How “Shoot First, Aim Later” Tactics Dearly Cost the EEOC

By Gerald L. Maatman, Jr. and Christopher J. DeGroff

Joining a growing line of cases reflecting judicial intolerance for questionable litigation tactics, the recent ruling in EEOC v. Peoplemark, Inc. (W.D. Mich. March 31, 2011), represents solid support for employers targeted by questionable government-initiated litigation.

In EEOC v. Peoplemark, Inc., the EEOC alleged that the staffing company’s policy of not hiring individuals with a criminal record had a disparate impact on African-Americans. Notably, the EEOC has repeatedly signaled that it intends to attack these blanket criminal background policies as disproportionally and discriminatorily affecting minorities.

Indeed, the Court in Peoplemark, Inc. noted that an EEOC Commissioner had even highlighted this case in a public meeting in 2008, noting that the Commission had unanimously approved the case against Peoplemark.

The problem with the EEOC’s theory

The problem with the EEOC’s theory was its assertion that Peoplemark’s had a blanket no-hire policy was simply not true. In fact, of the 286 individuals the EEOC purported to represent in this case, only 22 percent actually had been hired and placed by Peoplemark. Significantly, the Court found that even after the EEOC knew that was the case, it proceeded with the litigation anyway.

The EEOC based its claims on a three-year investigation into a charge filed by Sherri Scott. Scott was a two-time felon with convictions for housebreaking and larceny who Peoplemark chose not to hire because of her criminal record. After hotly contested subpoena enforcement actions, the company gave the EEOC over 18,000 pages of documents with the detailed personnel information of the group the EEOC sought to represent.

Based on its investigation, the EEOC filed suit on May 29, 2008 claiming that Peoplemark had a blanket policy of not hiring anyone with a criminal record. Peoplemark denied that it had such a categorical policy.

The EEOC litigated the case for a total of 3 1/2 years, based almost exclusively on the fact that Scott had not been hired, and some “early statements” by a company witness. In April 2009, the EEOC finally identified the 286 individuals it claimed it represented (and only after it was forced to do so by the Court).

What it took for the EEOC to fold the case

Peoplemark’s expert was able to determine that 22 percent of these individuals had actually been hired and placed by the company. Even after the EEOC had the materials showing that this was the case, it still pursued the matter. It was only after the EEOC failed to designate a statistical expert per a scheduling deadline that it finally folded and agreed to dismiss the case.

In its Motion for fees, costs, and sanctions, Peoplemark argued that the EEOC had deliberately caused the company to incur attorneys’ fees and expert fees when it should have known that the company did not have the blanket no-hire policy. The Court agreed.

Citing the longstanding case of Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), the Court noted that it had the authority to assess fees against the EEOC if the action it brought was “frivolous, unreasonable, or without foundation…”  In the Court’s view, if the EEOC had done the investigation it should have done with its own represented individuals, it should have known that Peoplemark had, in fact, hired a number of the allegedly injured individuals, thereby undercutting the EEOC’s central “blanket policy” position. Indeed, the Court suggested that the EEOC should have known this critical flaw before it even filed the case, after three years of an intense administrative investigation.

The Court’s decision found that the final nail in the EEOC’s coffin was its failure to identify a statistical expert to champion its disparate impact claim. The Court noted that the EEOC knew from the day it filed this case that it would rely heavily on expert statistical testimony, and that it would “carry a major price tag for both sides.”

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Nevertheless, the EEOC failed to identify an expert within the time period set in the Court’s schedule, even after receiving significant extensions. The EEOC’s failure to pursue the statistical component of its case led the Court to find that an award of “attorneys’ fees is appropriate because of the unnecessary burden imposed on defendant.”

Award against the EEOC one of the largest ever

The remainder of the Court’s decision is a detailed analysis of how it would calculate the fees award.  After making some minor deductions for duplicative or vague requests, the Court awarded Peoplemark $219,350.17 in attorneys’ fees. The larger component of the sanction, however, was $526,172.00 in expert fees. The EEOC challenged the expert fees as being too high, citing what it had paid its (notably, unused) expert.

The Court found that the EEOC’s argument was like comparing “apples to oranges” and rejected its position. After adding in some additional miscellaneous expenses, the Court ordered the EEOC to pay Peoplemark a total of $751,942.48. This is one of the largest sanction awards ever against the Commission.

EEOC v. Peoplemark, Inc. joins cases like EEOC v. Bloomberg L.P.EEOC o/b/o Serrano, et al v. Cintas Corp., and EEOC v. CRST that suggest a growing intolerance for the EEOC’s “shoot-first, aim later” tactics in large-scale pattern or practice cases.

The Court in Peoplemark concluded that the stakes in these systemic cases are high, and expense of litigating them should not be taken lightly. Employers are well-served to pressure-test the EEOC’s theories from the onset of a case by requiring the EEOC to “show its work” in all aspects of its claims.

Faced with case authority like EEOC v. Peoplemark, Inc., however, the EEOC will find it far more difficult to stonewall the targets of its litigation.

This was originally published on Seyfarth Shaw’s Workplace Class Action Blog .

Co-author Christopher J. DeGroff is a partner and a member of the Labor and Employment Practice Group in Seyfarth Shaw’s Chicago office. He represents employers throughout the country in a wide range of employment law matters largely focused on multi-plaintiff and class/collective actions.

Gerald L. Maatman, Jr. is a partner of Seyfarth Shaw LLP, the leading national employment and labor law firm. He is resident in the firm’s Chicago and New York offices, and has a primary emphasis in his practice on defending employers sued in employment-related class actions and EEOC pattern or practice lawsuits brought in federal and state courts throughout the United States. Contact him at gmaatman@seyfarth.com.

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2 Comments on “How “Shoot First, Aim Later” Tactics Dearly Cost the EEOC

  1. Good Morning !!

    I will add my “2 cents” that these governmental violations do not just lie with the EEOC. The OFCCP operates exactly the SAME way and I have been through it personally several times – once with the EEOC and the second with the Office Of Federal Contract Compliance Programs (OFCCP). The OFCCP came in with an agenda and ignored the empiracle data which clearly documented our position, nearly identical to the situation in Peoplmark. My attorney looked at me and asked what we wanted to do. I said we charged straight at them and the Regional Director for willful and wanton BIAS. We had to “face down” OFCCP, put our entire company’s governmental contracts on the line and “Just Say ‘No'” to the OFCCP’s heavy-handed tactics. We charged the OFCCP Regional Office with BIAS and went after them with the same, if not greater vengence that they came after us. In the, ten (10) months later, I go t a call out of the blue 2 days before Christmas from an entirely DIFFERENT OFCCP Regional office “asking” us if we would be amendable to a withdrawl of the charges letter and accept a non-monetary concilatory letter. WE WON !!!!

    My point is, just as Peoplemark did, if you know you are RIGHT, DON’T back down and DON’T be afraid to go after a corrupt and/or bias governmental agency !!!! That is the ONLY way to thwart their out-of-control behavior !!!! And it WORKS !!! But you have to have the “stomach” for it as well !!! Most company HR departments and/or legal counsel do not. Sorry to say, but is true. Governmental agencies count on being able to intimidate employers. They really don’t know what to do when an informed employer says, “No MORE !!!” and then goes AFTER THEM.

    I applaud Peoplemark !!! Exactly what had to be done.

    Food for thought !!!

    Stuart A. Moir

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