On July 14, 2015, the United States Court of Appeals for the 7th Judicial Circuit affirmed the district court's ruling that former employees of an information technology staffing firm were not liable for breach of restrictive covenants under Illinois law. Instant Technology LLC v. DeFazio, et al., Nos. 14-2132 & 14-2243 (7th Cir. 7-14-2015). The employees had signed employment agreements in which they agreed to not solicit business from the employer's clients, recruit the employer's employees to other jobs, or disclose confidential information. After the employees started a competing business, the employer filed a lawsuit against the employees in federal district court for breach of the restrictive covenants in their employment agreements. After a bench trial, the court concluded that the employees were not liable.
U.S. District Court, Northern District of Illinois
A stripper has filed a lawsuit in the U.S. District Court in Peoria, Illinois, alleging that a Gentleman's Club where she performed violated federal and state employment law by failing to pay her and other exotic dancers minimum wage. The lawsuit alleges that the club misclassified her and other dancers as independent contractors instead of employees to avoid minimum wage and other employment law requirements. Whether an individual is an employee or an independent contractor depends mostly on the degree of control that the company exercises over the individual's work. The dancer alleges that she was actually an employee because the club controlled the terms and conditions of her work environment though various workplace rules, such as no gum chewing while performing, always smile at customers while performing, etc.
On March 24, 2015, the 7th Circuit reversed summary judgment in a Title VII race discrimination case. Hutchens v. Chicago Board of Education, et al., No. 13-3648 (7th Cir.). The case involved a large-scale layoff and reorganization. The plaintiff alleged that she was laid off while a less qualified white employee was selected for retention instead of her because of her race (black). There was only one open position. The district court accepted the defendant's explanation for its selection as a non-pretextual justification. The 7th Circuit, however, stated that there was considerable doubt about the honesty of the main witnesses for the defense as well as an absence of any corroborating documentary evidence.
On October 7, 2014, U.S. District Court Judge John W. Darrah issued a Written Opinion and Order granting CVS's Motion for Summary Judgment and dismissing the EEOC's lawsuit against CVS. Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 14-cv-863 (N.D.Ill.2014). In this lawsuit, the EEOC alleged that CVS's Severance Agreement is invalid and unenforceable under Title VII of the Civil Rights Act of 1964. The case was closely watched by employment law attorneys because the terms and conditions of CVS's Severance Agreement are typical of those commonly used by employment lawyers in severance or separation agreements. Some employment law attorneys were concerned that invalidation of the standard terms and conditions of severance or separation agreements would create obstacles to negotiating settlements of employment law claims. The incentive for most employers to pay employees monetary settlements of employment law claims is to receive a release of claims and an agreement to not sue in exchange for the payment. If these terms were declared unenforceable, the incentive would be lost, and it would take some very creative lawyering to structure viable settlements of employment law claims. In view of Judge Darrah's dismissal of the EEOC's lawsuit, this will not be the case.
A federal judge in Chicago recently dismissed the EEOC's lawsuit against CVS. The EEOC had alleged that CVS's standard severance agreement is unenforceable under Title VII. The EEOC's attempt to invalidate CVS's severance agreement was closely watched by employment lawyers. That's because CVS's severance agreement is typical of severance agreements used by many other employers. If customary terms of separation agreements, such as a general release of claims, confidentiality clause, and covenant to not sue, were declared unenforceable, employers would have less incentive to settle employment law claims. Why pay an employee a substantial amount of money to settle an employment law claim without getting a general release in exchange? This is the dilemma that employment attorneys would have faced when trying to resolve employment law claims, if the EEOC had succeeded.
On February 7, 2014, the United States Equal Employment Opportunity Commission filed a lawsuit against CVS Pharmacy, Inc. in the United States District Court for the Northern District of Illinois in Chicago (EEOC v. CVS Pharmacy, Inc., No. 14 C 0863). The EEOC alleges that CVS's severance agreement is unenforceable because it unlawfully interferes with the right of employees to file discrimination charges and communicate/cooperate with the EEOC. The EEOC contends that this violates Section 707 of Title VII of the Civil Rights Act of 1964, which prohibits employer conduct that constitutes a pattern or practice of resistance to the rights protected by Title VII. The suit, which has been assigned to U.S. District Judge John W. Darrah, may significantly impact employers and employees as well as employment law practitioners.