By Joseph S. Murray IV

For the past couple of years, the nonunion employment bar has watched as the National Labor Relations Board upended the law surrounding handbooks, waivers, arbitration agreements and a host of other aspects of the employment relationships. The Equal Employment Opportunity Commission, apparently not content to allow the NLRB to have all of the fun, has stepped up the use of its authority to attack separation and employment agreements.

In EEOC v. CVS Pharm., Inc., 809 F.3d 335 (7th Cir. 2015), the EEOC contended that CVS’ standard severance agreement constituted a pattern and practice of resistance to the full enjoyment of rights in violation of Section 707(a) of Title VII (42 U.S.C. § 2000e-6). The EEOC pointed to seven specific clauses it believed violated Title VII. EEOC v. CVS Pharm., Inc. Cmplt. ¶ 8.a.–f. (last visited Dec. 6, 2016). The EEOC contended the clauses each contained language that interfered with an employee’s right to file a charge with the EEOC or to participate in an EEOC investigation.

Interestingly, CVS in fact explicitly allowed for charge filing and participation in the release: “Nothing in this paragraph is intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with any such agency in its investigation.” Cmplt. ¶ 8.f. Similar to the NLRB, the EEOC appears to take the position that this single savings clause is insufficient when it appears only once and not after every offending clause.

Similarly, in EEOC v. Doherty Enters., 126 F. Supp. 3d 1305 (S.D. Fla. 2015), the EEOC alleged that an arbitration agreement contained provisions that violated Section 707. Doherty Enterprises’ arbitration agreement stated that claims arising under Title VII and other federal laws must be submitted to arbitration—the agreement specifically provides that arbitration must be used in lieu of “other governmental dispute resolution forum,” e.g., the EEOC. While the arbitration agreement contained a savings clause for NLRB and workers’ compensation claims, it did not have a savings clause for claims under the EEOC’s jurisdiction.

While the EEOC’s position in both cases is not surprising, the aggressive way it brought the suits is. In both cases, the EEOC brought the suit under Section 707 in what appears to be an attempt to avoid conciliation (in Doherty there was also no individual or Commissioner’s charge of discrimination). In both cases, the EEOC argued that under a Section 707 “pattern or practice of resistance” case, it is not obligated to follow the administrative procedures contained in Section 706 (42 U.S.C. § 2000e-5), including conciliation. The 7th Circuit rejected the EEOC’s position, noting that the EEOC’s position eliminates the specific provision of Section 707(e) that requires the EEOC to follow Section 706. CVS Pharm., Inc., 809 F.3d at 340; cf. Ariz. ex rel. Horne v. Geo Grp., Inc., 816 F.3d 1189, 1201 (9th Cir. 2016). The Southern District of Florida, on the other hand, denied Doherty Enterprises’ motion to dismiss on the same grounds, finding the EEOC needs only “reasonable cause” to file suit under Section 707 and that Section 707(e) requires conciliation only when there is a charge of discrimination. Doherty Enters., 126 F. Supp. 3d at 1310.

In October, the EEOC issued its Strategic Enforcement Plan (SEP) for Fiscal Years 2017–2021. In the SEP, the EEOC states it “will focus on . . . overly broad waivers, releases, and mandatory arbitration provisions (e.g., waivers or releases that limit substantive rights, deter or prohibit filing charges with EEOC, or deter or prohibit providing information to assist in the investigation or prosecution of discrimination claims).” SEP, p. 8. The agreements in the CVS and Doherty Enterprises cases are examples of the agreements and contract clauses the EEOC is focusing on in the SEP. In addition, an EEOC official, speaking with a number of North Carolina labor and employment attorneys in late October, stated that the EEOC will focus on covenants not to reapply or rehire contained in settlement or severance agreements. While the EEOC has long asserted these covenants are retaliatory, see, e.g., Tom Gilroy, EEOC Opposes Settlement Clauses That Bar Re‐Application and Rehiring, BNA Daily Labor Report, Apr. 4, 2008, not one court has sided with the EEOC. See, e.g., Jencks v. Modern Woodmen of America, 479 F.3d 1261 (10th Cir. 2007).

If the EEOC is serious about relitigating the viability of these covenants, then its actions in CVS and Doherty Enterprises shed light on how it will likely attack repeated or institutional use of covenants not to reapply or rehire. By using Section 707, the EEOC will potentially be able to pressure employers into abandoning such covenants through immediate litigation and the substantial costs associated with the litigation. While current case law would support motions to dismiss, the EEOC has no problem filing seemingly quixotic cases in an effort to prove a point or change the law.  See, e.g., CRST Van Expedited, Inc. v. EEOC, 136 S. Ct. 1642 (2016) (district court awarded attorneys’ fees to CRST in the amount of $4,560,285.11); EEOC v. Freeman, 126 F. Supp. 3d 560 (D. Md. 2015) (court ordered the EEOC to pay $938,771.50 after stating “[t]he EEOC needed to stop pursuing this case after Freeman showed that the EEOC’s dog did not hunt.”). Since obtaining an award of attorneys’ fees against the EEOC is a difficult proposition with a low chance of success, many employers are likely to abandon such clauses once the EEOC files suit.

Ultimately, employer-side attorneys must now pay closer attention to the pronouncements of the EEOC, as well as the NLRB, when drafting documents for their clients. For employee-sided attorneys, the EEOC’s position will provide additional arguments to refuse covenants not to reapply or rehire or to push for actual consideration for the client agreeing to such terms. In addition, the EEOC’s position on other agreement terms may open up additional claims against employers or arguments while negotiating settlement. Regardless of who you represent, all employment attorneys should continue to monitor the EEOC’s actions in this area and any successes it may achieve.