Employers Dodge EEOC bullet Aimed at Severance Agreements, But The Battle Isn’t Over

Back In February, we reported on a lawsuit the Equal Employment Opportunity Commission (EEOC) filed against CVS in the Northern District of Illinois. As you may recall, the EEOC alleged CVS’ severance agreement unlawfully restricted employees’ rights to file discrimination claims under Title VII of the Civil Rights Act of 1964 (Title VII). Had the federal court agreed, employers could have lost some important protections which severance agreements typically offer, including agreements not to sue.

As promised, we have kept an eye on the situation, and are pleased to report the court recently dismissed the EEOC’s claim, though only on procedural grounds. The court found the EEOC failed to engage in the required informal conciliation process before filing suit. While the court didn’t reach the merits of the case, its opinion does include a footnote which may help employers in severance agreement disputes down the road. Judge John W. Darrah noted CVS’ agreement did not actually prohibit employees from filing a discrimination claim, and that even if it intended this result, the agreement would simply be invalid rather than a violation of Title VII.

This ruling means severance agreements protecting employers from lawsuits are likely safe – for now. There is currently another similar EEOC suit pending in Colorado against a second company, CollegeAmerica. We will let you know when there are any important developments in this case.

In the meantime, it would still be wise to ensure your company’s severance agreement makes clear that departing employees are not prohibited from filing a discrimination claim or cooperating with any agency that enforces state or federal discrimination laws.