On March 31, 2011, the Equal Employment Opportunity Commission (EEOC) was sanctioned by a federal court in Michigan and ordered to pay more than $750,000 in attorneys fees, expert witness fees and court costs to Peoplemark, Inc. (Peoplemark), a staffing company headquartered in Owensboro, Kentucky. The decision brings to an end nearly three years of litigation.

In 2008, the EEOC filed a class action lawsuit against Peoplemark. In its complaint, the EEOC alleged that Peoplemark violated Title VII of the Civil Rights Act by adopting a blanket policy of refusing to hire anyone with a criminal record. According to the EEOC, such policies have a “disparate impact” on certain minority groups, including African-Americans and Hispanics. The case was high stakes litigation not only for Peoplemark, but also for the EEOC, which brought the lawsuit as part of a new policy of aggressively enforcing Title VII against employers who categorically deny employment to job applicants with a criminal history.

After what the court described as “months of tumultuous litigation,” the EEOC was completely unable to prove its case. It could not prove that Peoplemark had a policy of refusing to hire anyone who had a criminal record. It could not identify anyone who had suffered discrimination as a result of Peoplemark’s alleged hiring policies. It was unable to produce statistical or expert evidence to back up its claims of discrimination. As a result, the EEOC dismissed its case against Peoplemark, but only after Peoplemark had incurred significant costs to defend the case.

Peoplemark subsequently filed a motion for sanctions, asking that the court award it more than $1 million in attorneys fees, expert witness fees and court costs. In that motion, Peoplemark argued that “due to the EEOC’s unreasonable and meritless litigation strategy, in which it deliberately caused Peoplemark unnecessary delay and expense in a very time-consuming and complex case, the agency should be required to compensate Peoplemark for all fees and expenses incurred.” The court agreed with Peoplemark, finding that “[t]his is one of those cases where the complaint turned out to be without foundation from the beginning.” The court also admonished the EEOC for continuing to pursue its case against Peoplemark after it was clear that Peoplemark had done nothing wrong. “The EEOC should have known that it was unreasonable … to continue to litigate [the case] thereby driving up defendant’s costs, because it knew that it would not be able to prove its case.” On these facts, the court ruled that it was appropriate to sanction the EEOC and awarded Peoplemark attorneys fees in the amount of $751,942.48.

Although Peoplemark did not recover all of the fees it incurred, the company was nevertheless vindicated. And, more importantly, the case stands as a significant deterrent to regulatory overreach and abuse.