Message to Employers: “We’re from the Government . . . and we’re not here to help!”

Employers can expect some new challenges in responding to EEOC Charges and with eight months to go before a new administration, the White House has announced it is targeting the use of non-compete agreements, commonly used by many American employers to safeguard business interests and protect trade secrets and confidential information.  Employers also are facing a December 1, 2016 deadline to decide how to address the Department of Labor’s final Rule on the Fair Labor Standard Act’s “white collar exemption”, which has more than doubled the salary requirement employers must meet to claim the exemption from employee overtime.

EEOC Issues Standards for Employer Position Statements

The Equal Employment Opportunity Commission (“EEOC”) has issued first-time-ever national standards and procedures it expects employers to follow in responding to an employee EEOC Charge of Discrimination.  While some of the procedures are nothing new, and reflect long-standing practices, one aspect should cause employers and their legal counsel concern.

The new guidelines dictate that employers provide very detailed information and specific information, which is comparable to information a plaintiff’s attorney would typically request in litigation discovery.  In the new procedures, the EEOC explicitly states it  will provide a copy of the employer’s EEOC Response and any attached documents to the Charging employee at their request, and allow them to file a rebuttal statement, which will not be provided to the employer.  In essence, the EEOC will facilitate the employee’s pre-litigation discovery, but leave the employer in the dark.  This presents a quandary for employers.  Typically, you want to present your strongest arguments in your position statement.  However, knowing that particular information and legal theories presented to the EEOC will be seen by the employee and his or her attorney raises the issue of how much to include, knowing that litigation is likely to follow the filing of the Charge.  The EEOC procedures give no basis as to why the employer is not allowed access to the employee’s rebuttal statement.

The procedures also require that if any reference to trade secrets or confidential business or financial information is made in the employer’s position statement, copies of such documents must be provided as separate attachments.  The procedures note the “EEOC will review attachments designated as confidential and consider the justification provided, as the agency will not condone blanket or unsupported assertions of confidentiality.”  What this means is that the EEOC will decide whether it considers the documents confidential, and if it does not, such documents could be provided to the Charging employee and their attorney.  The procedures also provide a much stricter standard for granting employers extensions of time to submit their position statements.  The EEOC now requires that all position statements and documents be filed digitally via an EEOC Internet portal.

White House Targets Non-Compete Agreements

Earlier this month, the White House released a report highly critical of the use of non-compete agreements by American employers, and listed what it considered the seven (7) problem areas of non-compete agreements:  

1. Workers who are unlikely to possess trade secrets (i.e., low wage workers) who are nevertheless required to sign non-competes
2. Workers who are only asked to sign a non-compete after accepting a job offer (thereby reducing their bargaining power)
3. The lack of clarity to workers regarding the meaning and implications of the non-compete
4. Overly broad non-compete agreements
5. No consideration for non-compete beyond continued employment
6. Non-competes that prevent workers from finding new work - even when they were fired without cause
7. How non-competes restrict consumer choice

While such restrictive employment covenants are generally not favored by the courts, they will be enforced if the terms of the agreement are reasonable under the particular circumstances.  Generally, there are three requirements: (1) the employer has a valid interest to protect; (2) the geographic restriction is not overly broad; and (3) a reasonable time limit is given.  The employer bears the burden of proving the reasonableness of the agreement.  The reason these types of agreements are construed very narrowly is that most courts recognize that an employer is not entitled to protection against ordinary competition from a departing employee.  Non-compete agreements can be valuable tools to protect an employer’s legitimate business interests, but generally, it is inadvisable to have low level employees sign such agreements, because they are typically not going to possess the confidential information that would warrant enforcement of the agreement.

The White House cannot take any direct action, because such agreements are governed under the individual laws of each state, and are not governed by federal law.  The Report indicates that the Administration “will identify key areas where implementation and enforcement of non-competes may present issues, examine promising practices in states, and identify the best approaches for policy reform”, suggesting plans to lobby state legislators and policymakers in the individual states.

DOL Final Rule for FLSA White Collar Exemption

After significant delay, the U.S. Department of Labor (DOL”) announced its final rule updating the regulations applicable to white collar exemptions, which will go into effect December 1, 2016. The DOL estimates that, absent employer action, the change will entitle more than 4 million white collar workers currently classified as exempt to overtime eligibility.

The Fair Labor Standards Act (“FLSA”) generally requires that most employees be paid at least minimum wage for all hours worked and overtime pay for all hours worked over 40 hours in a workweek. However, employees employed as bona fide executive, administrative and (most) professional (“white collar”) employees are exempt from both minimum wage and overtime pay if they meet two key requirements: are paid more than a specified weekly salary on a fixed salary or “fee” basis and perform certain job duties. 

The most significant change in the final rules is that it more than doubles the required salary to $913 per week, or $47,476 annually.  The previous standard was $455 per week, or $23,660 annually. The new rule establishes a mechanism whereby the salary and compensation levels will be updated every three years, with the first update taking effect January 1, 2020.  Encompassed within the white collar exemptions are highly compensated employees who earn a higher total annual compensation level than the other categories of white collar employees and satisfy a minimal duties test. Currently, the minimum annual compensation threshold for highly compensated employees is $100,000. The final rule increases this threshold to $134,004.

In the U.S. Department of Labor Blog, the DOL has offered the following suggestions to employers on how to adapt to the upcoming new requirements:•Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.

• Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.
• Pay overtime in addition to the employee’s current salary when necessary: Employers also can continue to pay their newly overtime-eligible employees the same salary, and pay them overtime whenever they work more than 40 hours in a week. This approach works for employees who work 40 hours or fewer in a typical workweek, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods. 
• Evaluate and realign hours and staff workload: Employers can ensure that workload distribution, time and staffing levels are all managed appropriately for their white-collar workers who earn below the salary threshold. For example, employers may hire additional workers.

Despite the happy talk from the DOL, the business community is highly critical of the new final rule.  Lower-wage business and service industries call the move a business and career killer, with limited to no benefit to the employees it is supposed to help.  According to the National Retail Federation (“NRF”), instead of increasing salaries to raise workers above the overtime threshold, many businesses will simply reclassify professionals as hourly workers, removing their existing perks, flexibility, and benefits. Likewise, the NRF expects most businesses will pay the required overtime, but simply cut base pay to compensate for the cost.

In light of broad reach of the dramatically increased salary threshold, as well as the virtually automatic increase every three years, it is imperative that employers begin analyzing their salaried exempt workforce to prepare for compliance by December 1, 2016, if they have not done so already.

“Sign of the Beast” Lawsuit - Part II

I’ll admit the title of this post sounds like the title of a bad horror movie, and for the owners of a West Virginia coal mine, a religious discrimination/failure to accommodate lawsuit is turning into a real-life legal horror show. The federal judge in the case last week granted the Equal Employment Opportunity Commission’s ("EEOC") motion for additional damages, bringing the verdict against the employer to $586,860 in lost wages, benefits and compensatory damages.

In my previous post, "Sign of the Beast" Hand Scanning Case Provides Valuable Lesson to Employers, I related how an employer’s use of a high-tech hand scanning device to keep track of payroll and stay in compliance with the Fair Labor Standards Act ("FLSA") resulted in a large dollar jury verdict in a religious discrimination case, as well as continued scrutiny from the Equal Employment Opportunity Commission ("EEOC"). [EEOC v. Consol Energy, Inc., N.D. W.Va.]

 

One employee, Beverly H.R. Butcher Jr., told his supervisor that he could not comply with the hand scanning policy because he believed the technology has a connection to the "mark of the beast" and the Antichrist, as alluded to in the Book of Revelation in the New Testament of the Bible. As a proposed reasonable accommodation, the company offered to allow Butcher to scan his left hand with his palm up, which he declined. Butcher resigned, stating that he was doing so involuntarily. He brought his complaint to the EEOC, which filed suit on his behalf against the company, alleging that Consol had violated Title VII by failing to reasonably accommodate Butcher’s sincerely held religious beliefs.

 

In January 2015, a jury ruled in Butcher’s favor and awarded $150,000.00 in compensatory damages. However, that was not the end of the case. In a post-trial motion, the EEOC sought an additional $413,000 in front and back pay.

 

On August 21, 2015, U.S. District Judge Frederick P. Stamp awarded Butcher an additional $436,860.74 in front and back pay, even more than the EEOC had originally requested. The Judge also ordered a three year injunction against Consol Energy, prohibiting the company from denying reasonable accommodations regarding the use of the hand scanning system. The Court also ordered that the company provide training to employees on religious accommodation. Not surprisingly, the company plans to appeal the verdict in the case.

 

This case should serve as a serious wake-up call to employers about recognizing religious accommodation issues under Title VII, and engaging in the interactive process of reaching an accommodation if it can be done without undue hardship. Just from the facts of this case, it’s clear no real attempt was made to accommodate Butcher, and it does not appear that the company took the issue seriously.

 

The need for employers to train supervisors on religious accommodation was recently highlighted in the recent Supreme Court decision in EEOC v. Abercrombie & Fitch Stores, Inc. In my post Ignorance is not Bliss: Religious Discrimination after the Supreme Court’s Decision in EEOC v. Abercrombie & Fitch Stores, I discussed how the Court’s ruling now imposes a heightened standard on employers, and how the EEOC’s new guidelines for accommodating religious garb can serve as a roadmap to hopefully avoiding the type of lawsuit and verdict discussed above.

 

Mark Fijman is a labor and employment attorney with Phelps Dunbar, LLP, 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

Settlement in HIV Termination Lawsuit Highlights Continuing Employer Confusion over ADA

A nationwide manufacturer and distributor of fruit juice will pay $125,000 to settle a lawsuit brought by the EEOC on behalf of an employee who was terminated after the company learned he was HIV-positive. [EEOC v. Gregory Packaging, Inc. (N.D. Ga.]  The fact that the employer specifically told the man he was being terminated because of his HIV status highlights continuing employer confusion over the Americans with Disabilities Act (“ADA”), even twenty-five years after its passage, and especially as it relates to employees with HIV/AIDS.

The plaintiff in the case was employed as a machine operator at the Newnan, Georgia facility of Gregory Packaging, Inc., a company that sells juice products to school districts and medical institutions. When the employee developed a skin rash unrelated to his HIV, rumors began to circulate among other employees that the employee’s rash was the result of AIDS.  In an effort to quash the rumors, the employee informed his supervisor that while he did have HIV, the skin condition was unrelated, and there was no danger of him transmitting HIV to food products or co-workers.  Despite his good job performance, and no evidence of a health risk, the employee was terminated approximately a month later.  He was informed the reason he was being fired was because he had HIV.

The employee declined a separation agreement offered by the company, which included a release of claims. The Equal Employment Opportunity Commission (“EEOC”) subsequently brought a lawsuit on the employee’s behalf, alleging violations of the ADA and similar claims brought under Georgia state law.  Despite the company’s early efforts to fight the lawsuit, the case was settled pursuant to a court-approved consent order, which provided for the $125,000 payment by the New Jersey based company, and required equal employment opportunity training and reporting to the EEOC.

What is most surprising about this case, is that even before the ADA’s expansion under the Americans with Disabilities Amendment Act (“ADAAA”), it was generally established that a person with HIV/AIDS met the Act’s definition of an individual with a disability.  Furthermore, as noted in EEOC guidelines, even those who are regarded as having HIV/AIDS are protected under the Act, even if they do not have the disease.  The example given by the EEOC is a person being fired on the basis of a rumor that he had AIDS, even though he was not infected.

Employers involved in the food and restaurant industry are often at the focus of these types of lawsuits. As was the case at Gregory’s Georgia facility, the situation is often fueled and exacerbated  by rumors spread by co-workers or customers, and fears of HIV/AIDS being transmitted through an employee’s contact with food products.   

According to the Department of Health and Human Services, HIV/AIDS is not a disease that can be transmitted through food handling. Diseases that can be transmitted by an infected person handling food include (1) noroviruses, (2) the Hepatitis A virus, (3) Salmonella, (4) Shigella, (5) Staphylococcus, and Streptococcus.  For more detailed information, employers in the food service/restaurant industry can find guidance through the EEOC publication “How to Comply with the Americans withDisabilities Act: A Guide for Restaurants and Other Food Service Employers.”

Employer’s also need to be aware that in the context of HIV/AIDS, the ADA also protects employees who do not have the disease, but have an association or relationship with someone who does.  In the EEOC guidelines, examples of employment discrimination against persons with HIV or AIDS include:

•         An automobile manufacturing company that had a blanket policy of refusing to hire anyone with HIV or AIDS.

•         An airline that extended an offer to a job applicant and then rescinded the offer after the employer discovered (during the post-offer physical) that the applicant had HIV.

•         A restaurant that fired a waitress after learning that the waitress had HIV.

•         A university that fired a physical education instructor after learning that the instructor’s boyfriend had AIDS.

•         A County tax assessment office that cancelled training opportunities for an accountant following her disclosure that she had HIV.

•         A retail store that generally rotated all sales associates between the sales floor (where they could earn commissions) and the stock room (where they processed merchandise) except for the sales associate who was rumored to have HIV, who was never rotated to the floor.

•         A call center employee who was denied a promotion to shift manager because his employer believed the employee would be unreliable since he had AIDS.

•         A company that contracted with an insurance company that had a cap on health insurance benefits provided to employees for HIV-related complications, but not on other health insurance benefits.

While the ADA does include a “direct threat” defense in regard to employees who pose a significant risk of substantial harm to the health and safety of the employee or others, the defense  requires medical or other objective evidence, as opposed to subjective beliefs or assumptions based on stereotypes.  However, the take-away from this case is that proper training of supervisors in addressing ADA issues is a much better and less expensive option than having to establish defenses after a suit has been filed.

Mark Fijman is a labor and employment attorney with Phelps Dunbar, LLP, 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





EEOC Says “Do as I Say” and “Pay no Attention to What I Do” in Background Check Battle

            In its litigation offensive against employers over the use of criminal/credit background checks in making employment decisions, the federal agency is getting put on the spot over its own employment practices in two high profile cases. 
 

            In earlier posts, I discussed the EEOC’s lawsuits against national retailer Dollar General, and car maker BMW Manufacturing Co., alleging that the employers’ criminal background check policies systematically discriminated against African-American job applicants or existing employees.
 

            In the Dollar General case, the EEOC is currently fighting a motion to compel filed by the retailer, in which Dollar General is asking a U.S. District Court in Illinois to force the anti-discrimination agency to disclose its own policies on using background checks and criminal histories in employment decisions.  In a South Carolina District Court, BMW also has filed a similar motion to compel, seeking all of the EEOC’s documents regarding its policies and guidelines for evaluating the criminal records of individuals applying to work for the federal agency.
 

            Not surprisingly, the EEOC is arguing to the Courts in both cases that it should not be required to turn over the information, claiming the agency’s own practices are irrelevant to the allegations against the two companies.  In response, BMW, echoing an earlier response by Dollar General, noted to the Court:
 

This is not the first time that the EEOC has refused to provide information about its own employee screening policies and procedures while claiming that the policies and procedures of others are        unlawful . . . [a]nd, in all cases, courts have concluded that the information is relevant to issues of business necessity and estoppel and have compelled the EEOC to provide it.

The other cases BMW and Dollar General are referring to likely include the crushing defeat handed to the EEOC earlier this year by the United States Court of Appeals in Equal Employment Opportunity Commission v. Kaplan Higher Education Corporation.  In that case the EEOC sued the educational services company for implementing credit checks after discovering that some employees had stolen student’s financial aid payments. The credit check policy applied to job applicants seeking positions where they would have access to cash or financial information. The EEOC claimed the policy disproportionally impacted “more African-American applicants than white applicants.”
 

In its affirmation of the district court’s grant of summary judgment in favor of the company, the Sixth Circuit blasted the EEOC’s disparate impact theory of liability. In ruling against the EEOC, the Sixth Circuit noted that pursuant to its own personnel handbook, the EEOC runs the very same type of credit checks on its employees because “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” The court specifically and wryly noted that this was the very same reason that Kaplan adopted its policy. 





EEOC “Spam” Gets a Green Light

          Merriam-Webster Dictionary defines “spam” as an “unsolicited usually commercial e-mail sent to a large number of addresses” or “a canned meat product.”  Another definition may now be “an aggressive investigative tactic of the Equal Employment Opportunity Commission (“EEOC”) which has been given a green light by the courts.”

On September 24, 2014, a U.S. District Court Judge in Washington, DC announced he will dismiss a lawsuit over the Equal Employment Opportunity Commission (“EEOC”) sending a blast of more than 1300 e-mails to a company’s employees, requesting they supply information to the agency as part of an investigation into allegations of age discrimination.

In my October 2013 post, “You’ve Got (Mass) Mail . . . From the EEOC?”, I discussed the federal lawsuit filed by construction equipment maker Case New Holland (“CNH”) in which the company alleged the EEOC unconstitutionally solicited or “trolled” the company’s employees to become class members in a potential age discrimination class action.

Prior to the e-mail blitz, the company had cooperated with the EEOC’s investigative requests by producing ten of thousands of page of documents and hundreds of thousands of electronic documents.  The company heard nothing more from the agency for more than a year and a half, until the incident that caused the company to sue the EEOC.

At 8:00 a.m. on June 5, 2013, the EEOC conducted a mass e-mailing to the business e-mail addresses of 1330 CNH employees across the United States and Canada. Over 200 of the recipients were members of management. The e-mail stated the EEOC was conducting “a federal investigation” and making “an official inquiry” into allegations that CNH discriminated against job applicants and employees, and contained a link to an on-line series of questions regarding alleged discrimination. It also asked for the employee’s birth date, address and telephone number. The EEOC’s on-line survey instructed CNH employees to “Please complete and submit this electronic questionnaire as soon as possible.”

The e-mail had been sent without any advance notice to CNH and according to the lawsuit, the mass mailing disrupted CNH’s business operations at the start of the workday and communicated to employees they should cease their legitimate work duties and instead immediately respond to the agency’s questions. A significant concern was the company’s belief that the EEOC had deliberately cut the employer out of the investigatory process, and had solicited members of management, whose statements arguably could have bound the company.

CNH filed its lawsuit on August 1, 2013, alleging that the EEOC’s mass e-mailing: (1) was not authorized by any EEOC rule or regulation, (2) violated the federal Administrative Procedure Act, (3) constituted an unreasonable search and seizure in violation of the Fourth Amendment, (4) violated the takings clause of the Fifth Amendment, and (5) violated the EEOC’s own compliance manual, which requires that an employer be allowed to have a spokesman or attorney present during an interview of management employees, and that advance notice be given. The suit claims the EEOC engages in bullying tactics to force companies into monetary settlements of questionable claims.

However, in his ruling announcing his plans to dismiss CNH’s lawsuit, U.S. District Judge Reggie B. Walton stated that the company lacked standing to bring the suit because it was not able to establish how it was injured by the EEOC’s investigatory tactic, other than vague allegations of business disruptions.  Judge Walton announced he would issue a written opinion dismissing the case within the next two months.  At this time, the company has not announced if it plans to appeal the ruling.

Although the EEOC had never before utilized e-mail at this scale to try and identify alleged victims of discrimination, it had argued to the court that the tactic was clearly within the agency’s investigatory authority.

With the U.S. District Court giving the green light to the EEOC’s investigatory “spam”, at least for the time being, it appears highly likely that employers will be seeing much more of this tactic.  From the EEOC’s perspective, it is cheaper and quicker then actually sending investigators to a workplace, and has the added benefit of being able to target thousands of potential plaintiffs/class members with the click of a mouse.  Also, as noted in CNH's lawsuit, it has the effect of allowing the EEOC to cut the employer out of the investigative process.

Mark Fijman is a labor and employment attorney with Phelps Dunbar, LLP, 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

EEOC Targets Mandatory Arbitration Agreements in Lawsuit Against Restaurant Franchisee

 

 

      A Florida company that owns franchise restaurants, such as Applebee’s and Panera Bread, has been sued by the Equal Employment Opportunity Commission (“EEOC”) for making its employees sign mandatory arbitration agreements.  The lawsuit, filed September 18, 2014 in the U.S. District Court for the Southern District of Florida, is the latest instance of the EEOC targeting employer practices which the agency  views as limiting employees’ right to file charges of discrimination or bring lawsuits under Title VII and other employment discrimination statutes.

            According to the agency’s allegations in EEOC v. Doherty Enterprises, Inc. (Civil Action No. 9:14-cv-81184-KAM), the company “requires each prospective employee to sign a mandatory arbitration agreement as  a condition of employment.  The agreement  mandates that all employment-related claims -- which would otherwise allow  resort to the EEOC -- shall be submitted to and deter­mined exclusively by  binding arbitration.”  The EEOC alleges the arbitration agreements interfere with employees' rights to file discrimination charges and “violates Section 707 of Title VII of the Civil  Rights Act of 1964, which prohibits employer conduct that constitutes a pattern  or practice of resistance to the rights protected by Title VII.

            The lawsuit is not surprising since the EEOC made it clear in its 2013 – 2016 Strategic Enforcement Plan that “[t]he EEOC will target policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or that impede the EEOC's investigative or enforcement efforts.”  However, while these type of “test” cases by the agency result in substantial legal costs for employers, the EEOC does not seem to have been getting much bang for its buck when it actually gets in front of a federal judge.

            As noted in my September 21, 2014 posting, “EEOC Experiences “Separation Anxiety”in Lawsuit Against CVS”, last week the EEOC suffered a big defeat in their controversial lawsuit against CVS Pharmacy, over the drug store chain’s use of separation agreements for departing employees.  In that lawsuit, the EEOC had taken the same approach as it has in this latest case, alleging the drug store chain’s use of very standardized separation agreements 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.” 

            In comments about the agency’s lawsuit against Doherty Enterprises, EEOC Regional Counsel Robert E. Weisberg left little doubt that more lawsuits over arbitration agreements can be expected:

"Employee communication with the  EEOC is integral to the agency's mission of eradicating employment discrimination.  When an employer forces all complaints about  employment discrimination into confidential arbitration, it shields itself from  federal oversight of its employment practices.   This practice violates the law, and the EEOC will take action to deter further use of these types of overly broad arbitration agreements."

           
        As was the case of separation agreements in the CVS lawsuit, mediation agreements are commonly used by employers nationwide, and the EEOC’s litigation focus is troubling to the business community.  For employers who utilize arbitration agreements, it would be advisable to have them reviewed by legal counsel.

 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





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