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EEOC’s Lawsuit Challenging CVS Separation Agreements Is a Big Deal

Posted in CHRO & EEOC, Class Actions, Discrimination & Harassment, Highlight, Human Resources (HR) Compliance, Litigation, Manager & HR Pro’s Resource Center

My good friend, Jon Hyman of the Ohio Employer’s Law Blog, probably said it best this morning:

I try to shy away from hyperbole, but OH MY GOD, THIS CASE COULD BE RUINOUS!!!

Yeah, pretty much.

Is the sky falling?

So, if you — like me — have been tied up with day-to-day affairs for a bit, or thinking how tomorrow’s snowstorm is going to put you over the edge, you might have missed the news of a lawsuit brought by EEOC against CVS.In it, the EEOC has challenged a bunch of garden-variety provisions that are being used in nearly every separation agreement in this country, I suspect.  Just look at some severance agreements that are publicly available and you’ll see some of the biggest companies using these same agreements with their executives.

Jon does a nice job recapping the provisions that are at issue (such as confidentiality and nondisparagement) so I’m not going to repeat them here, but if the EEOC prevails, it would turn this area of law on its head.

And that’s the key fact: IF the EEOC prevails.  My gut tells me that the courts are not likely to view the government’s arguments with favor.  The arguments just seem too “out there.” But that’s why we have the legal system — to test arguments like these.

But for employers, that is of little solace.

There are, however, some potential stopgap measures. In some agreements now, there is a carveout that says, in effect, nothing in this agreement prohibits employees from engaging in conduct with the EEOC and such conduct won’t constitute a breach of the agreement.  Jon suggests some language.

There are two other potential ideas that can be considered as well:

  1. First, employers could consider a “severability” clause that says that to the extent that any provision is found to be overbroad or illegal, it shall not affect the enforceability of the rest of the agreement.
  2. Second, employers could borrow the idea of a “blue pencil” from the area of restrictive covenants and empower the court to “revise” any provision that is overbroad to make it fit within the contours of the law.

None of these solutions is perfect and again, it is far from clear whether this lawsuit will find any favor in the courts anyways.

For now, employers will be left to wonder if the agreements that they have relied on to end lawsuits may ultimately survive an even bigger lawsuit.