Here is something to watch out for. Earlier this month, the U.S Court of Appeals for the Seventh Circuit held that naming an EEOC claimant in the legal proceedings section of a company’s periodic reports may constitute retaliation under Title VII of the 1964 Civil Rights Act.
Here’s what happened…
Celia Greengrass, a former account executive with International Monetary Systems Ltd., filed a discrimination charge with the EEOC in January 2008. After the EEOC notified IMS in January 2009 that it would investigate Greengrass’ charge, the company decided to disclose the matter, along with three other unrelated employment claims, in the legal proceedings section of its Form 10-K filed in April 2009. All four references named the claimants, including the following:
“On January 20, 2008, Celia Greengrass filed a sexual harassment complaint with the Equal Employment Opportunity Commission. The claim is still under investigation by the EEOC but IMS believes the claims to be meritless and will vigorously defend itself.”
This was the first periodic report in which IMS disclosed the actual names of any of the claimants. IMS made similar disclosures in its next Form 10-Q. However, by the time it filed its second quarter Form 10-Q, IMS had returned to its former practice of generically referencing such matters:
“During the second quarter of 2009, three legal complaints in which the company was the named defendant were dismissed or settled with no material expense incurred. Remaining open are two employment-related actions that have been filed against the company with various government agencies. Management feels that both of the actions are without merit and is vigorously defending its position. It is not anticipated that any material losses or settlement expense will arise relative to these pending actions.”
Greengrass filed a charge of retaliation with the EEOC in September 2010, alleging that public disclosure of her name made her “unemployable.”
The Court found that the timing of IMS’s naming of Greengrass, its flip-flopping disclosure policy, as well as internal emails that could indicate “disdain for the EEOC process and animus against Greengrass for filing her complaint,” added up to a triable claim under Title VII.
If, in fact, IMS had disdain for the EEOC process and animus against a former employee for filing a claim, I suspect that it would not be the first employer to feel that way. Therefore, this is a good wakeup call for companies that routinely address these issues.
Consider the following:
- This decision demonstrates that legal proceedings disclosures may contain hidden hazards. For example, it may not be a good idea to “voluntarily” disclose pending legal proceedings that are not material. Also, although Item 103 of Regulation S-K lists “the principal parties thereto” among the information to be provided in periodic reports, you should always carefully consider how best to frame legal proceedings disclosures to avoid making matters worse.
- When making changes to previously issued disclosures, be mindful of the message such a policy shift may send.
- As always, it is important that all personnel understand the importance of wording all internal and external emails appropriately, particularly in connection with pending or prospective litigation or investigations. See, for example, this Doug’s Note regarding the hazards of ill-advised emails in the context of a whistleblower investigation.