Bloomberg LP

Rebuilding America's offices, in its own image

October 7, 2013: 1:25 PM ET

The Equal Employment Opportunity Commission has taken to the courts to change employers' behavior. Not everyone's thrilled.

131007132227-walmart-discrimination-620xa

The EEOC's more aggressive approach is likely a response to the 2011 Supreme Court decision in Dukes v. Wal-Mart, which made it much harder for employees to file larger, multi-plaintiff cases against their employers.

FORTUNE -- In May 2010, representatives from the Equal Employment Opportunity Commission showed up, unannounced, at the Calhoun, Ga. office of personal aid company HomeNurse Inc. (HNI). They had come to investigate accusations by an ex-employee that the company's screening practices discriminated against African American, older, and disabled job candidates.

According to court filings, EEOC personnel arrived with subpoenas in hand, intimidated the small office's staff, rifled through its confidential personnel and patient files, and illegally took company documents. The EEOC acted "as if it were the FBI executing a criminal search warrant," HNI said in a court filing.

On September 30, a federal magistrate judge in Atlanta ruled that the commission's tactics constituted a "highly inappropriate search and seizure operation." The agency's "failure to follow its own regulations, its foot-dragging, its errors in communication which caused unnecessary expense for HNI" constituted a "misuse of its authority as an administrative agency."

The scathing ruling marked the fourth time in two months that a judge has chastised the EEOC, the agency responsible for enforcing the nation's employment discrimination laws.

MORE: Why the 14th Amendment matters in the debt-ceiling crisis

Last month, a federal judge in New York dismissed most of the agency's claims of pregnancy bias against Bloomberg LP. After finding that the agency didn't tell Bloomberg about the claims against it or give it a chance to settle, the judge encouraged Bloomberg to seek fees from the EEOC to cover its legal expenses.

In August, a federal judge in Maryland dismissed an EEOC lawsuit that accused event services company Freeman of using racially discriminatory hiring practices because the commission's expert report was rife with analytical errors.

And earlier this summer, a federal judge in Iowa dismissed an EEOC lawsuit against trucking company CRST after ruling that the agency had failed to fully investigate allegations that the firm had permitted sexual harassment against its women drivers before filing suit. The judge ordered the EEOC to pay CRST $4.7 million in attorneys fees and costs, the largest ever sanction against the agency.

The recent judicial reprimands against the EEOC have given attorneys cause to criticize the agency as overly contentious and out of line.

"[The EEOC has] been extraordinarily aggressive in the past five years," says lawyer David Long-Daniels, who represented HNI in its EEOC suit and has counseled employers for 23 years. "They have every right to investigate a legitimate grievance, but they simply have to do so consistent with their own regulations."

The EEOC did not return requests for comment, and an automatically generated email from the agency's press office said that it was closed because of the government shutdown.

Gerald Maatman, a lawyer who represents employers against EEOC suits, says the agency is "going wide around the corners" of its authority. Perhaps because of legislative deadlock in Congress, the Obama Administration seems to be using the EEOC as a tool to "push the needle of laws" towards its own views, he says.

But you could also view the spate of harsh rulings as simply the cost of the EEOC's pursuit of large, precedent-setting lawsuits in a pro-business climate.

MORE: Jamie Dimon, Alibaba, and our crumbling regulatory standards

The EEOC cases that have drawn judges' ire illustrate the agency's efforts to reshape the workplace efficiently and systemically. The commission targeted company practices that affected many employees -- instead of focusing on the discrimination suffered by one individual. For instance, the cases the agency filed against HNI and Freeman examined what the agency considered discriminatory hiring and recruitment processes. Eliminating barriers for job applicants has been a particular area of focus for the EEOC; it filed similar suits against Dollar General (DG) and the U.S. unit of German automaker BMW in June.

These larger cases -- by nature -- are harder to win and noisier when they implode.

The agency's tactic is likely a response to the 2011 Supreme Court decision in Dukes v. Wal-Mart, which made it much harder for employees to file larger, multi-plaintiff cases against their employers, says Paul Secunda, a professor of employment law at Marquette University Law School in Milwaukee, Wisc.

The EEOC may be trying to fill the void the ruling created by taking a more prominent role in filing class action lawsuits on behalf of multiple employees, Secunda says. Indeed, in 2012, 20% of the EEOC's active lawsuit docket targeted systemic practices, the highest proportion since 2006. The EEOC stated in an enforcement plan that it expects that figure to reach as high as 24% by 2016.

Though riskier, pursuing systemic lawsuits lets the EEOC get more bang for its buck. Filing lawsuits that target systemic discrimination at a company instead of just one instance of it, allows the agency to use what little resources it has to throw the most significant punch it can, says Secunda.

The agency has been "historically underfunded," says Joseph Seiner, professor of employment law at University of South Carolina School of Law and a former EEOC lawyer, and the strain on its resources has become more pronounced in recent years.

In the past three years, the EEOC has received a record number of complaints against employers. Its high water mark came in the 2010 fiscal year when it received 99,922 complaints, a 7% increase from 2009 and a 25% increase from a decade prior. Total complaints have hovered around that figure ever since. Meanwhile, Congress denied the EEOC's request for an increase to its $367 million budget in 2011, cut $7 million from its budget in 2012, and again rejected its appeal for more funding for its 2013 budget.

MORE: Why the Silk Road bust could help Bitcoin

The strategy seems to be paying off. In fiscal year 2012, the EEOC recovered a record $365.4 million even as it filed 122 cases, down from 260 in 2011 and 250 in 2010.

The current climate is very "hostile to employees that claim discrimination," says Secunda. What some people interpret as misplaced aggression is the EEOC filing lawsuits that will have the widest impact. And as for the slaps on the wrists from judges: No one wins 100% of the time, he says.

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.