CVS Scores Seventh Circuit Win in EEOC's Severance Case

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By Patrick Dorrian

Dec. 17 — The Equal Employment Opportunity Commission can't pursue its claim that CVS Pharmacy Inc.'s standard severance agreement interferes with employees' federally protected civil rights, the U.S. Court of Appeals for the Seventh Circuit held Dec. 17, citing the agency's failure to attempt to resolve its dispute with the company before suing.

The result in the closely watched case will likely be viewed as a victory for employers, as the court rejected the EEOC's contention that it doesn't need to comply with its usual pre-suit obligation under Title VII of the 1964 Civil Rights Act to conciliate when it believes a company has engaged in a pattern or practice of “resistance” to a worker's federally protected job rights.

The court was unpersuaded by the agency's attempt to distinguish between claims alleging a “pattern or practice of resistance” and those alleging a “pattern or practice of discrimination” under the statute.

Section 707(a) of Title VII, which includes the reference to a pattern or practice of resistance to discrimination, “does not create a broad enforcement power for the EEOC to pursue nondiscriminatory employment practices that it dislikes—it simply allows the EEOC to pursue multiple violations of Title VII” in a single proceeding, Judge Joel M. Flaum wrote, affirming a lower court's summary judgment in favor of CVS.

The EEOC's allegation that an employer engages in Title VII resistance when it conditions a worker's receipt of severance or similar post-termination benefits on a promise not to file an administrative discrimination charge against the company has previously been rejected by the Seventh (158 DLR AA-1, 8/17/05), Third (30 DLR AA-1, 2/13/15) and Sixth (206 DLR A-1, 10/25/06) circuits, Flaum added.

Lawsuit Angered Management Community

The commission sued CVS in February 2014 in federal court in Illinois. It argued that by offering a severance agreement that might deter terminated employees from filing charges with the EEOC or participating in EEOC proceedings, the company had engaged in an unlawful employment practice under Title VII.

According to the Seventh Circuit, the EEOC had refused to first explore conciliation efforts with CVS prior to filing its lawsuit.

The lawsuit drew the ire of management lawyers, who argued that the agreement CVS presented to former CVS store manager Tonia Ramos is a typical severance pact that actually contains a clause informing workers that they have the right to file an EEOC charge and to contact the agency or cooperate with an EEOC investigation (109 DLR CC-1, 6/6/14).

Rejecting the EEOC's contention that conciliation wasn't required because the agency was asserting a pattern-or-practice claim under Section 707(a) of Title VII, 42 U.S.C. § 2000-e6(a), rather than Section 707(e), the U.S. District Court for the Northern District of Illinois granted summary judgment to the company.

It found that Section 707(a) doesn't create a cause of action for the EEOC separate from the agency's right to bring pattern-or-practice cases against employers under Section 707(e) of the statute (196 DLR A-3, 10/9/14).

Appeals Court Rejects ‘Expansive' Reading

Affirming the lower court, the Seventh Circuit rejected the EEOC's “novel” and “expansive” reading of Section 707(a), which it said permits the agency to challenge an employer's alleged “resistance to the full enjoyment of any of the rights secured by [Title VII].”

Based on that language, it held 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.” 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), the Seventh Circuit ruled.

Flaum said the court's “interpretation is not only most consistent with congressional intent, it is the approach required under the EEOC's own regulations.”

The interpretation put forth by the EEOC “reads the conciliation requirement out of the statute,” Flaum said—the agency would never be 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).” To the contrary, he said, the U.S. Supreme Court recently reaffirmed Congress's intent that conciliation is “a key component” of Title VII's statutory scheme (82 DLR AA-1, 4/29/15).

Company ‘Very Pleased' With Ruling

The company is “very pleased” with the Seventh Circuit's “decision to affirm the district court's grant of summary judgment” against the EEOC, Mike DeAngelis, senior director of corporate communications at CVS Health, told Bloomberg BNA Dec. 17.

The EEOC told Bloomberg BNA Dec. 17 that it was still reviewing the Seventh Circuit's decision and had no comment on the ruling.

Judges Daniel A. Manion and Ilana Diamond Rovner joined the opinion.

Elizabeth E. Theran of the EEOC in Washington represented the commission. Jones Day represented CVS.

To contact the reporter on this story: Patrick Dorrian in Washington at pdorrian@bna.com

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