Many employers offer severance to terminated employees, provided the employee signs a severance or release agreement. By doing so, the employer hopes to obtain closure and avoid litigation by the employee against the company. Unfortunately, some recent enforcement proceedings by the Equal Employment Opportunity Commission (EEOC) are resulting in exactly the opposite: litigation over the terms of such agreements.
The EEOC has, for many years, stated in guidance it has issued regarding severance agreements that, although such agreements may use broad language to describe the claims that are being released, an individual must still have the right to file a charge with the EEOC, and no agreement between an employee and employer can limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC. Thus, the EEOC’s guidance has taken the position that any provision in a severance or release agreement that attempts to waive or impede these rights is invalid and unenforceable.
In recent years, the EEOC has increased its attempts to enforce and expand the position reflected in its guidance through litigation it has instituted against employers. For instance, in May 2013, the EEOC filed a complaint in federal court, in Illinois, alleging that an employer engaged “in a pattern or practice of resistance to the full enjoyment of the rights secured by Title VII, in violation of Section 707 of Title VII” when it conditioned the receipt of severance benefits on an employee signing a severance agreement which provided that: (1) the employee would not institute complaints in administrative agencies, and (2) the employee would not discuss or comment upon the termination in any way that would reflect negatively on the company. Even though the agreement also stated that nothing prevented the employee from truthfully responding to a subpoena or otherwise complying with a government investigation, the EEOC alleged that these statements interfered with an employee’s right to file a charge and to participate and cooperate with investigations, and chilled the willingness and ability of employees to come forward and assist in such investigations. The case eventually settled with the employer agreeing, among other things, to include a disclaimer in future agreements that its agreement is not intended to limit the right or ability to file discrimination charges.
Seemingly unsatisfied with even that result, the EEOC has pressed even further in more recent litigation. Specifically, in February 2014, the EEOC filed another complaint in Illinois federal court. This case is notable because in the agreement at issue the employer did tell employees that they could still participate in EEOC proceedings. However, in challenging this agreement, the EEOC took the position that such a statement was not sufficient because it was only a single qualifying sentence, not repeated anywhere else in the agreement.
In this pending litigation, the EEOC has also objected to several other provisions of the agreement, including provisions:
- prohibiting the employee from making any statements that disparage the business or reputation of the company;
- requiring the employee to release and forever discharge the employer from any and all causes of action, lawsuits, proceedings, complaints, charges, damages, claims, and attorneys fees, including any claim of unlawful discrimination of any kind; and
- requiring the employee to agree to not file or initiate any complaint, claim, action, or lawsuit of any kind asserting the released claims.
Some of these provisions — including in particular the provision that employees release any claim of unlawful discrimination of any kind — are included in almost every severance agreement. Further, without such a provision, and many of the others identified by the EEOC as allegedly violating the law, it is unlikely an employer would agree to give an employee severance.
Employers should take solace that it is not a foregone conclusion that requesting all, or even any, of the provisions the EEOC has challenged would be found to constitute retaliation. In fact, the EEOC has, in the past, had mixed results challenging provisions in severance agreements on the grounds that an employer requesting such provisions is engaging in retaliation. That said, the case currently at issue ultimately may be decided by the Seventh Circuit, setting precedent in Illinois, Indiana, and Wisconsin.
So what can an employer do in light of these efforts by the EEOC? In order to avoid incurring the wrath of the EEOC and potential litigation, now is the time to review the terms of any severance agreements or releases you are using. It is clear that the EEOC is concerned about certain terms. You may be able to obtain your goal of avoiding litigation (either by the employee or the EEOC) by carefully reviewing and assessing the need for the terms in your severance agreements and releases, including in particular those identified by the EEOC as problematic. While the eventual outcome of the most recent case is unclear at this point, revising or eliminating terms that the EEOC has challenged may prevent you from ending up on the EEOC’s radar screen.