participate in other charges of discrimination and (2) the agency’s failure to conciliate prior to filing the lawsuit.
The main point employers should glean from these cases is that transparency is extremely important, as it appears the EEOC is not going to halt its attack on separation agreements. Employers must ensure that workers, especially rank and file employees, clearly understand that they maintain the right to participate in these governmental agency proceedings even after releasing claims. Separation agreements should have well-delineated sections preserving the employee’s right to file an anti-discrimination charge with federal, state or local agencies, and make clear that they are permitted to cooperate with such agencies. Yet it is important to remember that an employer can still condition separation payments upon the employee’s waiver of the right to file or pursue private litigation in court and the right to recover monetary payment based on a claim filed with the EEOC.
However, the EEOC appears to take the position that employers violate Title VII if they include confidentiality provisions in settlement agreements prohibiting employees or former employees from discussing the allegations that formed the basis of a discrimination charge. Many employers are not willing to conform to this view, given the general desire for confidentiality regarding settled disputes, and we are aware of no court decisions that have upheld the EEOC’s position. At this time, the law in this area is unsettled, and further legal developments are necessary to clarify the appropriate course of action.