As many of our loyal readers are aware, the Equal Employment Opportunity Commission filed suit in the U.S. District Court for the Northern District of Illinois against CVS Pharmacy this year, alleging that a standard severance agreement used by the company violates Title VII of the Civil Rights Act of 1964 because it is allegedly “overly broad, misleading and unenforceable….” Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill. Feb. 7, 2014). The high-profile case has the potential to have serious impact in many industries, including the retail industry. 

The EEOC alleges that various specific provisions of CVS’s Agreement violates Title VII because it interferes with employees’ rights to file charges, communicate voluntarily, and participate in investigations with the EEOC and other state agencies, including the following: 

  • Cooperation: requiring an employee to “notify the Company’s General Counsel by telephone and in writing” of a legal proceeding including an “administrative investigation” by “any investigator, attorney or any other third party…”
  • Non-disparagement: prohibiting the employee from making any disparaging statements about the Company and its officers, directors and employees.
  • Non-disclosure of confidential information: prohibiting disclosure of confidential information without prior written permission of the Company’s chief human resources officer.
  • General release of claims: which includes a release of all “causes of action, lawsuits, proceedings, complaints, charges, debts contracts, judgments, damages, claims, and attorney fees…”
  • No pending actions; covenant not to sue: in which an employee represents the employee has no pending “complaint, claim, action or lawsuit” of any kind “in any deferral, state, or local court, or agency,” agrees not to file “any action, lawsuit, complaint or proceeding” asserting the released claims, and requires an employee to promptly reimburse “any legal fees that the Company incurs” for breach of the covenant. 
  • Breach by employee: allowing CVS to obtain injunctive and other relief, including attorney fees upon material breach.

The EEOC alleges in the CVS suit that the allegedly offending restrictions are limited only by a “single qualifying sentence” which reads that nothing in the covenant not to sue was “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.” Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 14-CV-863, at pg. 4.    

Highlights From The Retail Litigation Center Amicus Brief

The Retail Litigation Center, Inc. (the “RLC”) recently asked for permission to file a brief in support of CVS on April 28, 2014.  Over the EEOC’s objection, the Court allowed the RLC to weigh in on the case.

In its brief the RLC raises a number of key points related to the CVS litigation, demonstrating how and why the EEOC’s position is untenable and overreaching.  

First, the RLC argues that the CVS separation agreement contains standard terms widely used in the industry, and by other employers. Indeed, the same terms in the CVS agreement have been approved by federal courts and do no otherwise violate Title VII. Furthermore, the terms conform with standard industry practice, not only in the retail industry, but in other industries as well. 

The RLC also argues that the EEOC’s theory fails to provide employers with a discernible standard to guide their conduct, and violates employers’ due process rights. Indeed, based on the EEOC’s guidance, and relevant case law, CVS had no prior notice that its conduct violated federal law. Indeed, the RLC argues that most of the EEOC’s objections to the CVS agreement are “atmospheric,” claiming that the form and style of the Agreement restrain employees’ right under Title VII. The RLC further argues that the EEOC’s new “standard” for evaluating severance agreements could (and would) invite arbitrary enforcement by the EEOC and courts. This is because the EEOC attempts to replace the prevailing guidance governing separation agreements in favor of an “undefined” and “subjective” standard. Id. at 11.

Finally, the RLC adeptly argues that a ruling against CVS would undermine the important societal goals of finality, and informal dispute resolution underlying Title VII. It notes that separation agreements are common devise used by “countless” employers and employees alike, across hundreds of industries, to the mutual benefit of employers, employees and the judicial system. The RLC argues that the EEOC’s approach would sacrifice those benefits and make resolution of disputes more difficult and costly. 

Implications For Employers

Employers are well-served to watch the EEOC v. CVS case carefully. The EEOC’s position attempts to signficantly alter existing authority governing terms of severance agreements.  Indeed, portions of the CVS agreement follow — or are more expansive for employees — of the EEOC’s own guidance here and here, and agreements held enforceable by in key court decisions relied upon by employment practitioners. See, e.g., EEOC v. Eastman Kodak Co., Case No.. 06-CV-6489 (W.D.N.Y. 2006). The RLC’s amicus brief effectively demonstrates sincere concern felt by the employer community regarding the significant implications of the EEOC’s position.