EEOC’s Attack on Severance Agreements Rejected by U.S. Court of Appeals

Yesterday, in a result that will likely be viewed as an important victory for employers, the Seventh U.S. Circuit Court of Appeals affirmed the dismissal of the EEOC’s landmark lawsuit against CVS Pharmacy Inc. The Commission sued CVS in February 2014, claiming that CVS’s severance agreements interfered with employees’ rights under Title VII of the Civil Rights Act of 1964. The Seventh Circuit specifically rejected the EEOC’s attack on CVS’s severance agreements, holding that the agreements did not violate Title VII. The EEOC had argued that the release of claims and other provisions in the agreements deterred employees from filing charges of discrimination; the Seventh Circuit rejected that argument, holding that an employer may condition the receipt of severance benefits on an employee’s release of claims, and the denial of severance benefits is not a basis for a discrimination claim. The Seventh Circuit also held that the EEOC had not attempted to settle (or “conciliate”) the dispute prior to filing suit. “This decision is very important because it supports an employer’s ability to provide a severance payment to an employee in return for a release of claims. Many employers were very worried that the EEOC’s lawsuit would threaten their ability to obtain enforceable releases in return for a severance.” said Joe Schmitt, attorney at Nilan Johnson Lewis. “Nevertheless, in light of the increase court challenges to severance agreements, and the continuing scrutiny of the issue by government agencies, employers should always take a close look at their severance agreements.” To talk with Schmitt about the recent case ruling and suggested best practices for employers using severance agreements, contact Angela Deeney at (651) 789-1277 or angela@kohnstamm.com.

 

Associated Practice Areas

Associated Professionals