[author: Pete Land]

Employers often expect that, before the EEOC can expand a single-employee EEOC charge into a class action lawsuit, the EEOC must explain the scope of any potential class action and offer an employer the opportunity to resolve it. That expectation is open to question, however, after the Northern District of Illinois’s recent decision in EEOC v. Union Road Towing, Inc. In that case, the Court rejected an employer’s attempt to eliminate an EEOC class action based upon the limited nature of the EEOC’s pre-suit disclosures. Because the Seventh Circuit has not yet resolved this specific issue, the district court’s ruling increases the risk to Illinois employers that the EEOC can turn adverse findings in single-employee charges of discrimination into claims on behalf of an entire class of employees, without first affording the employer an informed opportunity to attempt to resolve such class-wide claims. As explained below, to retain the possibility of pre-lawsuit resolution of such claims and avoid expansive discovery, employers should repeatedly seek clarification of the scope of any potential class action referenced in EEOC reasonable cause determinations or conciliation discussions.

In Union Road Towing, Inc., two employees filed EEOC charges alleging disability discrimination pursuant to the Americans with Disabilities Act (ADA). After investigating, the EEOC issued a reasonable cause determination that the employer had violated the ADA in three different ways with respect to the two named employees and an unspecified “class of disabled individuals.” The violations included unlawful termination at the end of an unpaid leave of absence and denial of requests for such leave. The EEOC then attempted to conciliate with the employer. During conciliation, however, the EEOC did not clarify the size of the potential class or the specific nature of the potential class claims, despite communications from the employer indicating its understanding of the scope of the potential litigation. In particular, the employer believed the class members were limited to a few individuals who had been denied leave and did not include anyone who had been terminated. Based upon that understanding, the employer found the EEOC’s $2 million settlement demand excessive and refused to offer a counter. The EEOC’s subsequent lawsuit alleged termination claims on behalf of 17 additional class members. The employer sought summary judgment with respect to the additional plaintiffs, arguing that the EEOC failed to adhere to Title VII’s administrative requirements by not investigating their claims or engaging in good-faith conciliation efforts about such claims.

With respect to the scope of the EEOC’s investigation, the Court ruled conclusively that Seventh Circuit precedent precluded court review of the EEOC’s determination that its investigation sufficiently supported claims advanced in subsequent litigation. This decision was consistent with existing law. As to conciliation, the court acknowledged that existing law was less clear and agreed with the employer that the EEOC had failed “to clarify its position after receiving communication from [the employer] indicating that there was a misunderstanding concerning the scope of the conciliation.” However, because the employer also contributed to the miscommunication by disengaging in the settlement discussion instead of seeking additional clarification, the Court allowed the EEOC to pursue claims on behalf of the 17 additional class members.

Although there is no Seventh Circuit law determining this issue, the decision in EEOC v. Union Road Towing, Inc. contradicts an Eighth Circuit decision issued one week earlier that protected employers against similar class action litigation. In EEOC v. CRST Van Expedited, Inc., the EEOC sought to expand federal court litigation to include claims on behalf of employees who were not parties to the underlying EEOC charges. The Eighth Circuit granted summary judgment for the employer and eliminated the additional class claims because the EEOC had not investigated and attempted to conciliate such claims before filing suit. Part of the Eighth Circuit’s rationale was that the EEOC should be limited from using federal-court discovery to substantiate violations beyond those uncovered by the EEOC’s pre-litigation investigation and included in pre-suit conciliation discussions.

Until the Seventh Circuit or the United States Supreme Court adopts the employer-friendly approach used in the Eighth Circuit, employers in Illinois (and possibly elsewhere in the Seventh Circuit) should not rely on vague pre-suit references by the EEOC to potential class action claims as a basis for eliminating such litigation. Instead, employers should confirm the scope of any potential class claims before breaking off conciliation discussions to ensure that they are able to assess the potential risks of litigation.