Severance agreements are among the most common of employers’ tools to reduce their liability, as they trade separation benefits in exchange for a release of claims by former employees. In our March issue, we reported on an Equal Employment Opportunity (“EEOC”) lawsuit against CVS Pharmacies seeking to invalidate the company’s standard severance agreement, including provisions that have become standard fare in separation and release agreements. The EEOC onslaught continues as it pursues a similar lawsuit against a private college.
Late last month, the EEOC filed a lawsuit in Colorado federal court against CollegeAmerica, alleging that the private college’s separation agreement violated the Age Discrimination in Employment Act by improperly preventing employees from filing age discrimination complaints. Specifically, the EEOC alleges that the college improperly conditioned the departing employee’s severance benefits on her promising, among other things, not to file any grievance with a government agency and not to disparage the company. According to the EEOC, the provisions had the effect of interfering with the employee’s unwaivable right to file discrimination charges or cooperate with the EEOC or state fair employment agencies.
The EEOC’s complaint also includes a retaliation claim. In support of this claim, the EEOC points to a breach-of-contract lawsuit that the college filed against the former employee after she filed an age discrimination charge with the EEOC.
The cases against CVS and CollegeAmerica should serve as a warning sign that the EEOC is closely scrutinizing the terms of severance agreements. Employers should proceed with caution when using such agreements, especially template agreements that were obtained online or drafted years ago and have not been reviewed by counsel.