WASHINGTON — The Supreme Court could put the brakes on the Obama administration's growing crackdown against companies facing claims of discrimination against women, minorities and other protected groups.
Justices will hear arguments Tuesday in a case that considers whether employers can defend discrimination lawsuits by asserting that government lawyers did not try hard enough to settle claims before going to court.
Companies are complaining increasingly about the Equal Employment Opportunity Commission's "systemic litigation" program, which turns individual complaints of bias into high-stakes class-action cases on behalf of dozens or even hundreds of workers.
The enforcement strategy has netted over $100 million in legal judgments and settlements from more than 50 companies since 2011, including $20 million from Verizon Inc. to settle allegations that the company unfairly fired or disciplined hundreds of disabled workers for missing work.
EEOC general counsel P. David Lopez has said the bigger cases send a stronger message to all employers about complying with the law. But employer groups deride the strategy as "sue first and negotiate later." They complain of government bullying tactics and unfair take-it-or-leave-it offers that do not allow for meaningful settlement talks.
Many employers confronted with claims of workplace bias would rather negotiate a minimal settlement with the EEOC and pledge to fix the problems than mount a costly legal defense in court.
The case before the high court involves an Illinois mining company sued by the EEOC in 2011 for failing to hire any female workers despite receiving applications from many qualified women. Mach Mining says the suit should be thrown out because the commission did not try in good faith to reach a settlement before taking the company to court.
A federal judge agreed to look into whether the EEOC's attempt to settle the case was "sincere and reasonable." But the 7th U.S. Circuit Court of Appeals in Chicago reversed that, saying a court has no business peering into the EEOC's private settlement talks.
Federal law does require the EEOC to attempt to halt unlawful employment practices by "informal methods of conference, conciliation and persuasion." But the EEOC may choose to sue if it is unable to reach a settlement that is "acceptable to the commission."
Lower courts have struggled to determine exactly what that means. Some courts have required a minimal showing of "good faith," while other courts probe more deeply.
But the 7th Circuit is the first to reject the inquiry altogether. It said there was no clear standard of "how many offers, counteroffers, conferences or phone calls" would be needed to satisfy a court.
Lawyers for Mach Mining argue that judicial review of the conciliation process is needed to find out whether the EEOC complied with basic steps such as giving an employer enough information about the charges or providing enough time to respond to settlement offers.
In an unusual move, the EEOC also asked the Supreme Court to take up the case. The Justice Department argues that allowing employers to question the government's settlement efforts at all undermines law enforcement and only encourages companies to drag out settlement talks.
If the high court affirms the decision, it would help the EEOC overturn nearly four decades of case law that has allowed courts outside the 7th Circuit to get a look at the settlement process and derail EEOC suits.
Some federal judges have thrown out EEOC class-action cases after inspecting the settlement process. Last year, for example, a New York judge dismissed most of the EEOC's pregnancy bias charges against financial news company Bloomberg LP. The judge ruled that the EEOC did not adequately identify the class members or provide other important details to the company during settlement talks before suing.
Business groups, including the U.S. Chamber of Commerce, say the EEOC is shortchanging the settlement process in favor of litigation to pursue a policy agenda.
"The feeling among employers is that it's very unfair when the weight of the federal government comes down on you and says, 'We want millions of dollars,' but won't put its cards on the table and negotiate with you," said Gerald Maatman, a Chicago lawyer who filed a brief on behalf of the American Insurance Association.
A brief filed on behalf of more than a dozen women's rights organizations, including the National Organization for Women, argues that letting a judge review informal and confidential settlement discussions will burden courts and make it easier for companies to avoid liability.
Systemic cases now make up nearly 25 percent of the EEOC's litigation docket, up sharply from less than 5 percent before Obama took office, according to the agency and lawyers familiar with the caseload.
In a recent case, JPMorgan Chase & Co. paid nearly $1.5 million last year to settle charges of sexual harassment against 16 female mortgage bankers at an Ohio office. Also in 2014, McCormick & Schmick's Seafood Restaurants Inc. paid $1.3 million to settle allegations that hundreds of African-Americans were denied jobs for "front of the house" positions at restaurants in Baltimore. Neither company admitted wrongdoing.
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