On December 17, the Seventh Circuit in U.S. Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 14-3653 (7th Cir. Dec. 17, 2015), rejected the EEOC’s aggressive effort to sue an employer without engaging in conciliation or even alleging discrimination or retaliation. Employers—at least in Wisconsin, Illinois, and Indiana—can breathe a little easier now that it’s clear that the EEOC must follow these procedures before it can bring a lawsuit.

As background, CVS fired a store manager in 2011. She signed the company’s standard four-and-a-half page separation agreement, which, like most such agreements, included a release of all discrimination and retaliation claims under Title VII of the Civil Rights Act (among other claims that can be waived) in exchange for severance pay. The EEOC never alleged that the employer actually discriminated against this employee, but instead initiated a separate lawsuit against the employer over the use of its standard separation agreement (without filing a charge of discrimination first or engaging in conciliation). The agency argued that the separation agreement was “overly broad, misleading, and unenforceable” on the ground that it allegedly interfered with employees’ rights to file charges with the EEOC and participate in EEOC investigations.

The EEOC claimed that the employer’s use of its separation agreement constituted a “pattern or practice of resistance to the full enjoyment of rights secured by Title VII.” This language, from Section 707(a) of Title VII, allows the Attorney General to sue employers directly for discriminatory employment practices without having to follow the conciliation and other pre-lawsuit procedures that the EEOC must follow under Section 706 of the Act. The EEOC argued that it, too, had authority to exercise this Section 707(a) power without following the Section 706 prerequisites because Congress gave the EEOC the same authority as the Attorney General to sue employers directly under Section 707(e).

In a unanimous opinion written by Judge Flaum, the court rejected the EEOC’s arguments. The court emphasized that Section 707(e) requires that EEOC lawsuits alleging a “pattern or practice of discrimination” be “conducted in accordance” with the Section 706 pre-suit procedures. The EEOC’s interpretation of Section 707 “reads the conciliation requirement out of the statute,” the court concluded. The court reasoned that, if the EEOC had broader authority to initiate lawsuits under Section 707(a) without engaging in conciliation or the other Section 706 procedures, the agency would never have to comply with these procedures. The EEOC’s argument made no sense to the court, given Congress’s desire that the EEOC first make an effort to resolve cases informally. The court summarized:

Section 707(a) does not create a broad enforcement power for the EEOC to pursue non-discriminatory employment practices that it dislikes—it simply allows the EEOC to pursue multiple violations of Title VII . . . in one consolidated proceeding.

In a footnote, the court offered a separate reason for ruling against the EEOC: the challenged separation agreement did not interfere with employees’ rights to file charges or participate in EEOC proceedings, as the agency alleged. The EEOC attempted to downplay the explicit language in the agreement permitting employees to participate in EEOC and other agency proceedings as “confusing” and written in “legalese,” but the court stressed that this language was sufficient, especially since the agreement itself advised employees to consult an attorney and required employees to acknowledge that they understand and voluntarily accept the agreement.