EEOC Challenges Restrictive Separation Agreement

The U.S. Equal Employment Opportunity Commission (EEOC) has filed a lawsuit against CVS Pharmacy, Inc. alleging that the pharmacy chain’s standard separation agreement is “overly broad.” Specifically, the EEOC claims that the separation agreement interferes with a former employee’s right to communicate with the EEOC or to file discrimination charges. Employers should take note of this case because the form of agreement used by CVS is not unusual and is similar to the kind used by many other large employers.

The EEOC charges that the separation agreement requires that CVS be notified if the employee participates in an administrative investigation. It also requires the employee not to disparage CVS or its officers, directors or other employees. As a counterpoint, the agreement provides a single line that states that nothing in the terms of the agreement are intended to interfere with the employee’s right to participate in any legal proceeding or to participate with a government agency’s investigation.

The EEOC is seeking to permanently enjoin CVS from using the current version of the separation agreement, and the agency also seeks to prohibit the company from taking any other actions that may inhibit an employee’s right to file a charge.

Because the provisions under attack are commonly used by employers, this case is now on the radar of employment lawyers everywhere as it is feared to be an attack on virtually all separation agreements. Separation agreements play a very important role in helping an employer to secure peace and freedom from damaging lawsuits when an employee leaves his/her employment.

However, with a continuing poor economy, the EEOC has expressed concern that terminated employees are more likely to accept severance pay regardless of the terms of the severance agreement. As a result, the EEOC has begun to attack the standard terms of severance agreements as being unduly restrictive and prohibitive, resulting in its lawsuit against CVS.

The case is U.S. Equal Employment Opportunity Commission v. CVS Pharmacy Inc., case number 1:14-cv-00863, in the U.S. District Court for the Northern District of Illinois Eastern Division.

If you have any questions about this case or would like to discuss the use of separation agreements, please contact me, or the Scarinci Hollenbeck attorney with whom you work.