Has the EEOC gone wild with its new enforcement agenda and increased budget to pursue systemic or class claims on behalf of multiple employees or applicants? From my observations on the front lines defending against these cases, the EEOC is definitely overreaching these days and looking for ways to convert a garden-variety, single-employee charge into a class case despite facts that support any class theory of recovery.
Some federal courts, however, are striking back and not only dismissing unfounded EEOC class cases but also sanctioning the EEOC for attorneys’ fees and costs, even in one case where the EEOC was ordered to reimburse an employer for more than $4 million in legal costs to defend itself against such frivolous litigation. In recent times, courts have found that the EEOC has rushed to judgment against some employers, failed to properly investigate and follow its own administrative requirements and attempted to pressure companies into settling on a class basis without providing sufficient explanations of the facts to support large settlement demands.
EEOC class actions—also known as pattern and practice cases—can be quite costly to defend against because they can spiral out of control as courts do not require the EEOC, as a federal agency, to comply with the certification requirements of Rule 23 of the Federal Rules of Civil Procedure. In other words, companies cannot rely on Rule 23 to weed out frivolous enforcement actions when the EEOC sues. As a result, it is critical for a company facing this type of litigation to determine early on whether the EEOC has followed its own administrative requirements as such failure may create a jurisdictional defense or support a sanction that results in dismissal of the case.
By way of background, the EEOC must give the employer fair notice during the administrative phase that it is investigating the case on a class basis and the scope of the class at issue. For example, from a jurisdictional standpoint, the EEOC may not sue a company on a nationwide basis if, during the administrative phase of the case, the EEOC focused its investigation only on a single region, territory or district of the company and failed to give notice of any companywide allegations of discrimination.
Additionally, before the EEOC files suit, it is statutorily required to conciliate in good faith with the employer in an attempt to the settle the case. While courts in years past have interpreted the "good faith" requirement as a low threshold for compliance by the EEOC, there have been a few recent examples of the EEOC engaging in such bad faith that courts have dismissed the cases as sanctions.
Perhaps the most notable of these recent cases is EEOC v. CRST Van Expedited, Inc., in which the U.S. District Court for the Northern District of Iowa dismissed a sexual harassment case filed by the EEOC on behalf of 67 women, and awarded CRST more than $4 million in attorneys’ fees. The district court, in finding the EEOC’s prosecution of the case to be frivolous, unreasonable and without foundation, sharply criticized the EEOC’s litigation strategy as one of “sue first, ask questions later.” Here, the district court found that the EEOC failed to investigate the specific allegations of the 67 class members until after the civil action was commenced. In fact, the EEOC had not interviewed any of the women who were supposedly sexually harassed and did not subpoena any documents to determine if the allegations were true. Before filing suit, the EEOC also did not identify any of the 67 female class members and did not attempt to conciliate the allegations of those women. In the end, the district court found that the EEOC had not complied with its own administrative requirements and dismissed the case due to the jurisdictional defects.
Also, in EEOC v. Cintas Corp., the U.S. District Court for the Eastern District of Michigan dismissed a gender discrimination action filed by the EEOC on behalf of 13 women because the EEOC failed to exhaust its own administrative requirements. Similar to the CRST case, the district court found the EEOC’s litigation strategy to be another “sue first, ask questions later” scenario. In dismissing the case, the district court found that at no time before the lawsuit was filed had the EEOC identified any of the 13 female class members. Nor did the EEOC make any individual reasonable cause determinations that any of the 13 female plaintiffs had experienced any discrimination. And, finally, the district court noted that the EEOC had not conciliated the individual claims of the 13 female class members.
In yet another case, EEOC v. Bloomberg L.P., the U.S. District Court for the Southern District of New York recently dismissed retaliation claims as a sanction in a gender (pregnancy) discrimination lawsuit filed by the EEOC on behalf of a nationwide class of women. The district court sharply criticized the EEOC for its failure to reasonably and flexibly participate in conciliation during the administrative phase of the case before suit was filed. The district court commented that the EEOC failed to provide information to the employer so that it could analyze and formulate any reasonable monetary counteroffer to the EEOC’s “take-it-or-leave-it” settlement offer of more than $41 million. In short, the district court referred to the EEOC’s approach in conciliation as a “weapon to force settlement,” and further commented that “the EEOC cannot, when the employer reasonably asks for information to formulate a monetary counteroffer, make substantial monetary demands and require employers simply to pony up or face a lawsuit.”
Finally, in EEOC v. Peoplemark, Inc., the U.S. District Court for the Western District of Michigan found that the EEOC failed to properly conduct an investigation and engaged in such frivolous litigation that the EEOC was sanctioned with more than $750,000 in legal costs incurred by the employer. There, the problem with the EEOC’s prosecution of the case was that it ignored evidence before it filed suit that unequivocally showed that the EEOC’s theory of the case was false. The court commented: “This is one of those cases where the complaint turned out to be without foundation from the beginning.”
Because the EEOC these days is quick to pull the trigger and convert almost any single-claimant charge into a class litigation case, employers should document every time during the administrative phase of the case when the EEOC fails to follow its own statutory requirements or otherwise engages in bad faith in conciliation. Such evidence may be needed if the EEOC later launches a "sue first, ask questions later" class claim against your company.