Ready to rewrite your severance agreements? You may well have to, if the EEOC wins a recently filed lawsuit.
You know how these things go down: A company has to downsize and offers departing employees some kind of financial package in exchange for the employee’s pledge not to divulge proprietary company information and, in most cases, file an employment lawsuit.
Usually, it’s a good deal for both sides — the employee gets a few weeks’ pay and the company can feel pretty confident that the firing won’t come back to bite it in the future.
But now the EEOC has filed suit against the pharmacy chain CVS, alleging that its severance agreement is so overly broad it interferes with employees’ rights to file complaints with the EEOC.
The scary part: CVS’s agreement contains the kind of boilerplate language found in virtually all companies’ severance pacts.
Five pages, single-spaced
In its complaint, the agency said CVS’ “five page single-spaced Separation Agreement … deters the filing of charges and interferes with the employees’ ability to communicate voluntarily” with federal agencies.
Here are six specifics cited in the EEOC complaint:
Cooperation. “In the event Employee receives a subpoena, deposition notice, interview request, or another inquiry, process or order relating to any civil, criminal or administrative investigation, suit, proceeding or other legal matter relating to [CVS] from any investigator, attorney, or any other third party, Employee agrees to promptly notify [CVS]’s General Counsel by telephone and in writing.”
Non-Disparagement – “Employee will not make any statements that disparage the business or reputation of [CVS], and/or any officer, director, or employee of [CVS].”
Non-Disclosure of Confidential Information. “Employee shall not disclose to any third party or use for himself or anyone else Confidential information without the prior written authorization of [CVS]’s Chief Human Resources Officer.” This information included “information concerning [CVS]’s personnel; the skills, abilities, and duties of [CVS] employees; wages and benefit structures; succession plans; and information concerning affirmative action plans or planning . . . .”
General Release of Claims. “Employee hereby releases and forever discharges [CVS] . . . from any and all causes of action, lawsuits, proceedings, complaints, charges, debt contracts, judgments, damages, claims, and attorneys fees against the Released Parties, whether known or unknown, which Employee has ever had, or now has or which the Employee . . . may have prior to the date [of] this Agreement . . . . The Released Claims include . . . any claim of unlawful discrimination of any kind . . . .”
No Pending Actions; Covenant Not to Sue. “Employee represents that as of the date Employee signs this Agreement, Employee has not filed or initiated, or caused to be filed, or initiated, any complaint, claim, action or lawsuit of any kind against any of the Related parties in any federal, state, or local court, or agency. Employee agrees not to initiate or file, or cause to be initiated or filed any action, lawsuit, complaint or proceeding asserting any of the Released Claims against any of the Released Parties . . . . Employee agrees to promptly reimburse [CVS] for any legal fees that [CVS] incurs as a result of any breach of this paragraph by Employee.”
“If the employee breaches CVS’ Separation agreement, Employee acknowledges that a breach . . . will result in irreparable injury to some or all of [CVS] . . . . In the event that a court issues a temporary restraining order, preliminary injunction, permanent injunction, or issues any other similar order enjoining Employee from breaching this Agreement, or awards CVS any damages due to Employee’s breach of this Agreement, Employee agrees to promptly reimburse [CVS] for all reasonable attorney’s fees incurred by CVS . . . .”
Any of this language sound familiar?
The CVS document does include a statement that “[n]othing in this paragraph is intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with such agency in its investigation.”
Problem was, the disclaimer was just one sentence buried in the five-page document. That didn’t cut it, according to the EEOC.
What the feds want
The EEOC asks the court to:
- order CVS to stop using the Separation Agreement
- order CVS to institute policies informing employees of their right to file a charge with governmental agencies
- create a 300-day window for former employees who were subject to the Separation Agreement to file a charge of discrimination, and
- require CVS to cover legal costs.
As of this writing, CVS hadn’t responded to the suit. But if the court sides with the EEOC, employers everywhere may have to rework key components of their severance and settlement policies.
We’ll keep you posted.
