Court Dismisses EEOC's Controversial Lawsuit Challenging Standard Provisions in Separation Agreements

22 September 2014 Labor & Employment Law Perspectives Blog

Earlier this year, the EEOC brought a lawsuit in federal court in Illinois claiming that the severance agreement used by a nationwide retail pharmacy in connection with the terminations of hundreds of employees unlawfully restricted the rights of these employees under Title VII to file charges of discrimination with the EEOC and to cooperate in EEOC investigations. As we noted in response to the concern that many employers shared regarding the attack on standard separation agreement provisions, the case in Illinois is just one of a number of recent suits brought by the EEOC in its attempt to challenge the enforceability of separation agreements that contain routine provisions used by many employers in their separation and settlement agreements. These provisions include nondisparagement and confidentiality clauses and promises by the employee not to bring suit against his/her employer.

In the lawsuit in Illinois federal court, the EEOC went so far as to allege that the release of all claims provision violated Title VII. The EEOC has claimed that these and other routine separation and settlement agreement provisions are an improper attempt to deter employees from cooperating with the EEOC, even though the employer’s separation agreement contained an express provision allowing employees to engage in such cooperation. The case has been closely watched because, if the EEOC should prevail, it would create great uncertainty as to what provisions can properly be included in a release of employment claims.

Good news for employers could be on the horizon however. Last Thursday, the court in the case stated it would be dismissing the EEOC’s lawsuit. Though the judge has not yet issued its decision explaining its reasoning for the dismissal, it appears that the court has rejected the EEOC’s attempt to dramatically rewrite the law governing releases of employment claims by employees. While the EEOC may appeal, and there are other similar cases pending, this decision is tentatively good news for employers who enter into separation and settlement agreements that contain provisions similar to those in the employer’s challenged separation agreement.

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