The EEOC stated that this did not constitute a finding of a violation, and the commission planned to investigate the matter with "minimal interference" to West Point Market's operations. The letter also asked Vernon to provide specific information within two weeks. The charges against West Point Market were called a "pattern of practice," meaning that the EEOC had used complex statistical analysis to compare thousands of hiring decisions. A defense of his pattern of practice would require its own statistical analysis.

Vernon had suspicions of who might have triggered the commission's charges. Because no employees had complained and no private parties had filed charges, his suspicions remained unconfirmable. The deputy director of the EEOC's Cleveland office, Walter Champ, said that his office had been following Vernon's actions for years. Champ pointed out that the commissioner in Washington would not have signed the complaint if the case did not appear to be strong.

Vernon turned for advice to his regular law firm. At an hourly rate of $225, the firm assigned a new attorney who was inexperienced in employment law. The attorney agreed that the charges were outrageous and that Vernon should not be forced to spend thousands of dollars to defend himself. The attorney recommended that Vernon ignore the charges. Vernon decided not to respond to the charges or to request any additional information.

There the matter rested for the next nine months.

WEST POINT'S WORKFORCE

From July 1, 1991 through March 24, 1994, West Point Market ran approximately 32 classified advertisements in the Akron Beacon Journal, the West Side Leader, Bakery Marketing and Production, the Canton Repository and the Cleveland Plain Dealer for 240 openings. West Point Market received 1287 applications during this period; 1043 (81 percent) of the applicants were white and 244 (19 percent) were African-American. West Point hired 26 cooks, 13 cashiers, six food preparation specialists, five office personnel and 169 sales associates. Twenty-four African-Americans were hired during the allegation period: one cashier, four cooks, and 19 sales associates.

THE COMMISSIONER'S DECISION

On January 16, 1995, Commissioner Barry Hoberman issued the following decision: "We believe that West Point Market discriminated against African-Americans in recruiting and hiring." The decision specifically stated that West Point Market engaged in recruitment practices that discriminated against African-Americans; failed to hire African-Americans into entry-level positions; and failed to maintain proper records on its employment process in accordance with EEOC regulations.

To settle the charge, the EEOC demanded that West Point Market place a full-page classified advertisement aimed exclusively at African-Americans; achieve a 33 percent African-American work force within five years; pay nearly $100,000 to 24 African-American applicants who the EEOC believed had been victims of discrimination during West Point's hiring process; hire African-American applicants to the exclusion of others; and report to the EEOC on its job applicants, including their race, for the next five years.

The letter stated that the EEOC was interested in providing justice to potential victims of discrimination. For an overview of the EEOC and how it proves discrimination see Appendices 1 and 2.

VERNON'S NEW DEFENSE TEAM

At this point Vernon decided that his attorney had erred badly in recommending that he ignore the EEOC's demands. Concluding that he needed someone with experience in employment law, Vernon dropped his law firm and hired a specialist, Neil Klingshirin, to advise him. The new attorney summarized the EEOC's charges, then told Vernon, "We need to determine the best strategy to provide a clear and specific job-based explanation for your actions." Klingshirin analyzed the case against WPM:

The EEOC used applicant stock statistics (Labor Market Comparison Approach) to determine that discrimination occurred at your store. They want you to have a 33 percent African-American workforce in place within five years, however they never stated where the percentage came from. This is not the SMSA for Akron, however my research indicates that this is the approximate percentage of African-Americans that are employed by the Akron fire and police departments. It appears that the EEOC is using the percentage of African-Americans in the city of Akron as their relevant labor market. And since you have less than 10 percent African-Americans on your workforce, they are assuming that you are discriminating against African-Americans.

Even so, thought Klingshirin, "there is good news." The definition of the labor market used in statistical comparisons frequently was the subject of intense argument during court cases. The proportion of a given demographic group in the labor market could change radically depending on the combination of geography and skill level that was chosen. Furthermore, the law did not specify how large a difference in percentages was tolerated before a court would conclude that an employer had discriminated. He told Vernon that several court cases "could help our case." [1]

Klingshirin proposed the following course of action:

The EEOC assumed that Akron's African-American workforce had the appropriate qualifications for your entry-level job openings. On the contrary, we need to prove that you need people with specific job qualifications. We need to perform our own formal utilization analysis and examine the percentage of available workers in each job category (cooks, cashiers, misc. food preparation, and office and sales). I have done some research on your applicant pool and noticed that 20 percent of your applications came from outside the city of Akron. Therefore, I recommend that we use the numbers for Summit County. This includes the city of Akron and the surrounding communities. I have already retrieved the numbers for Summit County." (see Exhibit 7).

Vernon and his new lawyer created a three-stage defensive strategy. First, they would defend their hiring records with statistical information that the EEOC would understand. Second, they would try to respond positively to the settlement demands. Third, they would build support from friends--including the African-American community--to place political pressure on the EEOC to resolve the crisis.

To combat these charges, Vernon hired Dr. Gerald Barrett, a University of Akron professor with a Ph.D. in industrial/organizational psychology and a law degree. Dr. Barrett performed a utilization analysis to examine the percentage of available African-American workers in Summit County, which included the city of Akron, for each job category: cooks, cashiers, misc. food preparation, office and sales.

Stage two of the defense strategy was to respond positively to the settlement demands. Vernon agreed in principle that a greater effort could be made to attract a more diverse workforce. He hired a new Director of Human Resources, Terrie Freiman, who increased West Point's networking with the African-American community. Although she did not have a college degree, she did have experience in Human Resources Management. Relationships were built with the Arlington St. Baptist-Urban League, the local chapter of the NAACP, the Summit County Department of Human Service, and the city's African-American activities programs such as "Hands Across the Bridge," a celebration of Akron's diversity.

Vernon proposed alternatives to the cash payments for back pay and damages to the victims of discrimination identified by the EEOC. He proposed that West Point Market invite new applications from the 24 African-Americans who had not been hired. Any of them who were hired and remained with West Point for one year then would receive free tuition to a local college while continuing to work at West Point Market.

The final stage of Vernon's strategy was to build support from friends. He aimed to create political pressure on the EEOC to resolve the crisis. Vernon put all his marketing skills into the campaign. He mailed background information to U.S. senators and the local U.S. representative and solicited their letters of support. He also wrote to the Office of Advocacy in the Small Business Administration. Vernon also began a "grass roots" movement at home. The president of the state grocers association regularly updated state legislators on West Point's situation.

West Point Market was also a member of several national organizations including the Society of Human Resource Management (SHRM) and the Food Marketing Institute. Their lobbyists supported Vernon and introduced him to key people in Washington. Prominent African-American leaders in Akron circulated petitions of support. The Akron chapter of the NAACP, now under new leadership, wrote to the EEOC's Cleveland office in support of West Point. According to the chapter, "We have never seen or heard of any unfair practices at West Point. We will stand by them all the way."

The chairman of the EEOC in Washington D.C. also received many letters. One was from Ohio's governor, George Voinovich:

Recently a situation was brought to my attention that is very confusing to me. There is a small, family-owned retail business in Akron called the West Point Market. They have enjoyed a stellar reputation as being a good citizen in the Akron area. The Akron NAACP has confirmed this company's high level of support in providing jobs to African-Americans and in financially supporting NAACP programs over the years. I do not understand why or how a charge can be levied when there has been no specific complaint filed. I find this incredulous; it is incomprehensible to me how this could be happening. Furthermore, there has never been one race-discrimination complaint filed against West Point with the Ohio Civil Rights Commission, the state agency that often works with the EEOC in investigation complaints.

As word spread throughout Akron about the EEOC's charges, support for West Point grew. Loyal customers started a $6,000 defense fund, and the local newspaper backed the company.

THE REVERSAL

On April 25, 1995 it appeared that Vernon's three-stage strategy had succeeded. The EEOC announced that it was willing to drop its demand for a workforce comprising 33 percent African-Americans and to explore creative alternatives to back pay for the affected class members. During the initial stages of negotiations, the Small Business News, an Akron-Cleveland publication, ran an explosive article on the event. The reporter already had interviewed the civil rights attorney when he approached Vernon. "By the time he interviewed me," Vernon reflected, 'no comment' was not an option."

The article was largely sympathetic to West Point, portraying the company as a victim who was confident of winning its case, and the EEOC as a tool of organized labor. The article alleged that the United Food & Commercial Workers Union had initiated the complaint. (A forerunner to this union had been ousted by West Point's employees in a 1957 decertification note case that was so notable that the Wall Street Journal had covered the story.) The union's chief organizer, Lou Maholic, was asked if his union had played any role in the complaint. He replied, "I may have given the (EEOC's) phone number to some people who called to complain." (See end of text for article availability).

Four months later, the EEOC's Cleveland office notified Vernon that it would no longer honor its proposed terms nor the previously accepted portions of the settlement, and that it wanted to triple to $210,000 the back pay due from West Point. The EEOC gave no reason for its latest action. At the same time, Congress amended the Equal Access to Justice Act (EAJA) to include a special provision for small businesses. The EAJA allows defendants to recover legal fees (up to $125 per hour) and other expenses (e.g., expert witnesses, reasonable cost of any study, analysis, or a project that is found necessary for the preparation of the party's case). This would allow West Point Market to recover their legal fees if the court decided that the EEOC had demanded a settlement that was "unreasonable" when compared to the trial court's ultimate award.

THE DECISION

Russell Vernon thought that his decision might make or break his company. He saw three options available to West Point Market.

- Bring his case to court, filing under the Equal Access to Justice Act to recover West Point's legal fees of $100,000. A loss would mean paying West Point's legal fees as well as the EEOC's proposed penalties, for a total of $310,000.

- Settle out of court, paying the $210,000 sought by the EEOC. Combined with the $67,000 already spent on West Point's legal defense, this would bring the total loss to $277,000. Could Vernon afford to do this?

- Reconcile with the EEOC out of court. If Vernon chose this option, West Point could not recover any of the money already spent on its defense.

Vernon also had to consider that a victory in court would afford an opportunity to clear his reputation. If he settled out of court or reconciled, he might be perceived as a racist. This could be detrimental to the store's future.

Placing a bag of Chocolate Raspberry Suicides into a customer's shopping bag, Russell Vernon pondered all that he had learned over the past few months about discrimination cases. He was sure that this decision would be among the most important he had ever made.

Todd A. Finkle is Associate Professor of Management Fellow at the Fitzgerald Institute for Entrepreneurial Studies at The University of Akron.

Robert a. Figler is Associate Professor of Management at the University of Akron.

Kenneth A. Dunning is Professor of Management and Fellow at the Fitzgerald Institute for Entrepreneurial Studies at the University of Akron.

(1.) Several court cases that have examined this subject include the International Brotherhood of Teamsters v. United States, 431 U.S. 324, 229 n. 20 (1977); Hazelwood School District v. United States, 433 U.S. 299, 307 (1977); and Castenda v. Partida, 430 U.S. 482, 497 n. 17 (1977). In International Brotherhood of Teamsters vs. United States, the Supreme Court supported the use of statistical analysis using data from the community from which the employees are hired as an acceptable way of determining an imbalance. This imbalance could be used as a sign of possible discrimination. However, they pointed out that data for the general population might not accurately reflect the pool of qualified job applicants.

In Hazelwood School District v. United States, the Supreme Court reiterated that statistics can be an important source of proof that employment discrimination exists. They expressed the view that given enough time and no discrimination, the ethnic and racial composition of the work force will be more or less representative of the community. The decision also pointed out that the populations used for comparison must be relevant labor markets.

EXHIBIT 4: REQUEST FOR INFORMATION

REQUEST FOR INFORMATION CHARGE NO. 220941271

For all West Point Market, Inc. facilities during the period March 29, 1991 to the present, please submit the following;

1. List the name, address, phone number, and number of employees for each facility.

2.a) Provide description and copy of the recruitment and selection policies. Provide a copy of all related documents such as employment applications, test, interview forms, applicant logs, etc.

b) If not stipulated in the policies requested above, describe the recruitment and selection process (how are applications/ resumes accepted, and how are they organized, how long are they considered active, how long are they retained, the screening process, etc.) for all retail positions, including management positions. Specify any differences in policies or procedures for different job groups, if appropriate.

c) State the name, race, and title of the persons involved in each stage of the recruitment and selection process referred to in Item 2(b).

d) State the name and title of the person(s) who is the custodian of the records designated in this request for information, and the physical location of these records.

3. List all recruitment efforts, including but not limited to school placements, outside organizations, and employment agencies utilized for all retail positions.

4. Copies of all job ads for positions which were published during the period March 29, 1991 to the present. Indicate for each job ad the name of the publication, the dates of publication, and the contact person.

5. Copies of all employee handbooks in effect during the relevant period.

6. Copies of all union agreements covering retail employees which were in effect during the relevant period.

7. Copies of all job descriptions for all positions and the minimum qualifications for each job.

8. Copies of all applicant logs for the relevant period.

9. provide list (separately by each facility) of all retail vacancies filled from March 29, 1991 to the present, by name, person hired, race, date of hire, job title, EEO-l category, (sales worker, clerical etc.) job status (full or part-time) and date of termination if applicable

10. Grouped separately by each store, and within each store by job sought, provide a copy of all employment applications submitted during the period March 29, 1991 to the present. Attach all interview notes and any other screening documents to the original employment application.

Additionally, separate for each store the applications of those hired from those not hired.