Workplace Class Action Blog

Court Issues Mixed Bag Discovery Decision In EEOC Nationwide Race Discrimination Case

Posted in EEOC Litigation

Bbagy Christopher M. Cascino and Gerald L. Maatman, Jr.

In EEOC v. DolGenCorp, LLC d/b/a Dollar General, No. 13-CV-4307 (N.D. Ill.), a case we blogged about previously here, Judge Andrea Wood of the U.S. District Court for the Northern District of Illinois recently decided several discovery issues that have become increasingly common in large-scale, EEOC-initiated disparate impact litigation.

Judge Wood’s ruling is a mixed bag. On the one hand, Judge Wood allowed the EEOC to take discovery on certain background checks performed by Dollar General even though the EEOC did not claim that those background checks had a disparate impact. She also ruled that the EEOC could exceed the presumptive 25 interrogatory limit because the case was nationwide in scope.  She further held that pre-suit statistical analyses performed by the EEOC were protected by the deliberative process privilege. On the other hand, she ruled that EEOC documents subject to the deliberative process privilege may nonetheless be discoverable if an employer can demonstrate a particularized need for the materials that outweighs the EEOC’s need for confidentiality.

Case Background

The EEOC filed suit against Dollar General, alleging that Dollar General’s use of criminal background checks for applicants is discriminatory because it has a disparate impact on African-American job applicants. During the course of discovery, the EEOC sought information regarding other background checks performed by Dollar General. Dollar General refused to turn them over, arguing that the other background checks were not relevant to the EEOC’s claims.

Also during discovery, the EEOC served more than 25 interrogatories on Dollar General. In turn, Dollar General refused to answer four of the interrogatories that exceeded the presumptive 25 interrogatory limit under the applicable local rules.

Finally, Dollar General sought any statistical analyses the EEOC had regarding the purported disparate impact of Dollar General’s background check policy. The EEOC refused to turn its pre-suit analyses over, claiming that they were protected by the deliberative process privilege.

Both parties moved to compel discovery. Magistrate Judge Sheila Finnegan granted the EEOC’s motions to compel and denied Dollar General’s motion to compel. Dollar General subsequently filed Rule 72 objections to Magistrate Judge Finnegan’s report and recommendation.

The Court’s Decision

The Court began by considering whether Dollar General should be compelled to turn over documents regarding other, non-challenged background screening used by Dollar General.  Judge Wood held that the documents were relevant to Dollar General’s business necessity defense.  Id. at 4. Specifically, Judge Wood held that the EEOC was entitled to respond to Dollar General’s business necessity defense by showing that alternative, equally effective background checks were available to Dollar General. The Court found that the non-challenged background screening performed by Dollar General might represent such alternative background checks. Id. at 4-5.

The Court then rejected Dollar General’s argument that the EEOC was required to investigate any background checks it claimed were relevant before filing suit. Id. at 5. The Court held that such investigation would only be necessary if the EEOC was claiming the background checks had a disparate impact. Id. Because the EEOC was not challenging these other background screenings, the Court compelled Dollar General to turn over documents about its other background checks. Id.

The Court then addressed the excess interrogatories. The Court held that the EEOC was allowed to exceed 25 interrogatories because its claim was “nationwide in scope, raise[d] complicated data issues, and involve[d] many different legal and factual areas.” Id. at 7-8.

The Court next considered whether Dollar General could discover the EEOC’s pre-suit statistical analyses of Dollar General’s background check policies. After noting that “[t]he deliberative process privilege protects communications that are part of the decision-making process of a governmental agency,” the Court found that these analyses were protected by the deliberative process privilege because they were performed as the EEOC was determining whether to sue Dollar General. Id. at 8-9.

Nevertheless, the Court held that the EEOC might nonetheless be required to turn the analyses over if Dollar General could demonstrate a “particularized need for the documents that exceeds the EEOC’s need for confidentiality.” Id. at 11. The Court then remanded the issue to the Magistrate Judge so that she could decide whether Dollar General could make such a showing.

Implications For Employers

Employers involved in litigation with the EEOC should be aware of this decision because the EEOC will undoubtedly rely upon it when it seeks discovery regarding non-challenged employment policies and when it seeks to serve excess interrogatories in complex, nationwide cases. The EEOC will also try to use the ruling to shield any pre-suit statistical analyses it performed from discovery. However, employers also can use decision to support discovery gambits vis-à-vis the Commission; even if the EEOC’s pre-suit statistical analyses are protected by the deliberative process privilege, they are nonetheless subject to discovery because of some particularized need.

Readers can also find this post on our EEOC Countdown blog here.

Happy Thanksgiving To Our Readers In The Class Action World

Posted in Class Action Litigation

thanksgivingBy Gerald L. Maatman, Jr.

Happy Thanksgiving to our loyal readers of the Workplace Class Action Blog!

We are busy at work as the holiday season begins in finalizing our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report.

We anticipate going to press in the first week of January, and launching the 2016 Report to our readers from our Blog.

This will be our Twelfth Annual Report, and the biggest yet with analysis of over 1,300 class certification rulings from federal and state courts in 2015. As in past years, the Report will be available for download as an E-Book too.

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We were humbled and honored by the review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”) — the review is here EPLiC said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Practitioners and corporate counsel should not be without it on their desk, since the Report is the sole compendium of its kind in the United States.”

The 2016 Report will analyze rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2015 for employment discrimination, wage & hour, and ERISA class actions, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

Information on downloading your copy of the 2016 Report will be available on our blog in early January. Happy Holidays!

District Court Cuts The Cord To Cable Employees’ Discipline And Promotions Class Claims

Posted in Class Action Litigation

sealBy Gerald L. Maatman Jr. and Christina M. Janice

In a new order issued on November 13, 2015 in Brand, et al. v. Comcast Corp., Case No. 11-CV-8471 (N.D. Ill.  Nov. 13, 2015), a matter we have previously blogged on here, Judge Matthew F. Kennelly of the U.S. District Court for the Northern District of Illinois denied a motion brought by African-American employees of Comcast Corporation (“Comcast”) to amend the Court’s certification order of a Title VII hostile work environment class to add discipline and promotions classes based on newly discovered evidence of alleged discrimination.

This case is instructive for employers both in defeating class certification motions, as well as in designing and implementing centralized performance and promotion tools for implementation across a diverse workforce.

Case Background

On November 28, 2011, service and line technicians working at Comcast’s South 112th Street facility in Chicago, brought a class action alleging Comcast exposed Plaintiffs and their co-workers at this 90% African-American workplace to a hostile work environment defined by insect and vermin infestations and frequent racial epithets by their managers. Plaintiffs alleged that they and their co-workers were denied necessary training and systematically provided old, defective and insect-infested equipment, and often were without the tools and equipment they needed to perform their jobs. As a result, Plaintiffs allege that they and the class of co-workers they seek to represent failed to meet Comcast performance metrics, received fewer promotions and lower pay, and were disciplined more often, than co-workers at “mostly white” locations. Id. at 2.

On July 5, 2014, the Court certified Plaintiffs’ “hostile work environment” class under Title VII for all African-American employees at the South 112th Street facility from January 1, 2005 through present. Id. Finding, however, that under Wal-Mart Stores, Inc. v Dukes, 131 S. Ct. 2541 (2011), there was too wide a variation in individual employee experiences and claims to meet the commonality requirement for class certification, the Court denied Plaintiffs’ motion to certify classes of employees claiming discriminatory “terms and conditions” of employment, pay, promotions, and discipline or termination. Id. at 2-3.

After the close of discovery Plaintiffs moved the Court to amend its class certification order to certify discipline and promotions classes based on newly acquired evidence that during the class period Comcast implemented a Performance Improvement Plan (“PIP”) and Qualify to Pursue (“QTP”) promotion metrics with knowledge that a larger percentage of its South 112th Street facility workforce would fail to meet QTP metrics, and be placed on PIP’s, than at other locations. Id. at 4.

Specifically, Plaintiffs sought certification of disparate treatment classes of “all current and former African American technicians at the 112th Street facility that were subject to a Performance Improvement Plan (‘PIP’) from November of 2007 through December of 2011, as a result of failing to meet a specific performance metric” and “all current and former African American CommTech 3 employees at 112th Street that failed to Qualify to Pursue (‘QTP’) to the next technician level from January of 2009 through December of 2011, as a result of failing to meet a specific performance metric.” Id. at 4-5.

The Court’s Decision

Finding sufficient newly acquired evidence to revisit the issue of class certification, the Court nonetheless denied the motion as to the proposed discipline or “PIP class,” reasoning that under Wal-Mart commonality requires a showing that the class members all “suffered the same injury.” Id. at 8 (internal citations omitted). In this respect, the Court reasoned that mere placement on a performance plan “is not the relevant “injury” on a claim under Title VII or section 1981” brought under a theory of disparate treatment. Id. at 8-9.

The Court similarly rejected the proposed promotions or “QTP class.”  Observing that denial of promotion qualifies as an adverse employment action under Title VII and section 1981, the Court found that being placed in QTP status is not in and of itself a promotion. Id. at 11.  Moreover, the Court noted that the Record reflected that the named Plaintiffs had varying experiences – some were promoted, some promoted late and some never promoted –  such that Plaintiffs could not prove disparate treatment. Id. at 12.

Observing that Plaintiffs chose to bring their claims under a disparate treatment theory of liability under Title VII (rather than demonstrate disparate impact arising from the application of Comcast’s policies and practices), the Court observed that to prevail, “[e]ach plaintiff would need to demonstrate individually that he or she failed to meet performance objectives as a direct result of Comcast’s effort to undermine 112th Street technicians and that this resulted in an adverse employment action.” Id. at 12-13. Because Plaintiffs would have to demonstrate how each employee was undermined and the adverse action each suffered, common questions would not predominate as to warrant class treatment. Id. at 13.

Implications for Employers   

While to Comcast’s benefit the Court’s order in Brand turns largely on the decision of the Plaintiffs to bring their claims under a disparate treatment theory of discrimination under Title VII, employers designing and implementing performance improvement and career advancement tools should be mindful that development of these centralized employment performance tools exposes employers to risk of class action litigation under Title VII. Care should be taken to design facially neutral tools using best legal compliance practices for validating these tools as achieving their legitimate business purposes, without less discriminatory alternatives, in their intended environments.


Employers Beware: EEOC’s 2015 Performance And Accountability Report Reaffirms Its Commitment To High Profile, Systemic Litigation

Posted in EEOC Litigation

thCAD0SFA4By Christopher DeGroff, Gerald L. Maatman, Jr., and Jennifer A. Riley

On November 19, 2015, the EEOC released its annual 2015 Performance and Accountability Report (“PAR”). The Report reflects the progress of the EEOC’s continued efforts to meet the enforcement priorities outlined in its 2012 strategic enforcement plan (“SEP”), including its systemic litigation initiative. For employers, this is perhaps the most important document issued by the Commission. In short, it should be required reading for corporate counsel and professionals involved in compliance efforts relative to workplace litigation issues.

In its SEP, among other things, the EEOC underscored its efforts to champion bigger, more media-focused “systemic” cases, including pattern or practice cases where the alleged discrimination “has a broad impact on an industry, occupation, business, or geographic area.” In the SEP, the EEOC set forth a goal to ensure that systemic cases make up at least 20% of its annual litigation docket and at least 22% to 24% of its litigation docket by 2016. (Read more here.)

As background, the PAR is a “scorecard” of sorts for the EEOC. It provides a report on its activities during the past fiscal year, from October 1, 2014 through September 30, 2015, including its progress toward meeting the goals outlined in the SEP, and provides a preview of what we can expect to see from the EEOC in the upcoming months.

In sum, although the Report acknowledges that the EEOC filed fewer systemic lawsuits in FY 2015, the number of systemic investigations and recoveries exceeded FY 2014 levels. Despite significant setbacks in FY 2014 (read more here), the agency’s statistics trumpeted in the PAR show that, rather than backing down, the EEOC was inspired to be even more aggressive in FY 2015.

The EEOC’s Overall Results

The EEOC’s results reflect a mixed bag for employers.  The EEOC’s totals represent a slight increase in charges filed (93,727 in 2013, compared with 88,778 in 2014, and 89,385 in 2015), and a slight increase in merits lawsuits (131 in 2013, compared with 133 in 2014, and 142 merits lawsuits in 2015).

However, the EEOC’s report reflects a steady decrease in the number of systemic lawsuits, both in the number filed (21 in 2013, compared with 17 in 2014, and 16 in 2015), and in the number of systemic lawsuits on-going in the court system (54 in 2013, compared with 57 in 2014, and 48 in 2015).

Although the agency completed more systemic investigations in 2015 than it completed in 2014, the EEOC’s numbers did not meet 2013 levels. In 2015, the agency completed more investigations than it completed in 2014, but fewer investigations than it completed in 2013 (300 in 2013, compared with 260 in 2014, and 268 in 2015).  The agency recovered more as a result of those investigations than it recovered in 2014, but less than it recovered in 2013 ($63 million in 2013, compared with $13 million in 2014, and $40 million in 2015).

Charges:   A Bigger Backlog

Monthly-Reports (2)The EEOC reported that it received 89,385 charges alleging employment discrimination in 2015.  The number was up slightly over the number received in 2014 (88,778), but remains below the record-breaking recession-period numbers that we saw between 2008 and 2013.  During those years, the numbers steadily rose from 95,402 in 2008, to 93,277 in 2009, to 99,922 in 2010, and 99,947 in 2011, before starting a gradual decline to 99,412 in 2012 to 93,727 in 2013.

As of the end of FY 2015, the EEOC had a backlog of 76,408 charges, a slight increase of 750 charges over the backlog at the conclusion of FY 2014.

Settlements: Recoveries Soar

In its Report, the EEOC reported a surge in the total amount of monetary settlements.  Its administrative enforcement program produced $356.6 million from claim resolutions, up over $60 million from the $296.1 million that it collected in FY 2014.  The EEOC resolved 155 merits lawsuits in the federal district courts, for a total monetary recovery of $65.3 million, a substantial increase ($42.8 million) over the $22.5 million that it collected during FY 2014.  In addition, the EEOC resolved 6,360 complaints and secured more than $94.9 million in relief for federal employees and applicants who requested hearings in FY 2015.

Lawsuits: More Suits, Smaller Share Of Systemic Cases

In its 2015 PAR, the EEOC reported that, during fiscal year 2015, the EEOC filed 142 merits lawsuits, including 100 individual suits, and 42 suits involving “discriminatory policies or multiple victims,” of which 16 (or 11%) involved challenges to alleged systemic discrimination. According to the EEOC, in the 16 systemic lawsuits, the EEOC challenged a variety of types of alleged systemic discrimination, including an alleged age-based refusal to hire, a refusal to accommodate religious beliefs, an imposition of unnecessary medical restrictions, and a systematic failure to maintain records.

Whereas these numbers reflect an upward trend in the number of merits lawsuits, the growth of systemic lawsuits was stagnant. In 2013, the EEOC reported that it had filed 131 merits lawsuits, compared with 133 merits lawsuits in 2014, and 142 merits lawsuits in 2015.  However, in 2013, the EEOC reported that 21 (16%) of those lawsuits were systemic suits, compared with 17 (13%) systemic lawsuits in 2014, and 16 (11%) systemic lawsuits in 2015.  These numbers might explain the agency’s effort in 2015 to report 40 (18.3%) “multiple victim” cases.

At the end of FY 2015, the EEOC had 218 cases on its active district court docket, of which 48 (22%) involved challenges to systemic discrimination. These numbers also reflect a decrease over the past two years.  At the end of FY 2013, the agency had 231 cases on its active docket, of which 54 (23%) involved challenges to systemic discrimination.  At the end of 2014, the agency had 228 cases on its active docket, of which 57 (or 25%) involved challenges to systemic discrimination.

Our “peek behind the numbers” suggests that the Commission’s prosecution of systemic lawsuits has stressed its budget, attorney workloads, and overall capacities. Big cases equate to significant hours of attorney time, and the EEOC’s capacity to file and prosecute an increasing number of systemic lawsuits has hit somewhat of a ceiling or cap due to budgetary and attorney workload limitations.

Systemic Investigations

With respect to investigations in FY 2015, the agency reported that it completed 268 systemic investigations and issued 109 cause findings. It resolved 70 systemic investigations by voluntary conciliation agreements and obtained over $33.5 million in remedies as a result of its systemic initiative.

While reflecting an increase over FY 2014, these numbers still did not achieve the agency’s FY 2013 results. One year ago, the EEOC reported completing only 260 systemic investigations and securing only $13 million in monetary relief. At the end of 2013, the EEOC had launched 300 systemic investigations, resulting in 63 settlements or conciliation agreements, and had recovered approximately $40 million in remedies.

Overall Implications For Employers

Do these numbers mean that the EEOC is backing off its systemic initiative? Not a chance in our view.  Although the EEOC filed fewer systemic lawsuits in FY 2015, the number of 7_Top_HR_Mistakes_Companies_Make_NEW_BANNER (2)systemic investigations and recoveries exceeded FY 2014 levels, and its recoveries represented a climb toward its FY 2013 numbers. As we predicted a year ago, rather than backing down, these numbers signal that the EEOC’s FY 2014 defeats inspired it to more aggressively pursue its agenda.

We expect the EEOC to continue to search for and to initiate systemic investigations to continue this upward trend in 2016. In its FY 2015 PAR, the EEOC continued to highlight its emphasis on “maximizing [its] impact” through its focus on systemic discrimination. The EEOC noted that, at the end of FY 2015, it employed more lead systemic investigators “whose work is dedicated exclusively to development and coordination of systemic investigations,” and more social science research staff.

The EEOC also noted that it continued its efforts to develop means to coordinate systemic investigations across offices. In particular, the EEOC reported that its Systemic Watch List, a software tool that matches ongoing investigations or lawsuits, has “proven integral” to improved coordination. The EEOC also reported that it completed its expansion of the CaseWorks system, a “central shared source of litigation support tools” that facilitate the collection and review of electronic discovery and enable “collaboration” in the development of cases for litigation.

In short, we do not expect the EEOC to back off its systemic initiative in 2016, but to be more aggressive in pursuing those cases that fit within its agenda. So numbers aside, these metrics reflect an agency committed to “big impact” lawsuits that “send a message” to the employer community.

Readers can also find this post on our EEOC Countdown blog here.



Court Awards The EEOC Attorneys’ Fees In Contempt Dispute

Posted in EEOC Litigation

gavel on white backgroundBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In EEOC v. New Indianapolis Hotels, LLC, No. 10-CV-1234 (S. D. Ind. Nov. 9, 2015), Judge William T. Lawrence of the U.S. District Court for the Southern District of Indiana granted the EEOC attorneys’ fees for the time it spent trying to enforce a consent decree against an employer.  This ruling is a cautionary tale for employers, both because it shows how far the EEOC is willing to go to enforce consent decrees and provides further support for the EEOC’s position that it can seek attorneys’ fees even though its attorneys do not bill a client.

Case Background

On November 30, 2010, the EEOC brought a Title VII action against New Indianapolis Hotels LLC (“New Indianapolis”).  On September 20, 2012, the EEOC and New Indianapolis settled the case pursuant to a consent decree.  The consent decree provided for a significant amount of injunctive relief.  On March 26, 2014, the EEOC filed  a motion for contempt, arguing that New Indianapolis violated five provisions of the consent decree, including: (1) workplace posting; (2) training of managers; (3) establishment of a new hiring procedure; (4) recordkeeping; and (5) reinstatement of alleged victims of discrimination

After almost a year of contempt proceedings, the Court found that New Indianapolis was in contempt because it had violated all five of the foregoing provisions.  The EEOC moved for attorneys’ fees for the time it spent litigating the motion for contempt.

The Court’s Ruling

The Court began by observing that federal judges have discretion to award attorneys’ fees in contempt actions.  Id. at 2.  It then pointed out that it would consider four factors in deciding whether to award attorneys’ fees, including: “(1) the harm from non-compliance; (2) the probable effectiveness of the sanction; (3) the financial resources of the contemnor and the burden the sanctions may impose; and (4) the offending party’s willfulness in disregarding the Court’s order.”  Id.

With respect to the first factor, the Court found that the violations of the consent decree “had a significant deleterious effect on individual class members.”  Id. at 3.  With respect to the second factor, the Court determined that an award of attorneys’ fees would be effective because it would “provide some remuneration for the time and expenses spent on the litigation.”  Id.  With respect to the third factor, the Court opined that New Indianapolis had failed to provide evidence that the imposition of attorneys’ fees would present a financial hardship.

The Court then addressed New Indianapolis’s argument that its violation was not willful as evidenced by the fact that it immediately complied with the consent decree after the magistrate judge recommended a finding of contempt.  Id. at 4.  The Court said this was “too little, too late,” and that New Indianapolis should have complied with the consent decree before the contempt motion was filed and before the magistrate judge issued his recommendation.  Id.  It thus concluded that an award of fees was appropriate.  Id.

The Court then determined whether the amount of fees requested by the EEOC was reasonable.  It found that the lodestar method – multiplying the hours spent by the EEOC on the contempt motion by a reasonable hourly rate – was the proper method of determining the EEOC’s fees.  Id.  It found that it could determine a reasonable hourly rate by looking to “prevailing market rates in the relevant community.”  Id.  It held that rates $325 and $275 per hour were reasonable for the EEOC’s attorneys, and that a rate of $100 per hour was reasonable for the EEOC’s paralegal.  Id. at 5.  As a result, the Court awarded the EEOC $50,515 in fees.  Id. at 9.

Implications For Employers

Employers involved in EEOC litigation should be wary of what injunctive terms they agree to in settling with the EEOC.  As this case demonstrates, the EEOC is willing to enforce the injunctive terms of consent decrees, so employers should be sure they are willing and able to satisfy the injunctive terms of any settlement with the EEOC before agreeing to them.  In addition, this case will provide further support for the EEOC’s position that, despite the fact its attorneys do not bill any client for their time, it should be entitled to attorneys’ fees in appropriate circumstances.

Reading Tea Leaves From Today’s U.S. Supreme Court Arguments In The Tyson Foods Class Action

Posted in Class Action Litigation

images By Gerald L. Maatman, Jr.

The U.S. Supreme Court heard arguments today in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 (U.S. Nov. 10, 2015). Many pundits believe the case has enormous implications for workplace class action litigation, as the case frames the potential issue of whether plaintiffs’ attorneys are permitted to conduct a “trial by formula” — that is, a class-action trial at which the defendant is not permitted to litigate its statutory defenses to individual claims. Indeed, many have seen the case as potentially covering three key class action questions, such as: (i) the Supreme Court might clarify the limitations on the use of statistical techniques to establish damages and liability under Rule 23; (ii) the case poses particular significance in the wage and hour context, because it provides the opportunity for the Supreme Court to weigh in for the first time as to the standards that apply to certification of collective actions under the Fair Labor Standards Act (“FLSA”); and (iii)  it provides an opportunity for the Supreme Court to address the constitutional argument that an award of monetary damages to uninjured class members is impermissible.

The transcript of today’s oral argument is here.

While the Tyson Foods case has the potential to be a “game-changer” in the class action world, the Justices’ questioning at today’s hearing suggests that the case may well be resolved on narrower grounds.

In sum, the “tea leaves” from the argument raise the prospect that the case will be resolved without any broad class action pronouncements.

Background To The Case

Employer groups have argued that preventing an employer in a class action from raising otherwise available defenses to the claims of individual class members violates class action rules and due process, and conflicts with the Supreme Court’s seminal decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  The Tyson Foods case involves a class consisting of 3,300 employees who claim they were paid insufficient overtime wages. The plaintiffs’ attorneys introduced evidence purporting to show how many minutes of off-production-line work (e.g., putting on protective gear and later taking it off) the “average” employee undertook in a typical week.

The plaintiffs’ expert calculated the workers’ average time putting on and taking off protective gear, although actual changing time varied greatly among class members. The expert videotaped 744 employees and calculated averages based on donning, doffing, and walking times. The judge at the trial level certified the class on that basis. Ultimately, after trial, the  jury awarded the $5.9 million lump-sum verdict in favor of the certified class; however, this was significantly less than the amount plaintiffs’ experts had calculated by averaging the donning, doffing, and walking time spent by about several hundred members of the class.

On appeal, Tyson Foods argued that plaintiffs’ use of averaging constituted impermissible “trial by formula” under Wal-Mart Stores Inc. v. Dukes, and cannot be relied on to certify a class under Rule 23 of the Federal Rules of Civil Procedure. However, the U.S. Court of Appeals for the Eighth Circuit affirmed the grant of class certification in a 2 to 1 decision, even though the trial-by-formula prevented the defendant from demonstrating that many individual members of the plaintiff class worked no overtime at all.

On June 8, 2015, the Supreme Court agreed to hear the case, and the parties and a significant number of interested groups – employers, advocacy groups, and others – filed amicus briefs. Siding with Tyson Foods as amici are Wal-Mart Stores, other businesses, a wide array of business associations, several conservative or libertarian legal advocacy organizations, and a group of professors.

The workers are supported — in addition to the federal government — by labor unions and their federations, liberal advocacy groups, several workers’ justice advocacy organizations, and professors of law, economics, and social science.

Philosophic Debate Over The Utility Of Class Action Litigation

The Tyson Foods case is playing out in the vortex of a philosophical debate. To several of the Justices, class actions are akin to blunt instruments for forcing companies to settle to avoid the cost of a trial, even if they might win on the merits, and as an easy way to pay exorbitant fees to class action attorneys.  To other Justices, the litigation system is working precisely as it is intended, and plaintiffs’ class action lawyers are simply holding companies accountable when there may be no better mechanism to do so for instances in which individual claims are small, but the overall value to the class is potentially in the millions of dollars.

The U.S. Government has entered the case on the workers’ side. On the absence-of-injury defense to the claims of some class members, the government supports an argument made by the workers that Tyson Foods forfeited any objection on this point by failing at the trial to exclude such workers from the action and for opposing a trial plan that would have excluded them from sharing in any award of damages.

The Tea Leaves From The SCOTUS Argument

Predicting outcomes based on questioning at the SCOTUS oral argument is a hazardous business.

At a high-level, however, several Justices appeared to side with workers and expressed sympathy for the plaintiffs’ argument that since Tyson Foods kept no records of the time spent preparing for slaughter and processing assembly lines, they could rely on older precedent permitting such averaging notwithstanding the holding in 2011 in Wal-Mart.

In particular, Justices Kennedy, Sotomayor, Ginsburg, Kagan, and Breyer expressed skepticism of the positions of Tyson Foods, and their questioning challenged any Rule 23 implications to the defense arguments. As Justice Kennedy asserted in the first two minutes of the defense presentation, “I just don’t understand your arguments….”

The plaintiffs’ side also encountered some rough sledding in questions from Chief Justice Roberts and Justices Alito and Scalia, with Justice Alito commenting that the distribution of the verdict was almost impossible “in other than a very slap-dash fashion.”

The Interesting Turn In The SCOTUS Hearing

In Anderson v. Mt. Clemens Pottery, 328 U.S. 680 (1946), the Supreme Court held that preliminary work activities, where controlled by the employer and performed entirely for the employer’s benefit, are properly included as working time under the Fair Labor Standards Act. Further, where the employer has failed to keep accurate or adequate records, the law does not deny recovery on the ground that the employee is unable to prove the precise extent of uncompensated work. Hence, an employee has carried his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. This 1946 case took on significant importance in today’s SCOTUS argument.

Relying on the part of Mt. Clemens Pottery in which the Supreme Court decided that evidence of the average time spent on a task could be used to determine damages under the FLSA if the employer did not keep records of actual time worked, several Justices questioned whether the averaging done by plaintiffs’ expert might be proper because Tyson Foods had not kept records of the exact time spent by each class member putting on and taking off each specific article of gear. On this point, Tyson Foods argued that Mt. Clemens Pottery only applied to the damages phase and should not be extended to a determination of liability. These questions, however, may well portend that the ultimate ruling in the case will be anchored in the meaning of Mt. Clemens Pottery in a class context.

Implications For Employers

The Supreme Court has been issuing seminal rulings on class action issues with increasing frequency  — first in Wal-Mart in 2011, and then in 2013 in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The future ruling in the Tyson Foods case also has the potential to shape the class action playing field and affect employers’ litigation strategies for opposing class certification generally, as well as other trial issues. At the same time, the “tea leaves” from today’s hearing also leaves open the possibility that the decision will not break new ground on broad class action issues.

Court Dismisses Police Officers’ Class Action Complaint Regarding Anti-Tattoo Policy

Posted in Class Action Litigation

motherBy Gerald L. Maatman Jr. and Christina M. Janice

In a recent order in Medici, et al. v. City of Chicago, Case No. 15 C 5891, 2015 WL 6501153 (N.D. Ill. Oct. 27, 2015), Judge Charles P. Kocoras of the U.S. District Court for the Northern District of Illinois dismissed a class action brought by three City of Chicago police officers who alleged that a new Chicago Police Department policy requiring on-duty officers to cover personal tattoos violated the officers’ First Amendment rights.

This opinion is instructive for public and private employers formulating and enforcing uniform and dress code policies.

Case Background

On June 8, 2015 the Chicago Police Department (“CPD”) revised its uniform policy to require on-duty officers to cover tattoos on their hands, face, neck, and other areas not covered by clothing, with skin tone adhesive bandages or tattoo covers. Id. at *1.  Three CPD officers, Daniel Medici, Dennis Leet and John Kukielka (“Plaintiffs”), had religious tattoos, and Medici also had a tattoo relating to his service as a U.S. Marine. Plaintiffs filed their complaint on July 2, 2015, against the City of Chicago (“City”), alleging the City had violated 42 U.S.C. § 1983 by infringing on their First Amendment rights to display their tattoos.  Plaintiffs also complained that the new tattoo policy required them to wear additional clothing or adhesives that subjected them to overheating, skin irritation, and discomfort. Id. Plaintiffs sought class certification, a declaratory judgment that the tattoo policy was unduly broad and violated the First Amendment, and an award of attorneys’ fees, costs, and other appropriate relief. Id.

The City moved the Court to dismiss the complaint as a matter of law, arguing that the Court could dismiss the complaint without any discovery because Plaintiffs had articulated in their complaint the City’s interest in “promot[ing] uniformity and professionalism” in adopting the tattoo policy. Id. at *2.

The Court’s Decision

The Court agreed with the City that the Plaintiffs, by including in their complaint a statement of the City’s interest in the tattoo policy, afforded the Court the factual allegations sufficient to scrutinize the tattoo policy under two prevailing First Amendment “balancing tests” articulated by the U.S. Supreme Court in Pickering v. Board of Education of Township High School District 205, 391 U.S. 563 (1968), and United States v. National Treasury Employees Union (NTEU), 513 U.S. 454 (1995), respectively. Applying in turn each of the “balancing tests” in these public worker cases, the Court found that the City’s tattoo policy does not violate Plaintiffs’ First Amendment rights. Id. at *3.

The Court focused primarily on the Pickering test, which it reasoned requires “that a restraint on government employee speech must ‘arrive at a balance between the interests of the [employee], as a citizen, in commenting upon matters of public concern and the interest[s] of the State, as an employer, in promoting the efficiency of the public services it performs through its employees,’ [internal citations omitted].” Id. at *2. The Court found that the tattoos were not a form of speech on matters of public concern, but a form of personal expression: “[w]hen an individual decides to place a symbol, a set of words, or a design on his or her body, he or she is engaging in a form of personal expression, rather than a form of commentary on the interest of the public.” Id. at *3.

Further, the Court observed that on-duty police officers “are not part of the citizenry at large, but instead government employees, whose speech may be subject to restrictions that, if applied to the general public, may be unconstitutional.” Id. Even assuming Plaintiffs were citizens commenting on matters of public concern, the Court found that the City’s interests would outweigh Plaintiffs’ First Amendment interests. Reasoning that police officers “have the difficult responsibility of ensuring public safety and maintaining order among the populous,”  the Court reasoned that tattoos may undermine the CPD’s ability to maintain the public’s trust and respect, and negatively impact the CPD’s ability to ensure safety and order. Id.  This was so, the Court explained, because tattoos, as symbols, can be easily misinterpreted and “cause members of the public to question whether allegiance to their welfare and safety is paramount.” Id. at *3-4.  Accordingly, the Court found no First Amendment violation under Pickering.

The Court further determined that the balancing test articulated in NTEU wholly disfavored Plaintiffs, as the Complaint failed to demonstrate: (1) that the speech took place outside the workplace; (2) that the speech addressed public concerns; (3) that the restriction upon speech was a wholesale deterrent to a broad category of expression by a massive number of potential speakers; and (4) that the speech had little if any adverse impact on the efficiency of the workplace. Id. at *4.  Indeed, the Court found that the tattoos “are contrary to and harmful to the CPD’s legitimate objective of maintaining a professional and uniform police force.” Id.

Implications For Employers   

Although the decision in Medici involves public employment and First Amendment concerns, the Court’s reasoning in dismissing the class action is highly instructive to both public and private employers. Employers requiring uniforms or standardized appearance should formulate specific dress code policies that: (1) consider whether and to what extent tattoos are offensive or disruptive in the workplace or to the employer’s customers or business, (2) articulate specific and clear guidelines regarding the display of tattoos; (3) allow for appropriate supervisory discretion – and a standardized process – to consider tattoo restrictions on a case-by-case basis; and (4) consistently enforce their policies.  Care should be taken to engage in a religious accommodation analysis in situations in which the employee’s display of tattoos or other body markings is related to religious practice.

U.S. Supreme Court Oral Argument in Spokeo, Inc. v. Robins

Posted in Class Action Litigation

thCADQZ9HPBy Gerald L. Maatman, Jr., Pamela Q. Devata, Robert T. Szyba

This morning the U.S. Supreme Court heard oral arguments in Spokeo, Inc. v. Robins, No. 13-1339. As our loyal blog readers know, this is a case that corporate counsel need to follow closely in light of the stakes for the future of class action litigation.

Spokeo arises as a putative class action brought under the Fair Credit Reporting Act (“FCRA”) and addresses one of the fundamental prerequisites to civil litigation: Does this plaintiff have standing under Article III of the U.S. Constitution to bring this case under the FCRA in the first place?  Groups on both sides of this argument have been watching this case closely (as we have noted here, here, here, and here), as the Supreme Court’s determination may have a very significant impact on consumers (as well as employees and prospective employees), employers, and the consumer reporting industry as a whole.

The question specifically presented to the Supreme Court is straight-forward — “Does a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation, have standing to bring a claim on behalf of himself or a class of individuals?”

We were at the SCOTUS today to hear the parties’ arguments, as well as the Justices’ questions.  Here is our take based on the argument (a copy of the argument transcript is here).

The Case’s Background And Context

Among its provisions, the FCRA requires that a consumer reporting agency (“CRA”) follow reasonable procedures to assure maximum possible accuracy of its consumer reports (15 U.S.C. § 1681e(b)), issue specific notices to providers and users of information (1681e(d)), and post toll-free phone numbers to allow consumers to request their consumer reports (1681b(e)).

Spokeo, Inc. (“Spokeo”) operates a “people search engine” — it aggregates publicly available information about individuals from phone books, social networks, marketing surveys, real estate listings, business websites, and other sources, which it organizes into comprehensive, easy-to-read profiles. Notably, Spokeo specifically states that it “does not verify or evaluate each piece of data, and makes no warranties or guarantees about any of the information offered…,” and warns that the information is not to be used for any purpose addressed by the FCRA, such as determining eligibility for credit, insurance, employment, etc.

In July 2010, Plaintiff Thomas Robins filed a purported class action alleging that Spokeo violated the FCRA because it presented inaccurate information about him. He alleged that Spokeo reported that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). But beyond identifying the inaccuracies, he did not allege any actual damages.  Instead, he argued that Spokeo’s alleged FCRA violation was “willful” and therefore he sought statutory damages of between $100 and $1,000.  The district court held that “where no injury in fact is properly pled” the plaintiff does not have standing to sue, and dismissed the case. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In its petition for certiorari, Spokeo posed this question to the Supreme Court: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.”  The answer, as it turns out, is likely to resolve a circuit split, as the Fifth, Sixth, and Seventh Circuits are lining up with the Ninth Circuit’s approach, while the Second, Third, and Fourth Circuits have generally disagreed and have required an actual, concrete injury to have standing.

The Company’s Position

Spokeo’s briefing argued that in order for any plaintiff to bring a “case” or “controversy” of the type that the courts can hear, the plaintiff must point to a concrete, actual, and particularized harm, as supported by the Supreme Court’s precedents and centuries of history dating back to the beginnings of the English common law. A technical violation of the statute, even if coupled with a monetary bounty to the plaintiff, is not, and has never been, enough. And the fact that the statute purports to provide redress does not itself evidence a harm, as here it merely awards damages to an uninjured plaintiff.  Spokeo further argued that analogizing Robins’ claim to a common law defamation claim also does not help, because at their core, common law defamation claims require injury. Lastly, the mere possibility of harm to his employment prospects is also not an actual, concrete harm. Thus, Spokeo maintained that the plaintiff has no standing, and therefore cannot proceed with his putative class action.

The Consumer’s Position

Robins took the opposite position on every point. He argued that so long as Congress provides a cause of action and allows a plaintiff to recover damages, that is all that is required for Article III standing.  No actual or concrete harm is necessary because the statutory violation suffices.  Looking to much of the same history and precedents, he disagreed with the company on whether a concrete harm is actually required. And even if it were, Robins argued he had “pocket-book Injury” — that is, if the company violated the law, it owed him the statutory damages. He analogized his cause of action to one of defamation, in that the litigation was centered on statements about Robins, although updated by Congress from the claims “fossilized” form to remove the requirement that plaintiffs point to an actual harm.

Both sides raised concerns over separation of powers, pointing out that eliminating the requirement of concrete harm runs the risk of courts reaching beyond their limited role to deciding “cases” and “controversies,” and the risk of Congress delegating to private (and thus financially interested) plaintiffs the Executive’s enforcement function. On the other hand, a determination that concrete hard is required would impermissibly override Congress’s policy determination to create a legal protection for consumers.

Today’s SCOTUS Oral Argument

Both sides encountered intense, probing questions from the Justices this morning.

If a questioning scorecard is indicative of the issues, it broke out this way by our rough tally:

Questions To Spokeo – 26 in the opening argument and 3 questions in the rebuttal argument [questions by Justice – Kagan (9), Sotomayor (6), Scalia (5), Ginsburg (4), Kennedy (2), Alito (1), Breyer (1), and Roberts (1)]

Questions To Robins – 36 in the opposition argument [questions by Justice – Scalia (13), Roberts (9), Breyer (3), Kennedy (3), Kagan (3), Ginsburg (2), and Sotomayor (1)]

From the start of the argument, Justices Kagan and Sotomayor challenged the company’s position, pressing for an explanation why, if Congress determined that the dissemination of false information is something it sought to protect, should the Court find that a plaintiff has no standing when seeking to recover statutory damages after false information was disseminated.  The justices zeroed in on the dissemination of inaccurate information, in and of itself, as potentially creating the injury required for standing.  Justice Kagan further pointed out that it could be difficult to know exactly what the impact dissemination of false information might be have, and Justice Sotomayor challenged whether the argument simply sought to superimpose of the word “concrete” onto the requirement to identify a legally protected right being violated.  Justice Scalia interjected in the questioning to point out that the statutory text did not identify “misinformation” as a remedy the statute sought to right, but instead the statute sought to require procedures that would be followed, such as the inclusion of a toll-free phone number, and pointing out that Robins’ interpretation would allow anyone to sue if the toll-free number was not provided (or any other technical violation), regardless of whether there was any concrete injury.

In terms of questioning directed to the Robins’ counsel, Justice Kennedy pointed out the circular logic that a plaintiff should be considered to sustain a monetary injury simply because a statute attributes an amount to a technical violation.  Chief Justice Roberts also posed the hypothetical of where a plaintiff’s phone number was disseminated in violation of a statute, but the phone number that was given was wrong.  The Chief Justice expressed skepticism that an injury could be established.  Indeed, Justice Breyer went on to characterize the respondent’s position as arguing that individuals who sustained no harm should be entitled to sue simply because they have knowledge that non-compliant procedures were followed, not because they sustained a concrete injury.  Justice Alito interjected to ask whether anyone actually performed a search of Robins, pointing out that if no search had been performed this would be the “quintessential speculative harm.”  Chief Justice Roberts followed with another hypothetical, where an individual was paid double a statutorily-required fee — would that constitute an injury because the statute was violated when the individual was paid the wrong amount (i.e., double)?  Robins’ counsel conceded there would be no standing there.  As to the analogy to defamation, Justice Scalia pointed out that defamation requires injury and thus does not help the respondent.

The Solicitor General, as amicus, also argued in support of Robins.  Chief Justice Roberts expressed concern about the possibility of Congressional attempts to authorize private litigants to enforce laws in a way that would interference with the Executive Branch, a phenomenon in which the Solicitor General’s office should have interest.  Justice Scalia also pointed out that violations of procedure do not give rise to standing, having previously pointed out that the FCRA requirements are procedural in nature.

What’s Next?

A decision from the Supreme Court as to the requirements for standing have clear and obvious implications for the future of putative class actions brought under the FCRA in general and perhaps other class actions too.  Indeed, the implications here would likely apply in a variety of other contexts, such as consumer class actions and other federal statutory claims.  The questioning this morning reveals that Justices Kagan, Sotomayor, and Ginsburg might be receptive to the notion that the dissemination of false information in and of itself suffices to confer standing, whereas Chief Justice Roberts, and Justices Scalia, Breyer, and Alito might require a plaintiff to identify a harm beyond a technical violation of a statutory provision.  Regardless of possible leanings, the argument made clear that the Justices have an interest in and have given thought to the issue.  We expect a decision in the winter/spring 2016, so stay tuned!


Ninth Circuit: The EEOC Can Subpoena Extensive Employee Information

Posted in EEOC Litigation

9th-circuitBy Laura J. Maechtlen and Courtney K. Bohl

As our readers may recall, in November 2012, Judge G. Murray Snow of the U.S. District Court for the District of Arizona nixed a subpoena issued by the EEOC seeking employee pedigree information (name, address, telephone number and social security number), and information regarding the reasons for employee terminations. The court held that the EEOC did not need this information in order to determine whether the employer, McLane Company, Inc., allegedly violated Title VII. The EEOC appealed.

On October 27, 2015, the Ninth Circuit reversed and sustained the EEOC’s broad subpoena in EEOC v. McLane Company, Inc., Case No. 13-15126, 2015 U.S. App. LEXIS 187702 (9th Cir. Oct. 27, 2015). The Ninth Circuit held that employee pedigree information was relevant to the EEOC’s investigation and should be produced. Further, the Ninth Circuit held that information regarding termination reasons was also relevant to the investigation, and remanded the matter to the District Court to determine whether the production of this information would be unduly burdensome.

The Ninth Circuit’s opinion is a must read for employers, especially employers doing business in Ninth Circuit states (Alaska, Arizona, California, Idaho, Montana, Oregon and Washington). It gives the EEOC broad access to information during the course of an administrative investigation, even if such information is only tangentially related to the underlying charge. This decision will likely embolden the EEOC to demand direct contact information of employees, especially in systemic discrimination cases, thereby making the defense of such charges burdensome and expensive.

Background Facts

A McLane employee, Damiana Ochoa, filed a charge of discrimination against McLane. Ochoa alleged that when she tried to return to work after taking maternity leave, McLane informed her that she could not resume her position unless she passed a physical capability strength test. Id. at *2. Ochoa attempted the test three times. Id. Each time she failed, and, as a result, was terminated. Id.

The EEOC undertook an investigation into the charge, requesting certain information from McLane, including information on the strength test, and the employees who had been required to take the test. Id. at *4. McLane complied with most of the EEOC’s requests, but refused to disclose pedigree information of its employees and it’s the reasons it terminated employee test takers. Id. The EEOC filed a subpoena enforcement action against McLane seeking this information.

The District Court denied the EEOC’s request for this information and the EEOC appealed.

The Ninth Circuit’s Ruling

In considering whether the EEOC was entitled to employee pedigree information, the Ninth Circuit clarified that the EEOC is entitled to “virtually any material that might cast light on the allegations against the employer.” Id. at *9. Under this loose standard, the Ninth Circuit held that employee pedigree information was relevant to the EEOC’s investigation because such information could be used by the EEOC to speak with other employees who took the test and determine whether there was any truth to Ochoa’s allegations. Id. at *11-12.

The Ninth Circuit rejected all three of McLane’s arguments against the enforcement of the subpoena. Id. at *12-17. First, it rejected McLane’s argument that pedigree information was not relevant to the charge because Ochoa only alleged a disparate impact claim, not a disparate treatment claim. Id. at 12. The Ninth Circuit found such information was relevant, reasoning that Ochoa’s charge is framed “general enough” to support either theory. Id.

Second, it rejected McLane’s argument that pedigree information was not necessary to the EEOC’s investigation. The Ninth Circuit stressed that the governing standard was relevance, not necessity, and noted that the pedigree information was clearly relevant to Ochoa’s charge. Id. at +13.

Third, the Ninth Circuit rejected McLane’s argument that pedigree information was not relevant because the strength test was neutrally applied, which, McLane argued cannot, by definition, give rise to disparate treatment, systemic or otherwise. Id. at *15. The Ninth Circuit reasoned that even if the strength test applied to everyone, the test still could be applied in a discriminatory manner. Id. at *15-16. For example, McLane could fire the women who failed the test but not the men who failed. Id.

Finally, the Ninth Circuit turned to the issue of whether the EEOC was entitled to the reasons McLane terminated test takers. Id. at *17-18. Although it determined that this information relevant to the EEOC’s investigation, it noted that McLane did not have to produce this information if it would be unduly burdensome. Id. The Ninth Circuit thus remanded this issue to the District Court for further consideration.

Implication For Employers

The Ninth Circuit’s opinion broadens the scope of information the EEOC may receive when investigating a charge, requiring that a request only be somehow relevant to a charge — quite a loose standard. While employers should continue to object to EEOC requests on the bases of relevance and over breadth, employers should also “tee-up” their arguments that compliance with a request or subpoena is unduly burdensome.

Readers can also find this post on our EEOC Countdown blog here.

Progress, But Also Perpetuated Errors, In The EEOC’s Proposed GINA Rule Regarding Wellness Program Incentives

Posted in EEOC Litigation

thCAD0SFA4By Paul Kehoe and Larry Lorber

Today, the U.S. Equal Employment Opportunity Commission (“EEOC”) issued a Notice of Proposed Rulemaking addressing wellness program incentives under the Genetic Information Nondiscrimination Act (“GINA Proposed Rule”) in the Federal Register (here).  This NRPM comes on the heels of the EEOC’s proposed rule covering wellness program incentives under the Americans With Disabilities Act (“ADA Proposed Rule”) released last April and discussed here.  Today’s proposal should be required reading for corporate counsel and HR executives. The EEOC’s litigation enforcement program has targeted wellness programs, and GINA discrimination issues is also on the Commission’s radar.

Today’s Proposal

The EEOC received about 340 substantive comments from the ADA Proposed Rule, and one of many major concerns from the regulated community was the EEOC’s piecemeal approach to addressing wellness program incentives because it ignored spousal incentives.  Today’s proposal attempts to fill that gap.  However, the GINA Proposed Rule still ignores the primary concerns of the regulated community — that the EEOC is effectively usurping the regulations issued by the Departments of Labor, Health and Human Services, and Treasury (the “Tri-Agency Regulations”) by establishing a parallel — and more onerous — regulatory scheme related to wellness program incentives.

The new proposal likely represents an improvement over the ADA Proposed Rule on wellness programs in that the 30% incentive is calculated based on the total cost of the employee’s chosen coverage, but the devil is in the details.  For example, the proposed apportionment provision permits a total incentive of $4,200 for a plan that costs $14,000, but only where the allocation to the employee is $1,800 if the single coverage plan costs $6,000 and $2,400 to the spouse and/or other dependents.  This mechanism ignores practical reality because many employers design wellness programs by providing an equal incentive for employees and spouses.  As such, this requirement is inconsistent with the Tri-Agency Regulations.

In addition, the EEOC continues to assert that it has the authority to define just what is a “reasonably designed” wellness program.  Congress and the Administration have already defined the term in the Affordable Care Act (“ACA”) and the Tri-Agency Regulations.  Introducing a “similar” definition means that the EEOC intends to adopt a different standard than the one previously adopted by Congress in the ACA or the Departments of Labor, Treasury and HHS in the Tri-Agency Regulations.  Moreover, by importing the “reasonable design” requirement from “health-contingent wellness program,” the GINA Proposed Rule (again as in the ADA Proposed Rule) imputes the burdens previously associated only with health-contingent wellness programs to all wellness programs, which exceeds what is required under the ACA and the Tri-Agency Regulations.

Implications For Employers

While this rule, if promulgated, would provide some clarity for employers, it would, in conjunction with the ADA Proposed Rule, establish a parallel – and more onerous – compliance scheme than the scheme set forth in the Tri-Agency Regulations issued by agencies with the necessary authority and expertise. Ultimately, because more onerous regulations always establish the baseline when authority is diffused among various authorities and agencies, these EEOC regulations would become the de facto law of the land, usurping the Tri-Agency regulations and establish more roadblocks for employers to provide incentives to their workforces and their families. The comment period will be open for sixty days until December 29, 2015. Stay tuned!

Readers can also find this post on our EEOC Countdown blog here.