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Tenth Circuit Upholds EEOC's Authority to Sue in Relation to Non-Disparagement Provision

    Client Alerts
  • October 13, 2017

When an employer provides an employee with a release and settlement agreement, the document regularly includes provisions that prohibit the employee from criticizing the employer and related parties. Several years ago, the Equal Employment Opportunity Commission advised employers that settlement agreements could interfere with employees’ statutory rights if they prevent them from filing charges with the EEOC. Last month, the Tenth Circuit Court of Appeals agreed with the EEOC’s position in a case where an employer attempted to use a settlement agreement’s non-disparagement language to sue an employee who later provided information to the EEOC.

In EEOC v. CollegeAmerica Denver, Inc., the defendant resolved a dispute with an employee by entering into a settlement agreement that contained a non-disparagement clause. The employer later concluded that the employee breached the agreement and sued her in state court. The EEOC then sued the employer in federal court, alleging that its interpretation of the settlement agreement’s non-disparagement language interfered with the employee’s statutory rights and also constituted retaliation against her. Specifically, the company claimed that the employee had reported adverse information to the EEOC without first informing the company.                                                           

The Tenth Circuit reversed a dismissal of the EEOC’s interference claim and remanded both it and the retaliation allegations to the district court. Although the decision primarily dealt with the question of whether the interference claim was moot, the court upheld for now the EEOC’s authority to sue based on the terms of the settlement agreement. This decision may embolden the agency to pursue claims against employers it views as using settlement agreements to attempt to prevent employees from later complaining to the agency.

This decision does not mean that employers cannot include non-disparagement provisions in settlement agreements with employees. However, all such agreements should include clear language stating that nothing in the agreement prevents the employee from communicating with or making any claim to any government agency, including the EEOC. Failure to include this disclaimer, or attempts to punish employees for communicating with a government agency, can subject the employer to later interference and retaliation claims.