Recently, a federal judge found a Detroit food distributor in contempt of court for failing to pay previous payroll tax liability to resolve a sexual discrimination case under the U.S. Equal Employment Opportunity Commission (EEOC). Previously, the court had ordered the payment as a consent decree in a lawsuit against the company. Furthermore, the court had found that the company’s failure constituted a flagrant disregard of the consent decree. In a similar case, the EEOC successfully sued a national furniture company for sexual discrimination against female applicants.

Brief Overview of the Sexual Discrimination Case

On September 27th, 2016, the EEOC filed suit against the company in the U.S. District Court for the Northern District of Ohio. In EEOC v. Sherwood Food Distributors, LLC, the EEOC alleged that Sherwood Food Distributors had discriminated against female applicants. Such discrimination had occurred at the defendant, Sherwood Food Distributors, locations in both Cleveland and Detroit. In short, the defendant allegedly refused to hire women for entry-level positions at those locations. In sum, the EEOC recognized 373 eligible claimants to receive awards from the court’s decision. Under the original consent decree, the court ordered the defendant to pay $3.6 million into a settlement fund. Subsequently, payments would be distributed from that fund to the applicants.

Title VII of the Civil Rights Act of 1964

Unquestionably, Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex (including pregnancy, sexual orientation, and gender identity), and national origin. Indeed, the law makes it clear that is unlawful for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his or her compensation, terms, conditions, or privileges of employment, because of the individual’s race, color, religion, sex, or national origin.

The Court’s Decision

Under the original 5-year consent decree entered by Judge Donald C. Nugent on October 16th, 2018, the defendant was supposed to send back-pay checks from the settlement fund to eligible claimants by December 14th, 2021. However, the defendant failed to comply with the order to pay its payroll tax liability. What’s more, Judge Nugent found that the defendant did so knowingly, with intent to delay compliance with the decree.

Meanwhile, the court rejected the defendant’s arguments that they had tried to negotiate an extended payment schedule with the EEOC. Rather, Judge Nugent felt that they did not take reasonable steps to comply, explaining, “Attempting to negotiate an extension ten days before a deadline that Defendant has been aware of for more than three years is insufficient.” Therefore, Judge Nugent found the defendant in contempt of court.

Company Must Pay Over $400,000

In the end, Judge Nugent ordered the defendant to pay the full amount of its payroll tax liability within 30 days. In sum, the payments include:

  • $362,000 in original payroll taxes owed, and
  • $46,249.23 more in taxes compared to what the defendant would have paid if they had not delayed.

Finally, should the defendant again fail to make a timely payroll tax payment, they must comply with a financial review by a third-party accountant.