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CVS Lawsuit Could Pose Major Changes to Tight Severance Contracts

March 29, 2014

When companies downsize, they rely on severance agreements to shield themselves from the threat of lawsuits.  Among other legal components, severance contracts typically include a general release of claims, a nondisparagement clause, and a covenant not to sue.  By agreeing not to sue their former employer, the departing individual receives money and/or other benefits.

However, some argue that these contracts are too tight; more specifically, the Equal Employment Opportunity Commission is pointing the finger at CVS, the country’s second-largest drugstore chain.  The EEOC, which is a federal agency mandated to enforce laws against bias in the workplace, is suing CVS for having an “overly broad” and “misleading” severance agreement, which according to the EEOC could impede workers from exercising their rights under job discrimination laws.

Regardless of whether or not an employee has signed a separation agreement, he or she still has the right to file a complaint with the EEOC if discrimination or wrongful termination occurred.  Further, a severance agreement cannot prevent a former employee from participating in an EEOC investigation.  The point of issue, in this case, arises where the EEOC believes that the misleading language contained in CVS’s severance contract discourages departing employees from exercising these rights and that agreements of this nature can be very confusing to individuals who are stressed about job loss.  For many, there exists a conflict between a nondisparagement clause, and the desire to bring charges with the EEOC.

If the Equal Employment Opportunity Commission wins this case, companies will undoubtedly be forced to take another look at the language within their severance contracts.

If you have questions regarding your rights as an employee, please contact HoganWillig at 716-636-7600