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It’s time to reevaluate defense strategies against employment discrimination claims

January 16th, 2014  |  Ron Miller

Three decisions in December from various federal courts of appeal strongly suggest that it is time for employers to reevaluate their defense strategies against employment discrimination claims. First, the Ninth Circuit determined that an employer cannot completely shield itself from judicial scrutiny by including in an arbitration agreement a clause eliminating all federal court review of arbitration awards. The First Circuit followed by ruling that a significant disparity between a district court’s award of attorneys’ fees and costs and the damages obtained from a jury award did not constitute an abuse of discretion. Finally, the Seventh Circuit created a split with its sister circuits by concluding that the EEOC’s failure to conciliate was not an affirmative defense to the merits of a discrimination suit.

Judicial review of arbitration awards. Addressing a question of first impression in In Re: Wal-Mart Wage and Hour Employment Practices Litigation, an appeal arising out of a protracted dispute over attorneys’ fees awarded in multidistrict litigation against Wal-Mart over alleged wage and hour violations, the Ninth Circuit ruled that a non-appealability clause in an arbitration agreement that eliminated all federal court review of arbitration awards, including review under Sec. 10 of the Federal Arbitration Act (FAA), was not enforceable. In so ruling, the appeals court affirmed the district court’s confirmation of an arbitration award allocating $28 million in attorneys’ fees among plaintiffs’ counsel.

Proportional attorney fee award. Next, in Diaz v Jiten Hotel Management, Inc, the First Circuit rejected an employer’s contention that an award of attorney fees “needs to be” proportional to the relief obtained. The appeals court concluded that an award of attorney’s fees and costs of nearly $105,000 for a suit obtaining a damages award of only $7,650 was not so disproportionate as to constitute an abuse of discretion by a district court. Because it found no basis in Massachusetts law for concluding that disproportionality alone supported vacating the district court’s conscientious exercise of its discretion, the appeals court declined to disturb its award of fees and costs.

Failure to conciliate defense. Finally, in EEOC v Mach Mining, LLC, the Seventh Circuit concluded the EEOC’s alleged failure to engage in good-faith conciliation before filing suit did not warrant dismissal of a discrimination case against an employer. The appeals court concluded that the language of Title VII, the lack of a meaningful standard for courts to apply, and the overall statutory scheme convinced it that an alleged failure to conciliate is not an affirmative defense to the merits of a discrimination suit. Further, the court explained that finding in Title VII an implied failure-to-conciliate defense would add to that statute an unwarranted mechanism by which employers could avoid liability for unlawful discrimination.

Develop a plan. Dealing with an employment discrimination complaint is an event for which most employers should be prepared. It requires a systematic approach and entails development of a strategy. Employers should know what to expect and how to respond. The following considerations should be part of the employer’s plan:

• Know what laws are involved, the basic facts, and what the organization is accused of.
• If dealing with the EEOC, it may be wise to bring in counsel if the charge is a pattern or practice charge or a high level executive is accused. Legal counsel can also play a valuable role as a resource to be consulted as needed throughout your investigation and in reviewing your position statement.
• Charges should be thoroughly investigated immediately; be aware of possible defenses and make sure you preserve them.
• Evaluate your position and decide on a course of action. Consider settlement if your investigation reveals the possibility of a violation.

Employers should continually monitor all of their policies, procedures, and personnel with the goal of providing equal opportunity to all. That starts with making certain the organization has adequate complaint procedures at all levels and educating employees, supervisors, and managers about what steps to take if faced with alleged discrimination.

Finally, as part of a litigation strategy, remember that not all defense tactics are going to be successful. Each of the cases cited above conceivably could be read as the court reinforcing its focus on the merits of a dispute in the face of a defensive posture designed to avoid addressing the merits. This suggests that employers’ best strategy may be to proactively enforce their own antidiscrimination policies and practices — before the courts get their chance to weigh in.