By Christopher DeGroff, Matthew Gagnon, and Gerald L. Maatman, Jr.

Judge John Darrah of the U.S. District Court for the Northern District of Illinois issued a decision this week in the EEOC’s landmark case against CVS Pharmacy. As we have previously blogged about here, in EEOC v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill.), the EEOC staked out new ground in Title VII litigation by taking aim at certain provisions of CVS’s standard severance agreement. As we reported here, the Court decided to dismiss the case a few weeks ago but had not yet issued a decision. That decision came out on October 7, 2014. While we expected an important decision about the substance of Title VII’s protections, what we got instead was a landmark ruling on the scope of the EEOC’s enforcement authority. It is a stunner of a defeat for the Commission.

Case Background

In February of this year the EEOC brought suit against CVS, alleging that certain provisions of CVS’s standard severance agreement violate Title VII because they interfere with an employee’s right to file charges, communicate voluntarily with the EEOC and other state agencies, and participate in agency investigations. The case arose out of a former CVS pharmacy manager who was discharged in July 2011. She filed a charge with the EEOC, alleging that CVS terminated her due to her sex and race. On June 13, 2013, the EEOC dismissed the charge, but it then sent CVS a letter saying that it had reasonable cause to believe that CVS was engaged in a pattern or practice of resistance to the full employment of rights secured by Title VII by virtue of the severance agreements that the charging party and others signed at termination. Id. at 2-3. Specifically, the EEOC claimed that the agreement deters the filing of charges and interferes with the employee’s ability to communicate voluntarily with the EEOC and other federal and state agencies.

The Court’s Decision

Judge Darrah decided the case on purely procedural grounds. It was undisputed that the EEOC did not engage in any effort to conciliate prior to bringing suit. Id. at 3. The EEOC argued that it was not required to engage in conciliation procedures because it was not bringing a garden-variety pattern or practice claim under section 707(e), but rather was alleging a pattern or practice of resistance to the full enjoyment of rights created by Title VII. That “resistance” claim was brought under section 707(a), which does not mandate the same pre-suit procedures as are required under section 707(e).

Judge Darrah dove into the history of Title VII  to dismantle the EEOC’s argument. When Title VII was originally enacted, the Attorney General was given the power to bring civil complaints under section 707(a) when there was a reasonable cause to believe that an employer engaged in “a pattern or practice of resistance” to the full enjoyment of any of the rights secured by Title VII.  That power was transferred to the EEOC in March 1974. Under section 707(e), the Commission was given the authority to investigate and bring pattern or practice claims either on behalf of a person aggrieved, or on behalf the Commission itself. However, section 707(e) expressly mandates that all such actions must be conducted in accordance with the procedures set forth in section 706, which, among other things, requires the EEOC to engage in conciliation procedures before filing suit.

The EEOC’s argument was that the Attorney General was not required to adhere to section 706 pre-suit obligations when it exercised authority under section 707(a). Since the Attorney General’s authority was transferred to the EEOC, the EEOC was similarly not required to follow the pre-suit procedures of section 706.

The Court disagreed, holding that the transfer of authority may have granted the EEOC the power to bring charges of a pattern or practice of discrimination, but it did not create a separate cause of action. Judge Darrah reasoned that: “[I]t is clear that the transfer of prosecutorial authority in 707(a) from the Attorney General was not intended to create a cause of action for the EEOC other than those specifically conferred on the commission pursuant to 707(e) and subject to the procedures provided in 706, including the obligation of conciliation.” Id. at 7. In other words, there is no separate cause of action for “resisting” employment laws under section 707(a). The EEOC is stuck with the pattern or practice claims under section 707(e) and the procedural requirements of section 706.  Because the EEOC did not adhere to those procedures when it failed to conciliate, it was not authorized to file suit against CVS, and CVS was entitled to judgment as a matter of law.

Implications For Employers

One has to admire the EEOC’s creativity as it seeks to boost its power. In the same case it sought to open up whole new territory for itself through a novel interpretation of the substantive protections of Title VII, while at the same time advancing a theory that would further dismantle the procedures that protect employers from the EEOC’s trigger finger. As we blogged about here, the EEOC is spending a considerable amount of time and resources easing its path to bringing systemic pattern or practice cases. This case touches on one of the most visible of those efforts: its attempt to immunize itself from any judicial scrutiny of how it conducts its pre-suit obligations, especially its conciliation obligations. If the EEOC had its way against CVS, then it would be able to dispense with that obligation altogether for some pattern or practice cases. Thanks to Judge Darrah’s ruling, that protection remains, at least for now.

While this turned out to be quite an interesting ruling on the procedural aspects of defending against EEOC litigation, it leaves the EEOC’s substantive challenges to CVS’s severance agreements unresolved. The EEOC is pursuing a similar theory against a different employer in the U.S. District Court for the District of Colorado. See EEOC v. CollegeAmerica Denver, Inc., Case No. 14-CV-01232-LTB-MJW (D. Colo.). That may provide another opportunity to see if the EEOC’s substantive theory holds water. Stay tuned.

Readers can also find this post on our EEOC Countdown blog here.