Wednesday, August 20, 2014

Please Release Me

Three recent lawsuits filed against employers by the U.S. Equal Employment Opportunity Commission (EEOC) underscore the importance of having a labor and employment lawyer review and approve release language in settlement agreements.  Such language is a necessary part of settlement agreements designed to resolve employment issues, including those relating to potential charges of discrimination, arising out of employer decisions to terminate employees for performance reasons or because of reorganizations or reductions in force.  The position taken by the EEOC in these lawsuits makes it very clear that simply recycling release language from prior settlement agreements is a serious mistake.

The EEOC’s litigation position arises out of its Strategic Enforcement Plan (SEP) for Fiscal Years 2013 to 2016.  The main focus of the SEP is systemic discrimination in the workplace, and one of the primary objectives of the enforcement plan is to preserve access to the legal system.  It is this objective that has led the EEOC to target release language in settlement agreements that appears to have the effect of discouraging or prohibiting individuals from exercising their rights to participate in EEOC anti-discrimination enforcement activities.

The first of the three cases is EEOC v. Baker & Taylor, Civil Action No. 13-3729 (N.D. Ill. 2013), in which the EEOC contended that Baker & Taylor violated Title VII of the Civil Rights Act of 1964, as amended, by including in its settlement agreements release language that conditioned payment of severance pay, among other things, on the employee’s agreement not to file charges with any administrative agency of the United States.  The case was settled, with the employer agreeing to revise its standard severance agreement to add a disclaimer that the agreement was not intended to limit the employee’s right to file discrimination charges with the EEOC.

The second case is one that is currently pending before the U.S. District Court for the Northern District of Illinois and is hotly contested.  This lawsuit, against CVS Pharmacy, Inc., attacks several allegedly improper severance provisions, including a cooperation clause, a non-disparagement provision, a non-disclosure of confidential information provision, a general release of claims, and a “no pending actions” provision.  The lawsuit claims that a general disclaimer, asserting the absence of intent to interfere with an employee’s right to participate in an appropriate state or federal lawsuit or to cooperate with a governmental agency in investigating claims of discrimination, was insufficient to avoid the alleged violation of law.

The third case, filed in May in the District of Colorado against CollegeAmericaDenver, asserts that CollegeAmerica violated Title VII by conditioning the receipt of severance on “overly broad, misleading, and unenforceable” release language.  That case, too, is still pending.

The EEOC’s position in these cases is inconsistent with previous guidance and with language previously held enforceable by a federal court in EEOC v. Eastman Kodak Co., Case No. 06-CV-6489 (W.D.N.Y. 2006).  And it leaves practitioners wondering whether there is any form of release language that would be acceptable to the EEOC while still giving the employer its quid pro quo of assuring an end to litigation arising out of the facts and circumstances of the employment action that affected the employee giving the release.

Until the CVS case, in particular, is resolved, release language in settlement agreements must be closely scrutinized to make sure that the employer is not providing severance pay and other benefits to an employee in return for an unenforceable release.  We will keep you advised.  In the meantime, this is one situation in which recycling is not advisable.