Daughter’s Facebook Post Reveals Father’s Breach of Settlement, Costing Dad $80,000

Confidentiality clauses are typical in settlement, severance, and separation agreements, as employers typically want to avoid a situation where a former employee openly discloses the amount of a settlement or severance payment. Employers often offer significant monetary consideration in exchange for, among other things, the employee’s discretion. Recently, a Florida appeals court found that a former school headmaster violated the terms of a confidential age discrimination settlement with the school, after his daughter jokingly mentioned the settlement in a Facebook post saying “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.” The settlement required the employee and his wife not to reveal the existence and terms of the settlement agreement to anyone other than their attorneys or professional advisers. As a result of his daughter’s gleeful disclosure, the employee’s payout was reduced by $80,000!

For employers, this case highlights the importance of including confidentiality language in settlement agreements which clearly communicates what conduct is prohibited and who can learn information about the settlement. In addition, if an agreement indicates that others are expressly permitted to learn of the agreement’s terms, such as a spouse or immediate family member, it is prudent to also specify that a breach by any of those individuals will be considered a breach by the employee, and as a result, will subject the employee to the same penalties. Moreover, adding an express reference to social media may be worthwhile. The agreement at issue in the Florida case did not, and it took two courts to finally determine, much to dad’s chagrin, that disclosure on Facebook constituted a breach.

The case also shows a willingness of courts to enforce reasonable confidentiality terms, especially in a situation where the result of the breach is exactly the type of harm the company sought to prevent. When considering what types of penalties to include for a breach, it is important to ensure that the penalty is not oppressive and/or punitive. In this case, the company paid the employee the agreed-upon back pay and attorneys’ fees and sought only to recover the amount provided for punitive damages. However, a court may be less likely to enforce a penalty for a breach that goes well beyond the amount contemplated by the settlement agreement.

Lastly, as this case demonstrates, even inadvertent disclosures, whether online or in some other forum, can prove costly and result in legal and financial liability. Consequently, companies should take proactive steps to prevent such disclosures. For instance, companies should put physical and electronic safeguards in place to protect confidential information, only disclose confidential information to employees with a need to know, and if such information is disclosed, ensure that employees understand their obligations to keep the information confidential.  Following basic rules and common sense can avoid odd conclusions the dad was forced to live with in Florida.

Sara Dajani is an Associate Attorney with the DC region business law firm of Berenzweig Leonard, LLP. Sara can be reached at sdajani@BerenzweigLaw.com.

EEOC Takes Aggressive Position On Severance Agreements

The Equal Employment Opportunity Commission (“EEOC”) recently filed a lawsuit against one of the nation’s largest pharmacy chains, CVS, claiming its separation agreements violate Title VII of the Civil Rights Act. This action by the EEOC is surprising and significant, since the targeted provisions are ones that are commonly found in severance agreements. According to the lawsuit, the EEOC claims that CVS conditioned payment of severance benefits on execution of severance agreements that contained overly broad, misleading, and unenforceable language that unlawfully prevents employees from communicating with the agency or filing discrimination claims. In its lawsuit, the EEOC claims the following provisions of the agreement violate Title VII:

• A cooperation clause requiring employees to notify the company of contacts relating to legal proceedings;
• A non-disparagement clause;
• A non-disclosure of confidential information clause; and 
• A general release and covenant not to sue clause.
  

The EEOC is seeking a permanent injunction prohibiting CVS from restricting the rights of former employees to file charges or participate in agency proceedings, reformation of CVS’s separation agreement, and for CVS to provide 300 additional days for any former employee who signed the agreement to file administrative charges.

The EEOC claims that being able to bring charges and communicate with employees plays a critical role in the EEOC’s enforcement policy because it informs the agency of employer practices that may be unlawful. An employee’s right to communicate with the EEOC is protected under federal law, and therefore, the EEOC claims that when employers have language similar to that found in CVS’s severance agreements, it has the effect of buying an employee’s silence regarding discriminatory practices.

The EEOC’s claims are a departure from its prior position in which it previously determined similar language was in compliance with Title VII. In fact, CVS modeled its severance agreements with language the EEOC previously found compliant in an earlier lawsuit. This can be rightly viewed as an overreach by the EEOC to strike down provisions of severance agreements that are used almost universally by employers and have been previously approved by the agency.

If the EEOC is successful in this lawsuit, employers will need to revisit their severance agreements and make any necessary changes to comply with the court’s decision. However, unless the court strikes down the provisions in the case, or another court acts otherwise, we are not currently recommending a drastic departure from our prior severance agreements based on this lawsuit. While we believe it is unlikely that the EEOC will be successful on all of its claims against all provisions of CVS’s agreements, this new aggressive stance by the agency is a good reminder to employers to always revisit severance agreements to ensure they are legally compliant, and consider taking steps to avoid similar claims.

Nick Johnson is an attorney with Washington, DCbusiness law firm Berenzweig Leonard. He can be reached at njohnson@BerenzweigLaw.com.