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Severance agreements are challenged by the U.S. Government

It is very common for laid-off employees to be given a certain number of weeks’ salary as severance pay. Often, in return for the severance, the employee is asked to sign a contract promising that he or she won’t sue the employer and won’t make any public statements that would put the employer in a negative light.

While these types of agreements are common, the federal Equal Employment Opportunity Commission recently suggested that severance contracts that go too far in limiting employees’ rights might be illegal.

The EEOC filed a lawsuit against the CVS pharmacy chain, claiming that some of CVS’s severance agreements did just that. The CVS agreements made workers promise:

  • Not to file EEOC charges against the company, even where appropriate;
  • Not to engage in “whistleblowing” by revealing corporate wrongdoing;
  • To notify the company’s legal department if they were ever asked to cooperate with a federal investigation into the company; and
  • To pay the company’s legal fees if they violated the agreement.

If you’re offering or accepting a severance agreement, it’s important to speak to an attorney to make sure that you understand the terms and that the agreement itself is legally valid.

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