The Equal Employment Opportunity Commission (EEOC) has always kept an eye on the specific language used in separation agreements. This was evidenced in EEOC v. Eastman Kodak Co. when Eastman Kodak inserted a clause which obtained a release from discrimination. This clause would affect the employee’s right to file a discrimination charge against the employer or cooperate with the EEOC or a similar government agency who may be investigating the company’s practices.
In 2014, two lawsuits were filed by the EEOC against employers whose separation agreements violated anti-discrimination laws by making severance pay and other separation benefits conditional. Though both cases were dismissed by the respective courts on technical grounds, the EEOC has not relented in its efforts to make sure that the terms of severance agreements do not violate the Title VII rights of employees.
We get it. Every company wants to protect itself against actions taken by disgruntled former employees who believe they are entitled to large pay-outs simply because they have been asked to leave. However, you must keep your overly-zealous Human Resources and Legal teams from going too far in their efforts to protect your company.
If any of these practices seem familiar, then perhaps the language in your severance agreements will place you at odds with the EEOC:
There is one aspect of the EEOC’s expectations that is not at all acceptable to employers. That is the EEOC’s wish to stop employers from the practice of imposing a confidentiality clause that prohibits current and former employees from discussing the allegations and conditions that form the basis of a discrimination charge.
As is often true when it comes to employment legislations, there is a great deal of ambiguity when it comes to the specific clauses in a separation agreement which could be considered as overly broad, misleading or unenforceable. Neither the actual legislation nor court precedents provide much guidance. This places the onus of avoiding culpability squarely on the employers.
The EEOC is not the only government agency involved in addressing this issue. Non-compliance may also expose an employer to action from the National Labor Relations Board (NLRB) and the Securities and Exchange Commission (SEC) if unable to substantiate that the required confidentiality agreement is tied to a legitimate business objective. These agencies are most likely to weigh in if there is a need to protect witnesses, the possibility of evidence being destroyed, and indications of a cover up or fabricated testimony.
Our best advice: remember that severance agreements only come into play when a party is involuntarily leaving a position. Termination is almost always accompanied by high levels of emotion. The best way to protect your company is to make every effort to make the process as objective as possible. Confidentiality clauses in the severance agreement should consider the employee’s former role in determining the level of protection that is needed and should specifically state what information is to be considered confidential. Recognize that a senior finance person may have access to information that a call center resource would not. Here’s a simple test that you should apply: Can you state a legitimate business reason for each restriction that you place in the severance agreement? If not, ask your attorneys and HR team to take another look.
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