On February 7th, the EEOC announced that it was filing suit against CVS, alleging that CVS used a severance agreement that interfered with an employee’s right to file discrimination charges or communicate and cooperate with the EEOC.
In short, the EEOC is challenging the use of a number of provisions used in most severance agreements. The Complaint filed by the EEOC specifically addresses several clauses in the severance agreement:
Cooperation clause, requiring the former employee to notify CVS’s general counsel if he or she receives a subpoena or other request pursuant to a civil, criminal or administrative investigation, suit or other proceeding.
Non-disparagement clause, forbidding the former employee from making any statements that would negatively reflect on CVS or any of its officers, directors or employees.
Confidentiality clause, forbidding the disclosure of any confidential information, without the permission of the Chief Human Resources Officer, which includes information about personnel, wage and benefit structures, succession plans and affirmative action plans.
General release clause, which releases CVS from any and all causes of action, lawsuits, charges, including any claim of unlawful discrimination of any kind.
Covenant not to sue, where the former employee agrees not to initiate or file any lawsuits against CVS and requires the former employee to pay any of CVS’s legal fees for breach of the covenant not to sue.
At this point, you are probably thinking that you have most or all of these provisions in your severance agreement. First, take a deep breath, nothing has actually changed yet. A lawsuit by the EEOC is only an attempt at changing the current severance agreement landscape, but they need to win the lawsuit to enact any change. Additionally, the eventual loser in the suit will likely appeal the decision, further prolonging any change. However, it must be said: if the EEOC wins, it will significantly impact what risk an employer can bargain away through a severance agreement.
Second, if you are interested in making changes to your standard severance agreement, just in case the EEOC prevails, then you have several options.
Daniel Schwartz of the Connecticut Employment Law Blog suggests either adding a severability clause, providing that a provision found overbroad or illegal will not affect the enforceability of the agreement, or empower a court to revise any provision that is overbroad.
Or, Jon Hyman of the Ohio Employer’s Law Blog suggests adding the following provision to your severance agreement:
Nothing in this Agreement is intended to, or shall, interfere with Employee’s rights under federal, state, or local civil rights or employment discrimination laws (including, but not limited to, Title VII, the ADA, the ADEA, GINA, USERRA, or their state or local counterparts) to file or otherwise institute a charge of discrimination, to participate in a proceeding with any appropriate federal, state, or local government agency enforcing discrimination laws, or to cooperate with any such agency in its investigation, none of which shall constitute a breach of the non-disparagement, confidentiality, or cooperation clauses of this Agreement. Employee shall not, however, be entitled to any relief, recovery, or monies in connection with any such action brought against any of the Released Parties, regardless of who filed or initiated any such complaint, charge, or proceeding.
These solutions are different, but effective, ways to preserve the efficacy of your severance agreements, while still passing muster in court if the agreement is challenged. Unfortunately, simply removing the potentially offending clauses would expose your business to significant risk and essentially render the main purpose for severance agreements, which is avoiding future lawsuits, moot.
Regardless of your preference, now seems like a good time to review your severance agreements and possibly ask legal counsel to assist with fixing any issues.