EEOC Sues CVS Pharmacy

The Equal Employment Opportunity Commission (“EEOC”) recently commenced litigation against CVS Pharmacy, Inc., in the U.S. District Court for the Northern District of Illinois claiming that certain provisions of a severance agreement used by CVS violates Title VII of the Civil Rights Act of 1964 because it is “overly broad, misleading and unenforceable…” Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., Civil Action No. 14 C 0863 (N.D. Ill., February 7, 2014).

According to the EEOC, “CVS conditioned the receipt of severance benefits for certain employees on an overly broad severance agreement set forth in five pages of small print. The agreement interfered with employees’ right to file discrimination charges and/or communicate and cooperate with the EEOC.” (EEOC Press Release, 2/7/14.)

The EEOC identified various sections of the CVS Agreement that violated Title VII:

  • A cooperation clause requiring the employee to promptly notify CVS’ General Counsel if the employee is contacted related to legal proceedings including contacts by “any investigator, attorney or any other third party.”
  • A non-disparagement clause prohibiting the employee from making any disparaging statements about CVS and its officers, directors, and employees.
  • A non-disclosure provision prohibiting disclosure to any third party of confidential information without prior written permission of CVS.
  • A general release of claims that included a release of all “causes of action, lawsuits, proceedings, complaints, charges, debts contracts, judgments, damages, claims, and attorney fees,” including “any claim of unlawful discrimination of any kind.”
  • A covenant not to sue clause where the employee represents that he/she has no pending lawsuit against CVS and prohibits the employee from filing any lawsuit. In the event of a breach, the employee is required to reimburse CVS for any legal fees that it incurs resulting from the employee’s breach of the covenant not to sue.
  • A provision stating that in the event of the employee’s material breach of the Employee Covenants section of the agreement, CVS would be entitled to obtain injunctive and other relief, including attorney fees.

Based on these sections, the EEOC claims that CVS is engaging in a “pattern or practice of resistance to the full enjoyment of the rights secured by Title VII” alleging that such provisions deter the filing of charges and interferes with an employee’s ability to communicate voluntarily with the EEOC and Fair Employment Practice Agencies. “Charges and communication with employees play a critical role in the EEOC’s enforcement process because they inform the agency of employer practices that might violate the law[.] For this reason, the right to communicate with the EEOC is a right that is protected by federal law. When an employer attempts to limit that communication, the employer effectively is attempting to buy employee silence about potential violations of the law. Put simply, that is a deal that employers cannot lawfully make.” (EEOC Press Release, 2/7/14.)

Although the EEOC notes that the CVS Agreement contains a statement that “[n]othing in this paragraph is intended to or shall interfere with an Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws[,]” the EEOC found this disclaimer ineffective, stating that it is a “single qualifying sentence that is not repeated anywhere else in the Agreement[.]”

While there is no ruling yet on the litigation filed by the EEOC against CVS, (and it is possible that the EEOC’s complaint, ultimately, will be dismissed in its entirety), in light of the EEOC’s current position about language in separation agreements, employers should carefully review their agreements, being mindful of the length of the agreement, any limitations on an employee’s rights and abilities to file administrative charges alleging discrimination, as well as any provisions limiting an employee’s communications to administrative agencies and third parties.

Beth Slagle has practiced law for more than 20 years and focuses her practice on business disputes and employment law. Beth’s work has earned her a spot in Best Lawyers in America since 2010, and she is the chair of the firm’s Insurance Coverage Litigation Group. She can be reached at [email protected] or412.456.2890.