The EEOC’s recenty lawsuit against CVS should concern every employer. (EEOC v. CVS Pharmacy, Inc., Case No. 14 C 0863, N. Dist. Ill.). According to the EEOC it is saving unsuspecting workers from overreaching employers who hide the details of their nefarious acts in “five pages of small print.” So just what is it that CVS does that is so reprehensible? They offer money and/or benefits to departing employees who are willing to sign a severance agreement. And why is a severance agreement so bad? According to the EEOC, an agreement that “attempt[s] to buy employee silence about potential violations of law … is a deal that employers cannot lawfully make.” (EEOC Press Release, http://www.eeoc.gov/eeoc/newsroom/release/2-7-14.cfm.)
But isn’t that the purpose of a severance agreement — to buy peace? And doesn’t it benefit all parties? After all, the employee is not without a benefit. (S)he receives additional compensation or benefits to which (s)he would not otherwise be entitled. And the employer is buying the claim, and avoiding litigation.
The specific provisions to which the EEOC objects include:
1. A general release that includes claims of discrimination;
2. A confidentiality clause that prohibits the dissemination of information to a third party;
3. A non-disparagement clause;
4. A cooperation clause requiring employees to notify the company of any administrative complaints; and
5. An attorneys’ fees provision for the breach of the agreement.
With the exception of the cooperation clause, each of these provisions is standard in a severance agreement. For the employer, the value of the agreement is avoidance of litigation, the expenditure of fewer dollars, and finality. Without these standard provisions, the value to the company is illusory. An employer is not motivated to give a departing worker extra compensation or benefits if it receives nothing in return.
Because of this EEOC v. CVS litigation, employers will need to reconsider whether they want to offer a severance agreement to departing employees. If the employer is willing to offer a severance, then the employer should consider modifying certain provisions to make it less likely that the agreement will be invalidated. Some of the provisions to consider in drafting a severance agreement should be:
1. A “carve out” language allowing the employee to speak to the EEOC or other governmental agencies; and
2. A severability provision that would allow the severance agreement to remain even if a provision was invalidated.
Unfortunately, nothing is easy about HR and workplace law. Thanks to this latest lawsuit by the EEOC, the ability of parties to buy peace and finality has been compromised.