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EEOC Challenge to CVS Severance Agreement Dismissed Due to Agency’s Failure to Engage in Conciliation

October 13, 2014

By Scott J. Wenner

Late last year the United States Equal Employment Opportunity Commission (EEOC) sued CVS in the Northern District of Illinois claiming that the retail pharmacy’s standard form severance agreement and release violated Title VII. More specifically, the agency claimed that the CVS agreement failed adequately to inform separating employees that they were not waiving their rights to file a charge of discrimination with the EEOC and/or a state or local agency, and that they could still support discrimination claims of others being investigated by the Commission.

Especially of concern to the agency appeared to be routine non-disclosure and non-disparagement clauses, and a cooperation clause that required the signatory to advise the company if he or she were subpoenaed or otherwise contacted about matters being released. Because CVS’s agreement resembled garden-variety separation agreements in common use, and as it indeed notified employees of their continued right to complain to and assist the EEOC, the case caused considerable concern among  employers.

In the CVS Severance Opinion filed last week, the court dismissed the EEOC’s action. Unfortunately, the ruling was not based on the merits of the claim. Thus, it fails to provide guidance to employers on how, if at all, their standard form severance agreements should be changed to withstand legal challenge. Because the EEOC has continued to maintain that the CVS agreement interfered unlawfully with its enforcement of Title VII by deterring employees from exercising their rights, it seems unlikely that the issue will go away until the courts bring clarity to what had been thought to be a reasonably clear set of rules embodied in guidance the agency provided years ago.  See, Enforcement Guidance on Non-Waivable Employee Rights, EEOC Notice No. 915.002 (Apr. 10, 1997).

The court’s dismissal of the EEOC’s complaint against CVS nevertheless had a silver lining for employers, however. CVS’s motion to dismiss was in part founded on the agency’s admitted failure to engage in conciliation before suing CVS. The EEOC contended that it was not required statutorily to conciliate before bringing an action under the section of Title VII on which it sued CVS – §707(a). The court roundly rejected the Commission’s position based on the Act’s legislative history and because “the EEOC’s own regulations require the agency to use informal methods of eliminating an unlawful employment practice where it has reasonable cause to believe that such a practice has occurred or is occurring. See 29 C.F.R. § 1601.24(a).” Declaring that “The EEOC may sue only after it has attempted to secure a conciliation agreement acceptable to the Commission,” and as the Commission admitted that it did not conciliate, the court granted the CVS motion to dismiss.

This dismissal will resonate with employers that have experienced high-handed tactics by the Commission in refusing to engage in good faith conciliation before bringing an action against an employer. The issue the court addressed was slightly different from the question presented in EEOC v. Mach Mining, LLC, which the Supreme Court agreed to review this term. In Mach Mining, the Court will decide whether inadequate conciliation efforts constitute an affirmative defense to an action brought by the agency. In CVS, there was no dispute over the EEOC’s failure to engage in conciliation. The court found as a matter of law that the Commission’s conceded failure to conciliate with the employer was grounds for dismissal of the action.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

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