You Can Buy Peace, Not Silence

Most civil cases never make it to trial. Some fall to summary judgment, but many more are settled.

Employers commonly want to end disputes with employees, either current or former, by entering into a settlement agreement that provides confidentiality. Many businesses fear if an employee’s co-workers learn the company settled, it will subject the business to more claims. In other words, knowledge of settlements will put a target on the employer’s back, especially if the settlement was for more than nuisance value.

Employers also often seek nondisparagement clauses, requiring the former litigant not to disseminate negative information to minimize negative publicity by someone whoobviously did not have a good relationship with the employer. Their true aim has never been “chilling” reports to federal agencies. But, myopically, the U.S. Equal Employment Opportunity Commission sees only how those clauses might — not will — affect its goals.

The EEOC has taken the position since at least 1997 that settlement agreements cannot obstruct individuals from providing it with information during an investigation, and that position has been upheld by courts. However, the EEOC wants agreements to expressly state a confidentiality clause does not bar employees from going to the EEOC. 

In May 2013, the EEOC’s Chicago District Office, sued an employer in the U.S. District Court for the Northern District of Illinois, alleging its standard severance agreements violated employees’ rights to file charges with the EEOC. That case settled soon after, but to achieve that settlement, the employer agreed to include language in severance agreements that does not limit in any way an employee’s right to file a charge or claim of discrimination with the EEOC or comparable state or local agencies.

Another, similar lawsuit was brought by the EEOC against a large retail pharmacy chain in February 2014, and is currently pending, also in the Northern District of Illinois. The EEOC again challenged the employer’s confidentiality clause and nondisparagement clause among other terms, and both challenges were made under Title VII. Based on these two cases, which are meant to make law and precedent, rather than recover money, it appears that settlement or severance agreements — particularly where used broadly as standard practice by an employer — will be part of the EEOC’s strategic focus going forward.

Employers may take issue with the confidentiality clause that declares an individual’s right to participate in the EEOC process. After all, the company is already — in many cases — the subject of a threatened or current lawsuit. The clause might serve as a flag to the employee that he or she has another way to continue a dispute. In other words, employers worry that such a clause puts a new target on their back. 

However, if employers wish to continue using confidentiality clauses that are not consistent with the EEOC’s current approach, they should do so judiciously. In the meantime, should the currently pending lawsuit settle or be litigated, it will clearly provide an indication of the EEOC’s course to come.