The Equal Employment Opportunity Commission’s (EEOC) six-year-old systemic discrimination enforcement program is building steam, fueled by more aggressive investigative tactics and litigation strategies that are creating new challenges for employers.

In adopting its 2012-2016 strategic plan in February, the EEOC reiterated its emphasis on systemic cases. Instead of focusing on individual charges of discrimination, the agency is using such claims to launch broad investigations with the goal of uncovering similar cases that can be combined into pattern and practice lawsuits.

As a result of the mandate from Washington, D.C., EEOC field investigators are under pressure to develop systemic cases, says Jennifer Gokenbach, a shareholder at Ogletree Deakins.

“They are looking at each claim and scrutinizing it more closely than in the past to see if there is a systemic discrimination issue,” she says.

At the end of the 2011 fiscal year, the EEOC had 580 systemic investigations underway, involving more than 2,000 charges. Although less than 10 percent of the lawsuits it filed in 2011 were systemic cases—23 out of a total of 261—that number seems certain to quickly multiply given the large number of investigations in the pipeline. Prelitigation systemic investigations resulted in settlements yielding $9.6 million in 2011—a substantial jump from
$6.7 million in 2010.

At the very same time, the agency is taking an aggressive approach toward using its subpoena power and testing novel legal theories.

“The bottom line takeaway for employers is that being a defendant in a lawsuit brought by the EEOC today is a very different proposition than it was five years ago—you have a tiger by the tail,” says Gerald Maatman, a Seyfarth Shaw partner. “The EEOC is a very aggressive litigant, sometimes with a take-no-prisoners attitude.”

Bang for the Buck

From the EEOC’s viewpoint, pursuing systemic cases leverages its limited resources to have the maximum impact on workplace discrimination at a time of tight federal budgets. In a press release announcing the strategic plan, the agency said it will develop a new strategic enforcement program to “stop and remedy unlawful employment discrimination” against large numbers of individuals or where the discrimination has a broad impact on an industry, profession, company or geographic area.

The agency clearly recognizes that systemic cases tend to generate headlines due to the size of the settlements or judgments. That makes it easier to obtain settlements from other companies in the same industry and highlights areas of discrimination the agency thinks employers need to address.

For example, in July 2011, the EEOC obtained a $20 million settlement from Verizon in a nationwide disability lawsuit—the largest ever under the Americans With Disabilities Act (ADA). The press release announcing the settlement emphasized the discriminatory impact of rigid attendance policies that fail to accommodate people with disabilities, an area of recent EEOC enforcement focus.

Judicial Push-back

The bright spot for employers is that some courts are taking steps to rein in the EEOC, with notable decisions favoring employers in both federal district courts and circuit courts of appeal within the past year.

“The EEOC is using the tools of law enforcement in a very aggressive way,” Maatman says. “They are stretching the envelope, making them exposure laden, and some federal judges aren’t liking what is going on.”

Two recent appeals court rulings were particularly favorable to employers. The 10th Circuit’s Feb. 27 decision in EEOC v. Burlington Northern Santa Fe R.R. Co. slapped down the agency’s use of its subpoena power to build a systemic case. The court found the subpoena for nationwide employment records was “not relevant” to a case that initially involved just two claims of disability discrimination, both from employees in Colorado.

Although Gokenbach says the decision gives employers grounds for challenging overly broad subpoenas or requests for information, she cautions that because the ruling involved ADA claims, the EEOC may argue it doesn’t apply to cases brought under Title VII.

And although Maatman calls Burlington Northern a “wonderful opinion,” he notes other courts have approved broad EEOC subpoenas. “For every victory in limiting the scope of subpoenas, the EEOC can point to another where it was given wide latitude,” he says.

In the other recent pro-employer ruling, the 8th Circuit on Feb. 22 affirmed the dismissal of 67 individuals from a hostile work environment lawsuit in EEOC v. CRST Van Expedited Inc. The court said the EEOC failed to meet its statutory obligation to investigate claims of discrimination and engage in bona fide conciliation prior to bringing a lawsuit.

Specifically, during the conciliation process, the EEOC did not provide the employer with the names of the proposed class members or even a general indication of the size of the class. The 8th Circuit agreed that the EEOC’s litigation strategy was “untenable” because it forced CRST to litigate a “moving target” of allegedly aggrieved workers.

Maatman calls the decision “a transformative ruling in terms of defense strategy for employers. The key aspect is that during the investigation, the EEOC has to come clean with the employer. The decision says the EEOC can’t use a lawsuit to fish for plaintiffs that aren’t identified beforehand.”

Defense Tools

Seyfarth Shaw Partner Christopher DeGroff says the EEOC’s aggressive litigation tactics underscore the need for robust e-discovery and data management capabilities because the agency has seized on the plaintiffs bar tactic of seeking sanctions for e-discovery violations. Additionally, defense attorneys need prompt access to the data to rebut the claims from the outset.

DeGroff also recommends ongoing audits of payroll procedures and hiring, pay and promotion practices to provide an early warning system for potential discrimination claims.

In addition to vigilance in those traditional areas of enforcement, employers must be on alert for practices the EEOC targets for test cases expanding workers’ protection, such as the use of criminal background or credit checks during the hiring process, Maatman adds. In January, the agency obtained its first settlement in a case involving criminal background checks, a $3.3 million settlement with Pepsi.

Gokenbach says an employer’s policies, training programs and methods for employees to report harassment and discrimination are factors courts consider when making a judgment. “Good faith measures speak volumes in these cases and go a long way in resolving these claims,” she says.