EEOC Ordered To Pay Attorney’s Fees and Costs After Bogus Discrimination Case

The Sixth Circuit has ordered the Equal Employment Opportunity Commission (“EEOC”) to pay more than $750,000 in attorney’s fees and costs for pursuing a frivolous employment discrimination case.

The case, EEOC v. Peoplemark, is the latest in a cluster of judicial reproaches to the EEOC’s policy of aggressively targeting employers for conducting criminal background checks and allegedly declining to hire felons, practices the Commission believes disproportionately impact minorities.

In 2005, Peoplemark, a temporary employment agency, refused to refer for employment an African American woman with a felony conviction.  The woman filed a discrimination charge with the EEOC alleging that her application was denied because of her race and the conviction.

While investigating the charges, the EEOC interviewed a Peoplemark official who (erroneously) stated that the company had a blanket policy of rejecting felony applicants. This prompted the EEOC to file a federal action against the employer alleging that the company’s “no felon” policy violated civil rights laws because it had a disparate impact on minorities.

During discovery, however, Peoplemark produced documents proving that it never had a policy depriving placement services to felons. The parties eventually agreed voluntarily to dismiss the case.

Prevailing parties can recover their attorney’s fees and costs in many Title VII discrimination actions. In Peoplemark, a magistrate judge determined that Peoplemark was the prevailing party and awarded the company a total of $750,942.48, which included $526,172.00 in expert witness fees the company paid to refute the EEOC’s claims.

The award covered fees incurred during the six month period between the date the EEOC should have known its case was groundless and the date of dismissal, as well as the entirety of Peoplemark’s expert fees. The district court adopted the magistrate judge’s recommendation.

On appeal, the EEOC, among other things, argued that

1. Peoplemark’s expert costs were excessive and
2. the EEOC should only have to pay expert fees incurred within the same six-month window as the attorney’s fees deemed to be recoverable.

The Fifth Circuit rejected both arguments and affirmed the district court’s award of fees and costs.

In so holding, the court noted that upon learning Peoplemark had no blanket policy against referring felons,

"The Commission should have reassessed its claim. From that point forward, it was unreasonable to continue to litigate the Commission’s pleaded claim because the claim was based on a companywide policy that did not exist.”

It has become increasingly tricky for employers to determine when and whether it is appropriate to conduct criminal background checks or deny employment based on a felony conviction. Barger & Wolen attorneys are available to assess your company’s policies.