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EEOC Goes on the Attack Against Severance Agreements

Posted by Frank Steinberg | Mar 04, 2014 | 0 Comments

The EEOC has filed suit against the CVS pharmacy chain for ostensibly using “an overly broad severance agreement set forth in five pages of small print.  The agreement interfered with employees' right to file discrimination charges and/or communicate and cooperate with the EEOC….”  THe CVS form of agreement is not unusual, and mirrors those of many other larger employers. 

This has caught the attention of the management side employment bar, which is in something of an uproar over the EEOC's action. Doubtless this is because the challenged provisions are so common virtually all such agreements.  Employer see this, correctly, as an attack on all.  CVS just happens to be the lucky organization in the crosshairs. 

We handle severance agreements for both management and employees, and agree that that this case bears watching.  It is not so clear to us that this is a “the sky is falling” moment for employers. The fact is that in severance agreement an ex-employer trades dollars for peace.  The company wants the employee to be gone, and hopefully never to be heard from again.  (That sounds harsh, and there are companies that are not so rigid in their approach, but this is the truth of most severance arrangements.)  Anything that threatens the certainty that the company is trying to buy is bound to cause them concern.  Even if the EEOC wins the case, it is unclear to us that there will be a serious negative impact on employers.

Especially in a poor economy like the one that has existed for the last 5 or 6 years, the employers have the upper hand in severance negotiations.  Recently terminated employees are far more likely to take the offered severance and sign whatever the employer wants when the prospect of another job may be years away. 

As a result, severance agreements have been getting increasingly restrictive over time, and it may be that the EEOC's case is the first governmental effort to restore some balance.

We will follow this and update when there are developments.

About the Author

Frank Steinberg

Frank is the founder and principal of Steinberg Law, LLC. A Jersey boy born and bred, he focuses on employment litigation and counseling, business litigation,  and aviation law. Following law school and a clerkship in the federal district court Frank spent his early career with large litigation ...


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