Fourth Circuit Denies EEOC’s Appeal, Cites “Disappointing Litigation Conduct”

Posted: February 23, 2015

Disappointing Litigation Conduct

Over the last several years, the Equal Employment Opportunity Commission (EEOC) has investigated the use of credit and criminal history information by employers in hiring decisions analyzing whether the practice resulted in disparate impact investigation. One of the several ongoing cases, EEOC v. Freeman, saw another chapter close on February 20 when the Fourth Circuit affirmed the District Court’s decision.

Case Background
The case began in 2008 after an applicant filed a discrimination complaint upon being rejected for a position. After attempts at conciliation failed, the EEOC filed suit claiming criminal checks conducted by Freeman had a “disparate impact on black and male job applicants, and that the credit checks had a disparate impact on black job applicants.”

During discovery, the EEOC produced two separate reports by its experts which were amended and supplemented with additional information. Freeman moved to exclude the reports and moved for summary judgment, which were both granted by the District Court. The EEOC then appealed to the Fourth Circuit.

Fourth Circuit’s Decision
Upon appeal, the Fourth Circuit analyzed the District Court’s harsh statements and conclusions regarding the EEOC’s expert testimony. The Court cited the District Court’s identification of “an alarming number of errors and analytical fallacies” in the EEOC’s reports, in addition to the “‘mind-boggling’ number of errors and unexplained discrepancies.”

The Court could not justify the EEOC’s actions citing the fact that Freeman produced complete background check logs for hundreds (if not thousands) of applicants which were not included in the database of individuals the EEOC’s expert analyzed to produce his findings. Based on the egregious discrepancies, the Court found the District Court did not abuse its discretion in excluding the expert testimony as reliable.

Concurring Opinion
While the majority opinion was harsh with the EEOC, the strongest language condemning the agency came in the concurring opinion. Issued by Circuit Judge Agee, the concurring opinion addressed concern with the “EEOC’s disappointing litigation conduct.” Circuit Judge Agee noted that the EEOC’s goal to serve the public interest was “jeopardized by the kind of missteps that occurred here” and posited that the EEOC should “reconsider pursuing a course that does not serve it or the public interest well.”

Circuit Judge Agee focused heavily on the EEOC’s expert testimony agreeing with the District Court that the expert “cherry-picked” from the data. Further, Circuit Judge Agee noted there was a “pattern of suspect work” by this particular expert, citing the EEOC v. Kaplan case in which the Sixth Circuit dismissed claims against Kaplan concluding that the testimony was “a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”

Circuit Judge Agee closed by noting that the EEOC’s “exercise of vigilance has been lacking” and that the EEOC failed in its duties to reasonably investigate charges, conciliate in good faith and to cease enforcement attempts if a claim lacks merit. Finally, Circuit Judge Agee stated that the EEOC would be well served reconsider “how it might better discharge the responsibilities delegated to it or face the consequences for failing to do so.”

Other EEOC Activity
In addition to the Freeman and Kaplan cases, the EEOC is involved in several other pending matters including its lawsuits against Dollar General and BMW that were filed in June 2013. In EEOC v. Dollar General, the EEOC alleged that the company’s use of criminal background checks resulted in a disparate impact against black applicants. According to the complaint, Dollar General revoked conditional offers of employment based on a matrix of convictions and associated timeframes without an individualized assessment.

In EEOC v. BMW, the EEOC alleged that BMW’s policy regarding the consideration of criminal history did not include time limit restrictions which resulted in blanket exclusions that screened out black candidates disproportionately without any evidence of business need or relevancy. BMW was recently successful in its attempts to have the EEOC produce information about its own background check policy and how it uses criminal information in hiring decisions. Given this recent development, employers are certainly awaiting the next phase of this saga with bated breath.

Another high-profile ongoing matter is Texas v. EEOC. The state of Texas filed this lawsuit following the EEOC’s 2012 Guidance on the use of criminal and arrest records in employment decisions. In particular, Texas focused on the Guidance’s claims that it potentially preempts state law. Specifically the Guidance states that “[c]ompliance with federal laws and/or regulations is a defense to a charge of discrimination”; however, an employer imposing an exclusion that goes beyond a “federally imposed restriction…would be subject to Title VII analysis.” The lower court dismissed Texas’ claims noting that the 2012 Guidance was not a final action that was judicially reviewable, that Texas lacked standing and that the claims were not ripe. Texas has appealed the decision to the Fifth Circuit.

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