Cases & Deals

CVS Pharmacy wins resounding Seventh Circuit victory over EEOC "pattern or practice" challenge to severance agreement

Clients CVS Health Corporation

On December 17, 2015, the Seventh Circuit affirmed the dismissal of a suit in which the Equal Employment Opportunity Commission ("EEOC") alleged that a standard severance agreement used by Jones Day client CVS Pharmacy, Inc. constituted a "pattern or practice" of resistance to rights secured by Title VII of the Civil Rights Act of 1964. The EEOC had argued that the severance agreement was confusing and so could have led former employees to believe that they were prohibited from filing charges with the EEOC.

The Seventh Circuit agreed with all three independent grounds pressed by Jones Day as bases for rejecting the EEOC's lawsuit. First, the court expressly rejected the EEOC's "expansive interpretation of its powers" under Title VII's pattern-or-practice provision, ruling that this authority "simply allows the EEOC to pursue multiple violations of Title VII" but "does not create a broad enforcement power for the EEOC to pursue non-discriminatory employment practices that it dislikes." Second, the court agreed with Jones Day's position that, in any event, CVS Pharmacy's severance agreement specifically authorized participation in government anti-discrimination proceedings and that the EEOC's contrary interpretation was unreasonable. Finally, the court affirmed the ground upon which the District Court had granted summary judgment to CVS Pharmacy, concluding that the EEOC was obligated to engage in conciliation efforts with CVS Pharmacy before filing the suit but had failed to do so.

This case has been closely watched by employers across the country because of its potential effect on ubiquitous terms in severance agreements, and the decision has significant substantive and procedural implications for the EEOC's exercise of its pattern-or-practice authority. Indeed, because of those significant implications, EEOC petitioned the Seventh Circuit to rehear the case en banc. Jones Day opposed that request, and in March 2016, the court denied it without comment.

On January 18, 2017, Jones Day secured an additional victory for CVS Pharmacy when the the United States District Court for the Northern District of Illinois granted CVS's motion for attorney’s fees and determined that the EEOC violated both the law and EEOC's own regulations when it sued CVS. In so doing, the court adopted the position put forward by Jones Day that the EEOC violated the law when it refused to attempt a private settlement before it filed suit. On February 22, 2017, the court ordered the EEOC to pay CVS more than $300,000. The EEOC filed a notice of appeal on April 20, 2017.

Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 1:14-cv-00863 (N.D. Ill.); No. 14-3653 (7th Cir.)

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