EEOC Lawsuit against CVS Dismissed on Technicality

As we reported a couple of weeks ago, the Equal Employment Opportunity Commission (EEOC) filed a lawsuit against CVS over the separation agreements the drugstore offered to its discharged employees. The agreements required the discharged employees to agree not to sue CVS, make disparaging remarks about the company, or disclose confidential information as a condition of receiving severance pay. These types of separation agreements are routinely used by employers, so the EEOC’s suit was closely watched by HR departments around the country, worried that the EEOC would come after them next. Therefore, when a federal court dismissed the EEOC’s suit against CVS, it appeared as though employers won a solid victory.

Except, when the court finally issued a written opinion explaining why the suit was dismissed, it became clear that employers did not really win a victory. Luckily, they weren’t defeated either: the court simply did not reach the merits of the case. The court did not decide whether the separation agreement violated Title VII of the Civil Rights Act, or any other federally protected right. Instead, the judge dismissed the case on a technicality, ruling that since the EEOC did not attempt to secure a conciliation agreement from CVS, the case had to be dismissed. Before the EEOC may file a lawsuit, it is required to secure conciliation from the party it seeks to sue, which means that the EEOC must attempt to resolve the disagreement through “informal methods of conference, conciliation, and persuasion.” 42 U.S.C. § 20003-5. The court ruled that since the EEOC never tried to do this, it was not permitted to file suit against CVS, and therefore dismissed the case.

Employers around the country have been keeping a close eye on the EEOC’s suit against CVS, as they want to see how the recent EEOC suits over separation agreements play out in court before engaging in the potentially expensive and time-consuming process of reconfiguring their current separation agreements. The EEOC has filed a similar lawsuit against College America in the 10th Circuit, so all eyes will now turn to that case. If the court rules against College America, then it might be time for employers to rethink severance packages that require an employee not to file a lawsuit against the company as a condition of receiving it. Stay tuned to the Workplace Report for the latest developments in that case.