Chalk up a loss for the Equal Employment Opportunity Commission (EEOC) in its lawsuit against CVS Pharmacy’s separation agreements.  As we reported earlier, the EEOC sued CVS alleging that CVS’s separation agreements deterred employees from filing charges and communicating with the EEOC about discrimination and retaliation.  Dismissing the case, a federal judge recently ruled that the EEOC failed to engage in the required procedural steps, including conciliation, before filing its lawsuit. 

EEOC Dismissed Employee’s Charge, Then Went After Employer 

This lawsuit is an example of the aggressive, proactive nature of the EEOC in extending the protections of Title VII to new and novel claims.  The case arose after CVS terminated Tonia Ramos, a pharmacy manager.  Ms. Ramos signed CVS’s standard separation agreement, which included a release of claims and a covenant not to sue.  She then proceeded to file a charge with the EEOC claiming that her discharge was based on sex and race in violation of Title VII.  Almost two years later, the EEOC dismissed Ms. Ramos’s charge.  

The EEOC then contacted CVS asserting that based on the separation agreement, CVS was engaging in a pattern or practice of resistance to their employees’ full enjoyment of rights under Title VII.  In other words, the EEOC concluded that even though the individual employee did not have a valid discrimination claim against CVS, it would bring a pattern or practice case against CVS based on the language in its standard separation agreement used with potentially hundreds of former employees. 

No Conciliation, No Lawsuit 

Under Title VII enforcement procedures, the EEOC has the authority to investigate and act on a charge of a pattern or practice of discrimination, whether filed on behalf of an allegedly harmed employee or by the EEOC itself.  The procedures require that the EEOC try to resolve any alleged unlawful employment practices through informal means before filing a lawsuit.  Such means include conferences, conciliation and persuasion.  Although the EEOC and CVS discussed potential settlement by telephone twice before the EEOC filed suit, the EEOC failed to engage in conciliation, which proved fatal to its case.  Because an attempt at reaching a conciliation agreement is a prerequisite to the EEOC filing suit and it was undisputed that the EEOC did not engage in any conciliation process, the federal court dismissed the EEOC’s case against CVS. 

Judge’s Guidance is in the Footnotes 

The case was dismissed on procedural grounds, but the judge took the opportunity to offer his view on the merits of the EEOC’s arguments in several footnotes in the opinion.  First, the EEOC argued that the term “resistance” as used in Title VII should be interpreted broadly to extend to the language in CVS’s separation agreement even if that language did not amount to discrimination or retaliation under the Act.  The judge rejected that argument, stating that the term “resistance” requires some retaliatory or discriminatory act. 

Second, the judge discussed the “covenant not to sue” provision in CVS’s separation agreement.  Even though the provision stated that an employee could not “initiate or file . . . a complaint or proceeding asserting any of the Released Claims,” the release of claims (in another paragraph of the separation agreement) stated that it did not limit “any rights that the Employee cannot lawfully waive.” In addition, the agreement contained two carve out provisions specifying an employee’s “right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws” and that the agreement did not prohibit the employee from cooperating with any such agency in its investigation.  The judge wrote that these provisions would allow an employee to file an EEOC charge.  He went on to write that even if the separation agreement explicitly banned filing charges, those provisions would be unenforceable and could not constitute “resistance” under Title VII. 

One Case Down; One Still Pending 

The dismissal of the CVS lawsuit is good news for employers who use separation agreements, especially in light of the judge’s comments signaling that the EEOC’s arguments were without merit.  However, a similar case filed by the EEOC against College America is still proceeding through the federal court in the District of Colorado.  (We wrote about the College America case here.) Like CVS, College America has asked the court to dismiss the EEOC’s case.  We will let you know when the court rules on that motion.  In the meantime, employers should review their separation agreements to ensure they include a provision that the agreement does not prohibit employees from filing a charge, participating in an investigation or otherwise cooperating with an appropriate federal, state or local government agency that enforces discrimination laws.