Recently, the U.S. Equal Employment Opportunity filed suit against CVS Caremark—the nation’s second largest drugstore chain, challenging the company’s standard severance agreement. In the lawsuit, the EEOC specifically challenged six (6) separate provisions contained in CVS’ severance agreements:
(1) A Cooperation Clause – a clause requiring the former employees to promptly notify the company of any subpoena, deposition notice, interview request or other process relating to any administrative investigation;
(2) A Non-Disparagement Clause – a clause in which the former employees promise not to make any statements that would “disparage,” or harm the business reputation of the company and the company’s officers/directors (even if the statements are true);
(3) A Non-Disclosure Clause – a clause in which the former employees agree to not disseminate information about staff, wages and benefit structures, succession plans and affirmative action plans (without the prior written authorization of the company);
(4) An Attorneys’ Fees Clause – clause in which the former employees promise to promptly reimburse the company for any legal fees it incurs as a result of a breach of the agreement by the former employee;
(5) A Covenant Not to Sue – a promise from the former employees no to sue (including the filing of any company with any agency); and
(6) A General Release – a release by the former employees of any claim, including claims of unlawful discrimination.
If these provisions sound familiar, there’s a good reason—virtually all employers rely on these provisions to end the threat of potential lawsuits. In exchange, the departing employees receive money or other consideration. According to CVS, more than 650 former employees entered into separation agreements with the company based on the challenged severance agreement.
The EEOC claims that CVS’ severance agreement contracts interfere with a worker’s rights to bring charges with the agency. But CVS said the EEOC’s suit is “unwarranted” because its severance agreement includes language “to state that it does not prohibit employees from doing so.” It is too soon to predict the outcome of this litigation—so the suit is definitely worth monitoring.
The U.S. Department of Health & Human Services, Office of Inspector General (OIG) issued its second Advisory Opinion of the year on February 12, 2014. In this opinion, the OIG concluded that it would not impose sanctions under the anti-kickback statute or civil monetary penalty law on Medicare supplemental health insurance (Medigap), preferred provider organizations (PPO’s) and hospitals participating in PPO networks. The OIG conducted analyses under both the anti-kickback statute and civil monetary penalty law.The OIG determined that the arrangement failed to meet the safe harbor for waivers of beneficiary coinsurance and deductible amounts, or the safe harbor for health plan reduced premium amounts under the anti-kickback statute analysis. Nevertheless, the OIG found the Proposed Arrangement presents a low risk of fraud or abuse because: (1) Medicare payments for inpatient services are fixed and would not affect waivers or reductions in beneficiary cost sharing; (2) the arrangement was not likely to increase utilization because the amount waived by the hospital was owed by the insurer, not the patient; (3) hospital competition would not be adversely impacted because participation in the PPO networks would be open to all Medicare-certified hospitals that meet state law; (4) the remuneration would not affect medical judgment because patient would not incur any additional cost based on their hospital selection and the physicians and surgeons would receive no remuneration; and (5) the Policyholders would be informed that they may select any hospital without penalty or increased cost.The OIG next analyzed the arrangement under the civil monetary provision because the premium credits were incentives to choose a network hospital. OIG concluded the premium credits are sufficiently similar in purpose and effect to differentials in coinsurance or deductible amounts and therefore, excepted from the definition of remuneration. The OIG also noted that the arrangement had the potential to decrease the costs to certain Medigap Policyholders without increasing costs to others and the potential to reduce state-insurance rates.
