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The Pay Up, Or Else, Law

Date: February 11, 2014

EEOC Enforcement on Small Business

This editorial was transmitted to the Colorado media for free use.

By Tony Gagliardi

Doubtful it would have mattered much to the pro-lawsuit crowd in control of the Colorado Legislature, but a recent report by a Denver-based attorney who represents employers shows just how exacerbating House Bill 13-1136 will be for small-business owners when defending themselves against an Equal Employment Opportunity Commission (EEOC) complaint.

House Bill 1136, which takes effect January 1, 2015, makes it easier to sue employers for expanded classes of economic damages, as well as for non-economic damages.  These non-economic damages include emotional pain, inconvenience, mental anguish and – get ready for this one – loss of enjoyment of life. But its most troubling provision is to allow EEOC complaints to be filed in state court – and to include employers with fewer than 15 employees. 

EEOC is a federal agency, and Congress, wisely understanding the everyday threats of frivolous lawsuits that small-business owners face, decided to exempt firms with fewer than 15 employees.

No matter. Sen. Morgan Caroll of Aurora, together with state Reps. Claire Levy of Boulder and Joe Salazar – all attorneys, not so coincidentally -- sponsored HB 1136 under the guise of a civil rights issue, but you need not scratch too far below the surface to see its much more likely consequences. 

Levy has since resigned the Legislature to take the top job at the Colorado Center on Law & Policy. On its website, CCLP lists, as its top core value, the conducting of “fact-based research that is grounded in data, not ideology.” The irony of this is not lost on small business, which lobbied against HB 1136 on the fact-based argument that according to the Colorado Civil Rights Division’s most recent annual report, only 339 employment discrimination claims were filed in a single year, and 313 were dismissed as having no merit.

Broaden that potential lawsuit pool, as HB 1136 does, and the litigation pickings become richer. As the U.S. Small Business Administration’s Office of Advocacy reports, “Most of Colorado’s small businesses are very small as 77.2 percent of all businesses have no employees, and most employers have fewer than 20 employees.”

As the National Federation of Independent Business noted just before Gov. John Hickenlooper regrettably put his signature on what it labeled the Sue Your Boss bill, “Far from having a pandemic of aggrieved employees in Colorado, the miniscule 26 cases the Civil Rights Division found some merit in … would seem to commend our state as a workers’ paradise. This is no matter, however, for proponents of HB 1136, who are not going to let facts and evidence ruin what sounds like a good cause, and – if truth be told – a great opportunity to open a new revenue stream for their legal brethren.”

New research by Merrily S. Archer, whose Denver-based EEO Legal Solutions law firm represents employers, shows with alarming evidence what small-business owners currently go through in defending themselves against an EEOC complaint. 

“Under the guise of ‘reality testing,’ EEOC mediators overstate the risk of EEOC enforcement activity to scare employers into cost-of-defense settlements, regardless of charge merit,” writes Archer, a former EEOC attorney, whose report, Behind Closed Doors: What the EEOC Mediators Say (and Don’t Say) To Make Employers Pay, throws some revealing light on the agency.

“Cautioning employers about the alternative to mediation has proved a big money maker for the agency,” she writes. “Employers spend thousands on attorney-prepared EEOC position statements and upwards of $75K to $100K in litigation, even when they have done nothing wrong.”  While the EEOC may think it tempting to make it go away for $25,000 to $30,000, Archer point out that “most employers, however, have difficulty viewing a $30K payout to an undeserving employee as a bargain, especially when their own experience and investigation have convinced them that they have committed no legal violation whatsoever.”

To be fair, prudent EEOC mediators would no doubt raise the costs of legal action, and the costs of defending against such an action, but the real questions remain: Are they truly acting in a neutral manner, or are they overstating the strength of EEOC’s legal hand when counseling employers to settle?

And to think Colorado chose to rush head-on into this brave new world of small-business harassment by lawsuit abuse. 

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Tony Gagliardi is Colorado state director for the National Federation of Independent Business.


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Under the guise of ‘reality testing,’ EEOC mediators overstate the risk of EEOC enforcement activity to scare employers into cost-of-defense settlements, regardless of charge merit.

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