Release Relapse: EEOC Files Suit Alleging that Employer’s Separation Agreement Violates Title VII

In a lawsuit filed earlier this month in the Eastern District of Northern Illinois, the EEOC has challenged a national employer’s Separation Agreement, and specifically the general release of claims that it asks departing employees to sign. The EEOC specifically alleges that the release violates Title VII of the Civil Rights Act of 1964 by interfering with employees’ right “to file a charge” with the EEOC and “to participate and cooperate with an investigation” by the agency. The lawsuit is noteworthy for two reasons. First, the release involved is fairly standard, i.e., there is nothing particularly aggressive about it (with one potential exception, discussed below). Second, the complaint clearly signals the EEOC’s current position on the type of releases commonly used by many employers: any release that could potentially be interpreted to limit employees’ ability to interact with the EEOC may be viewed as a violation of Title VII.

In its complaint in the suit, EEOC v. CVS Pharmacy, Inc., No. 14-CV-863 (Feb. 7, 2014), the EEOC alleges that the employer maintains a “five-page single spaced” Separation Agreement for its departing employees. The complaint sets forth a series of paragraphs from the Agreement by which, the EEOC alleges, employees agree: (a) to notify the Company’s General Counsel if they receive any document relating to an administrative investigation (“Cooperation”); (b) to release and discharge the company from any and all charges that they have on the date of the agreement (“General Release of Claims”); and (c) to not initiate any action, lawsuit, complaint, or proceeding asserting any of their released claims (“No Pending Actions; Covenant Not to Sue”). While the EEOC’s complaint acknowledges that the Agreement contains a “qualifying sentence” that recognizes employees’ ongoing “right to participate in a proceeding with any federal, state, or local agency enforcing discrimination laws,” the EEOC also alleges that the “qualifying sentence” is contained in just one the Agreement's paragraphs, even though “other limitations are contained in separate paragraphs.” The complaint concludes by alleging that a release of this type “constitutes resistance to the full enjoyment of rights secured by Title VII.”

It must be emphasized that no federal court has ruled on the EEOC’s complaint in this suit. There is no legal precedent at this time indicating that releases of the type involved in this suit are unlawful — and, in truth, there are two ways to view the suit. The first (and less concerning) view is that this case stems from a simple problem in drafting —– in other words, if the employer’s “qualifying sentence” had been presented more broadly rather than in just one paragraph, the Agreement would not be unlawful and the suit would not have been filed. The second (and far scarier) view is that the EEOC may attack releases of this type without regard to “qualifying sentences” or other guarantees of employees’ rights. The second alternative is unlikely, but, quite literally, the jury is still out.  

As a result, there is cause for employers to pay attention. At the very least, employers should be aware that the EEOC is pursuing this issue as an actionable violation.  Employers also should review their separation and release agreements. A good agreement is one that both ensures an effective release of claims by the employee and maintains the employee’s full right to interact with the EEOC. In light of this lawsuit, there is good reason to believe that maintaining a separation and release agreement which does not clearly and explicitly recognize former employees’ ongoing Title VII rights may subject an employer to EEOC scrutiny.