Federal Court Dismisses EEOC Lawsuit Challenging CVS Severance Agreement and Release

Employers can begin to breathe a sigh of relief after a federal judge last week dismissed a lawsuit brought by the Equal Employment Opportunity Commission against the CVS drug store chain. In the lawsuit, the EEOC took an aggressive and novel position with regard to standard employee release provisions used across the U.S. with employees terminated for economic and other reasons.

The CVS document contained standard release language prohibiting employees from filing suit against the company based on their employment and termination. Title VII prohibits employers from requiring that employees waive their right to file administrative complaints with the EEOC. The CVS release contained specific language making clear that the release did not impact these rights.

Despite this clear language, the EEOC contended that the agreement operated to deter CVS employees from filing EEOC charges. This claim was based on the length and complexity of the release, its requirement that employees notify CVS if they file an EEOC charge, and the threat of financial penalties for breach by employees of the release. The EEOC asserted that the overall effect of these provisions resulted in deterrence and interference with employees’ rights to notify the EEOC of discriminatory conduct.

Last week, the federal judge hearing this suit dismissed the EEOC’s claim on summary judgment. The judge has not released his opinion yet, but this decision should grant some assurance to employers that properly drafted releases with carve-outs for EEOC charges are not subject to general attack based on the very concept of releasing employment discrimination claims. For this reason, the lawsuit has been closely watched by employers across the U.S.

The EEOC may appeal this decision to the federal appellate courts. If ultimately successful, the EEOC’s position could significantly reduce employers’ incentive to provide severance packages to terminated employees. If seeking a release of employment-related claims in the context of such terminations is deemed retaliation under Title VII, many employers may elect to entirely skip the severance process, both depriving departing employees of needed compensation, and increasing litigation over the reasons for the terminations.