The United States Court of Appeals recently issued a decision which has the potential to dramatically alter the cost of employment-related litigation to employers. In a major decision, the U.S. Court of Appeals for the D.C. Circuit ruled that the Equal Employment Opportunity Commission ("E.E.O.C.") must attempt to investigate charges of discrimination before authorizing individuals to sue their employers. Martini v. Federal National Mortgage Association, No. 98-7068 (D.C. Cir. June 18, 1999). The ruling prevents the E.E.O.C. from relying on a regulation in which it authorized itself to issue a "right to sue" letter without investigating and without waiting 180 days as required by statute, whenever it "is probable that the Commission will be unable to complete its administrative processing of the charge within 180 days... ." Last week, the Court of Appeals denied rehearing, making it very likely the plaintiff will ask the U.S. Supreme Court to consider the question.
Currently, lawsuits brought by employees are a major cost of doing business. Many of these suits, however, are without merit. Federal law requires an employee seeking to sue his or her employer for discrimination first to file a charge with the E.E.O.C. The E.E.O.C. has 180 days to investigate and determine whether there is reasonable cause to believe that the charge is true. If the E.E.O.C. finds reasonable cause, it must attempt to resolve the dispute by conciliation or by bringing a civil action. However, if it finds no reasonable cause to believe the truth of the charge, it must dismiss the charge. When the E.E.O.C. dismisses a charge, or when, as is usually the case, it simply takes no action within 180 days of the filing of a charge, it issues a letter authorizing the employee to file suit against the employer - the so-called "right to sue" letter.
Unfortunately, the E.E.O.C. has issued a regulation that absolves itself of the duty to investigate or even wait for the full 180 days. In jurisdictions around the country, the E.E.O.C. has simply been issuing early right to sue letters. By requiring the E.E.O.C. to perform its duty to investigate, Martini makes it likely that more charges may be dismissed with "no reasonable cause" letters, rather than employees simply being told they may sue. While an employee whose claim has been dismissed by the E.E.O.C. for lack of merit may still file a lawsuit, the employee would have to do so with a "no reasonable cause" letter in evidence. Furthermore, employees whose cases have been dismissed as meritless will likely have more trouble finding lawyers willing to handle their cases than employees who have been given a "right to sue" letter, without the E.E.O.C. rendering an opinion on the merits of the claim.
The Martini Facts
Elizabeth Martini worked for the Federal National Mortgage Association ("Fannie Mae") in Washington, D.C., which was recently listed fourth in Fortune Magazine's July 1999 Best Companies (for employees) article. Martini filed an E.E.O.C. charge alleging that Fannie Mae treated her abusively because of her gender, and then retaliated against her for complaining about the harassment. Rather than investigate the charge, the E.E.O.C. invoked its regulation at the plaintiff's request, and issued her a "right to sue" letter only 21 days after she filed her charge. The E.E.O.C. did not conduct any investigation. The plaintiff filed her lawsuit, and Fannie Mae moved to dismiss on the grounds that despite the regulation, the E.E.O.C. did not have a right to authorize early suits under the statute. The district court denied this motion, and the case went to trial. A D.C. jury awarded the plaintiff $7 million in damages, which was later reduced to $900,000 by the trial judge. Fannie Mae appealed.
The Court of Appeals agreed with Fannie Mae. The Court held that the 180-day period is required by statute, and that the E.E.O.C.'s duty to investigate all charges of discrimination is "both mandatory and unqualified." The court held that the regulation permitting the E.E.O.C. to issue a "right to sue" letter prior to the expiration of 180 days is inconsistent with the agency's duty to investigate. The court reasoned that "greater compliance with the mandatory duties that Congress expressly prescribed… will occur when all complainants must wait 180 days after filing charges with the E.E.O.C. before they may sue in federal court." Accordingly, the Court of Appeals vacated the plaintiff's $900,000 judgment and directed the district court to dismiss the case as untimely, without prejudice to being filed again, because it was filed less than 180 days after the plaintiff filed the E.E.O.C. complaint.
What May Come Next
The Martini case may not be concluded. The plaintiff filed a motion for rehearing, which the court denied on August 30. The D.C. Circuit, however, explicitly recognized that its decision was contrary to the earlier decisions of the Ninth Circuit, which includes the West Coast, and the Eleventh Circuit, which includes Florida, Georgia, and Alabama. Employers in those jurisdictions do not benefit from this decision, and must continue to defend high numbers of frivolous lawsuits brought by employees. This split among the circuits on an important question of federal law may encourage the United States Supreme Court to review this issue, if the plaintiff files a petition for certiorari. If the Supreme Court grants certiorari, it would then decide finally whether the E.E.O.C. must fully investigate charges before sending employees off to court. Employers have a clear interest in ensuring that the Supreme Court agrees with the D.C. Circuit in requiring the E.E.O.C. to fully investigate frivolous charges in every state where a company has employees. Such a ruling could save companies millions of dollars every year, whereas the opposite ruling would ensure a continued barrage of frivolous lawsuits. McKenna & Cuneo, L.L.P. is monitoring this case closely, and will report to you again should any developments occur.
For more information, please contact:
| Kurt J. Hamrock - | Washington, D.C. - 202-496-7500 |