Josephine A. Trevathan, Atty., E.E.O.C., Washington, D.C., for plaintiff-appellant.

F. Douglas O'Leary, Moser, Marsalek, Carptenter, Cleary, Jaeckel, Keaney & Brown, St. Louis, Mo., for defendant-appellee.

Before LAY and HEANEY, Circuit Judges, and TALBOT SMITH,* Senior District Judge.

TALBOT SMITH, Senior District Judge.

The Equal Employment Opportunity Commission (EEOC) appeals from an order of the district court1 entered May 9, 1974 dismissing without prejudice its action against the Hickey-Mitchell Company (hereinafter the Employer) for violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e (Supp. II, 1972), amending 42 U.S.C. 2000e (1970).2 After an evidentiary hearing the court found that the Commission had failed to follow its own conciliation procedures and, consequently, had failed to prove satisfaction of the statutory condition to the maintenance of this action-- that it had been 'unable to secure from the respondent a conciliation agreement acceptable to the Commission.' 42 U.S.C. 2000e-5(f)(1) (Supp. II, 1972).3 Specifically, the court found the Commission had not mailed the notice required by 29 C.F.R. 1601.23 (1974), which provides:

Should a respondent fail or refuse to confer with the Commission or its representative, or fail or refuse to make a good faith effort to resolve any dispute, the Commission may terminate its efforts to conciliate the dispute. In such event, the respondent shall be notified promptly, in writing, that such efforts have been unsuccessful and will not be resumed except upon the respondent's written request within the time specified in such notice.

Before us the Commission does not dispute that the regulation was not followed, but urges that in the circumstances of this case, 1) compliance with the regulation was not required, and, alternately, 2) noncompliance was not prejudicial to the Employer. Such circumstances, as found by the trial court, we here summarize. On March 15, 1972 Margo Owens filed a charge with the Commission alleging that because of her race the Employer paid her less than a white employee doing the same work. The Commission's investigation of these charges in August, 1972 ultimately resulted in the Commission's determination on November 30, 1972 that reasonable cause existed to believe that the Employer had engaged in an unlawful employment practice. A copy of this determination, including a 'Notice of Conciliation Process' and an invitation to join with the Commission 'in a collective effort toward a just resolution of this matter,' was mailed to the Employer December 6, 1972.4 In January, 1973 the Employer's attorney, F. Douglas O'Leary, spoke by telephone with James Helm, a Commission official, concerning conciliation of the Owens charge. Mr. O'Leary indicated little willingness to conciliate the charge. At Mr. Helm's request, Mr. O'Leary wrote Mr. Helm a letter dated January 12, 1973 wherein Mr. O'Leary declined to engage in conciliation with the Commission.5 No further contact occurred between the parties until this action was instituted May 9, 1973.

We are thus squarely confronted with the issue of whether the Commission's failure to give the notice required by 29 C.F.R. 1601.23 (1974), that the Commission considers the conciliation efforts unsuccessful and intends to terminate them, should bar the prosecution of the Commission's civil action under 42 U.S.C. 2000e-5(f)(1) (Supp. II, 1972). We are not without guidance in this area; two district courts in addition to the court below have considered the issue and resolved it against the Commission. EEOC v. United States Pipe & Foundry Co., 375 F. Supp. 237, 246-248 (N.D.Ala. 1974); EEOC v. Louisville & Nashville R.R., 368 F. Supp. 633, 638-639 (N.D.Ala.1974); EEOC v. Firestone Tire & Rubber Co., 366 F. Supp. 273 (D.Md. 1973). We may reject out of hand the Commission's contention that the regulation is not applicable to the situation before us. The argument that the limited purpose of the regulation is to 'make certain that a respondent's failure to engage in conciliation is not the result of inadvertence or neglect' ignores the fact that the regulation applies in terms to a respondent's 'failure or refusal' to conciliate.6 That the Employer intentionally and knowingly declined to conciliate does not take the case out of the ambit of the regulation.

More serious, however, is the Commission's claim that the January 12 letter conclusively demonstrates its inability to secure a conciliation agreement within the meaning of 42 U.S.C. 2000e-5(f)(1) (Supp. II, 1972),7 and that the failure to give the 1601.23 notice is at most a technical error which did not prejudice the Employer. Resolution of this issue requires a brief examination of the purpose of the regulation and the function of conciliation, generally, in the enforcement scheme of Title VII.

As originally enacted Title VII did not empower the Commission to sue employers to enforce the Act.8 Rather, 'cooperation and voluntary compliance were selected as the preferred means for achieving' equality of employment opportunities.9 Voluntary compliance proved elusive, however, as more than half of the Commission's conciliation efforts were deemed unsuccessful.10 Consequently, Congress enacted the Equal Employment Opportunity Act of 1972 which amended Title VII to permit Commission suits.11 The statutory mandate that the Commission attempt conciliation was not abandoned, however,12 and the Act expressly conditions the Commission's powers of suit on its inability to 'secure from the respondent a conciliation agreement acceptable to the Commission.'13 As the House sponsor of the bill stated:The conferees contemplate that the Commission will continue to make every effort to conciliate as is required by existing law. Only if conciliation proves to be impossible do we expect the Commission to bring action in Federal district court to seek enforcement.14

Indeed, it is essential, as one observer notes, that negotiation remain the primary mode of enforcement, lest the Commission's energies be dissipated in interminable litigation in the Federal courts, which, whatever the outcome, would be detrimental to efficient and effective implementation of Title VII.15

Although the lower federal courts have differed over whether the fact of failure of conciliation must be affirmatively pleaded by the Commission,16 it is beyond dispute that a Commission lawsuit brought before any attempt at conciliation is premature. EEOC v. Westvaco Corp., 372 F. Supp. 985, 991-993 (D.Md.1974); EEOC v. E. I. DuPont de Nemours & Co., 373 F. Supp. 1321, 1333-1334 (D.Del.1974). 'The Commission's power of suit and administrative process (are not) unrelated activities, (but) sequential steps in a unified scheme for securing compliance with Title VII.'17

Against this background we must review the Commission's breach of 29 C.F.R. 1601.23 (1974) providing for notice to the respondent of the imminent termination of the conciliation process. We agree with the court below that the regulation affords even the most uncooperative and recalcitrant respondent18 'the right to be told that it has one last chance to attempt conciliation.'19 In view of the central role of conciliation in the scheme of Title VII we cannot say the regulation is merely 'technical.' This is an area where animosities run high and negotiations may be difficult to initiate.20 The regulation reflects formal recognition by the Commission of the need to keep the doors of communication open even where, as here, it has received a flat refusal to engage in conciliation discussions.

We are, of course, aware of the

general principle that 'it is always within the discretion of a court or an administrative agency to relax or modify its procedural rules adopted for the orderly transaction of business before it when in a given case the ends of justice require it. The action of either in such a case is not reviewable except upon a showing of substantial prejudice to the complaining party.'