Courts around the country have signaled an intolerance to questionable EEOC litigation tactics over the last 12 months (previously discussed in our blog here and here). Judge George C. Smith of the U.S. District Court for the Southern District of Ohio bucked that trend on July 6, 2011, in his ruling in EEOC v. JP Morgan Chase Bank, N.A., No. 09-CV-00864 (S.D. Ohio July 6, 2011). Judge Smith gave the EEOC the benefit of the doubt concerning its duty to notify an employer of the scope of its investigation, and adopted an exceedingly broad view of what satisfies the EEOC’s duty to conciliate a matter in good faith before filing a lawsuit.

The investigation in this case started ordinarily enough: in June 2008, Amiee Doneyhue filed an EEOC charge claiming that her boss – Ray Wile – treated male mortgage consultants better than Doneyhuw. In August 2008, Doneyhue filed an amended EEOC charge claiming that Wile had also sexually harassed her and when she complained, the company fired her. Chase vigorously denied the allegations. The EEOC attempted to broker a deal before it investigated the case, but those efforts failed. The EEOC investigator subsequently launched her investigation, including witness interviews of other employees in Doneyhue’s department. The EEOC seemed to focus its investigation on current and former co-workers that had worked for Wile. Months after the charge was filed, the EEOC sent an email to Chase mentioning for the first time that Doneyhue also had made class allegations. The company asked the EEOC where those allegations could be found in the charge, and the EEOC simply noted that Doneyhue had alleged that other similarly-situated women were victims of discrimination.

After Chase and the EEOC tangled over the scope of various information requests, the EEOC issued a letter of determination (“LOD”) and a proposed conciliation agreement indicating that the EEOC had determined that a class of female employees were victims of discrimination. The agreement demanded $300,000 for Doneyhue and $2 million to be distributed among class members – a class the EEOC admitted it could not identify at the time and would require Chase to assist in locating. During negotiations the EEOC repeatedly refused to identify the members of the class. Chase also made several attempts to meet with the EEOC in person to discuss the conciliation demand, and was rebuffed each time. The EEOC dealt with Chase only over the phone and in writing, and ultimately demanded a “last and best offer” from Chase. When Chase gave the EEOC an offer that it emphasized was “subject to negotiation,” the EEOC declared that conciliation was over and additional efforts would be “futile or non-productive.”

The EEOC then filed suit, claiming that Chase had discriminated against a class of employees at its Polaris Park facility. Chase filed a motion for partial summary judgment as to the class allegations, arguing that the EEOC’s suit was well beyond what it investigated at the administrative stage (or at least beyond what it told Chase it was investigating) and that it had not conciliated in good faith. Judge Smith rejected both arguments.

The Defense Claimed That The Lawsuit Exceeded The Scope Of Investigation

Chase claimed that the EEOC had not truly investigated a class beyond employees reporting to Doneyhue’s manager Wile, or that even if it did, the EEOC had not told Chase of it. The Court acknowledged that in the Sixth Circuit, an EEOC complaint must be limited to the investigation reasonably expected to grow out of the charge of discrimination. The Court found, however, that the EEOC had clearly looked at the circumstances of employees outside of Wile’s chain of command, and rejected Chase’s argument. Chase’s second argument – that it must be notified of the scope of the charge – relied on EEOC v. Outback Steak House of Florida, 520 F. Supp. 2d 1250 (D. Colo. 2007). Judge Smith differentiated that case, noting that in EEOC v. Outback, the EEOC had attempted to base a nationwide lawsuit on a strictly regional investigation. Judge Smith reasoned that it could be inferred from the EEOC’s testimony and information requests that Chase was informed of expanded class claims and denied Chase’s motion on that basis.

EEOC’s Duty To Conciliate In Good Faith

Perhaps more significantly, the Court also gave the EEOC virtually free reign to define for itself what is “good faith” conciliation. The Court noted, without explanation, that the EEOC’s conciliation demand was “on its face made in good faith.” Id. at 16-17. Judge Smith went on to hold that once Chase rejected the EEOC's demand, the Commission was “under no duty to attempt further conciliation….” Id. at 17. The decision concludes that “it is not for this Court to second guess the approach taken by [the EEOC] in attempting to conciliate the matter. As long as its effort was made in good faith, it is not subject to judicial review.” Id. On this basis, the Court rejected Chase’s motion for partial for summary judgment.

Implications For Employers

This is a disturbing case for employers. A strategy informed by EEOC v. JP Morgan Chase suggests that employers should push the EEOC for clear articulation of its position at every stage. Where, for example, the EEOC makes class allegations, but refuses to identify the class members, an employer should still insist the EEOC at least identify the scope of the class (by work unit or supervisor, for example). If the EEOC continues to stonewall, the employer should memorialize 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. 

As for a conciliation strategy, it is difficult to suggest steps beyond those taken by the employer here. Naturally, when the EEOC refuses to come to the negotiation table, it is difficult to bargain. Demonstrating to the Court that an employer at least attempted to engage in the method of negotiating proscribed by the EEOC is one suggestion (here, providing the EEOC with a more comprehensive offer). Nevertheless, it is difficult to conceive of a situation where the EEOC could be considered to have acted improperly using this decision’s view of the “good faith” standard. Fortunately, there are other decisions that take an evenhanded view of the good faith obligation that can be cited in other jurisdictions.