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EEOC Signals a Continuing Assault on Employer Severance Agreements

Posted on Fri, Jun 27, 2014 @ 10:55 AM

by Jack B. HarrisonJack B. Harrison

In the past several months, the Equal Employment Opportunity Commission (EEOC) filed two lawsuits confirming the agency’s intent to continue to aggressively challenge severance agreements negotiated between an employer and employee.

The first of these cases, EEOC v. CVS Pharmacy Inc. was filed in February 2014 in the United States District Court for the Northern District of Illinois.  In this first suit, the EEOC alleged that the defendant had violated Title VII by conditioning its offer of severance benefits on the employee signing a severance agreement that, according to the EEOC, “deters the filing of charges and interferes with employees’ ability to communicate voluntarily” with the EEOC.  According to the EEOC’s complaint, the offending provisions in the severance agreement included a requirement that the employee notify the company if he or she became part of an administrative investigation, a non-disparagement clause, a non-disclosure of confidential information clause, a release of all claims by the employee, and a covenant not to sue the company.  As should be obvious to most employers, many of these types of clauses are standard provisions in many severance agreements.

The EEOC filed its second suit challenging the provisions of a severance agreement in April 2014 in the United States District Court for the District of Colorado.  In this suit, EEOC v. CollegeAmerica Denver, the EEOC alleged that the severance agreement used by the defendant, a private college, chilled and interfered with the employee’s rights to pursue age discrimination claims under the Age Discrimination in Employment Act (ADEA).

In CollegeAmerica, the director of the Wyoming campus of CollegeAmerica, Debbi Potts, resigned from her position in July 2012.  In September 2012, Potts signed a separation agreement that included a provision that she would “refrain from personally (or through the use of any third-party) contacting any governmental or regulatory agency with the purpose of filing any complaint or grievance that shall bring harm to CollegeAmerica” and also included a non-disparagement provision.  Potts then filed a charge of discrimination against CollegeAmerica with the EEOC. 

During the course of the EEOC’s investigation of Potts’ claim, CollegeAmerica produced a form severance agreement that it had used for several years.  This form agreement included provisions under which an employee would release all claims alleging discrimination and/or claims arising under Title VII, would agree not to assist in pursuit of claims against the company, unless compelled by law, and would agree that no lawsuit or administrative action had been filed against the company in the employee’s name.  In its complaint filed in this case, the EEOC alleges that the severance agreements used by CollegeAmerica include “provisions that chill and deter the filing of charges of discrimination and may interfere with employees’ ability to communicate voluntarily with the EEOC . . . and interfere with employees’ protected right to file charges or participate in investigations or proceedings conducted by the Commission.”

Taken together, these two suits serve as a signal to employers that the EEOC plans to continue its review of and challenge to severance agreements that include provisions such as those outlined in these two cases.  Given that such provisions are standard in many severance agreements used by employers, it becomes important that prudent employers review their standard severance agreements to determine whether they will withstand a challenge by the EEOC.  The provisions in these agreements should be narrowly tailored to provide the maximum protection possible for the employer, while, at the same time, not intruding on the employee’s rights under Title VII and other discrimination statutes.

Tags: Severance Agreements, EEOC

Defamation Verdict for Former Ben-Gal Cheerleader | Overturned

Posted on Tue, Jun 24, 2014 @ 08:54 AM

By Jack B. HarrisonJack B. Harrison

In a decision of importance to both internet website operators and free speech advocates, on June 16, 2014, the United States Court of Appeals issued its opinion in the highly watched case of Jones v. Dirty World Entertainment.  In its decision the Court of Appeals reversed d decision by the lower court that had held that a website and its editor were not entitled to immunity under the Communications Decency Act and were, therefore, potentially liable for defamatory posts submitted by the website’s users.

In 2009, the website TheDirty.com posted a story stating as fact the sexual exploits of Sarah Jones, a high school teacher and Cincinnati Bengals cheerleader, involving Cincinnati Bengals players.  A subsequent post asserted that Jones had engaged in sexual relations with her husband in her classroom and that she had STDs.  Both posts were submitted to the website anonymously by readers of the website.  However, the publisher of TheDirty.com, Nik Richie, added his own comment at the bottom of the second post, stating: “Why are all high school teachers freaks in the sack? – nik.”

Jones then filed a lawsuit against Richie and the site, claiming the two posts alleging she had STDs were defamatory.  However, Jones did not sue the individual who actually wrote the posts.  Rather she sued the website which posted the anonymous comments and the publisher of the website.

The Court of Appeals described the procedure history of the case as follows:

In response to the posts appearing on www.TheDirty.com, Jones brought an action in federal district court alleging state tort claims of defamation, libel per se, false light, and intentional inflection of emotional distress. Richie and Dirty World claimed that § 230(c)(1) [of the Communications Decency Act of 1996] barred these claims. The district court rejected this argument and denied defendants-appellants’ motion to dismiss, motion for summary judgment, motion to revise judgment, and motion for judgment as a matter of law. The district court also denied Richie’s and Dirty World’s motion for leave to file an interlocutory appeal. The case was submitted to a jury, twice. The first trial ended in a mistrial upon a joint motion. The second trial resulted in a verdict in favor of Jones for $38,000 in compensatory damages and $300,000 in punitive damages. On appeal, Richie and Dirty World maintain that § 230(c)(1) barred Jones’s claims.

Thus, the issue before the Court of Appeals was whether or not the lower court was correct in holding that TheDirty.com and its publisher were not immune from suit for the publication of these stories because, according to the lower court, they “encouraged” the publication.

Following extensive briefing by the parties, as well as the filing of a large number of amicus briefs on behalf of website operators and free speech advocates, the Court of Appeals reversed the decision of the lower court and set aside the jury verdict.  In reaching this conclusion, the Court of Appeals adopted the “material contribution” test for determining whether or not a website operator or publisher is immune from suit under the Communications Decency Act for content that appears on its website.  Under this test, a court is to examine whether or not the website operator or publisher materially contributed to the content that is allegedly defamatory.  In applying this test to the facts of this case, the Court of Appeals stated the following:

[T]he [district] court concluded that those comments [by Richie] “effectively ratified and adopted the defamatory third-party post” and thereby developed the defamatory statements, [and] thus rul[ed] that the CDA did not bar Jones’s claims. Jones IV, 965 F. Supp. 2d at 823 (“Defendants are mistaken, for the salient point about Richie’s tagline is not that it was defamatory itself and thus outside CDA immunity, but rather that it effectively ratified and adopted the defamatory third-party post.”). The district court’s adoption or ratification test, however, is inconsistent with the material contribution standard of “development” [under the CDA] and, if established, would undermine the CDA. Therefore, Dirty World and Richie did not develop the statements forming the basis of Jones’s tort claims and accordingly are not information content providers as to them.

Because (1) the defendants are interactive service providers, (2) the statements at issue were provided by another information content provider, and (3) Jones’s claim seeks to treat the defendants as a publisher or speaker of those statements, the CDA bars Jones’s claims. See Universal Commc’n Sys., 478 F.3d at 418. Given the role that the CDA plays in an open and robust internet by preventing the speech-chilling threat of the heckler’s veto, we point out that determinations of immunity under the CDA should be resolved at an earlier stage of litigation.  See Nemet, 591 F.3d at 254 (“[I]mmunity is an immunity from suit rather than a mere defense to liability [and] is effectively lost if a case is erroneously permitted to go to trial.”).

In its opinion, the Court of Appeals affirms the basic value user-submitted speech to internet websites, even where such speech is critical and, arguably, defamatory.  As the Court of Appeals states in its opinion:

Some of this content will be unwelcome to others—e.g., unfavorable reviews of consumer products and services, allegations of price gouging, complaints of fraud on consumers, reports of bed bugs, collections of cease-and-desist notices relating to online speech….Under an encouragement test of development, these websites would lose the immunity under the CDA and be subject to hecklers’ suits aimed at the publisher.

The Court of Appeals does not conclude, of course, that there could be no liability for allegedly defamatory speech that appears on such a website.  Rather, the appropriate target of such a lawsuit, under the opinion issued by the Court of Appeals, would appear to be the actual author of the statements.