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Judge halts EEOC lawsuit, citing ‘obstinate’ refusal to cooperate

by Amanda Jones

Title VII of the Civil Rights Act of 1964 mandates that after the Equal Employment Opportunity Commission (EEOC) has investigated a charge of discrimination and determined there’s reasonable cause to believe the claim is true, it must try to negotiate a settlement with the employer through a conciliation process before filing a lawsuit. It’s becoming increasingly common for the agency to demand that employers pay substantial amounts during conciliation without telling them what evidence was uncovered during the investigation that would justify the settlement demand. In August, a Hawaii judge halted an EEOC lawsuit because the agency failed to give the employer essential information during conciliation.

Attempt to turn single charge into class action
In April 2008, a female bartender at Senor Frog’s Restaurant filed an EEOC charge alleging sex discrimination and retaliation against the company that operated the restaurant and a staffing agency that supplied employees to the restaurant (collectively, the employers). The woman alleged that after she had two consensual sexual encounters with a supervisor at the restaurant, he continued making sexually charged comments and touching her inappropriately, despite her opposition to his conduct. She said that when she complained, the supervisor cut back her work hours. Her EEOC charge alleged that other women at the restaurant had suffered similar treatment.

Learn more about the dangers of sexual harassment in the workplace in the HR Guide to Employment Law

After investigating the bartender’s claim, the EEOC made no findings regarding her allegations. However, without explanation, its determination concluded that there was reasonable cause to believe a “class of female employees” had been subjected to sexual harassment, adverse terms and conditions of employment, and retaliation, among other things.

During the purported conciliation phase that followed the issuance of its determination, the EEOC initially demanded that Senor Frog’s pay $200,000 to each of two women (neither was the bartender who filed the original charge). The agency claimed the women were part of a “class” of employees who suffered discrimination.

In addition, the EEOC demanded the establishment of a $500,000 “class fund” that it could distribute to other “aggrieved” individuals it might find. The agency said if it couldn’t find any other class members, it would donate the class fund money to a nonprofit. It didn’t explain how other class members might be identified, particularly since it had closed its investigation. The EEOC later decreased its demand to $100,000 for each of the two women and $350,000 for the “class fund.”

In trying to evaluate the EEOC’s settlement demand, attorneys for the employers asked for additional information about the alleged acts of discrimination, the individuals purportedly responsible for the conduct, and the alleged “class.” According to the attorneys, the EEOC refused to explain the basis for its cause determination or the results of its investigation. When the employers didn’t offer to pay what it demanded, the EEOC terminated the conciliation process and filed suit in federal district court in Hawaii.

Judge rules EEOC failed to conciliate in good faith
Attorneys for the employers asked the court to dismiss the lawsuit because the EEOC had failed to satisfy a required prerequisite to filing suit―that the agency conciliate in good faith in an attempt to resolve the charges. Judge Leslie Kobayashi agreed with the employers that conciliation was a jurisdictional prerequisite, meaning the court couldn’t consider the case unless the prerequisite had been satisfied.

After reviewing the conciliation-related correspondence between the agency and the employers’ attorneys, Judge Kobayashi concluded that the EEOC “failed to conciliate in good faith when it failed to provide either [employer] with any information with which they could evaluate the EEOC’s claims.” The judge said the EEOC’s “obstinate refusal to offer any information” to the restaurant and the staffing agency, including information about the alleged class of aggrieved individuals and alleged unlawful acts, made it impossible for them to evaluate the claims.

“In order to be meaningful, conciliation must have context and provide for an exchange of relevant and specific information between the parties,” Judge Kobayashi wrote in the August 22 ruling. “It is no surprise that [the employers], faced with little information, were unwilling to entertain the EEOC’s ‘take-it-or-leave-it’ offer. The EEOC cannot expect employers to make substantial offers of settlement when they are provided . . . no information with which to evaluate their liability.”

Judge orders EEOC to ‘redo the conciliation process’
Judge Kobayashi ordered that the case be stayed, or halted, so the EEOC could “redo the conciliation process.” She also specifically instructed the agency to “provide [the employers] with information such as the number or identity of [c]laimants identified during its investigation, specific incidents of harassment or discrimination, and any other information reasonably necessary for [them] to evaluate the claims and formulate a reasonable offer of settlement.” EEOC v. La Rana Hawaii, LLC, Civil Number 11-799 (Aug. 22, 2012, order).

Bottom line
The EEOC’s refusal to provide information while demanding substantial payments from the employers in this case is, unfortunately, not an isolated problem. Similar cases have been reported around the country recently, and the problem could continue. The EEOC’s strategic plan for fiscal years 2012 through 2016 puts pressure on the agency to file more “systemic” discrimination lawsuits―i.e., cases alleging that employers engaged in a pattern or practice of discrimination or unlawful treatment that affected large numbers of employees.

Be cognizant of the possibility that the EEOC might use a single charge of discrimination as a springboard to investigate and allege that your company is engaging in widespread unlawful conduct. For that reason, it’s even more critical that you consult with legal counsel experienced in dealing with the EEOC. You also should recognize that the EEOC’s initial settlement demand is not its final offer. There’s room for negotiation. Don’t hesitate to ask the EEOC to explain the basis for any cause determination, even if it seems unwilling to provide that information.