EEOC V. FREEMAN ROUND 3: EEOC Appeals Summary Judgment

This is our third Alert on EEOC v. Freeman, in which the EEOC has charged that Freeman’s use of background checks and criminal records adversely impacted blacks, Hispanics, and males. The EEOC also charged Freeman with a pattern or practice of discrimination. The Round 1 alert was on 8/22/12, featuring Freeman’s request to depose the EEOC. The Round 2 alert was on 9/14/13, featuring a summary judgment for Freeman by District Court Judge Roger W. Titus. Round 3 features the EEOC’s appeal of that summary judgment to the 4th Circuit court.

The appeal features four issues:

1. Whether the district court erred in concluding EEOC failed to identify the “particular employment practice” under challenge where EEOC isolated out from Freeman’s decision making process two individual sub- elements of Freeman’s background check policy for challenge: credit checks and criminal checks.
2. Whether the court abused its discretion in finding EEOC’s supplemental expert reports untimely and in excluding them as a discovery sanction.
3. Whether the court abused its discretion in excluding the expert reports as unreliable and erred in holding EEOC failed to establish a prima facie case of disparate impact discrimination.
4. Whether the court erred in limiting EEOC’s credit claim to acts within 300 days of the charge and the criminal claim to acts within 300 days of EEOC’s formal notice of expansion of its credit investigation.

Issue 1 relates to the ruling that the EEOC failed to identify a “particular employment practice” that caused adverse impact. Judge Titus ruled that the EEOC’s expert should have broken down his analysis by policy sub-criteria, objective versus subjective factors, and “specific job[s].” The EEOC argues, “Freeman’s ‘divide and conquer’ approach, endorsed by the court, is simply contrary to Title VII’s text, legislative history, and purpose, as well as the case law.”

The next two issues relate to expert reports for the EEOC. There were two experts. The first expert wrote a report that admittedly had inaccuracies. The expert then amended his analysis, and a second expert independently corroborated it. Issue 2 relates to the rejection by Judge Titus of both supplemental reports as being untimely. Judge Titus also ruled that the second expert merely replicated the work of the first expert. The EEOC argues that both supplemental reports were “substantially justified” under Rule 26.

Issue 3 relates to the rejection by Judge Titus of all of the EEOC expert reports as being unreliable under Daubert. According to the EEOC, Daubert states that pertinent evidence should be based on “scientifically valid principles,” and that Freeman never made the correct argument. Rather, Freeman challenged the expert reports because they were based on “bad data” (e.g., inaccuracies due to cherry picking and coding errors). The EEOC argues that this is not a challenge to principles and methodology used, and that there was never a charge of “junk science.” Thus, according to the EEOC, “attacks on an expert’s database go to the weight of the evidence, not to its admissibility.”

Finally, Issue 4 relates to the size of the class. Judge Titus granted Freeman’s motion to dismiss all claims made prior to 300 days before the original class agent’s charge. The EEOC argued, unsuccessfully, that the 300-day statute of limitations in §706 of Title VII does not apply to §707 pattern or practice claims. The EEOC also argues in the alternative that the time frame should have been expanded for technical reasons that are beyond the scope of this report.

Although important for potential class members, Issue 4 is the least of the four issues. Rather, the heart of the appeal rests with whether the EEOC made a prima facie case for adverse impact and that, in turn, rests on whether the supplemental reports were timely and whether they were based on valid principles and methodology. Basically, the EEOC would like to go to trial and let the experts on both sides battle it out to determine if the data presented by the EEOC amounts to a valid charge of adverse impact, and if so, whether Freeman can defend the charge based on job relatedness and consistency with business necessity.

The EEOC has much at stake here. The Commission has made a well-advertised frontal assault of background checks, and it has already lost one case on this issue EEOC v. Kaplan’s Higher Learning (2013 U.S. Dist. LEXIS 11722). It is clear that the EEOC will continue to prosecute such cases, and much of its success or failure will rest on the outcome of the appeal.

by Art Gutman, Ph.D., Professor, Florida Institute of Technology