seal.jpgBy Laura Maechtlen and Brian Wong

When negotiating settlement terms with the EEOC, employers can expect the EEOC to make great efforts to incorporate expansive enforcement mechanisms into a proposed consent decree. To this end, the EEOC frequently demands any consent decree agreed upon by the parties for settlement purposes include an express “continuing jurisdiction” clause that allows the parties at any time to seek additional enforcement orders from the Court. In reality, this is a one-way clause to benefit the EEOC when and if it seeks to invoke the Court’s power to force compliance with the consent decree. 

To be valid, a consent decree should spring from and serve to resolve a dispute within the Court’s subject-matter jurisdiction, come within the general scope of the case made by the pleadings, and further the objectives of the law upon which the complaint was based. Whereas parties must look to contract law to enforce typical settlement agreements, consent decrees allow the EEOC to seek equitable relief from the Court that may exceed the confines of the consent decree’s agreed-upon terms. 

In EEOC v. Product Fabricators, Inc., 2012 WL 264605 (8th Cir. Jan. 31, 2012), the Eighth Circuit made a strong statement as to a district court’s role in enforcing EEOC consent decrees when it held that a district court abused its discretion by rejecting a proposed EEOC consent decree. 

The consent decree in question arose out of a 2009 EEOC action against Product Fabricators, Inc. – in the case of EEOC v. Product Fabricators, Inc., Case No. 09-CV-2303 (D. Minn.) – in which the EEOC alleged the employer violated the Americans With Disabilities Act by making unlawful medical inquiries of employees, failing to keep employee medical information confidential, and discharging an employee because of his disability and/or as a result of an unlawful drug policy requiring employee reporting of medication use. 

When the parties presented a consent decree to the district court for approval, it rejected the proposed decree as unreasonable on the ground that it did not identify a basis for the district court to continue jurisdiction over the case for two years. 

On appeal, the Eighth Circuit held the district court abused its discretion because it “gave no consideration to the strong preference for settlement agreements as a means of protecting the federal interest in employment discrimination cases.” Id. at *6. Though the district court held the EEOC raised neither present nor past instances of employer conduct that would warrant the district court’s continuing jurisdiction, the Eight Circuit pointed to the employer’s purportedly unlawful drug policy and pattern or practice of unlawful medical inquiries and unlawful recordkeeping as justifications for continuing jurisdiction.

Further, while the district court based its rejection of the consent decree’s continuing jurisdiction provision on the EEOC’s statement that it did not expect to engage the district court to enforce the decree, the Eighth Circuit explained the importance of continuing jurisdiction stems not just from likelihood of enforcement, but also the parties’ ability to move quickly to enforce the decree, if necessary.

Tellingly, the Eighth Circuit further emphasized that “continuing jurisdiction is the norm (and often the motivation) for consent decrees,” and that “a consent decree offers more security to the parties than a settlement agreement where the only penalty for failure to abide by the agreement is another suit.” Id. at * 5. The Eighth Circuit further reasoned a consent decree’s inclusion of dispute resolution provisions such as a “notice-to-comply” clause does not supplant the deterrent effect of continuing jurisdiction on an employer.

This case serves as a reminder to employers that settlement of EEOC actions through consent decrees affords the EEOC much greater latitude in enforcement than would otherwise be available under a standard settlement agreement. Consent decrees may be enforced both as contract and judicial order, and the Eighth Circuit’s decision in EEOC v. Product Fabricators, Inc. puts employers on notice that district courts can exercise broad discretion in seeking compliance with consent decrees, and may not hesitate to flex their supervisory and enforcement muscles.