We recently wrote about the EEOC’s lawsuit challenging CVS’s separation agreement and urged employers to view it as an opportunity to take a serious look at their own form agreements before the EEOC does (see our post here).

The EEOC now has issued a second wake-up call, this time suing CollegeAmerica because of  the separation agreement forms it has used for at least three years.

According to the EEOC complaint, CollegeAmerica “conditioned . . . employees’ receipt of severance benefits and other consideration on overly broad, misleading, and unenforceable separation and release agreements that chill and interfere with its employees’ rights to file charges and/or cooperate with the Commission and [state eeo agencies] and/or assist others pursuing discrimination claims . . .”

Template Provisions

Here is a closer look at the allegedly unlawful provisions:

  1. “Employee’s Release. . . Except as compelled by law, Employee will not assist any other private person or business in their pursuit of claims against the Company.”

As most readers know, the EEOC has long maintained that an employer cannot require an employee to waive the right to participate in EEOC investigations or proceedings, such as by assisting others.

  1. “No Claims Filed.  Employee represents that Employee has not filed any . . . administrative actions in the Employee’s name or on behalf of any other person or entity, against the Company . . . and that Employee is unaware of any . . . administrative actions filed on Employee’s behalf.”

The EEOC apparently challenged this provision as a variant of a prohibited charge filing waiver.

  1. “Employee’s Continued Cooperation.  Employee agrees to cooperate with and assist the Company, as reasonably requested by the Company, with regard to any investigation, administrative action or litigation for which or about which Employee has information.”

The EEOC’s CVS complaint challenged a far more aggressive cooperation provision, but the EEOC apparently now believes that even this rather standard cooperation requirement also interferes with an employee’s right to file a charge or participate in an EEOC investigation or proceeding.

  1. “Compliance Disclosures.  Employee represents that Employee has disclosed to the Company all matters of non-compliance with regulatory requirements and that there are no open or pending issues that fail to comply with any regulatory requirements of which Employee is aware . . . Employee’s misrepresentations will be a breach of this Agreement . . .”

Note that this provision only requires noncompliance disclosure where the employer is unaware.  So it doesn’t apply to charges already filed or bar an employee from filing a charge to make the employer aware.  But the EEOC apparently believes that an employer can’t require an employee to disclose unlawful discrimination to it –however the employee prefers– because that somehow interferes with an employee’s right to disclose unlawful discrimination to the EEOC.  To address this (odd) concern, the EEOC has made the unfortunate policy choice to challenge an employer’s attempt to learn about unlawful discrimination in order to address it.

  1. “Non-Disparagement.  Employee agrees to refrain from making negative or disparaging comments about the Company or otherwise taking any action or making any comment that would harm the goodwill of the Company.”  (Two of the four College America templates make this provision mutual).

The EEOC’s CVS complaint challenged a somewhat similar provision, apparently in the belief that this type of relatively generic non-disparagement provision would interfere with an employee’s right to disparage an employer by filing a charge or participating in an investigation.

The complaint does not explain with any specificity why the EEOC views these provisions as offensive. And given the EEOC’s fascinating opinion of its own authority, some of these provisions may be defensible if challenged in litigation.  That said, the best way for an employer to avoid litigation in the first place is to take the time now to make sure it is using a best practices separation agreement.

Best Practices

We previously opined that the EEOC case against CVS was not all that surprising because there were a lot of employment separation agreements in use that did not necessarily reflect best practices. The EEOC complaint against College America simply adds to our growing list of common separation provisions most likely to draw governmental scrutiny.

An employer could avoid most of the issues in the CollegeAmerica complaint — and all of the issues in the CVS complaint — simply by including an agreement wide carve out for discrimination charge filing and agency participation, or tailored carve outs in specific provisions. But the EEOC has not and may never prevail against some of these provisions, and there are countervailing interests at stake. Does a given employer, for example, create an acceptable level of business risk by adding an EEOC carve out to a bar on the disclose of trade secrets and similar confidential information?

Moreover, merely adding carve outs and the like won’t save a separation agreement that ignores any of the multiple other legal issues that arise under most of the multiple other employment laws, particularly the NLRA, OWBPA, ERISA, SOX and Dodd-Frank. We specially note the OWBPA requirement that a separation agreement be “written in a manner calculated to be understood by…the average [recipient].”  And the EEOC’s CVS complaint specifically commented, apparently critically, that the challenged agreement there was five single spaced pages.  So a best practices agreement also should be simple, short and skip the legalese.

Our prior CVS case post concluded that just because a form agreement has “worked before” and hasn’t been challenged doesn’t mean it will work now and won’t be challenged. To that we also add the wisdom from our dentist friends: “Floss only those teeth you want to save”.