On May 17, 2013, the U.S. Court of Appeals for the Sixth Circuit rendered its opinion in EEOC v. Memphis Health Center, Inc., Nos. 11-6426/27 (6th Cir. May 17, 2013), and held that a prevailing ADEA defendant can recover its attorneys’ fees against the EEOC under the Equal Access to Justice Act (“EAJA”).

The EAJA allows qualifying corporations, generally including those with net worth of less than $7,000,000 and less than 500 employees at the time of filing, to collect attorneys’ fees incurred in government litigation absent a showing by the government that its position was substantially justified. 42 U.S.C § 2412.

In EEOC v. Memphis Health Center, the Sixth Circuit extended the EAJA to qualifying defendants who prevail in ADEA litigation, demonstrating that the EAJA provides a useful tool for employers to combat abuses of authority by the EEOC.

Factual Background

Charging party Rita Smith worked for Memphis Health Center (“MHC”), a nonprofit hospital, as a dental assistant for 25 years. In August 2007, after Smith was laid off in a downsizing, Smith filed a grievance claiming that an MHC doctor favored an older, more recently hired worker. Memphis Health, at 2. During her severance period, Smith accepted a lower-paying position as a call center operator. Id. at 3.

In January 2008, Smith and two outside candidates applied for a new dental assistant opening. MHC called Smith in for interview on “casual Friday,” and she unintentionally wore jeans and tennis shoes and failed to bring a copy of her resume. Id. MHC hired another candidate, who was seven years younger than Smith, among other reasons, because she came prepared for the interview. Id. at 3-4.

After Smith filed a charge, the EEOC brought suit against MHC asserting claims for age discrimination and retaliation. Id. at 4. The district court granted summary judgment on both claims because the new hire was not “substantially younger” than Smith, and Smith did not engage in any protected activity. Id.

Following summary judgment, MHC filed a motion seeking attorneys’ fees and costs totaling $70,389.83 against the EEOC pursuant to the EAJA. The magistrate conducted a claim-by-claim analysis, found only the age discrimination claim substantially justified, and awarded 50% of the attorneys’ fees incurred by MHC. Id. at 5. The district court adopted the magistrate’s recommendation, and the EEOC appealed. Id. at 6.

The Sixth Circuit’s Opinion

As an initial matter, the Sixth Circuit noted that the EAJA waives sovereign immunity and expressly authorizes fee-shifting against the government to deter unreasonable exercises of governmental authority. Id. at 7. The EAJA requires the government to pay attorneys’ fees to a prevailing party, except as specifically prohibited by statute, “unless the court finds that the position of the United States was substantially justified” or special circumstances make an award unjust. Id. at 8.

The EEOC argued that, because the ADEA contains its own fee-shifting rule, the EAJA did not apply. The Sixth Circuit rejected the EEOC’s argument. It found that, because the ADEA is silent on the issue of fee awards to prevailing defendants -- that is, it does not specifically provide for or preclude such an award -- the EAJA “fills the void” in the ADEA and provides prevailing defendants with a statutory right to attorneys’ fees. Id. at 9-10.

The Sixth Circuit determined that the district court, however, erred by conducting a claim-by-claim analysis that segmented the substantial justification determination. Id. at 13-14. The EAJA requires a “holistic determination” of the government’s case as a whole. Id. at 14.

For these reasons, the Sixth Circuit remanded the case so that the district court could assess whether the EEOC’s position, as a whole, was substantially justified. It noted that, if the two claims are distinct, the district court should assess which claim was more prominent in driving the case or, if the claims are sufficiently intertwined, the district court may find that an insubstantial justification as to one renders the EEOC’s entire overall position unjustified. Id. at 14-15.

Implications For Employers

Addressing an issue of first impression in the Sixth Circuit, EEOC v. Memphis Health Center held that the EAJA applies to ADEA claims brought by the EEOC against private employers. If an employer meets the threshold requirements, the EAJA gives it substantial leverage to combat unjustified ADEA claims brought by the EEOC and other government agencies. Employers, accordingly, should keep the EAJA in their EEOC litigation toolkits.