EEOC and big cases: Not yet ready for prime time?

The U.S. Equal Employment Opportunity Commission has taken some serious hits from the courts lately. Although the agency says it plans to plow ahead undeterred, the decisions are encouraging for retailers – especially as they affect the use of criminal and credit background information.

In 2011, a federal court in Michigan found the EEOC's claims in a criminal background case "were without foundation from the very beginning" and ordered the EEOC to pay $750,000 in attorneys' fees to the company defendant. EEOC v. Peoplemark, Inc., had dragged on through the EEOC and the court system for approximately six years and was finally thrown out after the court found that 22 percent of the 286 applicants supposedly "not hired" because of their criminal records had, in fact, been hired.

Then, in 2012, the EEOC issued an Enforcement Guidance on use of criminal background information, taking a fairly hard line against the solicitation or use of such information, and also unleashed a four-year plan calling for increased emphasis on "systemic discrimination." The plan required the EEOC to maintain a baseline number of "systemic" cases in the litigation docket, and that number must increase by a certain percentage each year until 2016.

The EEOC has brought a number of class actions since 2012, including recent criminal background lawsuits against BMW and Dollar General stores. Those cases are in the earliest stages, but employers are prevailing in quite a few other "systemic" cases. And another employer has recently sued the EEOC over tactics that it used in recruiting employee-litigants.

In EEOC v. Freeman, a federal court in Maryland granted summary judgment to an event planning company because the EEOC had failed to prove that the company's criminal background and credit check policies had a disparate impact on African-American and male applicants. In doing so, the judge had harsh words for the EEOC's statistical expert and his analysis, calling the latter "flawed," "skewed," "rife with analytical errors," "laughable," and "an egregious example of scientific dishonesty." The judge claimed that the expert had 'cherry-picked" from the available data to support the agency's theory.

The judge explained that the EEOC's reliance on national statistics showing racial disparities with respect to credit ratings, arrests and convictions was not enough – the EEOC was required to provide evidence that a specific element of the company's background check process caused a disparate impact. The court also noted that the EEOC itself conducts pre-employment criminal background investigations for all new hires, and credit checks for roughly 90 percent.

Earlier this year, a federal court granted summary judgment to Kaplan in a case where the EEOC had challenged the company's use of credit information in hiring decisions.

Outside the context of background information, the EEOC was sanctioned in a sexual harassment class action, EEOC v. CRST Van Expedited, Inc. A federal court in Iowa ordered the agency to pay the employer approximately $4.7 million in attorneys' fees and expenses. According to the court, the EEOC failed to conduct a reasonable investigation, did not have a basis for bringing its claims, and refused to identify the members of the classes.

And one employer has taken the offensive after the EEOC sent a solicitation through employees' business email accounts. Wisconsin-based Case New Holland and its affiliate CNH America, LLC, have sued the agency and an individual investigator in federal district court in the District of Columbia, alleging that the EEOC violated the Administrative Procedure Act and the company's constitutional rights. According to the lawsuit, the EEOC's investigators sent more than 1,000 unsolicited emails to Case New Holland's employees (without prior notice to the company and before the EEOC had determined that there was reasonable cause to believe that discrimination was taking place) using the company email system. The lawsuit alleges that the emails, sent by the investigator in Baltimore, Maryland (who reported to the EEOC's Philadelphia District Office), said that the companies were under investigation without specifying the type of discrimination. The emails allegedly contained a link to an online questionnaire soliciting employee feedback on the company's employment practices and policies. Some of the emails were sent to current and former managers, whose responses and statements could arguably legally bind the company. The companies seek to enjoin the EEOC from communicating with employees through the company's email system, and from disclosing the information gathered in this way "to any third party" or in any way against the companies. The companies also seek to force the EEOC to turn over all of the information that it gathers "through their illegal mass business email distribution."

According to the lawsuit, when a Congressional representative from Pennyslvania asked the District Director of the Philadelphia Office to justify the investigator's actions, he responded that the mass email was "efficient."

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