When the EEOC Goes Too Far–Part II

In my post, When the EEOC Goes Too Far, I wrote about an opinion from the Middle District of North Carolina, issued in June. In that case, EEOC v. PBM Graphics, Inc., the court found that the EEOC had caused an unreasonable delay in pursuing its claims, based on a 5+-year-long investigation and seemingly superficial conciliation efforts. The court ordered the parties to engage in limited discovery to determine whether the EEOC’s delay had prejudiced the defendant-employer. If so, the court ruled, the employer would be entitled to have the complaint dismissed in accordance with the doctrine of laches.

A laches defense to overzealous claims by the EEOC seems to be gaining traction. A decision issued yesterday by the Western District of North Carolina went farther than the PBM Graphics decision and actually dismissed the case based on this defense.

The facts are similar in both cases. Like the complaint in PBM Graphics, the claims asserted in Propak Logistics were based on the employer’s alleged practice of hiring Hispanics and refusing to hire non-Hispanic persons for non-management positions. Similar to the multi-year delay in PBM Graphics, there was a nearly seven-year delay between the time of the initial Charge and the filing of the Complaint. A few other important, albeit unsettling facts, include:

  • the EEOC did not interview the Charging Party until six months after he’d filed his Charge and did not interview him for a response to the employer’s position statement until a year after it had been submitted;
  • the EEOC referred the Charge to the DOJ, which initiated and completed its investigation in less than a year, resulting in a No-Cause Finding;
  • there was a four-and-a-half-year delay between the Charge filing and the EEOC’s attempt to conduct additional interviews of the relevant decisionmakers;
  • the Charging Party’s federal lawsuit was dismissed with prejudice two months before the EEOC issued its Cause Finding;
  • the Charging Party requested a Right-to-Sue-Letter no less than four times;
  • there was a two-year delay between the time the EEOC designated the Charge as a class claim and the first interview of a potential class member;
  • the employer’s VP of HR was deposed more than eight years after the Charge was filed; and
  • the facility at which the Charging Party had worked (for all of two months) closed in 2008.

And, as in PBM Graphics, here the employer also filed a motion to dismiss on several grounds, including on the defense of laches. The court denied the motion to dismiss based on failure to state a claim and gave the parties three options: (1) agree to proceed with discovery; (2) have the court consider the motion as a motion for summary judgment; or (3) submit additional briefing and evidence.

The EEOC apparently conceded that there had been a delay. (Indeed!!) This is where we left off in PBM Graphics–the court ordered the parties to engage in limited discovery on this issue. Here, though, the court found that the record contained sufficient evidence to answer the question.

The court explained that, for the purpose of laches, evidence of prejudice may include unavailability of witnesses, change in personnel, and the loss of pertinent records. The court also pointed out that there were periods when the EEOC “took little or no action toward completing the investigation,” during which the “back pay meter has been running” as the defendant-employer could be liable for that period. Because back pay is an equitable remedy within the court’s discretion, though, the court considered this to be further evidence of potential prejudice.

Finding that the employer had established its laches defense by proving that it “suffered material prejudice as a result of the EEOC’s unreasonably lengthy delay,” the court explained:

The fact remains, however, that Propak no longer conducts business at the facility at which the alleged discrimination occurred. The purported class of individuals allegedly discriminated against last existed in 2004 and it is uncertain that these individuals could even be identified at this late date. Meanwhile, for the last eight years, Propak has been embroiled in both the EEOC investigation and two lawsuits stemming therefrom, during which time it has continuously incurred attorney’s fees. The interests in vindicating Propak’s conduct has been served while it appears to be impossible to vindicate the private interests of unidentified and unavailable class members.

Legal music to my ears. The case is a stellar example of a victory of common sense and fairness. It seems that the employer had excellent legal representation, who continued to assert the company’s defenses instead of throwing in the towel and being cooperative to a fault. And that was rewarded by the court, which recognized that there are limits to the EEOC’s power–i.e., there is a difference between an investigation and a persecution.

I have no doubt that many employers will find this to be an important and valuable resource in their arsenals to defend against the EEOC when it goes too far.

As a side note, the court found that the EEOC’s failure to provide its damages calculations to the employer was evidence of an unreasonable delay. This appears to support the use of a laches defense where a defense of failure to conciliate may not be successful, particularly in jurisdictions like the Fourth Circuit that require only the most minimal effort by the EEOC to meet its statutory burden to conciliate in good faith.

EEOC v. Propak Logistics, Inc., No. 1:09cv311 (W.D.N.C. Aug. 7, 2012).

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