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EEOC Sues CVS Over Broad Release Language in Severance Agreements

    Client Alerts
  • February 28, 2014

In most situations, employers that pay departing employees significant amounts of severance require a release of legal claims in exchange. However, the wording of such releases can by itself create new legal headaches for the employer. This reality was made clear last month when the Equal Employment Opportunity Commission sued the drugstore chain CVS over alleged language in its standard employee release form.
Well established law prevents releases and settlement agreements from keeping an employee from making a complaint to a government agency as a condition of settlement. The EEOC claims that the CVS release is written so broadly that employees signing it could conclude that it prohibits them from filing discrimination charges or communicating with the EEOC. The EEOC alleges that use of such release language violates a provision of the Civil Rights Act of 1964 that applies to employers that resist employees’ rights under the statute. The agency takes the position that broad release language violates this provision even if the employer never tried to use the release to stop an employee from alleging discrimination to the EEOC.
Employers should review language used in releases and settlement agreements to make certain that it cannot be interpreted to prohibit complaints to a government agency. The release should be brief and written as plainly as possible. Some agreements specifically exempt government agency complaints from their terms. Other releases apply only to lawsuits filed by the employee, and make no reference to charges or other actions that could be interpreted as administrative in nature. Many employers no longer include covenants not to sue in their releases, partially due to concerns that these provisions will be read to apply to EEOC charges and similar complaints.
These concerns do not apply to situations where an employee has already filed an EEOC charge and the release agreement requires that the employee notify the agency of the settlement, and seek to have the charge withdrawn. Employers can prepare effective releases that remove the potential for litigation initiated by the departing employee. However, these agreements should not attempt to overreach by potentially applying to their rights to complain to a government agency.