How to Update Your Separation Agreements in Light of Recent EEOC Challenges

05 May 2014 Labor & Employment Law Perspectives Blog

Much has been written about the Equal Employment Opportunity Commission’s recent attacks on various provisions of separation agreements, including what are generally viewed as garden variety clauses that have been standard fare in separation agreements for many years. Among other things, the EEOC has challenged employers on the use of confidentiality clauses, non-disparagement clauses, and covenants not to sue.

The EEOC’s theory is this: Regardless of whether an employee and employer have already reached a mutual agreement regarding the terms of a separation, the EEOC still has an interest in addressing discrimination and retaliation issues that may be occurring in the workplace. The EEOC does not want separating employees to believe that employers can buy their silence (with a confidentiality clause, for example) as to any discrimination that may be occurring against the separating employee or any of his or her co-workers. Likewise, the Commission does not want separating employees to believe they are forbidden (because of a non-disparagement clause) from telling the EEOC about the bad things that occurred in the workplace and the bad actors there. Further, the EEOC does not want employees to believe that they have given up their right to file a charge of discrimination (because of a covenant not to sue) after settling their claims in a separation agreement. (The employer can certainly require the employee to sign a promise not to accept any personal monetary or other recovery arising from such charge, but the EEOC takes the position that an employer cannot forbid an employee from filing a charge in the EEOC or any state agency.) Finally, the EEOC has long held that a covenant not to sue cannot prohibit an employee from attacking the validity of the Agreement if it fails to include components required under the federal age discrimination laws (for example, the 21-day consideration period and seven day revocation period).

In light of this attack on years of commonly used practices, what changes should employers be considering to their separation agreements to defend against these EEOC tactics? At this point, we do not have significant judicial authority to guide the way, and for now at least, we do not know whether courts will accept some or all of the EEOC’s recent challenges. However, given the cost of litigation against the EEOC and the relative ease of modifying standard separation agreements, we believe employers should consider tweaking their agreements to address these concerns. Two illustrative paragraphs appear below. Option Two appears as a stand-alone paragraph and includes broader employee protections, and is therefore more legally conservative than Option One.

Nothing in this Agreement (including any confidentiality provision in paragraph ___, the non-disparagement provision in paragraph ___ and the covenant not to sue in paragraph ___) prevents you from filing a charge with the EEOC or otherwise cooperating with or providing information to the EEOC. However, this Agreement does prohibit you from obtaining any personal or monetary relief for yourself based on such a charge or based on you providing information to or cooperating with the EEOC.

Challenge to Validity, Truthful Testimony Under Oath and Cooperation with Government Agency: Nothing in this Agreement, including but not limited to the provisions in Sections ___, ____, ____, below (a) limits or affects your right to challenge the validity of this Agreement, including a challenge under the Age Discrimination in Employment Act of 1967, as amended; (b) interferes with your right and responsibility to give truthful testimony under oath; or (c) precludes you from participating in an investigation, filing a charge, or otherwise communicating with the Equal Employment Opportunity or state agency responsible for enforcing anti-discrimination laws. However, I promise never to seek or accept any damages, remedies or other relief for me personally with respect to any claims released in this Agreement.

There may not be a one-size-fits-all answer that is applicable in all situations, given the different risk tolerances and other interests that various companies may have, but all employers would do well to reevaluate their separation agreements with these considerations in mind.

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