It's Pay-Up Time for the EEOC

After being ordered to pay $2.6 million in legal fees, attorneys suggest the EEOC re-examine its approach to investigating discrimination claims. The ruling should also prompt employers to demand more information from the EEOC when they're confronted with an investigation into alleged violations, they say.

Thursday, September 15, 2011
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In a ruling that criticized the Equal Employment Opportunity Commission's "sue first, ask questions later" strategy, U.S. District Judge Sean Cox ordered the agency last month to reimburse Cincinnati-based uniform supplier Cintas Corp. more than $2.6 million in attorneys' fees and legal costs after the company prevailed in an 11-year-old employment-discrimination case.

Cintas had been fighting a gender-bias lawsuit brought against it by a group of female plaintiffs. In 2005, the EEOC intervened in the case, which was later merged with another suit against Cintas. Cox had earlier ruled against the plaintiffs, who are now appealing.

In his ruling, Cox chastised the EEOC for failing to properly investigate the allegations or interview individual complainants until well after it had filed its own complaint against Cintas. The agency also refused to identify the complainants until after it had filed its own complaint and it failed to engage in any conciliation measures with Cintas before filing its complaint, as required by law.

Earlier this year, another federal court in Michigan ordered the EEOC to pay $750,000 in legal costs to Peoplemark, a staffing company based in Kentucky, for failing to properly investigate claims that the company's policy of not hiring applicants with criminal records had an adverse impact on minority applicants.

It turned out no such policy existed at Peoplemark and that 22 percent of the claimants with criminal records had, in fact, been hired by the company. 

Employment attorneys contacted for this story say the ruling reflects the judge's frustration that the EEOC was apparently unwilling to follow its own investigation protocols.

"As an individual who represents companies, it was very pleasing to see that this type of outrageous behavior by the EEOC was not allowed," says John Barry, a partner in the labor group at Proskauer's Newark, N.J., office.

"The EEOC is a very important and powerful agency," he says, "and companies typically spend a lot of money responding to its inquiries, assuming those inquiries are based on something substantive, that there are facts to back them up rather than suspicion and speculation."

Pattern-or-practice allegations typically require companies to spend a great deal of money on investigation and legal costs, Barry says. Although the $2.6 million Cintas will receive from the EEOC will help a little bit, it likely represents only a fraction of the amount the company has spent defending itself over the last decade. 

The EEOC responded to the ruling with a statement expressing disappointment in the judge's ruling.

"In the meantime, we will continue to build on the numerous successes of our systemic litigation program to ensure strong enforcement of the anti-discrimination laws on behalf of women and other victims of discrimination," the statement reads.

Nonetheless, the Cintas and Peoplemark rulings cast a bad light on the agency, says Michael Burkhardt, a partner in the labor group at Morgan Lewis Bockius in Philadelphia. 


"As a government agency, you'd expect the EEOC to conduct itself in an appropriate fashion during litigation," says Burkhardt. "The court found that, in this case, the EEOC engaged in lots of discovery abuses."

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The EEOC misses lots of chances to settle cases before they go to court because its conciliation process -- in which the agency and a company it is investigating attempt to work out an agreement in order to avoid litigation -- is ineffective, he says.

"The EEOC has a fine mediation program, but the conciliation process usually places such draconian demands on employers that they often end up saying, 'We might as well go to court,' " says Burkhardt.

He also speculates the EEOC is under no pressure to fix its conciliation process. Instead, he says, it may be under pressure to file even more pattern-and-practice cases to justify the increased funding it's received under the Obama administration.

"Its goal may be to get bigger settlements, which, on some level, are used to prove that the EEOC is doing its job," he says.

For employers, Barry says, the "lessons learned" from the ruling should be that, when confronted with an EEOC inquiry, ask lots of questions first.

"This ruling should give companies a very strong club in terms of getting the EEOC to disclose more information on what they have, especially when it comes to pattern-or-practice allegations, before expending an inordinate amount of resources defending themselves," he says.

"I'm sure the ruling is also reverberating inside the EEOC as well," he says, "and they'll be looking more closely at some of their cases before they push forward."

Although Cintas ended up getting far less than it sought in legal fees (it had asked to be reimbursed for nearly $6 million), the ruling should encourage the EEOC to alter its approach in future investigations, says Burkhardt. 

"This case essentially says to the EEOC, 'Don't just go and sue, with the intention of figuring things out later,' " he says, " 'because defendants have the opportunity to recover attorneys' costs if you engage in this conduct.' "

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