Co-authored by Alex S. Drummond and Daniel B. Klein
Entry of a consent decree in an EEOC enforcement lawsuit typically ends hard fought litigation. However, employers should never presume that the Commission views the litigation at an end. The recent ruling in EEOC v. Wal-Mart Stores, Inc., Case No. 01-CV-339 (E.D. Ky. Jan. 6, 2011), aptly illustrates this concept.
In March of 2010, on the eve of trial, EEOC and Wal-Mart settled a pattern or practice sex discrimination lawsuit alleging failure to hire women for entry-level jobs at Wal-Mart’s London, Kentucky distribution center. The EEOC had filed the action under Section 707 of Title VII, which allows the Government to bring a civil action against an employer for systematic discrimination. The EEOC alleged that gender-biased decision-making at the company resulted in low numbers of females hired for entry-level order filler positions. The consent decree settling the action required Wal-Mart to provide jobs as they became available to eligible and interested female class members. Wal-Mart agreed to fill the first 50 openings with female class members; for the next 50 positions female class members would be offered every other job that opened up, then every third position of the next 50 openings. The consent decree explicitly stated that Wal-Mart was required to fill a vacant order filler job with an individual on the EEOC’s hiring list, “subject to criteria that is applicable for all new hires in the order filler position.” Wal-Mart also agreed to pay more than $11.7 million in back wages, its share of employment taxes, and up to $250,000 in settlement administration fees. Other features of the consent decree included Wal-Mart’s posting a notice in the facility, training its managers and employees involved in the hiring process, and using validated interviewing questions when interviewing candidates. For a summary of the terms of the consent decree, see http://www.eeoc.gov/eeoc/newsroom/release/3-10.cfm. The Court retained jurisdiction over the consent decree for five years.
Subsequently, the EEOC brought a motion to enforce the terms of the consent decree after the settlement. The EEOC asserted that since entry of the consent decree, Wal-Mart had hired only one class member, and that it was using the physical and logistical tests for the order filler position to avoid hiring class members. The language in the consent decree at issue focused on the requirement that the placements were “subject to criteria that is applicable for all new hires in the order filler position.”
The Court disagreed with the EEOC, finding nothing in the consent decree that would prohibit Wal-Mart from applying the two tests in the hiring process. The Court noted that the EEOC did not object to the appropriateness of the tests, nor did the Commission assert that the tests had a disparate impact on female applicants. Similarly, the EEOC did not argue that Wal-Mart was prohibited from applying new hiring criteria, or that the retailer was required to unconditionally hire all class members who sought employment.
The EEOC also asserted that the parties intended that Wal-Mart could only exclude class members who failed to meet uniformly enforced, non-biased screening requirements such as minimum age, legal right to work in the United States, problematic background checks, and other non-discriminatory uniformly enforced criteria. The Court also rejected this contention, as it refused to examine the intent of the parties given the unambiguous language of the consent decree. The Court also rejected the EEOC’s alternative theory that, if Wal-Mart had intended to apply the two new tests to class members, it committed fraud in the settlement negotiations by failing to mention the tests, at least in part, because it knew the Commission was concerned about the disparate impact of such testing. The Court reasoned that the employer had not committed fraud by failing to ensure that all of the EEOC’s concerns were met in the consent decree.
In sum, the Court rejected every argument the EEOC raised, and concluded that if the EEOC had a concern with these issues, it should have done a better job in negotiating clearer criteria for the hiring obligations in the consent decree. The ruling in EEOC v. Wal-Mart Stores, Inc. illustrates the importance of careful drafting of employer obligations in any settlement of employment-related litigation, especially where programmatic relief obligations are concerned in EEOC consent decrees. As the EEOC’s systemic litigation program is a focal point in its litigation enforcement efforts, employers also should expect the EEOC will “live and learn” from this case and instruct all its litigation staff to approach future consent decree negotiations with a careful eye to delineate employer injunctive relief obligations.