Are We Done Yet ?… The Investigation That Never Ends.

The Issue

Does the EEOC have investigative authority to subpoena employers for information after the EEOC has issued an employee a right-to-sue letter? What about after a court has already entered a judgment on the merits in favor of the employer? The Seventh Circuit says yes. 

The EEOC… What Now?

The Equal Employment Opportunity Commission (EEOC) is an agency that was created by Congress under the Civil Rights Act of 1964. The purpose of the agency is to serve the public interest by enforcing the provisions of Title VII of the Civil Rights Act and other non-discriminatory legislation in the workplace context. Under the Equal Employment Opportunity Act of 1972, the EEOC’s power was magnified to include enforcement through the courts, longer periods of time for administration, and conciliation of charges. Further, Section 706 of this Act lays out the procedures and timing guidelines for claims filed with the agency.

First, an aggrieved employee may file a charge with the EEOC. Thereafter, the agency investigates the claim against the employer. This investigation could include a subpoena for relevant information and ultimately lead to a lawsuit filed by the agency itself. The charging employee has the option to allow the charge to be resolved by the EEOC or to obtain a right-to-sue letter from the EEOC, which is necessary to file a lawsuit in federal court (excluding charges under the Age Discrimination in Employment Act).

The Split

The Seventh Circuit joins the Ninth Circuit in holding that the EEOC has the administrative authority to investigate possible discrimination independent of the employee’s cause of action. In EEOC v. Union Pac. R.R (2017), the Seventh Circuit upheld the EEOC’s ability to continue investigating an employer after issuing a right-to-sue notice to an employee and after the dismissal of the employees’ subsequent civil lawsuit on the merits. The court reasoned that ruling otherwise would erroneously undermine the EEOC’s authority as “merely derivative” of the employee’s right to sue, which would be contrary to the holding of the Supreme Court in EEOC v. Waffle House (2002).

In EEOC v. Fed. Express Corp. (2008), the Ninth Circuit held that the issuance of a right-to-sue letter does not strip the EEOC of authority to continue to process the charge, including an independent investigation of allegations of discrimination on a company-wide basis. They reasoned that “the EEOC’s right of action is independent of the employee’s private action rights” and further that “it is the [EEOC]’s province–not that of the court–to determine whether public resources should be committed” to the continuing investigation of a charge.

However, in EEOC v. Hearst (1997), the Fifth Circuit held that the EEOC “may not continue an administrative investigation based upon an individual’s charge once the charging party has been issued a right to sue letter and has initiated litigation based upon that charge.” They reasoned the time for investigation passes after litigation has commenced.

Looking Forward

The Seventh Circuit’s opinion largely aligned with the US Supreme Court’s holding in EEOC v. Waffle House (2002).  The Supreme Court reasoned that “[t]he statute clearly makes the EEOC the master of its case and confers on the agency the authority to evaluate the strength of the public interest at stake.”

Following the Seventh Circuit’s decision, the EEOC’s investigative authority could be challenged in other circuits and present an opportunity for the Supreme Court to rule on this issue. In particular, the issue of whether a valid, final judgment on the merits presents enough discovered information on the employer’s practices would be a different issue from that of Waffle House. The Supreme Court of the United States may need to more definitively rule on this issue for uniformity of the law across circuits.

A Taxing Dilemma: Whether Gross Ups are Permitted for Title VII Back Pay Awards

When an employee sues his or her employer in a Title VII action, the employee may be awarded a lump sum as back pay. That lump sum can cause a tax problem for the employee, who may be pushed into a higher tax bracket and therefore owe more in taxes than he or she would have owed if the employer had made the payments over time. Some appellate courts have allowed federal district courts the discretion to award a tax consequence adjustment, or “gross up,” for receipt of a lump sum back pay award to offset this consequence and make the employee whole. The Ninth Circuit recently joined the Third, Seventh, Ninth, and Tenth Circuits by allowing gross ups, furthering the split with the D.C. Circuit.

The Split

 In a brief opinion, the D.C. Circuit rejected the possibility of gross ups in Danshaw v. Pena (1994), abrogated on other grounds by Rann v. Chao (2003):

We know of no authority for such relief…Given the complete lack of support in existing case law for tax gross ups, we decline so to extend the law in this case.

The Third, Seventh, Ninth, and Tenth Circuits disagree and allow district courts to award a gross up. The core of their viewpoint is that gross ups are necessary to make the plaintiff whole. Without any tax consequence adjustment, the plaintiff is still damaged by the employment discrimination. In its recent opinion joining these other Circuits, the Ninth Circuit described this position in Clemens v. CenturyLink Inc. (2017). It emphasized that Title VII exists “to make persons whole for injuries suffered on account of unlawful employment discrimination” and “provides courts with considerable equitable discretion to ensure adequate compensation.” The Ninth Circuit followed the Seventh Circuit’s opinion in EEOC v. N. Star Hosp., Inc. (2015) by citing Title VII as the source of courts’ authority to award back pay gross ups. There, the Seventh Circuit agreed with the Third and Tenth Circuits that “without the tax-component award, [the plaintiff] will not be made whole, a result that offends Title VII’s remedial scheme.”

In Eshelman v. Agere Sys. Inc. (2009), the Third Circuit noted that the decision of whether to award a gross up is within the discretion of the trial court:

[W]e do not suggest that a prevailing plaintiff in discrimination cases is presumptively entitled to an additional award to offset tax consequences above the amount to which she would otherwise be entitled. Employees will continue to bear the burden to show the extent of the injury they have suffered. The nature and amount of relief needed to make an aggrieved party whole necessarily varies from case to case.

While these four Circuits find that Title VII commands the possibility of gross ups to make a plaintiff whole, they do not find that plaintiffs are automatically entitled to the adjustment. While the D.C. Circuit categorically rejects gross ups, even in those courts that permit the possibility of gross ups, whether a plaintiff may receive a gross up, and how much of an adjustment is made, will depend on the particular case.

Looking Forward

Gross ups in awards for back pay in Title VII cases are ripe for Supreme Court review.  SCOTUS may want to settle (1) whether gross ups are permitted at all, and (2), if they are, what factors a district court should consider when exercising its discretion to make a determination in a particular case. In allowing the possibility of gross ups, the Third Circuit in Eshelman noted that a prevailing plaintiff is not automatically entitled to a gross up; the relief required to make an employee whole will inexorably vary depending on the case. The Ninth Circuit in Clemens suggested that difficulty in determining the proper gross up or negligibility of amount may be such factors that would make a gross up inappropriate, but it may be helpful to establish a set of criteria for district courts to use in their review.

The Demise of “married Sunday, fired Monday”: Sexual Orientation Discrimination in Title VII

The Issue

In June 2015, the Supreme Court held in Obergefell v. Hodges that states must license and recognize same-sex marriages under the Due Process Clause of the Fourteenth Amendment.  While this historic decision opened the chapel doors for same-sex couples, the LGBT community still faces discrimination in other arenas, including employment. Does discrimination based on an employee’s sexual orientation fall under the prohibition of sex discrimination in Title VII of the 1964 Civil Rights Act? Overturning circuit precedent, the Seventh Circuit says yes. The Seventh Circuit is the first to rule in favor of expanding the meaning of discrimination on the basis of sex to include sexual orientation, and is therefore at odds with its sister circuits.

Title VII and Sex Discrimination Cases

Title VII of the Civil Rights Act of 1964 states that an employer subject to the Act cannot discriminate in hiring practices or against employees on the basis of “race, color, religion, sex, or national origin.”  While the Supreme Court has not directly weighed in on whether this statute bans discrimination based on sexual orientation, the Court has previously interpreted the meaning of sex for Title VII purposes. In Price Waterhouse v. Hopkins (1989), the Supreme Court held that discrimination against an employee because he or she does not conform to gender stereotypes is prohibited. In Price Waterhouse, a female senior manager claimed her employer discriminated against her when the firm held her candidacy for a partnership position and failed to propose her for the position because she expressed more masculine attributes in her dress, hair, and personality. In Oncale v. Sundowner Offshore Servs. Inc. (1998), the Supreme Court again expanded sex discrimination under Title VII, holding that the sex of a harasser is immaterial to whether there was sex discrimination. Courts have used these cases to both support and undermine the inclusion of sexual orientation discrimination within Title VII.

The Split

The most recent circuit spilt on this issue is between the Seventh and Eleventh Circuit. In Hively v. Ivy Tech Cmty. College of Ind. (2017), a former part-time professor alleged discrimination under Title VII for her unsuccessful applications for a full-time position as well as the school’s failure to renew her part-time contract in 2014 because she is a lesbian. The Seventh Circuit, in an en banc decision, held that Hively’s claim fits within the interpretation of sex discrimination of Title VII because it is based on assumptions about the proper behavior for someone of a given sex.

The discriminatory behavior does not exist without taking the victim’s biological sex into account. Any discomfort, disapproval, or job decision based on the fact that the complainant- woman or man – dresses differently, speaks differently, or dates or marries a same-sex partner, is a reaction purely and simply based on sex.

The court made this determination by using a comparative method of analysis wherein it isolated the significance of the plaintiff’s sex in the employer’s decision and changed only that variable. Examining the situation if all the circumstances were the held the same, including the sex of her partner, and only Hively’s gender was changed, the court stated that “Hively represents the ultimate case of failure to conform to the female stereotype.” The Seventh Circuit also referred to the Supreme Court’s decision in Loving v. Virginia (1967) which held that discrimination because of the race with whom a person associates is a form of racial discrimination, to support its decision under an associational theory.

In Evans v. Ga. Reg’l Hosp. (2017), the Eleventh Circuit dismissed the plaintiff’s sexual orientation discrimination claim as such discrimination is not prohibited by Title VII. The court stated that it was required to follow its precedent in Blum v. Gulf Oil Corp. (1979) that “discharge for homosexuality is not prohibited by the Title VII”, unless the ruling is overruled either by the Supreme Court or the Eleventh Circuit sitting en banc. Rejecting the argument by the plaintiff that the Supreme Court decisions of Price Waterhouse (1989) and Oncale (1998) supported encompassing sexual orientation into sex discrimination, the court stated that these decisions were not clearly on point.

Looking Towards the Supreme Court

In September 2017, the Second Circuit sitting en banc heard oral arguments for Zarda v. Altitude Express, a case regarding this very question. The Equal Employment Opportunity Commission (EEOC) and the Department of Justice both filed amicus briefs. In rare fashion, these two government agencies have opposite positions. In 2015, the EEOC announced that sex discrimination in Title VII includes discrimination based on sexual orientation. The Trump Administration and Department of Justice argue that because Title VII does not define the word sex, it must be taken in its common meaning to mean biologically male or female and, therefore, the law does not encompass discrimination based on sexual orientation. The brief further states that Congress has had ample time and opportunity to add sexual orientation discrimination into the legislation and has chosen not to. The split and opposing opinions present compelling reasons for the Supreme Court to take on the issue in the coming years. It may even be sooner rather than later, as LGBT advocacy group, Lambda Legal, has filed a petition for a writ of certiorari with the Supreme Court to appeal Evans.