Court Gives EEOC’s Attack on Basic Severance Agreements a Big Setback

By Eric B. Meyer

Earlier this year, the Equal Employment Opportunity Commission filed a federal lawsuit against CVS in which it claimed that drug store chain “conditioned the receipt of severance benefits for certain employees on an overly broad severance agreement set forth in five pages of small print.”

Specifically, the EEOC took issue with several common provisions that you guys probably use in your severance agreements:

  • A general release;
  • A non-disparagement obligation;
  • A confidentiality provision;
  • A covenant not to sue; or,
  • A cooperation clause.

But don’t go throwing your severance agreements in the trash just yet.

Dismissing the EEOC lawsuit

Last Thursday, U.S. District Judge John Darrah announced at a hearing that the court would dismiss the EEOC’s lawsuit based on the EEOC’s failure to state a legally valid claim.

An opinion has not yet been published. However, here are links to the briefs:

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What CVS argued

In its brief, CVS raised three main arguments:

  1. Its severance agreement did not interfere with the right of any former employee to file EEOC charges or cooperate with the EEOC;
  2. Merely including contractual terms in a severance agreement is not retaliatory;
  3. The EEOC failed to attempt to conciliate before filing its lawsuit.

The basis for dismissal is yet unclear. If it turns out that the court dismissed the case based on the third argument, then the EEOC’s position on the merits remains untested.

However, if the Court dismissed the case, finding no merit in the EEOC’s main argument, then this represents a significant blow to the EEOC’s position that many common severance agreements are retaliatory.

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.

You know that scientist in the action movie who has all the right answers if only the government would just pay attention? Eric B. Meyer, Esq. gets companies HR-compliant before the action sequence. Serving clients nationwide, Eric is a Partner at FisherBroyles, LLP, which is the largest full-service, cloud-based law firm in the world, with approximately 210 attorneys in 21 offices nationwide. Eric is also a volunteer EEOC mediator, a paid private mediator, and publisher of The Employer Handbook (www.TheEmployerHandbook.com), which is pretty much the best employment law blog ever. That, and he's been quoted in the British tabloids. #Bucketlist.

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