The EEOC made headlines earlier this year when it filed suit against CVS Pharmacy, Inc., alleging that the company’s practice of conditioning certain employees’ severance pay on the signing of a separation agreement amounted to a pattern or practice of resistance to the full enjoyment of employees’ rights under Title VII of the Civil Rights Act. EEOC v. CVS Pharmacy, Inc., civil action no. 14-cv-863 (N.D. Ill, February 7, 2014). Specifically, the EEOC claimed the language in CVS’s standard separation agreement deterred employees from filing charges and interfered with the employees’ ability to communicate voluntarily with the EEOC and Fair Employment Practice Agencies because it contained provisions requiring a generalized release and waiver of claims, cooperation, non-disparagement and confidentiality. 

The EEOC filed suit against CVS following its public announcement of the consent decree in which Baker & Taylor, Inc. agreed to revise its severance agreement and to permit employees who had signed a prior version of the severance agreement to file a charge of discrimination for a 180-day period.

The Potential Ramifications

Most, if not all, of the provisions of which the EEOC alleged were illegal in the CVS case are used in some variation by employers throughout the country. CVS filed a motion to dismiss, arguing that the separation agreement did not preclude employees from filing an EEOC charge and that inclusion of contractual terms in a severance or separation agreement does not violate any part of Title VII. In the final few pages of its brief, CVS also argued that the EEOC’s lawsuit should be dismissed because it had failed to engage in conciliation efforts before filing its pattern and practice suit, as is required by Title VII and the EEOC’s own regulations. Given the numerous cuts they already have endured between a struggling economy and health care reform, health care employers anxiously awaited the Court’s ruling on the motion to dismiss. As noted in an amicus curiae brief filed by the Retail Litigation Center, invalidating the CVS severance agreement at issue would have “far-reaching and dramatic implications across multiple industries,” as the use of similar severance agreements has been upheld nationwide in both the public and private sector.

The Opinion Is Decided on Procedural Grounds

The Court entered its memorandum Opinion and Order October 7, 2014 dismissing the case in its entirety based on the EEOC’s failure to attempt to conciliate the claims. While the dismissal preserves the sanctity of the particular separation agreement at issue in this case, it provides little guidance to employers using nearly identical provisions in their own severance agreements.

What’s Next?

The EEOC will almost certainly appeal the decision while it awaits an opinion this term from the United States Supreme Court in the matter of EEOC v. Mach Mining on the issue of whether and to what extent a court may enforce the EEOC’s mandatory duty to conciliate discrimination claims before filing suit. See EEOC’s Conciliation “Efforts” Called Into Question, L. Jensen, Hall Render Blog, August 5, 2014. In the meantime, a similar suit remains pending in Colorado, in which a motion to dismiss was filed in June 2014. EEOC v. CollegeAmerica Denver, Inc., n/k/a Center for Excellence in Higher Education, Inc., d/b/a CollegeAmerica, civil action no. 14-cv-01232-LTB (D. Colo., Apr. 30, 2014). The CollegeAmerica decision may well impact whether the EEOC will abandon or focus on this challenge in the months to come.