The EEOC is Watching: Guidance on Language in Separation Agreements | DCR Workforce Blog

The EEOC is Watching: Guidance on Language in Separation Agreements

The EEOC is Watching:  Guidance on Language in Separation AgreementsThe 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:

  • Asking an employee to give up the right to file an anti-discrimination charge with federal, state or local agencies.
  • Interfering with an employee’s right to participate or cooperate in any proceedings or enquiries conducted by any government agency.
  • Using language which discourages or prohibits employees from reporting any improper conduct on the part of the employer to the government.
  • Using legalistic and confusing terms; a lack of transparency in the language of the separation agreement.
  • Making the severance pay conditional upon the non-disclosure of any of the employer’s actions.
  • Requiring employees to notify the Company when responding to a subpoena or when participating in any investigation by a regulatory or law enforcement agency.
  • Prohibiting the employee from revealing any negative information or making disparaging statements against the company and its officers, directors and employees.
  • Prohibiting disclosure of confidential information to anyone (including court officials) without prior written approval.
  • Imposing a general release on all claims against the company by the employee.
  • Requiring the employee to waive all rights to be a part of any recovery in a subsequent action brought against the employer by the EEOC or other employees.
  • Requiring the employee to accept a blanket waiver of any future action or claims against the company in case of any failure to adhere to the agreement.

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.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.