The Seventh Circuit just gave the EEOC a very generous present this holiday season. In what is truly a game changing decision published last night, the Seventh Circuit ruled EEOC v. Mach Mining, No. 13-2456 (7th Cir. Dec. 20, 2013), that an alleged failure to conciliate is not an affirmative defense to the merits of a discrimination suit. We previously blogged about this case here and here and the potential for long-lasting implications given that if the EEOC’s position won the day it will be able to force its will on employers without any meaningful recourse to determine whether the EEOC’s conciliation efforts were made in good faith. 

David Lopez, the EEOC’s general counsel – in an unusual move for the agency – issued a press release immediately after the ruling (link here) hailing its significance as a “landmark decision.”

Background

In EEOC v. Mach Mining, the EEOC alleged a pattern or practice of not hiring women for mining and related positions, or, in the alternative, maintaining a neutral hiring policy that has a disparate impact on women. The company asserted a number of affirmative defenses, including that the EEOC failed to conciliate in good faith before suing. The EEOC moved for summary judgment on just that defense, arguing that the Seventh Circuit’s decision in EEOC v. Caterpillar, Inc., 409 F.3d 831 (7th Cir. 2005), compelled the conclusion that the EEOC’s conciliation process is not subject to judicial review.

The District Court denied the EEOC’s motion for summary judgment, but granted the Commission’s motion to certify the order to the Seventh Circuit pursuant to section 1292(b). Id. at 4. The District Court certified two questions for appellate review, including: (1) whether District Courts may review the EEOC’s informal efforts to secure a conciliation agreement acceptable to the Commission before filing suit; and (2) if District Courts may review the EEOC’s conciliation efforts, should that review apply a deferential or heightened scrutiny standard of review.

The Decision

The appeal sparked great interest, and included the submission of amicus briefs by employer groups.

In deciding whether to allow the “failure to conciliate” defense to stand, the Seventh Circuit considered: (1) the language of Title VII; (2) whether there is a workable standard for such a defense; (3) whether the defense might fit into the broader statutory scheme set forth by Congress in Title VII; (4) the Court’s prior decisions; and (5) the decisions from other courts recognizing the “failure to conciliate defense” as appropriate. Id. at 5.

In rejecting the “failure to conciliate” defense, the Seventh Circuit held that the “Title VII contains no express provisions” for this defense and, in support of the EEOC’s position, makes clear that “conciliation is an informal process entrusted solely to the EEOC’s expert judgment and that the process is to remain confidential.” Id. The Seventh Circuit also held that cutting against the “failure to conciliate” defense is the fact that no workable standard of review exists by which District Courts can meaningfully judge whether the EEOC conciliated in good faith. Id. at 8. Specifically, the Seventh Circuit held that “[a] court reviewing whether the agency negotiated in good faith would almost inevitably find itself engaged in a prohibited inquiry into the substantive reasonableness of particular offers – not to mention using confidential and inadmissible materials as evidence – unless its review were so cursory as to be meaningless.” Id. at 11.

In terms of the statutory scheme of Title VII, the Seventh Circuit held that the “failure to conciliate” defense does not comport with Congress’ intent since, “offering the implied defense invites employers to use the conciliation process to undermine enforcement of Title VII rather than to take the conciliation process seriously as an opportunity to resolve a dispute.” Id. at 15. Similarly, the Seventh Circuit determined that “if an employer engaged in conciliation knows it can avoid liability down the road, even if it has engaged in unlawful discrimination, by arguing that the EEOC did not negotiate properly – whatever that might mean – the employer’s incentive to reach an agreement can be outweighed by the incentive to stockpile exhibits for the coming court battle.” Id. at 16. In rejecting the argument advanced by the employer and numerous amici supporting the “failure to conciliate” defense, and the fact that Congress intended for courts to watch over the EEOC to ensure that they comply with their pre-suit obligation, the Seventh Circuit opined that “[we] are not persuaded….that EEOC field offices are so eager to win publicity or to curry favor with Washington by filing more lawsuits that they will needlessly rush to court.” Id.at 17.

Finally, after noting that District Courts within the Seventh Circuit have exhibited “consistent skepticism toward employer’s efforts to change the focus from their own conduct to the agency’s pre-suit actions,” it turned to case law from other circuits and noted that “our decision makes us [the Seventh Circuit] the first circuit to reject explicitly the implied affirmative defense of failure to conciliate.” Id. at 22. The Seventh Circuit then noted that its decision “may complicate an existing circuit split more than it creates one…” Id. at 23. The Seventh Circuit declined to follow the “three part inquiry” that the Second, Fifth, and Eleventh Circuits use to evaluate conciliation as well as the “minimal level of good faith” inquiry engaged in by the Fourth, Sixth, and Tenth Circuits to evaluate the EEOC’s pre-suit conciliation obligation, and held that “while we respect the views of our colleagues in these circuits, we also recognize our duty to decide our cases independently and to disagree when we must.” Id. 

The Seventh Circuit concluded its decision by reiterating that going forward it will not scrutinize the EEOC’s pre-suit obligations because, “if the EEOC has pled on the face of its complaint that it has complied with all procedures required under Title VII and the relevant documents are facially sufficient, our review of those procedures is satisfied.” Id. at 27.

Implications For Employers

This decision is a game-changer. It changes the landscape for employers within the Seventh Circuit, and, in effect, has condoned the EEOC’s “shoot first, aim later” litigation tactics that we have reported on previously and have plagued employers for years. Employers in the Seventh Circuit are, in effect, left without any meaningful recourse to determine whether the EEOC’s conciliation efforts were made in good faith and the “failure to conciliate” defense is no more. In light of recent decisions we have reported about, including EEOC v. Bloomberg L.P. and EEOC v. Bass Pro Outdoor World, LLC, et al., that have expressly rejected the EEOC’s (and now Seventh Circuit’s) position that its conciliation efforts are not subject to judicial review, we expect that it is only a matter of time before the Supreme Court accepts a certiorari petition and weighs in on the availability of the “failure to conciliate” defense. In the meantime, all employers – not just those in the Seventh Circuit – should expect the EEOC to enter 2014 asserting its position vigorously in light of this decision and to continue to advance the argument that its conciliation efforts are not subject to judicial review. Stay tuned!