The EEOC Takes Aim, Once Again, at Employers’ Separation Agreements

On April 30, 2014, the U.S. Equal Employment Opportunity Commission filed suit against a private college, charging for the second time in two months that an employer’s severance agreement was unlawful. The EEOC alleged that CollegeAmerica, Inc.’s Separation and Release Agreements violated federal law by conditioning the receipt of severance payments and benefits on the employee’s promise not to file a charge with, or cooperate in investigations by, the EEOC against CollegeAmerica.

Debbi Potts, the campus director of CollegeAmerica’s Wyoming campus, resigned in July 2012 and signed a separation agreement in September 2012. The one-page agreement included the provisions that Ms. Potts would “refrain from personally (or through the use of any third-party) contacting any governmental or regulatory agency with the purpose of filing any complaint or grievance that shall bring harm to CollegeAmerica” and would not disparage the reputation of CollegeAmerica. Ms. Potts subsequently filed a charge of discrimination with the EEOC against CollegeAmerica.

During the EEOC’s investigation, CollegeAmerica produced its form severance agreements that it has used since 2012, all of which had provisions in which the employee released all claims for discrimination and claims arising under Title VII of the Civil Rights Act of 1964; agreed not to assist anyone in pursuit of claims against the company, except as compelled by law; and agreed that the employee had not filed any lawsuits or administrative action in his/her name against the company.

The EEOC’s suit against CollegeAmerica claims that Ms. Potts’ agreement, and similar provisions in the other form agreement, would prevent the employee from filing a discrimination charge with the EEOC or cooperating with the agency. The Complaint alleges that all the agreements include “provisions that chill and deter the filing of charges of discrimination and may interfere with employees’ ability to communicate voluntarily with the EEOC . . . and interfere with employees’ protected right to file charges or participate in investigations or proceedings conducted by the Commission.”

The EEOC’s current lawsuit indicates that it will continue to scrutinize and litigate employers’ separation agreements under the guise that any type of waiver restricts an employee from filing a charge with the EEOC or cooperating/communicating with the EEOC. Just two months ago, the EEOC filed a similar suit against CVS Pharmacy, Inc. in Illinois federal court alleging the company’s separation agreements unlawfully prevented employees from communicating with the agency or filing discrimination claims—despite the fact that CVS actually included language that a former employee is not prohibited from filing a complaint or cooperating in an investigation with a government agency, such as the EEOC. CVS has filed a motion to dismiss that lawsuit.

Based on the filing of CollegeAmerica and CVS lawsuits, it appears that the EEOC’s new position toward separation agreements is that it is seeking to invalidate even separation agreements that do not prohibit an individual to file charges and participate in a governmental investigation—as well as those agreements that expressly permit individuals to do so.