Court orders EEOC to pay $750K for ‘unreasonable’ lawsuit

Remember last year, when a federal court chided the Equal Employment Opportunity Commission for its “sue first, ask questions later” approach to a case involving a temporary staffing firm? Now several business groups have banded together to make sure the agency pays the price for its over-aggressive tactics.
The U.S. Chamber of Commerce, the Equal Employment Advisory Council and the National Federation of Independent Business Small Business Legal Center recently filed a joint “friend of the court” motion urging that a federal appeals court order the EEOC to fork over more than three-quarters of a million dollars to Peoplemark, Inc.
A lower court awarded Peoplemark $752,000 in attorney’s fees and costs after the agency pursued an “unreasonable and meritless litigation strategy” in a racial discrimination claim against the staffing company.
The case has gained notoriety in a time when employers have started to voice concerns about the EEOC’s tactics in expanded enforcement efforts. One observer characterized the agency’s approach as “ready, fire, aim.”
‘Disparate impact’ alleged
Here’s the background: The EEOC filed a lawsuit against Peoplemark, claiming that the firm had a blanket policy against hiring applicants with criminal records. That policy discriminated against African American and Hispanic applicants, the agency alleged.
According to the business consortium’s court filing, the EEOC’s lawsuit was brought on behalf of an individual who claimed that she was denied employment due to her criminal conviction record, “as well as an unidentified class of similarly situated individuals.”
But after the EEOC filed its civil complaint, Peoplemark produced a statistical analysis which revealed that at least 22% of the 286 applicants the EEOC claimed
were negatively affected by the company policy were, in fact, hired by the company.
And the EEOC couldn’t produce any statistical evidence of disparate impact based on the alleged hiring policy.
After extended legal wrangling, the agency and the company filed a joint motion to dismiss the case.
‘Without foundation from the beginning’
Subsequently, Peoplmark argued that the EEOC’s tactics “deliberately caused Peoplemark unnecessary delay and expense in a very time consuming and complex case,” and asked that the agency be required to reimburse the company’s attorney’s fees and costs.
The district court agreed, finding that the agency continued to
prosecute the case after it became clear that it had no basis for doing so.
The judge wrote:
“This is one of those cases where the complaint turned out to be without foundation from the beginning.
“Once the EEOC became aware that its assertion that Peoplemark categorically refused to hire any person with a criminal record was not true, or once the EEOC
should have known that, it was unreasonable for the EEOC to continue to litigate on the basis of that claim, thereby driving up defendant’s costs, because it knew it would not be able to prove its case.”
The EEOC appealed the lower court decision. The business consortium’s motion was filed with the Sixth Circuit Court of Appeals, which will decided whether the $752,000 award will stand.
The question is, will a $752,000 slap-down make the EEOC rethink its approach to similar cases? Only time will tell.