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Drafting Severance and Confidentiality Agreements Amid New EEOC and NLRB Scrutiny Navigating Agency Requirements for Non-Disparagement, Employee Behavior and Confidentiality Provisions Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. TUESDAY, NOVEMBER 4, 2014 Presenting a 90-Minute Encore Presentation of the Webinar with Live, Interactive Q&A Kerry E. Notestine, Shareholder, Littler Mendelson, Houston Christina A. Stoneburner, Partner, Fox Rothschild, Roseland, N.J.

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Page 1: Drafting Severance and Confidentiality Agreements Amid New …media.straffordpub.com/products/drafting-severance-and... · 2014-11-03 · Drafting Severance and Confidentiality Agreements

Drafting Severance and Confidentiality

Agreements Amid New EEOC and NLRB Scrutiny Navigating Agency Requirements for Non-Disparagement,

Employee Behavior and Confidentiality Provisions

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

The audio portion of the conference may be accessed via the telephone or by using your computer's

speakers. Please refer to the instructions emailed to registrants for additional information. If you

have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

TUESDAY, NOVEMBER 4, 2014

Presenting a 90-Minute Encore Presentation of the Webinar with Live, Interactive Q&A

Kerry E. Notestine, Shareholder, Littler Mendelson, Houston

Christina A. Stoneburner, Partner, Fox Rothschild, Roseland, N.J.

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Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ®A Timely Analysis of Legal Developments

On February 7, 2014, the Chicago District Office of the Equal Employment Opportunity Commission brought suit in the U.S. District Court for the Northern District of Illinois against CVS Pharmacy, Inc., claiming that a severance agreement used by the company 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-cv-863 (N.D. Ill., February 7, 2014). This ASAP will address the background to this lawsuit, describe the EEOC’s new and aggressive position toward severance agreements, and provide recommendations for employers.

BackgroundIn 2006, the EEOC entered into a consent decree (the Kodak Consent Decree) with Eastman Kodak Company (Kodak), which it had sued one week earlier, alleging that Kodak’s template release agreement violated Title VII of the Civil Rights Act of 1964 (Title VII) and the Age Discrimination in Employment Act of 1967 (ADEA) by, inter alia, containing language that explicitly prevented employees from assisting other employees with their claims of discrimination. See EEOC v. Eastman Kodak Co., no. 06-cv-6489 (W.D.N.Y. 2006). The Kodak Consent Decree contained express language that Kodak was required to use in any future release agreement, to wit:

Except as described below, you agree and covenant not to file any suit, charge or complaint against Releasees in any court or administrative agency, with regard to any claim, demand, liability or obligation arising out of your employment with Kodak or separation therefrom. You further represent that no claims, complaints, charges, or other proceedings are pending in any court, administrative agency, commission or other forum relating directly or indirectly to your employment by Kodak.

Nothing in this Agreement shall be construed to prohibit you from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency. Notwithstanding the foregoing, you agree to waive your right to recover monetary damages in any charge, complaint, or lawsuit filed by you or by anyone else on your behalf.

March 4, 2014 Recommendations in Response to the EEOC’s New Lawsuit on Severance Agreements By Kerry Notestine, Terri Solomon, and Daniel Thieme

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

Given that the EEOC had blessed the above-quoted language as the gold standard for release agreements, many employers have since that time included such language in their release agreements. Notwithstanding that thousands of such release agreements subsequently have passed muster when reviewed by the EEOC in connection with settlements of discrimination charges and lawsuits alleging violations of Title VII and/or the ADEA, the EEOC recently stated, in its Strategic Enforcement Plan for FY 2013-2016, that it intends to “target policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or which impede the EEOC’s investigative or enforcement efforts. These policies or practices include retaliatory actions, 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, and failure to retain records required by EEOC regulations.” See EEOC Strategic Enforcement Plan FY 2013-2016 at p. 10 (December 17, 2012).

In May 2013, the Chicago District Office of the EEOC, which has developed a reputation for taking particularly aggressive positions on issues that the EEOC generally, and the Chicago office specifically, deem significant, sued Baker & Taylor, Inc. in the U.S. District Court for the Northern District of Illinois, alleging that the company’s severance agreements interfered with employees’ rights to file charges with the EEOC and other fair employment practices agencies (FEPAs). Equal Employment Opportunity Commission v. Baker & Taylor, Inc., civil action no. 13-cv-03729 (N.D. Ill., May 20, 2013). In a sweeping consent decree entered in July 2013, Baker & Taylor agreed to include the following language in any future release agreement. See Equal Employment Opportunity Commission v. Baker & Taylor, Inc., documents #1 and 14 (N.D. Ill. July 10, 2013):

Nothing in this Agreement is intended to limit in any way an Employee’s right or ability to file a charge or claim of discrimination with the U.S. Equal Employment Opportunity Commission (“EEOC”) or comparable state or local agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, filing a lawsuit in Federal or state court in their own name, or taking any other action authorized under these statutes. Employees retain the right to participate in such any [sic] action and to recover any appropriate relief. Employees retain the right to communicate with the EEOC and comparable state or local agencies and such communication can be initiated by the employee or in response to the government and is not limited by any non-disparagement obligation under this agreement [sic].

(Emphasis added). Clearly, such language in the Baker & Taylor Consent Decree was a departure from the language that the EEOC had determined—in the Kodak Consent Decree—to be in full compliance with Title VII and the ADEA, notwithstanding that neither statute had been amended since 2006. Particularly questionable is the language stating that employees retain the right “to recover any appropriate relief” in an EEOC action, since the EEOC expressly agreed in the Kodak Consent Decree that an employee can be required to waive in a release agreement any right to recover monetary damages in any post-settlement EEOC action.

EEOC v. CVS Pharmacy, Inc.As mentioned above, the same district office of the EEOC brought suit on February 7 of this year in the same court against CVS Pharmacy, Inc. (the Company), claiming that the Company’s severance agreement (the Agreement)—which contained language modeled after that which was approved by the EEOC in the Kodak Consent Decree—violates Title VII because it is “overly broad, misleading and unenforceable....” The EEOC asserts in the lawsuit that the Agreement violates Title VII because it interferes with employees’ rights to file charges, communicate voluntarily and participate in investigations with the EEOC and other FEPAs.

In a February 7, 2014 press release (available on the EEOC’s website), EEOC regional attorney John C. Hendrickson proclaimed:

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.

The lawsuit alleges that the Company required exempt, non-store employees to sign “the five-page single spaced separation agreement” (emphasis in original) upon termination in order to receive severance pay. The EEOC identified the following sections of the Agreement in asserting violations of Title VII:

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

• A cooperation clause requiring the employee to “promptly notify the Company’s General Counsel by telephone and in writing” of contacts relating to legal proceedings including an “administrative investigation” by “any investigator, attorney or any other third party....” (Emphasis in lawsuit but not Agreement).

• A non-disparagement clause prohibiting the employee from making any disparaging statements about the Company and its officers, directors and employees.

• A non-disclosure of confidential information provision prohibiting disclosure to any third party of confidential employee and other information without prior written permission of the Company’s chief human resources officer.

• 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....” (Emphasis in lawsuit but not Agreement).

• A no pending actions; covenant not to sue clause where the employee represents the employee has no pending “complaint, claim, action or lawsuit” of any kind “in any deferral, state, or local court, or agency”. The clause prohibits filing of “any action, lawsuit, complaint or proceeding” asserting the released claims, and requires the employee to promptly reimburse “any legal fees that the Company incurs” for breach of the covenant not to sue. (Emphasis in lawsuit but not Agreement).

• A breach by employee clause, stating that in the event of the employee’s material breach of the Employee Covenants section of the agreement, the Company would be entitled to obtain injunctive and other relief, including attorney fees.

The EEOC alleges in the lawsuit that the above-identified restrictions are limited only by a “single qualifying sentence” in the covenant not to sue and “not repeated anywhere else in the Agreement.” However, that very sentence clearly stated—in language strikingly similar to that blessed by the EEOC in the Kodak Consent Decree—that nothing in the covenant not to sue was “intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with any such agency in its investigation.” Despite that provision, the EEOC claims that the terms of the Company’s standard Agreement, which was given to over 650 employees, constituted a pattern and practice of denying employees full exercise of their Title VII rights, including limiting their rights to file charges and cooperate with the EEOC and FEPAs in investigating charges of discrimination. The EEOC seeks in the lawsuit:

• a permanent injunction enjoining the Company from restricting the right to file charges or participate in agency proceedings;

• reformation of the Company’s standard Agreement;

• corrective communications, not only to those who signed the Agreement but to the Company’s entire workforce “informing all employees that they retain the right to file a charge of discrimination and to initiate and respond to communication with the EEOC and state FEPAs and are not required to keep certain information confidential in those communications” or to notify the Company about such communications, as well as training for human resources and management personnel who negotiate separation agreements; and

• three hundred additional days for any former employee who signed the Agreement to file administrative charges.

AnalysisWhile the court may ultimately decline to grant the EEOC any or all of the relief it seeks, employers—most of whom, like CVS, have likely relied upon the Kodak Consent Decree language previously approved by the EEOC—should take note of the EEOC’s new position toward release agreements, review their standard separation agreements, and consider taking prophylactic steps to guard against similar claims.

Most employers are aware of requirements under the Older Workers Benefit Protection Act (OWBPA), which in 1990 amended the ADEA by enumerating certain minimum requirements that a release agreement must satisfy in order for releases of claims of age discrimination under federal law to be effective. In addition, the OWBPA expressly states that “No waiver agreement may affect the Commission’s rights and responsibilities to enforce this Act. No waiver may be used to justify interfering with the protected right of an employee to file a charge or

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

participate in an investigation or proceeding conducted by the Commission.” 29 U.S.C. § 626(f)(4). Thus, the OWBPA and associated regulations prohibit any provision in a release of claims which would prevent an employee from filing a charge with the EEOC or from participating in an investigation by the EEOC. See 29 U.S.C. § 626(f)(4); 29 C.F.R. §1625.22(i). In addition, the regulations issued after the passage of the OWBPA limit covenants not to sue, attorneys’ fee reimbursements and similar provisions that employers often include in separation agreements. 29 C.F.R. §1625.23.

Significantly, the EEOC did not bring the CVS Pharmacy, Inc. lawsuit under the OWBPA/ADEA, but rather under Title VII. While the ADEA as amended by the OWBPA has express language (quoted above) protecting an individual’s right to file a charge with, and to participate in an investigation conducted by, the EEOC, Title VII does not contain such express language. Nevertheless, the EEOC previously has indicated in two major policy statements that many of the same requirements for effective releases that are imposed by the OWBPA/ADEA are equally applicable to releases of Title VII claims: Understanding Waivers of Discrimination Claims in Employee Severance Agreements (July 15, 2009) and Enforcement Guidance on Non-Waivable Employee Rights under Equal Employment Opportunity Commission Enforced Statutes, EEOC notice 915.002 (April 10, 1997).1 These policy documents, which provide the EEOC’s official position on these same issues, apply restrictions similar to some of those in the OWBPA to other statutes enforced by the EEOC, including Title VII and the Americans with Disabilities Act of 1990.

The courts have consistently denied enforcement of releases that preclude an employee from filing a charge of discrimination with a government agency. See EEOC v. Lockheed Martin, 444 F.Supp.2d 414 (D. Md. 2006); Ribble v. Kimberly-Clark Corporation, 2012 U.S. Dist. Lexis 21822 (W.D. Wis. 2012). The theory behind these rulings is that the EEOC and other government agencies have statutory mandates to enforce particular employment statutes, and as a matter of public policy private parties cannot agree between themselves to prevent the government from executing such statutory mandates. See Enforcement Guidance on Non-Waivable Employee Rights under Equal Employment Opportunity Commission Enforced Statutes, EEOC notice 915.002 at §III(a). In the CVS Pharmacy, Inc. lawsuit, however, the EEOC goes beyond this concept and seeks to invalidate a separation agreement that expressly permits an individual to file charges and participate in a governmental investigation.

Employers also should note that this concept of government mandates to enforce statutes likely applies to government agencies other than the EEOC and to statutes other than the ADEA and Title VII. The National Labor Relations Board (NLRB) has taken similar, and perhaps even more aggressive, positions attacking various kinds of employee agreements on the basis that they improperly attempt to limit employees’ exercise of the right to engage in concerted activity with co-workers granted by Section 7 of the National Labor Relations Act (NLRA), 29 U.S.C. § 157. The NLRB specifically identifies restrictions on social media activities and communications in other forums for discussing terms and conditions of employment as examples of overbroad restrictions on Section 7 rights. The NLRB would likely seek to apply these same principles to the kinds of clauses identified by the EEOC in the CVS Pharmacy, Inc. lawsuit (i.e., cooperation, disparagement, confidentiality, release of claims, and covenant not to sue). See NLRB Fact Sheet on the NRLB and Social Media, available on the NLRB website.

RecommendationsIn other contexts, courts have denied or limited relief sought by the Chicago District Office of the EEOC, which has the reputation of being highly aggressive. Therefore, it seems unlikely that all—or perhaps any—of the positions taken by the EEOC in the CVS Pharmacy, Inc. lawsuit will become binding on employers. Nevertheless, employers should take note of the EEOC’s recent pronouncements in the Baker & Taylor, Inc. and CVS Pharmacy, Inc. lawsuits, and in the EEOC’s highly publicized Strategic Enforcement Plan, and consider taking the following prophylactic actions:

• Review every separation agreement form to consider whether to strengthen existing provisions preserving the employee’s right to file administrative charges and participate in agency investigations. To avoid potential claims, employers may wish to include greater specificity in these provisions than had been thought to be adequate in the past. We recommend that these rights be specifically stated, and also refer to Section 7 rights under the NLRA. Also, prophylactically, we recommend that these rights apply to any government agency charged with enforcement of any law (not just the EEOC and NLRB, and not just employment laws).

• Despite the EEOC’s allegations in the CVS Pharmacy, Inc. complaint, it is far from clear that an employer must repeat these rights in every paragraph of a separation agreement that could potentially be determined to limit an employee’s right to engage in

1 These policy documents are available on the EEOC’s website.

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

legally-protected conduct. That would seem to make a separation agreement cumbersome and redundant, and may open the employer to challenges if the limitations are included in some but not all paragraphs. In light of the EEOC’s now more aggressive posture on these issues, however, we now recommend that the employer set off a statement of the protected rights in a separate paragraph of a separation agreement, perhaps in bold. In addition, for the avoidance of doubt, the employer could specifically refer to each paragraph containing restrictions on an employee’s rights (such as confidentiality and non-disparagement provisions) in the set-off paragraph, or begin each such section with language stating “Except as otherwise provided in paragraph [refer to paragraph protecting employee’s right to engage in protected activity],” thus reinforcing that nothing in any section of the agreement limits those rights.

• Employers should continue to provide in their separation agreements that, despite the employee’s retention of the right to file a discrimination charge, the employee is waiving the right to recover monetary damages or other individual relief in connection with any such charge.

• Employers should freshly review any separation agreement provisions mandating cooperation with the employer in connection with litigation and proceedings in light of the EEOC’s now more aggressive posture on these issues. Employers may wish to consider modifying terms that might spark concern from the EEOC.

Employers should consider the length and complexity of their separation agreements. The EEOC specifically noted that the Agreement in the CVS Pharmacy, Inc. lawsuit was five single-spaced pages. Even though the employees asked to sign these Agreements were exempt, non-store personnel who likely are relatively better educated and sophisticated than many non-exempt employees, the EEOC felt it important to highlight the length of the form separation agreement. Because releases and separation agreements often are much longer than five single-spaced pages, and since one of the OWBPA mandates for enforceable releases is that they be “written in a manner calculated to be understood by such individual, or by the average individual eligible to participate,” employers are advised to revisit the language contained in template release agreements.

Kerry Notestine is a Shareholder in Littler’s Houston office and is co-chair of the firm’s Business Restructuring Practice Group. Terri Solomon is a Shareholder in the New York office and Dan Thieme is a Shareholder in the Seattle office. If you would like further information, please contact your Littler attorney at 1.888.Littler, [email protected], Mr. Notestine at [email protected], Ms. Solomon at [email protected], or Mr. Thieme at [email protected].

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Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ®A Timely Analysis of Legal Developments

Recently, the Chicago District Office of the Equal Employment Opportunity Commission (EEOC) sued CVS Pharmacy, Inc. because CVS required employees to sign a release that the EEOC claims was “overly broad, misleading, and unenforceable” due to provisions in the release which allegedly infringed on the employees’ rights to file charges of discrimination and participate in EEOC investigations.1 On April 30, 2014, the Phoenix District Office of the EEOC sued CollegeAmerica Denver, Inc. in the United States District Court for the District of Colorado, making similar allegations.2 All employers should carefully review their form release agreements in light of these actions by the EEOC, which we expect will continue.

Complaint AllegationsThe complaint alleges that CollegeAmerica employed a campus director of its Cheyenne, Wyoming location until she resigned. CollegeAmerica and the former employee signed an agreement on September 1, 2012 in which CollegeAmerica agreed to pay her $7,000 and support her claim for unemployment compensation in exchange for her agreement not to contact any government agency to file a complaint, to forward complaints from disgruntled employees or students to CollegeAmerica, and not to disparage the company. The former employee later exchanged emails with another former CollegeAmerica employee in which the former employee allegedly disparaged the company. The company claimed a violation of the agreement and demanded the return of the $7,000 consideration. The former employee then filed an EEOC charge and the company received notice of this charge on March 18, 2013. The company sued the former employee in state district court on March 25, 2013, alleging breach of the September 1, 2012 agreement. She subsequently filed two other EEOC charges alleging retaliation. During the EEOC’s investigation into the charges, CollegeAmerica produced four form agreements that the company apparently used for separation agreements with individual employees and for reductions in force (RIF) involving terminations of multiple employees.3 The EEOC attached the agreement signed by the former employee and the four form releases to its complaint.

1 See Kerry Notestine, Terri Solomon, and Daniel Thieme, Recommendations in Response to the EEOC’s New Lawsuit on Severance Agreements, Littler ASAP (Mar. 4, 2014).

2 See EEOC v. CollegeAmerica Denver, Inc., n/k/a Center for Excellence in Higher Education, Inc., d/b/a CollegeAmerica, civil action no. 14-cv-01232-LTB (D. Colo., Apr. 30, 2014).

3 The agreements are referenced as: (i) separation—non-ADEA under 40, (ii) separation—ADEA age 40 and over, (iii) RIF –non-ADEA under 40, and (iv) RIF—ADEA age 40 and over.

May 13, 2014 They Really Mean It: the EEOC Sues Another Employer for Allegedly Overbroad Releases By Kerry Notestine, Terri Solomon, and Daniel Thieme

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

As in the CVS case, the EEOC asserts in the CollegeAmerica matter that provisions of the agreements requiring release of claims, cooperation with the company, and non-disparagement violate the Age Discrimination in Employment Act (ADEA) because those provisions allegedly chill the rights of individuals to file charges of discrimination and participate in EEOC and state agency investigations. The EEOC also challenges additional provisions in the CollegeAmerica agreements not present in the CVS release, e.g., clauses specifically prohibiting contact with government agencies and/or cooperation with others who filed complaints against the company, a clause representing that the individual has filed no claims to date, and a clause certifying that the former employee disclosed all non-compliance with regulatory requirements (including providing a sheet to list any instances of non-compliance of which the employee was aware). The EEOC further referenced that the form agreement included a severability clause and alleged that CollegeAmerica retaliated against the former employee by filing and pursuing the lawsuit after she filed EEOC charges.

AnalysisLittler’s March 4, 2014 ASAP provides important background on this issue. All employers should be aware that the EEOC has taken a consistent position since its 1997 Enforcement Guidance: that agreements prohibiting the filing of charges or participating in investigations violate the ADEA and Title VII, as well as all other statutes enforced by the EEOC. See Enforcement Guidance on non-waiveable rights under Equal Employment Opportunity Commission (EEOC) enforced statutes, EEOC Notice No. 915.002 (4/10/97). Thus, provisions such as that included in the agreement signed by the former employee prohibiting her from filing complaints or grievances with government agencies should be avoided. Note that a waiver of the right to recovery generally remains permissible, and we recommend including such a provision in releases along with a statement that nothing in the agreement prevents the individual from filing a charge or participating in a government investigation.

We noted in our prior ASAP on the CVS litigation that the National Labor Relations Board (NLRB) has taken similar, and perhaps even more aggressive, positions attacking various kinds of employee agreements on the basis that they improperly attempt to limit employees’ exercise of the right to engage in concerted activity with co-workers granted by Section 7 of the National Labor Relations Act (NLRA), 29 U.S.C. § 157. Because of these concerns, we also recommended in our prior ASAP that employers consider including a specific reference to the right to file charges and participate in investigations with the NLRB as well as the EEOC, and the additional statement that nothing in the release affects an individual’s right to engage in concerted activity protected by Section 7 of the NLRA.

Because courts have not rendered final decisions in the CVS and CollegeAmerica cases, it is less clear how employers should address claims that the other provisions of the agreements “chilled” individuals’ rights to file charges or participate in investigations. Certainly, employers have legitimate interests in continued cooperation with former employees, non-disparagement, and confidentiality. In order to avoid claims of chilling employee rights, we recommend that releases and separation agreements clearly state that the former employee’s continued right to file charges and participate in investigations is not restricted by any provision of the agreement, including release of claims, confidentiality, non-disparagement, covenants-not-to-sue, cooperation, and representations about prior claims and compliance issues.

The EEOC does not specifically indicate in the CollegeAmerica complaint why the severability clause in the agreements is problematic. A severability clause provides that an invalid provision should be separated from the rest of the agreement, and the rest of the agreement will be enforceable. The EEOC indicates that this CollegeAmerica agreement did not include a severability clause, while the form agreements attached to the complaint did include such a clause. Perhaps the EEOC may take the position that this CollegeAmerica agreement is invalid in its entirety because it did not include a severability clause, while certain provisions of the form agreements might be enforceable because such agreements did include a severability clause. Littler will monitor developments in this litigation and provide updates as warranted.

Of course, employers also should be careful to avoid adverse actions in close proximity to protected acts like filing of EEOC charges. According to the EEOC’s allegations in the complaint, the employer filed the lawsuit and took certain actions in the litigation immediately after the former employee filed charges of discrimination. Even if the filing of the charges was not the reason for the company’s actions, the timing of the litigation likely raises a possible inference of retaliation which CollegeAmerica may find difficult to rebut.

RecommendationsThe recommendations from our prior ASAP on the EEOC v. CVS litigation apply to this new EEOC lawsuit. Here are those recommendations with additional commentary:

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

• Review every separation agreement form to consider whether to strengthen existing provisions preserving the employee’s right to file administrative charges and participate in agency investigations. To avoid potential claims, employers may wish to include greater specificity in these provisions than had been thought to be necessary in the past. We recommend that these rights be specifically stated, and also refer to Section 7 rights under the NLRA as appropriate. Also, prophylactically, we recommend that these rights apply to any government agency charged with enforcement of any law (not just the EEOC and NLRB, and not just employment laws).

• Despite the EEOC’s allegations in the CVS and CollegeAmerica complaints, it is far from clear that an employer must repeat these rights in every paragraph of a separation agreement that could potentially be determined to limit an employee’s right to engage in legally-protected conduct. That would seem to make a separation agreement cumbersome and redundant, and may open the employer to challenges if the limitations are included in some but not all paragraphs. In light of the EEOC’s now more aggressive posture on these issues, however, we recommend that the employer set off a statement of the protected rights in a separate paragraph of a separation agreement, perhaps in bold. In addition, to avoid any doubt, the employer could specifically refer to each paragraph containing restrictions on an employee’s rights (such as confidentiality and non-disparagement provisions) in the set-off paragraph, or begin each such section with language stating “Except as otherwise provided in paragraph [refer to paragraph protecting employee’s right to file charges and participate in investigations],” thus reinforcing that nothing in any section of the agreement limits those rights.

• Employers should continue to provide in their separation agreements that, despite the employee’s retention of the right to file a discrimination charge, the employee is waiving the right to recover monetary damages or other individual relief in connection with any such charge.

• Employers should freshly review any separation agreement provisions mandating cooperation with the employer in connection with litigation and proceedings in light of the EEOC’s now more aggressive posture on these issues. Employers may wish to consider modifying terms that might spark concern from the EEOC.

• Employers should consider the length and complexity of their separation agreements. The EEOC specifically noted that the Agreement in the CVS lawsuit was five single-spaced pages. Even though the employees asked to sign these Agreements were exempt, non-store personnel who likely are relatively better educated and sophisticated than many non-exempt employees, the EEOC felt it important to highlight the length of the form separation agreement. The EEOC did not make similar allegations relating to CollegeAmerica’s separation agreements and RIF releases even though those documents also were five to six pages single spaced. Because releases and separation agreements often are much longer than five single-spaced pages, and since one of the OWBPA mandates for enforceable releases is that they be “written in a manner calculated to be understood by such individual, or by the average individual eligible to participate,” employers are advised to revisit the complexity and language contained in template release agreements.

Kerry Notestine is a Shareholder in Littler’s Houston office and is co-chair of the firm’s Business Restructuring Practice Group. Terri Solomon is a Shareholder in the New York office and Daniel Thieme is a Shareholder in the Seattle office. If you would like further information, please contact your Littler attorney at 1.888.Littler, [email protected], Mr. Notestine at [email protected], Ms. Solomon at [email protected], or Mr. Thieme at [email protected].

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Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ®A Timely Analysis of Legal Developments

On October 7, 2014, District Judge John Darrah of the North District of Illinois dismissed the Equal Employment Opportunity Commission’s lawsuit against CVS Pharmacy. Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., civil action no. 1:14-cv-00863, (N.D. Ill, October 7, 2014) (“10/7/2014 Memorandum and Order”). This lawsuit has been the subject of significant media attention due to the EEOC’s challenge to common provisions included in many standard severance agreements. While the decision is helpful for employers in that the EEOC did not prevail in this initial effort, the decision leaves many questions unanswered regarding the EEOC’s recent enforcement efforts and the appropriate employer response to the EEOC’s actions.

BackgroundThe Chicago District office of the EEOC sued CVS Pharmacy in the United States District Court of the Northern District of Illinois alleging that several provisions of CVS’ standard release of claims violated Title VII of the Civil Rights Act of 1964 because those provisions allegedly interfered with employees’ rights to file administrative charges, communicate voluntarily, and participate in investigations with the EEOC and other fair employment practice agencies (FEPAs). The provisions that the EEOC challenged included clauses on cooperation, non-disparagement, non-disclosure of confidential information, the general release of claims, pending actions, and the covenant not to sue. The EEOC also noted that CVS’ standard separation agreement was five single-spaced pages, implying that the agreement could be too long and complicated to be understood by the individuals asked to sign the agreement.

CVS immediately moved to dismiss the claims asserting, inter alia, that the EEOC could not show that any particular individual had been unlawfully discriminated or retaliated against through the use of the company’s standard severance agreements, establish a “pattern or practice” of unlawful conduct, plausibly allege or show intentional interference with protected rights, and/or show that the EEOC complied with its obligation to conciliate claims (attempt to settle) before filing the pattern and practice lawsuit. The parties fully briefed these issues before the district judge, and the Retail Litigation Center, Inc. also filed an amicus brief in support of CVS’ motion to dismiss. The EEOC’s lawsuit against CVS Pharmacy was the subject of a previous ASAP issued by Littler in March of 2014 that contained several recommendations regarding steps employers should consider taking in response to this lawsuit.1

1 See Kerry Notestine, Terri Solomon, and Daniel Thieme, Recommendations in Response to the EEOC’s New Lawsuit on Severance Agreements, Littler ASAP (Mar. 4, 2014).

October 20, 2014 EEOC Lawsuit Against CVS Pharmacy Challenging Severance Agreements Dismissed By Kerry Notestine, Terri Solomon, and Dan Thieme

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

The Phoenix District Office of the EEOC filed a second suit in April of 2014, this time against CollegeAmerica Denver, Inc., in the United States District Court for the District of Colorado, making many of the same allegations as in the EEOC’s lawsuit against CVS. The EEOC cited the Age Discrimination in Employment Act instead of Title VII as the statute allegedly violated. CollegeAmerica, like CVS, immediately moved to dismiss the EEOC’s complaint and that motion is awaiting a decision from the district judge in that case. Littler authored another ASAP on this filing and restated our recommendations on this topic.2

The Decision in the CVS CaseDistrict Judge Darrah dismissed the EEOC’s lawsuit against CVS because the EEOC failed to engage in conciliation (settlement) procedures that the judge found were required by Title VII.

It was uncontested that the EEOC had not engaged in conciliation. CVS stated in its statement of facts that the EEOC demanded that CVS sign a consent decree within 14 days of the EEOC’s finding of reasonable cause, CVS rejected the offer to sign the consent decree and offered to engage in conciliation efforts, and the EEOC refused to participate in conciliation. The EEOC responded by admitting that it did not engage in conciliation, although it did participate in four telephone calls in an attempt to settle the matter. Plaintiff’s Response to CVS Statement of Facts, civil action no. 1:14-cv-00863, Document #28 (June 6, 2014).

The EEOC asserted that it was not required to engage in conciliation in a technical argument about whether the statutory duty to conciliate under section 706 of Title VII applies to actions under section 707(a) of Title VII governing certain “pattern and practice” claims. See 42 U.S.C. §20000e-5, §20000e-6. The EEOC claimed that it only had to find “reasonable cause” to justify a section 707(a) pattern and practice claim without prior conciliation. EEOC’s Memorandum in Opposition to Motion to Dismiss at pp. 19-20, civil action no. 1:14-cv-00863, Document #27 (June 6, 2014). The district judge rejected the EEOC’s argument and held that the EEOC was required to conciliate before bringing the lawsuit against CVS. 10/7/2014 Memorandum and Order at pp. 8-9. It is not entirely clear whether there may have been an argument that the four telephone calls about settlement could be considered conciliation, but the EEOC’s admission in the response to CVS’ statement of facts that it did not engage in conciliation was sufficient for the district judge to decide that the EEOC had not met this statutory duty. As a result, the district judge dismissed the EEOC’s claims against CVS.

Because the district judge dismissed the case against CVS on the issue of conciliation, the judge did not make a specific ruling on the other arguments that CVS made for dismissal on the merits of the EEOC’s claims. The judge, however, did address two of the substantive issues asserted by CVS in footnotes to his opinion. In one footnote, the judge addressed CVS’ argument that the EEOC had not demonstrated that CVS engaged in unlawful discrimination or retaliation merely by including certain terms in the company’s form separation agreement. The judge stated that the EEOC’s attempt to expand the right to pursue a pattern and practice claim under section 707(a) beyond “acts of discrimination and retaliation” was without merit and that actual discrimination or retaliation had to be shown to establish a statutory violation. 10/7/2014 Memorandum and Order at p. 4, n. 2. In another footnote, the judge addressed CVS’ argument that the agreement included a carve out protecting the right to file an administrative charge which undermined the EEOC’s claim of interference with protected rights. The judge noted that the general release contains an exclusion for “any rights that the Employee cannot lawfully waive” and the covenant not to sue included a carve out for the employee’s right to participate in administrative proceedings and cooperate with such agency investigations. The court termed “not reasonable” the EEOC’s argument that the exclusion allowing participation in administrative proceedings did not protect the right to file a charge. The court also stated that even if the agreement banned filing of charges, which it did not, then those provisions would merely be unenforceable and not constitute actionable resistance to Title VII. 10/7/2014 Memorandum and Order at pp. 4-5, n. 3. As a result, District Judge Darrah’s dicta provides employers faced with challenges to separation agreements reason to believe that the EEOC will fail on the merits of its recent efforts to invalidate separation agreements.

RecommendationsAlthough CVS successfully defended this EEOC lawsuit over its form separation agreements, the decision did not reach important issues regarding the validity of standard clauses used in such agreements. The EEOC continues to look for opportunities to assert that terms included

2 See Kerry Notestine, Terri Solomon, and Daniel Thieme, They Really Mean It: the EEOC Sues Another Employer for Allegedly Overbroad Releases, Littler ASAP (May 13 2014).

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ASAP® is published by Littler Mendelson in order to review the latest developments in employment law. ASAP® is designed to provide accurate and informative information and should not be considered legal advice. ©2014 Littler Mendelson, P.C. All rights reserved.

A S A P ™ Littler Mendelson, P.C. • littler.com • 1.888.littler • [email protected] S A P ® Littler Mendelson, P.C. • www.littler.com • 1.888.littler • [email protected]

in separation agreements and post-charge filing releases of claims infringe on statutory rights under Title VII and the ADEA. We are aware of at least two other examples of this activity since the EEOC filed the CVS and CollegeAmerica lawsuits. In both of those cases, the EEOC has arguably made efforts to engage in conciliation, thus potentially avoiding the defense of failure to conciliate that was successful in CVS. Judge Darrah’s comments in the footnotes to the CVS decision provide support for employers’ use of the challenged terms. Until this issue is finally resolved on the merits, we continue to recommend the following steps to protect separation agreements and releases from challenge.

• Review every separation agreement form to consider whether to strengthen existing provisions preserving the employee’s right to file administrative charges and participate in agency investigations. To avoid potential claims, employers may wish to include greater specificity in these provisions than had been thought to be necessary in the past. We recommend that these rights be specifically stated, and also refer to Section 7 rights under the NLRA as appropriate. Also, prophylactically, we recommend that these rights apply to any government agency charged with enforcement of any law (not just the EEOC and NLRB, and not just employment laws).

• Despite the EEOC’s allegations in the CVS and CollegeAmerica complaints, it is far from clear that an employer must repeat these rights in every paragraph of a separation agreement that could potentially be determined to limit an employee’s right to engage in legally-protected conduct. That would seem to make a separation agreement cumbersome and redundant, and may open the employer to challenges if the limitations are included in some but not all paragraphs. In light of the EEOC’s now more aggressive posture on these issues, however, we recommend that the employer set off a statement of the protected rights in a separate paragraph of a separation agreement, perhaps in bold. In addition, to avoid any doubt, the employer could specifically refer to each paragraph containing restrictions on an employee’s rights (such as confidentiality and non-disparagement provisions) in the set-off paragraph, or begin each such section with language stating “Except as otherwise provided in paragraph [refer to paragraph protecting employee’s right to file charges and participate in investigations],” thus reinforcing that nothing in any section of the agreement limits those rights.

• Employers should continue to provide in their separation agreements that, despite the employee’s retention of the right to file a discrimination charge, the employee is waiving the right to recover monetary damages or other individual relief in connection with any such charge.

• Employers should freshly review any separation agreement provisions mandating cooperation with the employer in connection with litigation and proceedings in light of the EEOC’s now more aggressive posture on these issues. Employers may wish to consider modifying terms that might spark concern from the EEOC.

Kerry Notestine is a Shareholder in Littler’s Houston office and is co-chair of the firm’s Business Restructuring Practice Group. Terri Solomon is a Shareholder in the New York office and Daniel Thieme is a Shareholder in the Seattle office. If you would like further information, please contact your Littler attorney at 1.888.Littler, [email protected], Mr. Notestine at [email protected], Ms. Solomon at [email protected], or Mr. Thieme at [email protected].