Can the EEOC Be Trusted to Police Its Own Compliance?

Background

In the underlying lawsuit, the EEOC alleged that Mach Mining had engaged in a pattern or practice of not hiring women for mining and related positions or, in the alternative, that its neutral hiring policies had a disparate impact on women. The company asserted a number of affirmative defenses, including that the EEOC failed to conciliate in good faith. The EEOC moved for summary judgment on just that defense, arguing that its conciliation process is not subject to judicial review.

While observing that the circuit courts of appeals were split on the question of what level of review was appropriate, the district court concluded that “district courts within the Seventh Circuit, like all other courts to have considered the issue, have concluded that the EEOC's conciliation process is subject to at least some level of review.” 2013 WL 319337, at *3 (S.D. Ill., Jan. 28, 2013). Thus, the district court denied the EEOC's motion for summary judgment. But it also granted the Commission's motion to certify two questions to the U.S. Court of Appeals for the Seventh Circuit: 1) whether district courts may review the EEOC's informal efforts to secure a conciliation agreement acceptable to the Commission before filing suit; and 2) assuming that district courts may review the EEOC's conciliation efforts, should that review apply a more deferential or heightened standard of scrutiny?

In a landmark decision issued in December 2013, the Seventh Circuit handed a significant victory to the EEOC, ruling that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit brought by the Commission. EEOC v. Mach Mining, 738 F.3d 171 (7th Cir. 2013)

In rejecting the failure-to-conciliate affirmative defense, the Seventh Circuit found that conciliation “is an informal process entrusted solely to the EEOC's expert judgment and that the process is to remain confidential.” Id. at 174. The court further found that a failure-to-conciliate defense would frustrate Congressional intent, because “offering the implied defense invites employers to use the conciliation process to undermine enforcement of Title VII rather than to take the conciliation process seriously as an opportunity to resolve a dispute.” Id. at 15. In this regard, the Seventh Circuit raised the specter that an employer would engage in conciliation knowing that it could avoid liability down the road, “even if it has engaged in unlawful discrimination, by arguing that the EEOC did not negotiate properly ' [meaning] the employer's incentive to reach an agreement can be outweighed by the incentive to stockpile exhibits for the coming court battle.” Id . at 16.

Circuit Split

Although the EEOC prevailed in the Seventh Circuit, the Commission backed Mach Mining's request for the Supreme Court review to resolve the question of the reviewability of its pre-suit conciliation obligations, a question that has split the circuit courts of appeals. In this regard, and in contrast to the Seventh Circuit's outright rejection of judicial review, three circuits (the Fourth, Sixth and Tenth) have found that the conciliation precondition is subject to judicial review, but under a deferential standard that asks only whether the Commission acted in “good faith” or “reasonably.” See EEOC v. Radiator Specialty Co., 610 F.2d 178 (4th Cir. 1979); Serrano v. Cintas Corp. , 699 F.3d 884 (6th Cir. 2012); EEOC v. Zia Co., 582 F.2d 527 (10th Cir. 1978).

Three circuits (the Second, Fifth, and Eleventh) agree that the Commission must act in good faith, but apply a stricter standard of scrutiny, requiring that the EEOC must have outlined for the employer the reasonable cause for its belief that Title VII has been violated, offered an opportunity for voluntary compliance, and responded in a reasonable and flexible manner to the reasonable positions of the employer. See EEOC v. Agro Distribution, LLC , 555 F.3d 462 (5th Cir. 2009); EEOC v. Asplundh Tree Expert Co., 340 F.3d 1256 (11th Cir. 2003); EEOC v. Johnson & Higgins, Inc., 91 F.3d 1529 (2d. Cir. 1996). Finally, the Eighth and Ninth circuits have also subjected the EEOC's conciliation efforts to fairly strict judicial review, although neither circuit has articulated a specific standard. See EEOC v. CRST Van Expedited, Inc., 679 F.3d 657 (8th Cir. 2012); EEOC v. Pierce Packing Co., 669 F.2d 605 (9th Cir. 1982).

The Supreme Court

As noted above, the Supreme Court accepted review, and the case was queued up for oral argument last month. Central to the Court's determination will be whether it believes the EEOC can be trusted to police its own compliance with its pre-suit conciliation obligation. On this point, the Seventh Circuit opined that “[we] are not persuaded ' that EEOC field offices are so eager to win publicity or to curry favor with Washington by filing more lawsuits that they will needlessly rush to court.” But the Commission's track record suggests that the Seventh Circuit's view of the EEOC motivations and tactics may have been overly naive.

For example, in Asplundh Tree , after a 32-month investigation in which the employer fully cooperated, and before te EEOC had cited any theory of liability, the Commission gave the employer a “grossly arbitrary” deadline of 12 business days to consider a conciliation offer requiring reinstatement, front pay, “nationwide notice to its employees of [the] allegations,” and “nationwide anti-discrimination training of all its ' employees.” 340 F.3d at 1258-59. The employer's counsel attempted to contact the EEOC, but the Commission declared a failure of conciliation the next day. The Eleventh Circuit found that “[i]n its haste to file the instant lawsuit, with lurid, perhaps newsworthy, allegations, the EEOC failed to fulfill its statutory duty to act in good faith to achieve conciliation, effect voluntary compliance, and to reserve judicial action as a last resort.” Id. at 1261. “The chronology of events,” the court noted, “lend themselves to the interpretation that the Commission's haste may have been motivated, at least in part, by the fact that conciliation, unlike litigation, is not in the public domain.” Id. at 1261 n.3.

Impact on Employers

Whether to preserve tactical advantages in litigation or out of a desire to use the civil discovery process to identify and investigate allegations of discrimination (information that the EEOC should to obtain information from the employer throughout the investigatory process), the Commission has in several cases refused to provide the employer with sufficient information to evaluate the potential claims against it or reach a reasoned decision on settlement. For example, in EEOC v. Evans Fruit Co., 872 F. Supp. 2d 1107 (E.D. Wash. 2012), the EEOC demanded $1 million for an unspecified class of female employees who had allegedly been sexually harassed. The employer asked the EEOC for the names of the supposed harassers and promised to look further into the allegations of harassment, but a mere six days later, the EEOC ended conciliation. The court ultimately reproached the Commission for its failure “to be more forthcoming regarding the type of damages sought ', [the] justification for the amount of damages sought, potential size of the class, general temporal scope of the allegations, and the potential number of individuals ' alleged to be involved in the harassment.” Id. at 1115.

Likewise, in EEOC v. Bloomberg L.P., 967 F. Supp. 2d 802 (S.D.N.Y. 2013), the EEOC found that Bloomberg had discriminated against a “class” of pregnant women and demanded $7.5 million to compensate the class members, but did not identify who any of those supposed class members were. When Bloomberg requested information about these claimants (such as how many there were), the EEOC declared that conciliation had been unsuccessful. Only after filing its lawsuit and engaging in discovery did the EEOC identify the employees on whose behalf it sought relief. By doing so, the court concluded, the EEOC denied Bloomberg “an opportunity to tailor any class-wide conciliatory efforts to the breadth of legitimate claims it might face” and thereby “blatantly contravene[d] Title VII's emphasis on resolving disputes without resort to litigation.” Id. at 813-14.

Likewise, in the CRST case, the EEOC issued a cause determination regarding a single named employee and an unidentified “class” of others allegedly subjected to sexual harassment. Prior to and during conciliation, the EEOC conducted no investigation of its own to determine the size of the supposed “class” or the identity of its members. Only after filing suit and spending two years in discovery did the EEOC identify the employees whom it alleged had been sexually harassed, but the number of purported class members then continued to change throughout the discovery process. As the Eighth Circuit recognized, by suing first and identifying the scope of the liability later, the EEOC unfairly deprived the employer of a meaningful opportunity to conciliate.

Conclusion

These examples are not offered to suggest that all, or even most, EEOC officials would not prefer settlement in many cases. Nonetheless, they illustrate that the EEOC's incentives to discuss settlement can be overcome by other interests, which in some cases have led the Commission to circumvent its statutory obligation. Further, they serve as proof that the agency should not be trusted to police itself.

Given the current composition of the Court, it seems likely that it will align with the eight circuit courts of appeal that have ruled in favor of reviewability, and reverse the Seventh Circuit. Much more uncertain is whether the Court will take up the question of what standard of scrutiny courts should apply, as the Seventh Circuit's opinion did not reach that question. Regardless of the outcome, strong reasons remain for employers to engage in conciliation upon receipt of a demand from the EEOC. Paramount among these is the fact that conciliation negotiations are confidential and, until a lawsuit is filed, may not be publicly disclosed without the consent of all the parties. This allows employers faced with allegations of Title VII violations to avoid potentially grave reputational harm while trying to resolve issues. Moreover, if given sufficient information to gauge the reasonableness of the EEOC's settlement demands, and if those demands are, in fact reasonable, conciliation can provide the last, best opportunity to head of costly litigation. And depending on the eventual ruling, engaging in negotiations in good faith even when the EEOC's motives are questionable or its positions are is unreasonable may offer employers an additional defense to the prosecution of a subsequent lawsuit.

Mark Girouard is a shareholder in the Labor & Employment group of Nilan Johnson Lewis PA. Mr. Girouard defends employers in single plaintiff cases, private class actions, and litigation against the EEOC and other government agencies. He also advises employers on a range of issues including pre-employment assessments, family and medical leaves, military leaves, and disability accommodations. He can be reached at 612)-305-7579 or [email protected].

Under Title VII of the Civil Rights Act of 1964, the Equal Employment Opportunity Commission (EEOC) has an express statutory duty to attempt to secure, in good faith, a conciliation agreement with an employer as a precondition to filing a lawsuit. See 42 U.S.C. ' 2000(e)-5(f)(1). This conciliation process often works to the benefit of employers, the Commission, and the individuals whom it represents by affording them an opportunity to resolve their disputes without the need for protracted and costly litigation.

In some cases, however, the EEOC has approached conciliation in a “take-it-or-leave-it” manner, making unreasonable demands while threatening to file suit and issue a press release, which can inflict significant reputational harm on the employer. Take, for example, EEOC v. Ruby Tuesday, Inc., where the EEOC demanded that a restaurant, which was the subject of a sexual discrimination charge, pay more than $6 million to resolve the matter, but gave the employer less than two weeks to accept before the EEOC rushed to the courthouse. 919 F. Supp. 2d 587 (W.D. Pa. 2013).

In January, the U.S. Supreme Court was scheduled to hear oral argument in a closely watched case, Mach Mining, LLC v. EEOC (No. 13-1019), which poses the question of whether employers may challenge in court the EEOC's filing of a lawsuit on the basis that the Commission failed to attempt resolution in good faith. If the EEOC ' which argues that its compliance with its statutory obligation is immune from judicial review ' wins the day, then the Commission will be able to use the threat of litigation, and attendant reputational harm, as a cudgel to secure acquiescence to what may be unreasonable demands. If Mach Mining wins, employers will at least have recourse to judicial oversight to determine whether the Commission's conciliation efforts were made in good faith, which should help rein in overzealous EEOC officials.

Background

In the underlying lawsuit, the EEOC alleged that Mach Mining had engaged in a pattern or practice of not hiring women for mining and related positions or, in the alternative, that its neutral hiring policies had a disparate impact on women. The company asserted a number of affirmative defenses, including that the EEOC failed to conciliate in good faith. The EEOC moved for summary judgment on just that defense, arguing that its conciliation process is not subject to judicial review.

While observing that the circuit courts of appeals were split on the question of what level of review was appropriate, the district court concluded that “district courts within the Seventh Circuit, like all other courts to have considered the issue, have concluded that the EEOC's conciliation process is subject to at least some level of review.” 2013 WL 319337, at *3 (S.D. Ill., Jan. 28, 2013). Thus, the district court denied the EEOC's motion for summary judgment. But it also granted the Commission's motion to certify two questions to the U.S. Court of Appeals for the Seventh Circuit: 1) whether district courts may review the EEOC's informal efforts to secure a conciliation agreement acceptable to the Commission before filing suit; and 2) assuming that district courts may review the EEOC's conciliation efforts, should that review apply a more deferential or heightened standard of scrutiny?

In a landmark decision issued in December 2013, the Seventh Circuit handed a significant victory to the EEOC, ruling that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit brought by the Commission. EEOC v. Mach Mining , 738 F.3d 171 (7th Cir. 2013)

In rejecting the failure-to-conciliate affirmative defense, the Seventh Circuit found that conciliation “is an informal process entrusted solely to the EEOC's expert judgment and that the process is to remain confidential.” Id. at 174. The court further found that a failure-to-conciliate defense would frustrate Congressional intent, because “offering the implied defense invites employers to use the conciliation process to undermine enforcement of Title VII rather than to take the conciliation process seriously as an opportunity to resolve a dispute.” Id. at 15. In this regard, the Seventh Circuit raised the specter that an employer would engage in conciliation knowing that it could avoid liability down the road, “even if it has engaged in unlawful discrimination, by arguing that the EEOC did not negotiate properly ' [meaning] the employer's incentive to reach an agreement can be outweighed by the incentive to stockpile exhibits for the coming court battle.” Id . at 16.

Circuit Split

Although the EEOC prevailed in the Seventh Circuit, the Commission backed Mach Mining's request for the Supreme Court review to resolve the question of the reviewability of its pre-suit conciliation obligations, a question that has split the circuit courts of appeals. In this regard, and in contrast to the Seventh Circuit's outright rejection of judicial review, three circuits (the Fourth, Sixth and Tenth) have found that the conciliation precondition is subject to judicial review, but under a deferential standard that asks only whether the Commission acted in “good faith” or “reasonably.” See EEOC v. Radiator Specialty Co. , 610 F.2d 178 (4th Cir. 1979); Serrano v. Cintas Corp. , 699 F.3d 884 (6th Cir. 2012); EEOC v. Zia Co. , 582 F.2d 527 (10th Cir. 1978).

Three circuits (the Second, Fifth, and Eleventh) agree that the Commission must act in good faith, but apply a stricter standard of scrutiny, requiring that the EEOC must have outlined for the employer the reasonable cause for its belief that Title VII has been violated, offered an opportunity for voluntary compliance, and responded in a reasonable and flexible manner to the reasonable positions of the employer. See EEOC v. Agro Distribution, LLC , 555 F.3d 462 (5th Cir. 2009); EEOC v. Asplundh Tree Expert Co. , 340 F.3d 1256 (11th Cir. 2003); EEOC v. Johnson & Higgins, Inc. , 91 F.3d 1529 (2d. Cir. 1996). Finally, the Eighth and Ninth circuits have also subjected the EEOC's conciliation efforts to fairly strict judicial review, although neither circuit has articulated a specific standard. See EEOC v. CRST Van Expedited, Inc. , 679 F.3d 657 (8th Cir. 2012); EEOC v. Pierce Packing Co. , 669 F.2d 605 (9th Cir. 1982).

The Supreme Court

As noted above, the Supreme Court accepted review, and the case was queued up for oral argument last month. Central to the Court's determination will be whether it believes the EEOC can be trusted to police its own compliance with its pre-suit conciliation obligation. On this point, the Seventh Circuit opined that “[we] are not persuaded ' that EEOC field offices are so eager to win publicity or to curry favor with Washington by filing more lawsuits that they will needlessly rush to court.” But the Commission's track record suggests that the Seventh Circuit's view of the EEOC motivations and tactics may have been overly naive.

For example, in Asplundh Tree , after a 32-month investigation in which the employer fully cooperated, and before te EEOC had cited any theory of liability, the Commission gave the employer a “grossly arbitrary” deadline of 12 business days to consider a conciliation offer requiring reinstatement, front pay, “nationwide notice to its employees of [the] allegations,” and “nationwide anti-discrimination training of all its ' employees.” 340 F.3d at 1258-59. The employer's counsel attempted to contact the EEOC, but the Commission declared a failure of conciliation the next day. The Eleventh Circuit found that “[i]n its haste to file the instant lawsuit, with lurid, perhaps newsworthy, allegations, the EEOC failed to fulfill its statutory duty to act in good faith to achieve conciliation, effect voluntary compliance, and to reserve judicial action as a last resort.” Id. at 1261. “The chronology of events,” the court noted, “lend themselves to the interpretation that the Commission's haste may have been motivated, at least in part, by the fact that conciliation, unlike litigation, is not in the public domain.” Id. at 1261 n.3.

Impact on Employers

Whether to preserve tactical advantages in litigation or out of a desire to use the civil discovery process to identify and investigate allegations of discrimination (information that the EEOC should to obtain information from the employer throughout the investigatory process), the Commission has in several cases refused to provide the employer with sufficient information to evaluate the potential claims against it or reach a reasoned decision on settlement. For example, in EEOC v. Evans Fruit Co. , 872 F. Supp. 2d 1107 (E.D. Wash. 2012), the EEOC demanded $1 million for an unspecified class of female employees who had allegedly been sexually harassed. The employer asked the EEOC for the names of the supposed harassers and promised to look further into the allegations of harassment, but a mere six days later, the EEOC ended conciliation. The court ultimately reproached the Commission for its failure “to be more forthcoming regarding the type of damages sought ', [the] justification for the amount of damages sought, potential size of the class, general temporal scope of the allegations, and the potential number of individuals ' alleged to be involved in the harassment.” Id. at 1115.

Likewise, in EEOC v. Bloomberg L.P. , 967 F. Supp. 2d 802 (S.D.N.Y. 2013), the EEOC found that Bloomberg had discriminated against a “class” of pregnant women and demanded $7.5 million to compensate the class members, but did not identify who any of those supposed class members were. When Bloomberg requested information about these claimants (such as how many there were), the EEOC declared that conciliation had been unsuccessful. Only after filing its lawsuit and engaging in discovery did the EEOC identify the employees on whose behalf it sought relief. By doing so, the court concluded, the EEOC denied Bloomberg “an opportunity to tailor any class-wide conciliatory efforts to the breadth of legitimate claims it might face” and thereby “blatantly contravene[d] Title VII's emphasis on resolving disputes without resort to litigation.” Id. at 813-14.

Likewise, in the CRST case, the EEOC issued a cause determination regarding a single named employee and an unidentified “class” of others allegedly subjected to sexual harassment. Prior to and during conciliation, the EEOC conducted no investigation of its own to determine the size of the supposed “class” or the identity of its members. Only after filing suit and spending two years in discovery did the EEOC identify the employees whom it alleged had been sexually harassed, but the number of purported class members then continued to change throughout the discovery process. As the Eighth Circuit recognized, by suing first and identifying the scope of the liability later, the EEOC unfairly deprived the employer of a meaningful opportunity to conciliate.

Conclusion

These examples are not offered to suggest that all, or even most, EEOC officials would not prefer settlement in many cases. Nonetheless, they illustrate that the EEOC's incentives to discuss settlement can be overcome by other interests, which in some cases have led the Commission to circumvent its statutory obligation. Further, they serve as proof that the agency should not be trusted to police itself.

Given the current composition of the Court, it seems likely that it will align with the eight circuit courts of appeal that have ruled in favor of reviewability, and reverse the Seventh Circuit. Much more uncertain is whether the Court will take up the question of what standard of scrutiny courts should apply, as the Seventh Circuit's opinion did not reach that question. Regardless of the outcome, strong reasons remain for employers to engage in conciliation upon receipt of a demand from the EEOC. Paramount among these is the fact that conciliation negotiations are confidential and, until a lawsuit is filed, may not be publicly disclosed without the consent of all the parties. This allows employers faced with allegations of Title VII violations to avoid potentially grave reputational harm while trying to resolve issues. Moreover, if given sufficient information to gauge the reasonableness of the EEOC's settlement demands, and if those demands are, in fact reasonable, conciliation can provide the last, best opportunity to head of costly litigation. And depending on the eventual ruling, engaging in negotiations in good faith even when the EEOC's motives are questionable or its positions are is unreasonable may offer employers an additional defense to the prosecution of a subsequent lawsuit.

Mark Girouard is a shareholder in the Labor & Employment group of Nilan Johnson Lewis PA. Mr. Girouard defends employers in single plaintiff cases, private class actions, and litigation against the EEOC and other government agencies. He also advises employers on a range of issues including pre-employment assessments, family and medical leaves, military leaves, and disability accommodations. He can be reached at 612)-305-7579 or [email protected].