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.