EEOC Not Liable for Retailer's Attorney Fees

By Jeffrey Rhodes July 18, 2018
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EEOC Not Liable for Retailers Attorney Fees

​The Equal Employment Opportunity Commission (EEOC) was not liable for the attorney fees of nationwide retailer CVS that it unsuccessfully sued for allegedly unclear severance agreements, the 7th U.S. Circuit Court of Appeals held.

The EEOC filed a lawsuit against CVS Pharmacy Inc. alleging that the company was using a severance agreement that chilled its employees' exercise of their rights under Title VII of the Civil Rights Act of 1964. The company's severance agreement came to the attention of the EEOC in 2011 after a former store manager filed a charge with the commission. The former employee had accepted a severance agreement that included a broad release of claims and a covenant not to sue but that carved out exceptions for "rights that employee cannot lawfully waive" and for participation "in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws."

The EEOC argued that the agreement's broad release and obscure exceptions could deter former employees from cooperating with the commission or otherwise exercising their retained rights. After an investigation, the EEOC filed suit in 2014 against CVS. It contended that the company's use of the severance agreement constituted a pattern or practice of resistance to the rights protected by Title VII, in violation of Section 707(a) of the statute.

The district court rejected this claim on summary judgment, and the court of appeals affirmed. After that decision, the district court awarded CVS $307,902 in attorney fees. It reasoned that the EEOC should have realized even before filing the suit that EEOC regulations required initial conciliation before it could proceed with an enforcement action under Section 707(a).

Under Title VII, if the EEOC thinks a charge has merit, the commission first engages in conciliation with the employer according to Section 706's procedural requirements. If the parties cannot negotiate an acceptable solution, the commission has the authority to sue the employer in federal court on the employee's behalf. 

But the EEOC took a different tack in this case. It abandoned the former employee's charge of an unlawful employment practice by issuing her a right-to-sue letter in June 2013. Eight months later, the EEOC filed suit under Section 707(a), which it believed contained a grant of independent litigation authority for suits against "any person or group of persons ... engaged in a pattern or practice of resistance to the full enjoyment of any of the rights secured by this subchapter."

The EEOC took the position that a distinction between Section 707's subsections excused it from

following the same pre-suit procedures as for an individual action. Section 707(a), unlike Section 707(e), gives the EEOC a right to litigate without an underlying charge or unlawful employment practice, and—the EEOC thought—by extension without first conciliating. The EEOC noted the difference between the language of Section 707(a) and Section 707(e): the former refers to a "pattern or practice of resistance," while the latter speaks of a "charge of a pattern or practice of discrimination."

On appeal, the court reasoned that, while Title VII provides for fee shifting in favor of any prevailing party, fees should be awarded to prevailing defendants only in exceptional cases. The EEOC only needed a colorable legal argument to avoid a fee-shifting award. Prior to the EEOC filing suit, the appeals court had previously decided that the EEOC could institute pattern-or-practice lawsuits on its own initiative, without certain of the prerequisites to a lawsuit under other sections of Title VII. The EEOC believed that this included the ability to sue before engaging in conciliation with CVS.

[SHRM members-only toolkit: Managing Equal Employment Opportunity]

The appeals court found that CVS incurred legal fees not because of a failure to conciliate but because of the novelty of the EEOC's claimed independent cause of action under Section 707(a). Even had the EEOC conciliated, its ability to bring a pattern-or-practice-of-resistance case without underlying discrimination or retaliation would have been at issue and the legal arguments the same.

Moreover, CVS justified its large attorney fees request by arguing to the district court that the case involved novel issues that required deep understanding of Title VII's text, structure and history. This novelty and complexity showed that controlling authority did not squarely block the EEOC's argument.

As a result, the court of appeals reversed the district court's award of fees for CVS.

EEOC v. CVS Pharmacy, Inc., 7th Cir., No. 17-1828 (June 8, 2018).

Professional Pointer: Because the EEOC has broad authority and may make arguments that are unsuccessful without being liable for a company's attorney fees, employers should err on the side of caution in their employment practices to try to avoid costly litigation.

Jeffrey Rhodes is an attorney with Doumar Martin in Arlington, Va.

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