EEOC Experiences “Separation Anxiety” in Lawsuit Against CVS

          The details are still yet to be known, but word out of Chicago is that the EEOC has suffered a big defeat in their controversial lawsuit against CVS Pharmacy, over the drug store chain’s use of separation agreements.  Employers commonly use separation or severance agreements when the employment relationship ends. In exchange for some type of payment, the employee agrees to a general release of any potential claims he or she might have against the employer, and possibly other provisions, such as confidentiality and non-disparagement clauses.

As reported in my August 8, 2014 post “Mad Men: The EEOC Advertises its Aggressive Agenda”, earlier this year, the EEOC filed a lawsuit against CVS, claiming the drug store chain’s use of its standard separation agreement demonstrated a pattern and practice of CVS interfering with employees' Title VII in a way that “deters the filing of charges and interferes with employees' ability to communicate voluntarily with the EEOC.” 

The EEOC’s lawsuit was troubling for many in the business community, because employers nationwide commonly use the language being attacked in the CVS agreements. In the event the EEOC were to prevail, it could have result in chaos for many businesses, casting into doubt the validity of such standard severance agreements, and potentially allowing former employees to revive previously barred claims.  

On September 18, 2014, U.S. District Court Judge John Darrah verbally granted CVS’s motion to dismiss based on the EEOC’s failure to state a claim, and an opinion is expected shortly that will give the Court’s basis for dismissing the EEOC’s lawsuit.  CVS has announced it is pleased with the decision and the EEOC is withholding comment until it sees the Judge’s written opinion.

It is not surprising that the EEOC filed the lawsuit.  In its Strategic Enforcement Plan for 2013-2016, the EEOC had announced its intent to target employer policies it claimed discouraged or prohibited individuals from exercising their legal rights, including overly broad waivers or settlement provisions that prohibited filing EEOC charges or providing information in EEOC or other legal proceedings.

In its rush to file a “test” case, the EEOC might have made the error of simply picking the wrong defendant to go after, or not bothering to actually read the agreements in question.  When it filed its motion to dismiss, CVS noted that its separation agreements expressly allowed for employees to participate with and cooperate in any investigation by a government agency, including the EEOC. Specifically, CVS’s agreements expressly note that none of the provisions are:

“[I]ntended 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 any such agency in its investigation,” provided of course that the employee waives her entitlement to monetary and other relief.

       The decision in the CVS case may not bode well for a similar lawsuit filed by the EEOC in the United States District Court of Colorado.  Some legal commentators have suggested that the EEOC may be trying to use this type litigation to impose new guidelines for such agreements, or perhaps as a prelude to more formalized regulation

Mark Fijman is a labor and employment attorney with Phelps Dunbar, LLC, which has offices in Louisiana, Mississippi, Florida, Texas, Alabama, North Carolina and London. To view his firm bio, click here. He can be reached at (601) 360-9716 and by e-mail at fijmanm@phelps.com