Sterling's EEOC Loss Spotlights Due Process Issues

Sterling's EEOC Loss Spotlights Due Process Issues Yanik Chauvin

Note: This article has been updated to correct Maatman’s firm affiliation.

When dealing with the U.S. Equal Employment Opportunity Commission, it is critical for corporations to assert their due process rights, said Gerald Maatman Jr., who just won a major gender discrimination case on behalf of Sterling Jewelers Inc.

In Equal Employment Opportunity Commission v. Sterling Jewelers, the EEOC filed a nationwide class action suit in 2008 but wasn’t able to present any evidence of nationwide discrimination, resulting in a dismissal on March 10.

“The takeaway is that if you are the general counsel or the employer, you want to make sure you have a very clear picture of what the EEOC has done—who they interviewed and what data they have,” Maatman said.

In Sterling, he added, the scope of the case far exceeded the scope of the agency’s investigation. “We learned that they actually investigated only one store in New York and two in Tampa,” said Maatman, a partner at Seyfarth Shaw.

But the hard lesson here probably belongs to the EEOC’s lawyers.

Akron-based Sterling is the parent company of Kay Jewelers, Jared and other retail jewelry chains, and in February it reached agreement to acquire Zales. The EEOC sued Sterling on behalf of 44,000 women employees, making it the largest such EEOC suit in the country, Maatman noted.

The suit accused Sterling of a nationwide pattern of discrimination against women in both pay and promotions. It was filed by Ronald Cooper, then-general counsel of the EEOC, and signed by senior trial attorney Margaret Malloy of the New York District office.

But then it appears the EEOC lawyers dropped the ball. They were handed 19 female Sterling employees from eight states who filed discrimination charges with the agency against the company. And the agency had an expert prepare a statistical analysis of Sterling’s pay and promotions.

That analysis, according to the EEOC’s allegations, showed “that [Sterling] promoted male employees at a statistically significant, higher rate than similarly situated female employees and that [Sterling] compensated male employees at a statistically significant, higher rate than similarly situated female employees. Witness testimony further corroborates the allegations.”

The problem was that the EEOC lawyers put its evidence, including the statistical report, on the table during mediation. But the lawyers had previously—and unwisely—agreed to a confidentiality deal that prohibited either side from presenting evidence in court that was disclosed in mediation.

A magistrate judge cited the confidentiality agreement and the EEOC’s resulting lack of evidence in recommending that Sterling be granted its motion for summary judgment. U.S. District Judge Richard Arcara in Buffalo adopted the recommendation and dismissed the case March 10.

Justine Lisser, EEOC spokeswoman and senior attorney-advisor, said, “We are disappointed with the court’s decision.” She declined further comment.

Sterling spokesman David Bouffard, vice president of corporate affairs for Sterling’s parent, Signet Jewelers Ltd., said the decision, as well as other procedural rulings in the case, are still subject to appeal.

“We have taken the lawsuits seriously and investigated them thoroughly,” Bouffard added. “Based on our investigation, we have found them to be without merit. We are confident they do not reflect our company’s environment, which is built on core values of fairness, opportunity, integrity and respect.”