When manufacturers determine that it is necessary to let go of an employee there is often an assessment of risk and a decision about whether a severance package should be offered in exchange for a separation agreement that contains a general release and waiver of claims against the company. Given the recent trend in litigation by the Equal Employment Opportunity Commission (EEOC) over the past year targeting specific language used by companies in these types of agreements, I thought it would be helpful to review some of the language typically contained in releases that require employees to waive any federal discrimination claims: 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.
In one of the recent EEOC cases (EEOC v. CVS Pharmacy, Inc., N.D. Ill., No. 1:14-cv-863, 9/18/14), the agency alleged that 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 EEOC alleged that the severance agreement interfered with the employees’ rights to file discrimination charges and/or communicate and cooperate with the EEOC. Interestingly, the release language used by CVS is what has been suggested by the EEOC in its very own Enforcement Guidance. See Enforcement Guidance on Non-Waivable Employee Rights under Equal Employment Opportunity Commission Enforced Statutes, EEOC notice 915.002 at §III(a). While the court recently weighed in and found that the CVS language was consistent with current law, it is unlikely that the EEOC will back down on this enforcement initiative anytime soon.
Manufacturers should carefully review the general release and waiver language contained in form separation agreements used by the company and consider whether the language could pose any risk of an EEOC challenge and/or plaintiff-employee challenge, including the following provisions:
- Non-disparagement: Is there an explicit exception for communications with government agencies?
- Covenant not-to-sue: Does this clause state that it is not intended to prevent the filing of a complaint with any governmental agency? The focus should not only be on the EEOC as there are other agencies that enforce similar laws, such as whistleblower protections under Dodd-Frank.
- Release: May the release be read to prohibit the employee from filing charges or participating in investigations? Is there an explicit provision clarifying that the Release is not intended to do so?
- ADEA/OWBPA requirements:
- Is the release “written in a manner calculated to be understood” by the employee who will be executing the agreement and specifically refer to rights or claims under the ADEA?
- Is there a clause allowing for 21-days to consider the agreement prior to signing and a 7-day revocation period after signing?
- Does the agreement advise the employee in writing to consult with an attorney prior to signing?
- NOTE: There are additional requirements for any termination of 2 or more employees (i.e. reduction in force, layoff, etc.)
It is always a best practice to avoid broadness and vagueness in any type of employment agreement, and to narrowly tailor any employee restrictions. Not only does such practice prevent misunderstandings between the employer and the employee regarding expectations, but narrow restrictions are much more likely to be enforceable by a court.