EEOC’s attack on garden-variety severance agreements suffers a potentially MAJOR setback

Earlier this year, the EEOC filed a federal lawsuit against CVS in which it claimed that drugstore chain “conditioned the receipt of severance benefits for certain employees on an overly broad severance agreement set forth in five pages of small print.” Specifically, the EEOC took issue with several common provisions that you guys probably use in your severance agreements:

• a general release;
• a non-disparagement obligation;
• a confidentiality provision;
• a covenant not to sue; or
• a cooperation clause

But don’t go throwing your severance agreements in the trash just yet.

More after the jump…

Last Thursday, U.S. District Judge John Darrah announced at a hearing that the court would dismiss the EEOC’s lawsuit based on the EEOC’s failure to state a legally-valid claim.

An opinion has not yet been published. However, here are links to the briefs:

• CVS
• EEOC
• Retal Litigation Center, Inc. as amicus curiae.

In its brief, CVS raised three main arguments: (1) its severance agreement did not interfere with the right of any former employee to file EEOC charges or cooperate with the EEOC; (2) merely including contractual terms in a severance agreement is not retaliatory; (3) the EEOC failed to attempt to conciliate with the EEOC before filing its lawsuit.

The basis for dismissal is yet unclear. If it turns out that the court dismissed the case based on the third argument, then the EEOC’s position on the merits remains untested. However, if the Court dismissed the case, finding no merit in the EEOC’s main argument, then this represents a significant blow to the EEOC’s position that many common severance agreements are retaliatory.

UPDATE [10.8.14 1:27 PM]: The court has issued its opinion. The EEOC lost because it failed to conciliate. Phil Miles has more on this at Lawffice Space.