Judge in Chicago Dismisses EEOC Suit Challenging CVS Health's Severance Pacts

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By Michael Bologna

Sept. 19 — A federal judge in Chicago Sept. 18 dismissed the Equal Employment Opportunity Commission's controversial lawsuit against CVS Health, which asserted the drug store chain's standard severance agreement interferes with departing employees' rights to file discrimination charges and participate in agency investigations.

Judge John Darrah of the U.S. District Court for the Northern District of Illinois granted CVS's motion to dismiss for failure to state a claim.

The novel case had attracted attention from employers across the country, some of which accused the EEOC of seeking to stretch the reach of Title VII of the 1964 Civil Rights Act into new territory.

Among other things, the severance agreement warns employees of “enormous penalties” if they violate provisions barring disparagement of CVS or requiring employees to promptly inform the company's inside counsel if the EEOC contacts them, the EEOC's Gregory Gochanour said at a conference in June. Gochanour is a senior trial attorney in the Chicago district office.

John Hendrickson, the EEOC's regional attorney in Chicago, told Bloomberg BNA Sept. 19 that Darrah announced his “decision result” in court during a status call. He said Darrah intends to issue a written opinion shortly.

“The EEOC was, of course, hoping for a different result,” Hendrickson said in an e-mail. “However, we have not yet received or reviewed the judge's decision—none of the parties have—so we're really not in a position to comment beyond that.”

CVS ‘Pleased,' Waiting for Opinion

Mike DeAngelis, a spokesman for CVS, said “we are pleased with the court's decision in this matter, but we prefer to wait for Judge Darrah to issue his opinion before commenting further.”

Woonsocket, R.I.-based CVS is a major drug retailer operating 7,700 pharmacies, 900 walk-in medical clinics and a pharmacy benefits division with 65 million plan members.

The EEOC originally filed suit in February, alleging CVS conditioned the receipt of severance benefits for certain employees on an “overly broad severance agreement.” The complexity, length and ambiguity of that agreement, the agency asserted, interfered with employees' rights to file discrimination charges and cooperate with the agency.

The EEOC further alleged that CVS had violated Section 707 of Title VII, which bars employer conduct that constitutes a pattern or practice of resistance to rights protected under the act. Section 707 also permits the EEOC to seek relief without a charge of discrimination and without engaging in administrative processes required under Section 706 of Title VII.

CVS argued that its standard severance agreement specifically states that it does not “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.”

CVS petitioned the court for dismissal, contending that its typical severance pact actually contains a clause informing employees they have the right to file an EEOC charge and to contact the agency or cooperate with an investigation.

Petition for Dismissal

In a reply brief filed with the court July 7, the company stated:

“[T]he EEOC fails to grapple with the fundamental hole in the premise of its claim. CVS Pharmacy's Agreement expressly and specifically says, in terms any employee would easily understand, that it does not ‘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.' ”

Deborah White, president of the Retail Litigation Center, said her organization filed an amicus brief in the case, fearful of the precedent EEOC was seeking to establish. White said Darrah was correct to find no discriminatory intent in the company's severance practices.

“This particular suit alleged CVS’s use of a standard form separation agreement, which is something employers in all different businesses use, is itself a per se pattern or practice violation of the discrimination statute,” White said told Bloomberg BNA. “And that is just a huge overreach in terms of what we think the statute says. It would have had enormous implications for not only retailers but the business community in general if a court were to agree with that overbroad interpretation of the law.”

To contact the reporter on this story: Michael Bologna in Chicago at mbologna@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com