On February 7, the Equal Employment Opportunity Commission (EEOC) sued a national retail chain (Company) in Illinois federal court claiming that the Company’s standard separation agreement for non- store FLSA exempt employees “deters the filing of charges and interferes with the employees’ ability to communicate voluntarily with the EEOC and Fair Employment Practices Agencies (FEPAs).” EEOC alleges that more than 650 Company employees have signed the separation agreement as a condition to obtain severance pay.

The EEOC’s lawsuit, brought under Title VII of the Civil Rights Act of 1964, is particularly significant for employers in light of the agency’s announcement in its “Strategic Enforcement Plan for FY 2013 – 2016” that it intends to “target policies that [the agency believes] discourage or prohibit” employees from filing charges or participating in investigations.

The EEOC’s Complaint alleges that the Company conditions severance benefits for exempt non- store employees on signing a “‘five-page single spaced’ Separation Agreement,” which includes the following provisions that the agency claims infringe on employees’ right to file charges with the agency and participate in agency investigations.

  • Cooperation.  “IntheeventtheEmployeereceives [n]...interviewrequest”orany“inquiry”regarding an“administrativeinvestigation”the“Employee agreestopromptlynotifytheCompanysGeneral Counselbytelephoneandinwriting”
  • Non-Disparagement.  “Employeewillnotmae anystatementsthatdisparagethebusinessor reputationoftheCorporation,and/oranyoffice, directo,oremployeeoftheCorporation”
  • Non-Disclosure. “Employeeshallnotdisclose toanythirdpartyoruseforhimselforanyone elseConfidentialinformationwithouttheprior writtenauthorizationof[Companys]Human esourcesOffice” Confidentialinformation includes “information concerning the Corporation’s personnel, including the skills, abilities, and duties  of the Corporation’s employees, wages and benefit structures, succession plans, information concerning affirmative action plans or planning . . .”
  • Covenant Not to Sue.  “Employeeagreesnotto initiateorfil,orcausetobeinitiatedorfiled,any action,lawsuit,complaintorproceedingasserting anyoftheeleasedClaims[previouslydefined] againstanyoftheeleasedarties[previously defined]”

The Complaint acknowledges that the Covenant Not  to Sue provision includes the following carve-out: “[n] othing in this paragraph 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.”  But the Complaint minimizes this carve-out by noting that it is a “single qualifying sentence” that is “not repeated anywhere else in the Agreement.”

The EEOC seeks to permanently enjoin the Company from using the separation agreement and from “engaging in a pattern and practice of resistance to the right to file a charge and participate and cooperate with investigations by the EEOC and FEPAs ….” It also seeks to require the Company to issue a “corrective communication” to inform employees of their right to file charges with the EEOC/FEPAs and to participate in agency investigations.  Finally, it requests the court to allow any employees subjected to the separation agreements 300 days to file charges against the Company.

While the EEOC’s lawsuit may not yield a decision in the near future, employers should consider reevaluating their separation agreements to ensure that they will not become the EEOC’s next litigation target.