Today Seyfarth Shaw LLP submitted an amicus brief to the U.S. Supreme Court on behalf of the American Insurance Association in Mach Mining v. EEOC, No. 13-1019 (S. Ct.), perhaps the most important EEOC-related case to reach the SCOTUS in years. For our loyal blog readers interested in our amicus brief, a copy is here.

Mach Mining’s opening brief was filed last week – a copy is here if you missed it.

We have blogged on this case at various points before, as the litigation winded through the lower courts and culminated in the precedent-setting decision of the U.S. Court of Appeals for the Seventh Circuit reported at 738 F.3d 171 (7th Cir. 2013). Readers can find the previous posts here and here. In a game-changing decision for employers, in December 2013, the Seventh Circuit ruled that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit brought by the Commission. In essence, the Seventh Circuit determined that the EEOC’s pre-lawsuit conduct in the context of conciliation activities cannot be judicially reviewed. Subsequently, in what many SCOTUS watchers found ironic, even the though the EEOC prevailed in the Seventh Circuit, the Government backed Mach Mining’s request for SCOTUS review to resolve the disagreement among the courts of appeals regarding the EEOC’s conciliation obligations.

Our amicus brief questioned the underpinning of the Seventh Circuit’s decision – that employers asserting the failure-to-conciliate defense deflect judges from the merits and that there need not be any judicial review of the Commission’s conduct because the EEOC follows its obligations. We argued that the modern American judicial system does not work in that manner and that the Seventh Circuit’s ruling should be reversed.

Insofar as the Seventh Circuit’s ruling forbids judicial review of the EEOC’s satisfaction of its statutory obligation to conciliate discrimination claims in good faith, this undermines the ability of employers and insurers to reasonably assess settlement issues. When Congress enacted Title VII of the Civil Rights Act of 1964 (“Act”), it mandated that the EEOC engage in conciliation proceedings with employers prior to bringing lawsuits. 42 U.S.C. §2000e-5(b), (f)(1). While the language of the Act does not specify how conciliation proceedings must be conducted or the quantum of information that must be disclosed or exchanged, it clearly requires that the EEOC engage in good faith proceedings before bringing lawsuits. Id. Congress enacted this requirement in the interests of judicial economy, providing both the EEOC and employers with an avenue to resolve disputes confidentially, voluntarily, informally and without burdening the dockets of federal courts.

First, contrary to this clear Congressional intent that courts have followed over the last several decades, in EEOC v. Mach Mining, LLC, the Seventh Circuit held that this obligation is not judicially reviewable, and that, in essence, the EEOC may skip the statutory requirement of conciliation without any consequence. The Seventh Circuit opined that “failures by the EEOC in the conciliation process simply do not support an affirmative defense for employers charged with employment discrimination.” 738 F.3d at 181.  In support of its conclusion that employers may not use failure-to-conciliate as an affirmative defense, the Seventh Circuit noted “as a practical matter, there is little reason to expect the potential for dismissal to promote conciliation. The employer in a dismissed case has little incentive to resume talks, of course. The next employer the EEOC investigates will have seen the benefit of using the conciliation process as a strategic defense rather than a chance to settle.” Id. at 184-85. Contrary to Congress’s view that conciliation proceedings must be conducted as a vehicle to foster judicial economy, the Seventh Circuit decided that the requirement of conciliation proceedings was merely a formality that mostly benefitted employers who sought the dismissal of claims when the EEOC neglected to follow mandatory procedure.

Second, while the Seventh Circuit focused on critiquing certain employers’ potential defense strategies, it failed to account for the practical realities of its holding. The Seventh Circuit’s ruling encourages the EEOC to abstain from the procedural requirement of meaningful conciliation established by Congress and ignores the fact that employers and their insurance carriers – along with alleged victims of discrimination who may be desirous of settling – have both financial and business-reputation reasons to resolve litigation as quickly and cost-efficiently as possible. In reality, an insurer needs the EEOC’s help before it can authorize payment, due to insurers’ fiduciary obligations to their stockholders and legal obligations to regulators not to pay claims unless there is sufficient indicia that they have merit.  In this way, the Seventh Circuit failed to consider how the ruling impacts multiple constituents, including already over-burdened federal courts, which will now face more EEOC litigation; employers who face such claims; and the insurance industry, which bears the cost of defending the time-consuming and expensive litigation through employment practices liability insurance. In short, when the EEOC cooperates, alleged victims receive compensation more quickly, whether because insurers gain some leverage over employers who are otherwise resistant to settle, or because the carrier and the employer are better equipped to assess the EEOC’s demands and their litigation costs and risks. Employers always benefit, as fulsome information regarding the EEOC’s claims and settlement demands is necessary to make an informed and intelligent decision about whether to settle a claim or accept the reality of having to defend an EEOC lawsuit in federal court.

Implications For Employers

An eventual ruling by the Supreme Court on these issues will be important for any employer dealing with the EEOC.  If federal district courts cannot review its pre-lawsuit conciliation efforts, the EEOC will have free reign to pay mere lip service to its conciliation obligations and approach any negotiations in a “take-it-or-leave-it” manner. It remains to be seen whether the Supreme Court will agree with the Seventh Circuit’s approach.