In a closely watched case that has had management-side employment attorneys (and their clients) on the edge of their seats, the Seventh Circuit has just handed the Equal Employment Opportunity Commission (EEOC) a defeat. The court held that the EEOC cannot pursue its claim that CVS Pharmacy’s severance agreement violates anti-discrimination laws, because the Commission did not first attempt to conciliate before suing. EEOC v. CVS Pharm., 2015 U.S. App. LEXIS 21963 (7th Cir. Dec. 17, 2015).
The back story is one any employer knows by heart. In July 2011, the company fired a store manager, but in the tradition of “don’t go away mad, just go away” it offered her severance in return for signing the company’s standard separation agreement. That agreement contained a broad release of claims, including a release of claims under anti-discrimination laws.
The terms of the severance agreement were the standard terms employers rely upon all of the time to get the comfort of being “done and done” with a terminated employee. As required under recent interpretation of existing law, one of the terms provided that while the employee was waving the right to sue in court, it was not intended to prevent the employee’s ability to “participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws.”
So, one month after signing the agreement, the store manager filed an EEOC charge alleging race and sex discrimination. CVS responded to the charge by providing a copy of the severance agreement. Then things took a turn right down a rabbit hole.
Nearly two years after the charge was filed (the delay is not inconsistent with the space-time continuum under which EEOC investigations fall), an EEOC regional attorney sent CVS a letter stating there was “reasonable cause” to believe the CVS severance agreement established “a pattern or practice of resistance to the full enjoyment of the rights secured by Title VII . . . and that the pattern or practice is of such a nature and is intended to deny the full exercise of the rights described in Title VII . . . .”
The letter continued that CVS “conditioned employees’ receipt of severance pay on an overly broad, misleading and unenforceable” agreement that “interferes with employees’ right to file charges with the EEOC, . . . communicate with the EEOC[,] and participate in EEOC . . . investigations.” The Commission gave CVS 14 days to enter into a consent decree. When that did not occur (the EEOC made clear it was the only way the matter would be resolved), the EEOC sued.
Before suing the EEOC is supposed to engage in efforts at conciliation. Indeed, that is one of the Commission’s main purposes for existing. Here, however, it contended that it was not required to engage in conciliation because it was proceeding under Section 707(a) of Title VII, and therefore not bound by the pre-suit requirements of Section 706.
The district court disagreed and granted CVS’s motion for summary judgment. The EEOC appealed. Affirming the lower court’s decision, the Seventh Circuit rejected what Judge Flaum called the Commission’s “novel” and “expansive” reading of Section 707(a).
Joined by Judges Manion and Rovner, Judge Flaum stressed that “suits under Section 707(a) must challenge practices that threaten the employee’s right to be free from workplace discrimination and retaliation for opposing discriminatory employment practices – the only rights secured by Title VII.” The court held that there’s no difference between the EEOC suing for an alleged “pattern or practice of resistance” under Section 707(a) and a “pattern or practice of discrimination” under Section 707(e).
Judge Flaum suggested that this “interpretation is not only most consistent with congressional intent, it is the approach required under the EEOC’s own regulations.” The EEOC’s interpretation, on the other hand, “reads the conciliation requirement out of the statute,” with the Commission never required to engage in conciliation efforts before suing “because it could always contend that it was acting pursuant to its broader power under Section 707(a).” In so doing the court relied upon the Supreme Court’s decision in Mach Mining, LLC v. EEOC, 135 S. Ct. 1645 (2015) earlier this year that conciliation is at the heart of Title VII’s statutory scheme.
While not the basis for its decision, the Seventh Circuit also took the EEOC to task for its argument that the severance agreement restricted employee rights. To the contrary, said the court, the agreement “does not obstruct the signatory’s ability to file a charge with the EEOC.” It found the EEOC’s claim that the agreement had too much “legalese” to be lacking as well.
The take away here for lawyers handling employment law claims, regardless of the side, is that the EEOC’s effort at over reach is over – at least for now. Happy Holidays.