About Us  |  About Cheetah®  |  Contact Us

10th Circuit revives EEOC claim that nondisparagement clause interfered with statutory rights

By Lorene D. Park, J.D.

Though an employer’s general counsel—in response to the EEOC’s claim that its settlement agreement with a nondisparagement clause interfered with statutory rights—disavowed legal positions that were troubling to the agency, the employer subsequently asserted the theory that an employee breached the agreement by reporting adverse information to the EEOC. In the Tenth Circuit’s view, this precluded the employer from showing the alleged interference could not reasonably be expected to recur, so the EEOC’s claim was not moot and dismissal on this ground was reversed (EEOC v. CollegeAmerica Denver, Inc. nka Center for Excellence in Higher Education dba CollegeAmerica, September 5, 2017, Bacharach, R.).

Employer sues employee for breach. After resigning as a campus director, the employee entered an agreement with CollegeAmerica under which she received $7,000 in return for agreeing to refrain from disparaging the employer and/or contacting any governmental or regulatory agencies to file a complaint. Three months later, the employer informed her that it considered emails she had exchanged with another former employee to violate the nondisparagement clause and demanded she return the $7,000. She filed an EEOC charge alleging discrimination and, after receiving notice of the charge, the employer sued her in state court for breach of contract. She filed additional charges, which sparked the EEOC’s interest.

EEOC sues employer for interference, retaliation. Believing the employer’s interpretation and enforcement of the settlement agreement unlawfully interfered with statutory rights of the employee and the agency, the EEOC sued the employer in federal court. The employer then disavowed the legal positions that the agency found troubling and, as a result, the district court dismissed the unlawful-interference claim as moot.

With respect to the remaining claim that the employer unlawfully retaliated against the employee by filing the state court action against her, the employer presented a new theory: that the employee breached the agreement by reporting adverse information to the EEOC without notifying the employer. In the agency’s view, by presenting this theory, the employer was continuing to interfere with statutory rights. The EEOC therefore appealed the unlawful interference claim, arguing that it was not moot after all.

Interference claim not moot. Reversing dismissal of the interference claim, the Tenth Circuit explained that a “claim is moot when a plaintiff loses a personal stake in the outcome because of some intervening event.” If the defendant voluntarily stops the challenged conduct, a special rule applies and the claim will be moot only if: 1) it is “absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur;” and 2) interim relief or events have “completely and irrevocably eradicated the effects of the alleged violation.”

Here, the first condition was not satisfied. After the employer’s general counsel provided assurances that the employer would not take positions that troubled the EEOC, the employer subsequently asserted a new theory that the employee breached the settlement agreement by reporting adverse information to the EEOC. According to the agency, this demonstrated the employer’s ongoing interference with statutory rights. Because the employer stood by this new theory of breach on appeal, it failed to demonstrate the absence of a potential for recurrence. Consequently, the appeals court could not find mootness based on voluntary cessation.

Real world effect. Also unconvincing was the employer’s argument that the case was moot because the outcome would not affect anything in the real world. The appeals court noted that if the EEOC prevails in seeking a permanent injunction preventing the employer from interfering with statutory rights, the injunction would have a real world effect on its ability to present its new theory in state court.

The appeals court did not address the employer’s alternate argument that the EEOC’s claim for interference failed because it was brought under ADEA Section 626(f)(4), and that section does not provide an independent cause of action other than declaratory relief to negate a waiver asserted in an ADEA suit. This argument was not raised below and should be addressed by the district court in the first instance, explained the appeals court.