I wrote about severance agreements in 2013 here, here and here, where I addressed the key elements needed for an enforceable severance agreement, and compliance with the Older Workers’ Benefits Protection Act OWBPA. This time, we are going to look at other facets. There are very few (if any) employment law topics on which the EEOC has not weighed in, and severance agreements are no exception. Join The EmpLAWyerologist after the jump to learn what the EEOC might have to say about your severance agreements…
As you may recall from my previous posts your severance agreement can include a general release in which the employee, in exchange for severance pay waives the right to almost any claim arising out of his or her employment –except for filing or cooperating with an investigation of an already filed charge with the EEOC (or a state counterpart). The EEOC, while it has in the past acknowledged that waivers are enforceable– if they’re not “overbroad”– at term that the EEOC interprets very broadly. If, in the EEOC’s view it can “reasonably” be interpreted as prohibiting or discouraging an employee (or former employee) from filing a charge or cooperating in an EEOC investigation of a charge, then the waiver is “overbroad, misleading and unenforceable”.
EEOC v Eastman Kodak Co No. 06-CV-6489 (W.D.N.Y. 2006) had been the leading case on this issue. Eastman Kodak’s severance agreement required its employees to return any severance pay and pay Eastman Kodak’s legal fees if they assisted the EEOC in investigating any discrimination charges. This is where Eastman Kodak overstepped. One week after filing suit, the EEOC obtained a settlement, which required Eastman Kodak to use the following express language in its severance agreements going forward:
Except as described below, you agree and covenant not to file any suit, charge or complaint against Releasees in any court or administrative agency, with regard to any claim, demand, liability or obligation arising out of your employment with Kodak or separation therefrom. You further represent that no claims, complaints, charges, or other proceedings are pending in any court, administrative agency, commission or other forum relating directly or indirectly to your employment by Kodak. Nothing in this Agreement shall be construed to prohibit you from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency. Notwithstanding the foregoing, you agree to waive your right to recover monetary damages in any charge, complaint, or lawsuit filed by you or by anyone else on your behalf.
Many employers have used this exact language in their severance agreements without running afoul of Title VII, the Age Discrimination in America Act, (ADEA) or the EEOC–until December 17, 2012. What’s so magical about that date? The EEOC released its Strategic Enforcement Plan for Fiscal Year 2013-2016 and stated its intent to:
target policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or which impede the EEOC’s investigative or enforcement efforts. These policies and practices include retaliatory actions overly broad waivers, settlement provisions that prohibit filing charges with the EEOC or providing information to assist in the investigation or prosecution of claims of unlawful discrimination and failure to retain records required by EEOC regulations.
The EEOC’s Chicago Regional Office’s lawsuit against Baker & Taylor reflects this more aggressive stance. This case ended with a settlement in which Baker & Taylor agreed to include the following, broadly written provisions in its severance agreements:
Nothing in this Agreement is intended to limit in any way an Employee’s right or ability to file a charge or claim of discrimination with the U.S. Equal Employment Opportunity Commission (“EEOC”) or comparable state or local agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, filing a lawsuit in Federal or state court in their own name, or taking any other action authorized under these statutes. Employees retain the right to participate in such any [sic] action and to recover any appropriate relief. Employees retain the right to communicate with the EEOC and comparable state or local agencies and such communication can be initiated by the employee or in response to the government and is not limited by any non-disparagement obligation under this agreement [sic]. (Emphasis added).
Whereas the EEOC in the Kodak settlement specifically agreed that an employer can require an employee to waive the right to recover monetary damages in an EEOC proceeding, it appears to have now done an about-face, by requiring language allowing employee to retain the right to “recover any appropriate relief” in an EEOC proceeding. This requirement would appear to undermine one of the main reasons for providing severance pay in the first place, to wit: minimizing the risk of such proceedings, and the damages arising therefrom. What’s more, this change came about without any change whatsoever to Title VII or the ADEA between the two settlements. What’s up with that???
One possible explanation is that the Kodak matter arose in New York, whereas the Baker & Taylor settlement arose out of the EEOC’s Chicago Regional Office. So what? The EEOC is not as centralized in its operations as one might think. Each regional office has a fair amount of discretion in its operations, and the Chicago office is known to be particularly aggressive. It comes as no surprise then, that the same Regional Office sued CVS, regarding its severance agreement last year. The EEOC’s said that the restrictions therein are only limited by one sentence that is “not repeated anywhere else in the agreement”–in language much like that approved in the Kodak settlement. The EEOC nonetheless found that CVS’ severance agreement (which appears to be a fairly standard severance agreement used by employers) amounted to a” pattern and practice of denying employees full exercise of their Title VII rights, including limiting their rights to file charges and cooperate in the investigation of charges”. The court dismissed that case, finding that the EEOC failed to fulfill its obligation to make good faith efforts to conciliate (settle). The court therefore did not decide the actual issue of whether standard releases in a severance agreement are legal under Title VII or the ADEA. Similarly, the EEOC sued College America in federal district court in Colorado on the same grounds–and, the court dismissed that case, also on the same grounds as in the CVS case.
So, should you shred the severance agreements? Not just yet. Instead you might consider reviewing your severance agreements, include language–separate from the release/waiver– containing more than one sentence, specifically stating that employees retain their rights to file and cooperate with investigations of discrimination charges with federal, state and local agencies. Meanwhile, since the EEOC does not seem to be backing off this issue, stay tuned for further developments!
Do your severance agreements have to comply with ERISA laws? Find out next week.
Disclaimer: This post’s contents are for informational purposes only, are not legal advice and do not create an attorney-client relationship. Always consult with competent employment counsel on any issues discussed here.
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