How Much Investigation Is Enough?

The EEOC's Letter of Determination, which found that Sterling engaged in a pattern or practice of discrimination at its stores nationwide, referenced this statistical analysis as well as witness testimony. The EEOC subsequently relied on the same information in its complaint against Sterling. Following discovery, seven years after the conclusion of the EEOC investigation, Sterling alleged that the EEOC had not conducted a nationwide investigation. Sterling noted that the two EEOC investigators who were deposed could not recall details of the investigation and declined to answer some questions. The district court granted Sterling's motion for summary judgment on the basis that the EEOC failed to conduct a nationwide investigation before commencing suit on alleged claims of nationwide discrimination, and therefore did not satisfy its obligations to conduct a pre-suit investigation. The district court dismissed the case in March, 2014, and the EEOC appealed.

The Second Circuit's Ruling

In concluding that the courts cannot inquire into the sufficiency of the EEOC's investigation and that, accordingly, the summary judgment granted by the lower court was improper, the Second Circuit relied on Mach Mining LLC v. EEOC, an April, 2015 decision of the U.S. Supreme Court. In Mach Mining, the Supreme Court held (in reviewing the EEOC's obligation to engage in a pre-suit conciliation process) that judicial review of the EEOC's administrative actions should be narrow and generally limited to considering whether an attempt at conciliation had been made. The court's role does not extend to reviewing the adequacy of the conciliation process, and generally a sworn affidavit from the EEOC that it had attempted conciliation but failed was sufficient to establish that the EEOC had fulfilled its obligations.

Following Mach Mining, the Second Circuit determined in Sterling Jewelers that the scope of judicial review of the EEOC's investigative obligations was similarly narrow, and that the role of the court is only to determine whether the EEOC had conducted an investigation and not to review the sufficiency of such investigation or the evidence uncovered in the course of the investigation.

The court further held that the nature and extent of an EEOC investigation should be left to the EEOC's discretion and that allowing a court to “second guess the choices made by the EEOC” would improperly extend judicial review. The court even suggested that the lengthy and costly depositions in Sterling Jewelers might have been avoided, as the EEOC could likely have demonstrated it had conducted an investigation (under the analogous standard of Mach Mining) by simply submitting a sworn affidavit from the EEOC investigator outlining the steps the agency took to investigate the claims. Arguably, the Second Circuit's decision permits somewhat broader judicial review than Mach Mining did in the conciliation context, insofar as it left room to argue that the EEOC's investigation was not pertinent to the allegations included in the EEOC charge, although the court determined that was not true in Sterling Jewelers.

Aftermath

The case will now be remanded to the district court to be decided on its merits, and Sterling may still prevail if it can demonstrate that its policies and practices do not result in nationwide discrimination against its female employees.

Interestingly, both the U.S. Courts of Appeal for the Eighth and Ninth Circuits have previously upheld dismissals of cases after employers demonstrated that the EEOC had not conducted an adequate investigation of its claims prior to filing suit. In 1982, the Ninth Circuit held in EEOC v. Pierce Packing Co. that the EEOC had not fulfilled its investigative obligation, as it had obtained and relied upon the findings of a Department of Labor (DOL) investigation and had not conducted an independent pre-suit investigation. More recently, in the 2012 case of EEOC v. CRST Van Expedited, Inc., the Eighth Circuit held that the district court had properly granted summary judgment with respect to most of the charges on the grounds that the EEOC had failed to investigate and attempt to conciliate the specific discrimination and/or harassment claims of each individual member of the alleged class prior to filing its complaint. However, one circuit judge in CRST dissented, noting that “the nature and extent of the EEOC's investigation is beyond judicial review” and opining that, in light of the employer's very incomplete responses to the EEOC's requests for information during the investigative phase, the EEOC could not have identified all of the class members and could not have known the details of all of their claims prior to the filing of a lawsuit and commencement of discovery. After Sterling Jewelers and Mach Mining, the viability of these other appellate holdings is now subject to some doubt.

Conclusion

Employers have historically assumed that they could successfully argue for dismissal of an EEOC suit if they could expose the inadequacy of the EEOC's compliance with its administrative obligations, including its failure to sufficiently engage in statutorily mandated investigation or pre-suit conciliation. By narrowing the scope of judicial review of the EEOC's actions, the recent decisions in Mach Mining and Sterling Jewelers make it less likely that an employer will be able to achieve early dismissal through summary judgment, and more likely that an EEOC claim will be tried on the merits. Particularly in light of the Sterling Jewelers decision, the EEOC may be less motivated to resolve complaints at the administrative stage.

Now, more than ever, employers should enforce anti-discrimination policies and document their ongoing training efforts. Since they may no longer be able to avoid a trial by arguing the inadequacy of the EEOC's investigation, employers should discuss with their counsel whether it is now advisable to provide a greater amount of information to the EEOC during an administrative investigation.

John D. Shyer, a member of this newsletter's Board of Editors, is a partner in the New York office of Latham & Watkins LLP, and co-chair of the firm's global labor and employment law practice group. Rifka M. Singer is a benefits and compensation associate.

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating on the basis of race, color, religion, sex or national origin. An employee who believes he or she has been discriminated against in violation of Title VII may bring a charge of discrimination against his or her employer before the Equal Employment Opportunity Commission (the EEOC). Before the EEOC may commence a Title VII enforcement action against the employer, it must provide a notice of the charge to the employer, investigate the alleged charge, make a determination that there is reasonable cause to believe a violation of Title VII has occurred, provide notice of such determination to the employer, and make a good-faith conciliation effort. In order to ensure the EEOC's compliance with Title VII, Congress empowered the federal courts to review the EEOC's fulfillment of these pre-suit requirements. However, Title VII does not provide guidance regarding the scope or extent of the steps the EEOC must take to satisfy these administrative obligations. Employers have frequently questioned the adequacy of the EEOC's pre-suit investigations. To their consternation, in September 2015, the U.S. Court of Appeals for the Second Circuit held in EEOC v. Sterling Jewelers, Inc. that courts do not have authority to review the extent or sufficiency of the EEOC's investigation of charges. Indeed, the Second Circuit ruled that, to satisfy its statutory obligation, the EEOC need only demonstrate that it conducted an investigation pertinent to the allegations ultimately included in the complaint prior to moving forward with an enforcement action under Title VII.

Background

Sterling Jewelers involved 19 individual charges of discrimination brought over a two-year period by women employed in stores operated by Sterling Jewelers and its affiliates (“Sterling”) in nine states. Five EEOC investigators initially worked on the case, but all of the claims were later transferred to a single investigator. The EEOC requested copies of company-wide protocols and policies, as well as personnel information including hire dates, roles and responsibilities, and pay and promotion data. Sterling and the charging parties, with EEOC participation, also engaged in unsuccessful mediation efforts. Thereafter, Sterling agreed to provide the EEOC with reports that were generated in connection with the mediation process, including statistical analysis of Sterling's pay and promotion practices, which concluded that Sterling paid its female employees less than their similarly situated male colleagues and promoted male employees at higher rates than female employees.

The EEOC's Letter of Determination, which found that Sterling engaged in a pattern or practice of discrimination at its stores nationwide, referenced this statistical analysis as well as witness testimony. The EEOC subsequently relied on the same information in its complaint against Sterling. Following discovery, seven years after the conclusion of the EEOC investigation, Sterling alleged that the EEOC had not conducted a nationwide investigation. Sterling noted that the two EEOC investigators who were deposed could not recall details of the investigation and declined to answer some questions. The district court granted Sterling's motion for summary judgment on the basis that the EEOC failed to conduct a nationwide investigation before commencing suit on alleged claims of nationwide discrimination, and therefore did not satisfy its obligations to conduct a pre-suit investigation. The district court dismissed the case in March, 2014, and the EEOC appealed.

The Second Circuit's Ruling

In concluding that the courts cannot inquire into the sufficiency of the EEOC's investigation and that, accordingly, the summary judgment granted by the lower court was improper, the Second Circuit relied on Mach Mining LLC v. EEOC, an April, 2015 decision of the U.S. Supreme Court. In Mach Mining, the Supreme Court held (in reviewing the EEOC's obligation to engage in a pre-suit conciliation process) that judicial review of the EEOC's administrative actions should be narrow and generally limited to considering whether an attempt at conciliation had been made. The court's role does not extend to reviewing the adequacy of the conciliation process, and generally a sworn affidavit from the EEOC that it had attempted conciliation but failed was sufficient to establish that the EEOC had fulfilled its obligations.

Following Mach Mining, the Second Circuit determined in Sterling Jewelers that the scope of judicial review of the EEOC's investigative obligations was similarly narrow, and that the role of the court is only to determine whether the EEOC had conducted an investigation and not to review the sufficiency of such investigation or the evidence uncovered in the course of the investigation.

The court further held that the nature and extent of an EEOC investigation should be left to the EEOC's discretion and that allowing a court to “second guess the choices made by the EEOC” would improperly extend judicial review. The court even suggested that the lengthy and costly depositions in Sterling Jewelers might have been avoided, as the EEOC could likely have demonstrated it had conducted an investigation (under the analogous standard of Mach Mining) by simply submitting a sworn affidavit from the EEOC investigator outlining the steps the agency took to investigate the claims. Arguably, the Second Circuit's decision permits somewhat broader judicial review than Mach Mining did in the conciliation context, insofar as it left room to argue that the EEOC's investigation was not pertinent to the allegations included in the EEOC charge, although the court determined that was not true in Sterling Jewelers.

Aftermath

The case will now be remanded to the district court to be decided on its merits, and Sterling may still prevail if it can demonstrate that its policies and practices do not result in nationwide discrimination against its female employees.

Interestingly, both the U.S. Courts of Appeal for the Eighth and Ninth Circuits have previously upheld dismissals of cases after employers demonstrated that the EEOC had not conducted an adequate investigation of its claims prior to filing suit. In 1982, the Ninth Circuit held in EEOC v. Pierce Packing Co. that the EEOC had not fulfilled its investigative obligation, as it had obtained and relied upon the findings of a Department of Labor (DOL) investigation and had not conducted an independent pre-suit investigation. More recently, in the 2012 case of EEOC v. CRST Van Expedited, Inc., the Eighth Circuit held that the district court had properly granted summary judgment with respect to most of the charges on the grounds that the EEOC had failed to investigate and attempt to conciliate the specific discrimination and/or harassment claims of each individual member of the alleged class prior to filing its complaint. However, one circuit judge in CRST dissented, noting that “the nature and extent of the EEOC's investigation is beyond judicial review” and opining that, in light of the employer's very incomplete responses to the EEOC's requests for information during the investigative phase, the EEOC could not have identified all of the class members and could not have known the details of all of their claims prior to the filing of a lawsuit and commencement of discovery. After Sterling Jewelers and Mach Mining, the viability of these other appellate holdings is now subject to some doubt.

Conclusion

Employers have historically assumed that they could successfully argue for dismissal of an EEOC suit if they could expose the inadequacy of the EEOC's compliance with its administrative obligations, including its failure to sufficiently engage in statutorily mandated investigation or pre-suit conciliation. By narrowing the scope of judicial review of the EEOC's actions, the recent decisions in Mach Mining and Sterling Jewelers make it less likely that an employer will be able to achieve early dismissal through summary judgment, and more likely that an EEOC claim will be tried on the merits. Particularly in light of the Sterling Jewelers decision, the EEOC may be less motivated to resolve complaints at the administrative stage.

Now, more than ever, employers should enforce anti-discrimination policies and document their ongoing training efforts. Since they may no longer be able to avoid a trial by arguing the inadequacy of the EEOC's investigation, employers should discuss with their counsel whether it is now advisable to provide a greater amount of information to the EEOC during an administrative investigation.

John D. Shyer, a member of this newsletter's Board of Editors, is a partner in the New York office of Latham & Watkins LLP, and co-chair of the firm's global labor and employment law practice group. Rifka M. Singer is a benefits and compensation associate.