The EEOC Litigation Review - 2023 - Report - Page 34
rate from 2.7% in 2021 to 6.5% in 2022. At the hearing, the parties were ordered to
submit proposed findings of fact and conclusion of law, which were subsequently
submitted on February 10, 2022. Id. at 2-3.
The court held Sherwood in civil contempt for violating the consent decree.
First, the court explained that in order to establish a finding of civil contempt, the EEOC
must show that the other party violated a definite and specific order of the court, through
“clear and convincing evidence.” Id. at *4. The court noted that the consent decree
explicitly stated numerous times that Sherwood was responsible for payroll tax liability,
and that distribution of the settlement funds must be completed by December 14, 2021.
Further, the EEOC produced email communications that Sherwood was informed of its
payroll tax duties by the administrator in accordance with the consent decree.
Accordingly, the court held there was “clear and convincing evidence” that Sherwood
violated the consent decree. Id.
Second, the court held that Sherwood did not meet its burden to demonstrate that it
took all reasonable steps to comply. Sherwood claimed that it attempted to negotiate
an extension of the deadline, but the court rejected this approach, noting that its
extension request ten days before the deadline was untimely. Id. The court thus held
that “upon [the EEOC’s] unwillingness to negotiate, [Sherwood] should have complied
with the Decree and the Administrator’s request for payment.” Id.
Third, the court held that Sherwood failed to satisfy its burden of giving a detailed
explanation as to why it could not presently comply with the consent decree and pay the
$408,749.23 in payroll taxes. Id. at *5. The court reasoned that Sherwood made no
claim that it did not have the funds, nor did it offer any evidence of its financial situation.
In lieu of offering such evidence, Sherwood proposed paying in installments. The court
rejected this proposal as untimely. It opined that Sherwood should have made the
proposal during settlement negotiations.
In addition, the court dismissed Sherwood’s argument that the EEOC conducted its
investigation too slowly. Sherwood argued it should only be responsible for paying the
initial $361,890.68 and should not be required to pay the additional $46,858.55 resulting
from the 3.8% tax increase. The court rejected this argument on the grounds that the
crease in taxes owed was a result of Sherwood’s delay.
As such, the court ordered Sherwood to pay the full amount of $408,749.23 within 30
days of its order, and to pay any additional costs incurred by the administrator’s
fulfillment of his duties that exceed the $35,000 amount set forth in the consent decree.
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© Duane Morris LLP 2023
The EEOC Litigation Review – 2023
