Employers involved in recent years in legal disputes with the federal government have noticed an increasingly aggressive litigation posture taken by federal agencies. The government makes extraordinary settlement demands, or continues to doggedly pursue litigation even when presented with evidence that directly contradicts its legal position.

Companies faced with these litigation tactics can take some cheer from a decision earlier this month from the Fifth Circuit Court of Appeals. In Gate Guard Servs. v. Perez, the Department of Labor sued a security company under the FLSA for misclassifying its gate monitors as independent contractors instead of employees. After dismissing the claim, the district court awarded the company a portion of its attorney’s fees under the Equal Access to Justice Act (EAJA). Both sides appealed, and the Fifth Circuit awarded the defendant its full fees, over $800,000.

The Fifth Circuit concluded that under EAJA, DOL’s claim met the Act’s bad faith standard. DOL assigned an inexperienced investigator to the matter, who conducted a cursory investigation and later destroyed his notes of the investigation. He made a $6 million settlement demand even before the investigation was concluded. DOL moved forward with its suit despite evidence presented to it that the U.S. Army Corps of Engineers also classified its gate personnel as contractors. The court also noted that DOL obstructed the defendant in litigation from engaging in routine discovery, and filed a number of frivolous motions in response to standard litigation requests.

Cumulatively, the Fifth Circuit concluded that under EAJA, DOL acted knowingly or recklessly for purposes of harassing the employer well after it became aware of the frivolous nature of its case. While uncommon, judgments like this against the federal government are on the rise. The Senate held recent hearings to investigate why federal agencies continue to pursue meritless claims to the point where they expose taxpayers to payment of the defendant’s fees and expenses.

Employers involved in government investigations that believe they are being unfairly targeted or exposed to abusive litigation tactics may want to consider a post-judgment EAJA action. The credible threat of such an action may be employed by the company to curb excessive behavior by federal government agencies and their legal representatives during the pendency of the investigation or subsequent litigation.