EEOC Mediation Process: Pros And Cons

Best practices for negotiating a resolution

When a business receives a charge of discrimination from the Equal Employment Opportunity Commission (EEOC), it faces significant risks, both in terms of legal costs and reputational costs. A key decision the business must make quickly is whether to use the EEOC’s mediation process to try to resolve the claim. 

There are several benefits to utilizing the EEOC’s mediation process. These include access to a no-cost mediator, postponement of the government’s investigation, and early and final resolution of the dispute, if successful. There are also challenges with this process, including the requirement to use an EEOC-assigned mediator, negotiating with an individual, who may not have legal counsel and may not understand his or her claims or their value, and the likelihood that the company will be required to pay money to resolve the claim. 

Businesses can more efficiently and strategically navigate the risks of an EEOC charge once they understand the pros and cons of the EEOC’s mediation process, as well as best practices for effectuating any resolution achieved at the mediation.  

How Mediation Fits into the EEOC Process

Once a business receives notice of a charge of discrimination, it generally has a week or two to decide whether to use the EEOC’s mediation process. Even if the business misses the initial deadline to select mediation, the EEOC is usually willing to extend it if both parties are ready and willing to participate in mediation.  

If the business opts not to participate in mediation or if the mediation is unsuccessful, the next steps in the EEOC process will still be the same. In other words, an unsuccessful mediation will not change the EEOC process; it will simply extend it.  

The most common next step is for the EEOC to assign an investigator to the file and for the company to begin preparing its response to the charging party’s claims. Another possible – but uncommon – next step is for the charge to be dismissed without further investigation. This may happen because the EEOC realizes it does not have jurisdiction, or because the charging party seeks to shorten the EEOC process, so he or she can file a lawsuit. (The EEOC serves as the gatekeeper for litigation: employees and applicants must file their claims with the EEOC before they can assert federal discrimination claims in state or federal court.) 

Benefits of Mediation

If a business chooses to mediate with the EEOC, one of the major benefits of a successful mediation is that it often cuts the process in half, according to EEOC data. The percentage of EEOC mediations that end in a resolution has hovered around 70% over the past three years. Though mediation's success depends on the nature and complexity of the claims, the reasonableness of the parties, and the effectiveness of the mediators, in our experience, the process has a greater than 50% chance of success for little investment in the part of the company. 

The actual mediation typically takes less than a day, whereas responding to the EEOC charge and defending a potential lawsuit is a far lengthier and costlier process. Even if the mediation is unsuccessful, businesses may still benefit from a delay in the government’s investigation because they will have more time to set a strategy and consult with outside counsel to prepare for a future investigation. 

Another benefit of mediation is the ability to utilize an EEOC mediator at no cost to the company. Businesses that have gone through private mediation know they can be expensive. Depending on the location of the mediation and the chosen mediator, a private mediator may charge hourly rates anywhere from $300 per hour to as high as $1,000 per hour. While an EEOC study determined the average mediation lasts three to four hours, we have also seen them last 10 hours or more. Thus, the savings from a free mediator can be substantial. 

Though the EEOC provides the mediator at no cost to the company, it is worth noting that the entire mediation process will not be free if the business retains outside counsel to help it navigate the mediation process. This is generally a wise investment. Experienced attorneys can increase the likelihood of an early and final resolution by evaluating the strengths and weaknesses of the defense, assessing the potential liability exposure to the company, and determining the potential settlement value of the case.  

An early resolution of a case can result in massive savings to a business in terms of time, expense and liability exposure. As an initial matter, the company will have to neither invest time in collecting documents and information and participating in witness interviews to defend the case, nor expend significant resources defending the case through a lengthy litigation process. 

Second, because mediation is a confidential process, the parties cannot share the details of the mediation with others, nor can they use anything from the mediation as evidence in a later lawsuit. Each party is required to sign a confidentiality statement prior to participating in the mediation to acknowledge their agreement to this confidential process. Unlike a lawsuit filed in state or federal court, the EEOC’s file is not an easily accessible public record. Thus, if the company has concerns about negative publicity, an early resolution of the claim through the EEOC’s confidential mediation process can be an effective way to avoid those concerns.

Challenges of Mediation

Though there are many benefits to the mediation process, it also comes with challenges. One potential downside is the inability to select the mediator. In private mediation, the parties and counsel often consult with one another to identify a mediator they feel is best suited to handle the unique aspects of the dispute. 

In an EEOC mediation, the parties do not get to choose the mediator. Rather, the EEOC assigns the mediator – an EEOC employee who often handles a large caseload and has little information about the case until the mediation begins. As such, the company, with the assistance of counsel, should be prepared to work with the EEOC mediator to address any potential pro-employee bias, the unique aspects of the case that may impact the negotiations (i.e., important background facts or personality conflicts) and any complex legal issues. 

Another downside of mediation and perhaps the biggest challenge is a pro se charging party – claimants who choose to represent themselves rather than hiring an attorney. In pro se mediations, the process tends to be more emotional. More often than not, the charging parties feel mistreated and want someone to blame. Without the benefit of their own advisor, they struggle to fully understand the law, the process, or the value of their alleged claims. 

We have seen pro se parties make million-dollar demands, when there is no legal or factual basis to support such a request. Thus, navigating the emotional, legal and practical elements of mediation with a pro se charging party certainly comes with its challenges. 

That said, we have successfully mediated many claims with pro se charging parties. In most cases, the fact that they are unrepresented is not a reason to forego mediation. Oftentimes, the charging parties need an opportunity to tell their story and express their emotions. From the company’s standpoint, the mediation will be more productive if the company focuses less on emotion and finger-pointing and more on the practical aspects of the case: will the charging parties be able to prove the legal elements of their claim? Do they have evidence or witnesses to support the claims they are asserting? Does the law support the damages they seek to recover? Are they prepared to litigate this case for the long haul (up to several years) and possibly recover nothing? By focusing on the practical and legal realities of a case, there is a greater likelihood of reaching a reasonable compromise.

One of the final downsides businesses should consider before choosing to mediate is the prospect of paying the charging party to resolve the claim. This can be a frustrating aspect of the mediation process, particularly when the company followed its handbooks and policies, and its leaders feel the company did nothing wrong. Nevertheless, mediations require a reasonable compromise from both sides. The cost of resolving a dispute rises steadily after mediation. 

Thus, a company’s decision to resolve a claim is a business decision and the company should engage in a cost-benefit analysis, with the assistance of counsel, to evaluate the costs and risks of settlement versus continued litigation.

Despite the various challenges of mediation, the pros often outweigh the cons, particularly when a business is strategic and utilizes experienced advisors in the process. But even in successful cases, it is critical for businesses to maximize their protection by properly documenting the settlement. 

Best Practices for Negotiating a Settlement

The EEOC has a standard settlement agreement that the parties are required to execute. That agreement, however, only pertains to the claims before the EEOC. It is important for businesses to enter a more comprehensive private agreement with the charging party. 

One note before focusing on the private agreement: in both the EEOC and private agreement, it is critical for the business to be clear up front on the tax status of any payment to the charging party. Payments tied to lost wages are typically subject to payroll taxes and withholdings and reported on a W-2. Payments tied to emotional distress may be reported on a Form 1099 that is not subject to payroll taxes and withholding. While the exact tax ramifications vary by settlement, the key is to be clear with the charging party up front so there is no confusion on the ultimate payment amount. 

As for the private agreement specifically, it should include a general release of all claims from the charging party, not just the claims before the EEOC. There should be a provision stating clearly that the company is not admitting liability and that this is a settlement for purpose of avoiding litigation and further expenses. Preferably, there should also be a clear agreement that the charging party will not reapply for employment and that the business has no obligation to rehire him or her. It is also useful to include language about how to handle employment inquiries going forward. 

In most cases, the business will agree to provide the charging party’s prospective employers with a neutral reference, such as providing only dates of employment and position held. 

Other provisions the business may want to include are confidentiality and non-disparagement provisions – these will help prevent the charging party from discussing details of the settlement and criticizing the business on social media. However, businesses should be aware of the following:  

(1) The National Labor Relations Board (NLRB) frowns upon confidentiality and non-disparagement provisions and tends to view them as infringing on employees’ rights to engage in concerted activity in relation to the terms and conditions of employment. Businesses can generally address this issue with a carve-out provision protecting rights under the National Labor Relations Act, but there is still a risk the NLRB will render those provisions unenforceable.  

(2) There are potential tax implications with nondisclosure agreements (NDAs) involving sexual harassment claims. In the wake of the #MeToo movement, Congress passed a law that prevents businesses from taking a tax deduction from payroll and payment expenses tied to sexual harassment settlements. In other types of settlements, an NDA would not prevent those expenses from being deductible.  

Final Takeaways

When businesses are aware of the challenges of the EEOC mediation process, understand the limitations of the EEOC’s standard settlement agreement, and are strategic in their approach, the pros of using the EEOC’s mediation process generally outweigh the cons. In that regard, partnering with outside counsel, who regularly handle EEOC mediations can be especially valuable in efficiently and effectively defending these claims.

Patti Bartis, Amanda Williams and Zack Anstett are Employment Attorneys at Parker Poe.