By Alex Drummond and Erin Wetty

The debate continues in Corporate America and federal courthouses relative to the tactics utilized by the EEOC in pursuing its litigation enforcement program. Some like it; other do not. As detailed here, some federal judges have criticized the EEOC's tactics and dismissed the government's lawsuits on a variety of grounds, and some judges have entered large fee awards against the EEOC as a result. The one thing that is certain is that the EEOC's tactics are controversial, as the EEOC continues to push the legal envelope in litigating its cases in an aggressive fashion.

Yet, following this summer's pro-government ruling in EEOC v. JP Morgan Chase Bank, N.A., No. 09-CV-00864 (S.D. Ohio July 6, 2011) - previously discussed in our blog here - on September 20, 2011, Judge James C. Dever III of the U.S. District Court for the Eastern District of North Carolina continued the trend of affording the EEOC great flexibility in pursuing claims without satisfying procedural requisites as to the claims of the purported victims of workplace bias for whom it sues. In EEOC v. Luihn Food Systems, Inc., No. 09-CV-387 (E.D.N.C. Sept. 20, 2011), Judge Dever ruled that the EEOC’s failure to investigate and conciliate an individual's claim and its failure to issue a cause determination as to that claim does not deprive a federal court of subject-matter jurisdiction under Section 706 of Title VII when the EEOC satisfied those same prerequisites for other allegedly injured individuals under similar factual circumstances.

Factual And Procedural Background

In August 2009, the EEOC sued Defendant Luihn Food Systems, Inc., a Kentucky Fried Chicken franchisee, on behalf of four named aggrieved employees, each of whom had filed an EEOC charge alleging that the same male co-worker had sexually harassed them and that Luihn had failed to take corrective action. These charges also referenced a class of other similarly-situated female employees. The EEOC pursued its claims against Luihn under Section 706 of Title VII. Subsequently, the four employees intervened in the litigation per the procedures of Title VII.

During the course of discovery, the EEOC identified former employee Pamela Johnson as an additional individual who had been subjected to alleged sexual harassment by the same co-worker as the four intervening employees. The EEOC’s amended complaint made no mention of Johnson; Johnson had never filed a charge with the EEOC; and the EEOC admittedly never investigated Johnson’s specific claim, never issued a cause determination regarding her claim, and never attempted to conciliate her specific claim with Luihn.

Based on the EEOC’s failure to satisfy these administrative prerequisites before pursuing Johnson’s claim, Luihn moved for summary judgment as to the EEOC's claim for Johnson, arguing that the court lacked subject-matter jurisdiction.

The Court Sides With The EEOC

The EEOC argued that its failure to investigate and attempt conciliation with respect to Johnson’s specific claim was not a jurisdictional bar because it had satisfied these procedural prerequisites with respect to similarly-situated employees, specifically, the four employees who had intervened in the litigation. Judge Dever agreed with the EEOC and denied Luihn’s motion for summary judgment.

In reaching his conclusion, Judge Dever relied heavily on EEOC v. American National Bank, 652 F.2d 1176 (4th Cir. 1981). In American National Bank, the Fourth Circuit held that it had subject-matter jurisdiction over the EEOC’s race discrimination claims regarding a particular branch of the defendant bank, even though the EEOC had focused its investigation and conciliation attempts on a different bank branch and not the branch at issue in the case. The Fourth Circuit found that the EEOC’s claims could proceed because nearly identical race bias claims at the other branch were sufficient to put the employer on notice of the challenged actions at the second branch.

Applying the reasoning from American National Bank, Judge Dever concluded that the EEOC had sufficiently alerted Luihn that it would be pursuing a class-like claim because, during conciliation efforts, the EEOC sought to settle the claims of the four intervening employees, as well as the claims for at least one additional worker (though, it was not Johnson). The Court held that “[t]he presence of this additional employee indicates that the EEOC maintained throughout conciliation that its claims related to the four charging parties and a class of similarly situated female employees.” EEOC v. Luihn Food Systems, at 8. In doing so, Judge Dever declined to follow contrary case law precedent outside of the Fourth Circuit. Id. at 9.

In addition, because Johnson’s claim related to the same employer at the same store during the same relevant period and involved the same co-worker as the four intervening employees' claims, Judge Dever held that it was proper to allow the EEOC to proceed with pursuing Johnson’s claim, even though Johnson and the EEOC had not fulfilled the procedural prerequisites for her specific claim.

Implications For Employers

Like EEOC v. JP Morgan Chase Bank, N.A., this is a disturbing case for employers.  It encourages "hide the ball" tactics whereby an employer is forced to box with shadows and remain in the dark as to the size of the class of claimants for whom the EEOC seeks recovery. The result is a situation where the EEOC scours the list of ex-employees and workers in the employer's current employee population in an effort to expand the case and add others to the claimant list.

This ruling also underscores the need for aggressive defense tactics. Where, for example, the EEOC makes general class-like allegations or refers to additional unnamed similarly-situated individuals during its investigation and conciliation efforts, an employer should insist that the EEOC identify the scope of the class (by work unit or supervisor, for example). If the EEOC continues to refuse to cooperate, then the employer should memorialize in writing what it believes is the scope of the class, so there is no mistake what the employer did or did not know during the investigation and conciliation stage. This documentation can prove useful in subsequent litigation when a dispute centers on whether the employer had notice of the potential class claims. Fortunately, and as Judge Dever even recognized, there is significant case law outside of the Fourth Circuit that reaches a different conclusion than Judge Dever did and which employers may rely on if they find themselves in a similar situation as Luihn.