For the second year in a row, we are honored to have received the “Chicago Litigation Department of Year: Labor & Employment” award from The National Law Journal. In The National Law Journal’s annual report on the Chicago Litigation Departments of the Year, Seyfarth was recognized for our litigation prowess in a series of high-profile and precedent-setting victories in pattern or practice cases that the U.S. Equal Employment Opportunity Commission brought against our clients. Seyfarth Shaw is grateful for the The National Law Journal‘s recognition and honor for our firm.
Judge John Darrah of the U.S. District Court for the Northern District of Illinois issued a decision this week in the EEOC’s landmark case against CVS Pharmacy. As we have previously blogged about here, in EEOC v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill.), the EEOC staked out new ground in Title VII litigation by taking aim at certain provisions of CVS’s standard severance agreement. As we reported here, the Court decided to dismiss the case a few weeks ago but had not yet issued a decision. That decision came out on October 7, 2014. While we expected an important decision about the substance of Title VII’s protections, what we got instead was a landmark ruling on the scope of the EEOC’s enforcement authority. It is a stunner of a defeat for the Commission.
In February of this year the EEOC brought suit against CVS, alleging that certain provisions of CVS’s standard severance agreement violate Title VII because they interfere with an employee’s right to file charges, communicate voluntarily with the EEOC and other state agencies, and participate in agency investigations. The case arose out of a former CVS pharmacy manager who was discharged in July 2011. She filed a charge with the EEOC, alleging that CVS terminated her due to her sex and race. On June 13, 2013, the EEOC dismissed the charge, but it then sent CVS a letter saying that it had reasonable cause to believe that CVS was engaged in a pattern or practice of resistance to the full employment of rights secured by Title VII by virtue of the severance agreements that the charging party and others signed at termination. Id. at 2-3. Specifically, the EEOC claimed that the agreement deters the filing of charges and interferes with the employee’s ability to communicate voluntarily with the EEOC and other federal and state agencies.
The Court’s Decision
Judge Darrah decided the case on purely procedural grounds. It was undisputed that the EEOC did not engage in any effort to conciliate prior to bringing suit. Id. at 3. The EEOC argued that it was not required to engage in conciliation procedures because it was not bringing a garden-variety pattern or practice claim under section 707(e), but rather was alleging a pattern or practice of resistance to the full enjoyment of rights created by Title VII. That “resistance” claim was brought under section 707(a), which does not mandate the same pre-suit procedures as are required under section 707(e).
Judge Darrah dove into the history of Title VII to dismantle the EEOC’s argument. When Title VII was originally enacted, the Attorney General was given the power to bring civil complaints under section 707(a) when there was a reasonable cause to believe that an employer engaged in “a pattern or practice of resistance” to the full enjoyment of any of the rights secured by Title VII. That power was transferred to the EEOC in March 1974. Under section 707(e), the Commission was given the authority to investigate and bring pattern or practice claims either on behalf of a person aggrieved, or on behalf the Commission itself. However, section 707(e) expressly mandates that all such actions must be conducted in accordance with the procedures set forth in section 706, which, among other things, requires the EEOC to engage in conciliation procedures before filing suit.
The EEOC’s argument was that the Attorney General was not required to adhere to section 706 pre-suit obligations when it exercised authority under section 707(a). Since the Attorney General’s authority was transferred to the EEOC, the EEOC was similarly not required to follow the pre-suit procedures of section 706.
The Court disagreed, holding that the transfer of authority may have granted the EEOC the power to bring charges of a pattern or practice of discrimination, but it did not create a separate cause of action. Judge Darrah reasoned that: “[I]t is clear that the transfer of prosecutorial authority in 707(a) from the Attorney General was not intended to create a cause of action for the EEOC other than those specifically conferred on the commission pursuant to 707(e) and subject to the procedures provided in 706, including the obligation of conciliation.” Id. at 7. In other words, there is no separate cause of action for “resisting” employment laws under section 707(a). The EEOC is stuck with the pattern or practice claims under section 707(e) and the procedural requirements of section 706. Because the EEOC did not adhere to those procedures when it failed to conciliate, it was not authorized to file suit against CVS, and CVS was entitled to judgment as a matter of law.
Implications For Employers
One has to admire the EEOC’s creativity as it seeks to boost its power. In the same case it sought to open up whole new territory for itself through a novel interpretation of the substantive protections of Title VII, while at the same time advancing a theory that would further dismantle the procedures that protect employers from the EEOC’s trigger finger. As we blogged about here, the EEOC is spending a considerable amount of time and resources easing its path to bringing systemic pattern or practice cases. This case touches on one of the most visible of those efforts: its attempt to immunize itself from any judicial scrutiny of how it conducts its pre-suit obligations, especially its conciliation obligations. If the EEOC had its way against CVS, then it would be able to dispense with that obligation altogether for some pattern or practice cases. Thanks to Judge Darrah’s ruling, that protection remains, at least for now.
While this turned out to be quite an interesting ruling on the procedural aspects of defending against EEOC litigation, it leaves the EEOC’s substantive challenges to CVS’s severance agreements unresolved. The EEOC is pursuing a similar theory against a different employer in the U.S. District Court for the District of Colorado. See EEOC v. CollegeAmerica Denver, Inc., Case No. 14-CV-01232-LTB-MJW (D. Colo.). That may provide another opportunity to see if the EEOC’s substantive theory holds water. Stay tuned.
Readers can also find this post on our EEOC Countdown blog here.
On September 22, 2014, in EEOC v. Vicksburg Healthcare LLC, et al., Case No. 3:13-CV-895 (S.D. Miss. Sept. 22, 2014), Judge Keith Starrett the U.S. District Court for the Southern District of Mississippi granted defendant’s motion to dismiss an EEOC lawsuit for lack of personal jurisdiction and insufficient service of process. The EEOC had filed a disability discrimination claim on behalf of a nurse who worked at hospital owned by a subsidiary of defendant. The Court held that the EEOC, which sued a subsidiary hospital in Mississippi and its Tennessee-based parent corporation, did not put forth prima facie evidence of the necessary factors to satisfy personal jurisdiction requirements for the parent corporation in Mississippi. While this ruling is favorable for non-Mississippi parent corporations who operate subsidiaries in Mississippi, it has larger significance for employers. It shows that nationwide jurisdiction is not a given when the EEOC sues. Additionally, the ruling provides the framework for how to prevent liability by avoiding personal jurisdiction.
The EEOC filed an action on behalf of Beatrice Chambers alleging disability discrimination under Title I of the Americans With Disabilities Act of 1990. Id. at 1. The complaint named Community Health Systems, Inc. (“CHSI”) and Vicksburg Healthcare, LLC (“VHL”) as Defendants, alleging that both CHSI and VHL have been continuously doing business as River Region Medical Center (“River Region”) in Vicksburg, Mississippi. Id. The EEOC alleged that the Defendants terminated Chambers, who worked as a nurse at River Region for approximately 36 years, because of her unspecified disability, and additionally failed to provide her with reasonable accommodations in violation of the ADA. Id. at 1-2. VHL was a subsidiary of CHSI, which was incorporated in Delaware and had its principal place of business in Tennessee. Id. at 2. While VHL admitted doing business as River Region and admitted employing Chambers, CHSI denied doing business as River Region and denied employing Chambers. Id. Further, in its motion to dismiss, CHSI asserted the affirmative defenses of lack of personal jurisdiction, insufficient process, and insufficient service of process. Id.
The Court’s Decision
In granting CHSI’s motion to dismiss, the Court held that the issue of personal jurisdiction was controlling. Id. The EEOC has the burden of establishing a prima facie case for personal jurisdiction. Id. at 5. The Court noted that a non-resident defendant is amenable to being sued in Mississippi if: (1) Mississippi’s long-arm statute confers jurisdiction over the defendant; and (2) the exercise of personal jurisdiction comports with the requirements of federal due process. Id. at 3. The Mississippi long arm statute consists of three prongs, including: (i) the contract prong; (ii) the tort prong; and (iii) the doing-business prong. It was undisputed that the “doing-business” prong was case dispositive. Id.
CHSI submitted an affidavit from its Senior Vice President and Chief Litigation Counsel to the effect that it did not conduct business in Mississippi and that it lacked sufficient minimum contacts to be hauled into court in Mississippi. Id. at 6. The affidavit confirmed that CHSI is a holding company with no employees; CHSI indirectly owned subsidiaries including VHL; CHSI neither operated nor controlled the day-to-day operations of River Region; CHSI and River Region maintained separate banking records and did not co-mingle funds; CHSI did not employ nor have control over any River Region staff; CHSI never made any employment decisions regarding Chambers; CHSI and River Region observed corporate formalities (including no overlap between the Board of Trustees of River Region and the Board of Directors of CHSI; the respective Boards of River Region and CHSI each convened separate meetings; and the Boards maintained separate minutes and records); and CHSI is not qualified to do business in Mississippi, owns no property there, has no offices there, does not market there, and does not pay taxes there. Id. at 6-7. Following well-established precedent, the Court found this aggregation of factors to be dispositive. It held that the EEOC lacked personal jurisdiction to sue CHSI in Mississippi. Id. at 7.
The Court rejected the EEOC’s three arguments in opposition of dismissal. Id. at 7-8. First, the EEOC argued that the 10-K form submitted by CHSI to the SEC demonstrated CHSI’s intent to do business in Mississippi as it often used language such as “we” when referring to the hospital. Id. at 8. The Court rejected this argument, noting that the 10-K form also contained a provision saying the hospitals are expressly owned and operated by the subsidiaries. Id. Next, the EEOC mistakenly speculated that the River Region employee handbook contained references to CHSI. Id. at 9-10. The Court cited an affidavit from CHSI’s litigation counsel clarifying that the entity referred to in the handbook was a different indirect subsidiary, and not the parent corporation. Id. at 10. Finally, the EEOC erroneously relied on another case involving CHSI - Bass v. Community Health Systems, Inc., Case No. 2:00cv193 (N.D. Miss.). Id. at 12. The Court noted that no facts from that case illustrated that CHSI should be amenable to personal jurisdiction. Id.
Implications For Employers
When out-of-state parent corporations conduct business in Mississippi through subsidiaries, it is imperative that they observe corporate formalities to clearly maintain the parent-subsidiary relationship. Further, in documents such as 10-K forms and employee handbooks, employers must explicitly indicate that subsidiaries, and not the parent, own and operate local entities. If parent corporations follow the teachings of EEOC v. Vicksburg Healthcare, LLC, et al., they can avoid unwittingly submitting to personal jurisdiction in Mississippi courts while their subsidiaries do business there.
Readers can also find this post on our EEOC Countdown blog here.
The EEOC’s fiscal year ended on September 30, 2014.
So what did the EEOC’s litigation record look like for the past year?
Readers can also find this post on our EEOC Countdown blog here.
After Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), class action litigants are re-booting their theories in employment discrimination class actions. The stakes are high and the legal theories are novel in these workplace class actions, especially when an employer’s decision-making processes – either objective, subjective, or both – are challenged.
Most recently, Judge Emmet Sullivan of the U.S. District Court for the District of Columbia denied class certification in a long-running employment discrimination case involving discretionary decision making and, in the process, expressed cogently what it now takes to satisfy the commonality requirement of Rule 23(a). The order in Artis v. Yellen, No. 01-CV-400, 2014 U.S. Dist. LEXIS 136753 (D.D.C. Sept. 29, 2014), is helpful for its clarity on that subject, even if the specific record before the Court is (hopefully) not likely to arise in many future cases.
The History Of The Litigation
Why, you may ask? Well, if you read the decision, involving allegations of race discrimination against African-American and Native American secretaries and clerical staff working for the Federal Reserve Board, you’ll quickly see why. The Court was clearly not impressed with the litigation tactics of the plaintiffs’ attorneys. For starters, the named plaintiffs refused to participate in class discovery, including depositions, until ordered to do so. Id. at 9. Worse, they failed to notice any depositions of the defendant until after the close of class discovery (id. at 10-11); their statistics “expert” with a B.A. degree had, by his own admission, never before run statistical analyses of employment data in a discrimination case, and did not use any differential statistics to attempt to measure statistical significance (id. at 29-30); they attempted to file multiple corrected and supplemental briefs and expert reports after deadlines had passed (id. at 15-19); and more.
The Court’s Commonality Analysis
His patience apparently having been worn thin, Judge Sullivan struck the untimely filings and denied class certification. The commonality clarification he provided, beginning on page 25 of his ruling, is helpful and worth reading, despite the background noise created during the discovery phase of the litigation. First, consider his cogent discussion of the post-Wal-Mart v. Dukes legal landscape. Commonality can be shown in cases alleging subjective discretion in employment decisions, the Court writes, if (1) a common mode of exercising that discretion has been proven; (2) the exercise of discretion is tied to a specific employment practice and that subjective practice affected the class in a uniform manner; or (3) there is evidence uniting acts of discretion under a single policy or practice. Id. at 26 (citing Tabor v. Hilti, Inc., 703 F.3d 1206, 1229 (10th Cir. 2013), Scott v. Family Dollar Stores, Inc., 733 F.3d 105, 113 (4th Cir. 2013), and In Re Countrywide Fin. Corp. Mortg. Lending Practices Litig., 708 F.3d 704, 708 (6th Cir. 2013)).
The Court then worked through each of these three ways to show commonality, and found no record support for them presented by the plaintiffs. As for “common mode,” the depositions that were compelled elicited testimony that some supervisors made discriminatory decisions, but many others did not. Artis, at 27. (Nor did the plaintiffs have any evidence that “a single high-level manager was involved” in the challenged decisions. Id. at 28.) As for “affecting the class in a uniform manner,” the Court held the plaintiffs’ statistical evidence was unimpressive in multiple ways, failing to demonstrate any uniform effect. Id. at 28-31. And the only “uniting policy” in the record was the Fed’s anti-discrimination and affirmative action policy, which applies agency-wide and certainly does not provide glue tying the allegations of discrimination together. For these reasons, the Court reasoned that “the discrimination [the plaintiffs] allege stems from an array of individualized decisions of low-level supervisors who operate with significant discretion to design subjective criteria for making personnel decisions.” Id. at 25.
Implications Of The Decision
Corporate counsel who follow class action law should refer to this decision as a roadmap for how to engineer an effective class certification defense. Always remember that is it the plaintiffs’ burden to build an evidentiary record to support class certification, which was lacking here in several ways. And drilling down into the commonality test as explained in case law — in granular detail — will allow the defense to analyze the evidence pro or con as to the Rule 23 elements, and build the best arguments in the circumstances.
On September 29, 2014, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a high-profile lawsuit brought by the EEOC – entitled EEOC v. Port Auth. of N.Y. & N.J., No. 13-2705 (2d Cir. Sept. 29, 2014) – alleging that female attorneys were underpaid as compared to their male counterparts at the Port Authority of New York and New Jersey (“Port Authority”). In dismissing the case, the Second Circuit affirmed the District Court’s determination that the EEOC had failed to adequately plead its Equal Pay Act claims against the Port Authority because it had failed to plead any specific facts regarding what the job duties of the employees were.
The Second Circuit’s ruling is a distinct defeat for the Commission, as equal pay issues are a key agenda item on the EEOC’s enforcement program.
In 2007, the EEOC initiated a three-year investigation into pay practices at the Port Authority which led to the filing of EEOC v. Port Auth. of N.Y. & N.J., No. 10 Civ. 7462 (S.D.N.Y.) in the U.S. District Court for the Southern District of New York; the case was assigned to Judge Buchwald. The crux of the suit was that female attorneys in non-supervisory positions were paid less than similarly situated male attorneys performing the same work in violation of the Equal Pay Act (“EPA”). In support of the EPA claim, the EEOC broadly pled that female attorneys were paid less than male attorneys with the same “job code” and that the disparity could not be explained by factors other than sex. (The suit also initially included an age discrimination claim which was later abandoned.)
The complaint was devoid of substantive allegations regarding the actual job duties of the attorneys, and at an initial conference Judge Buchwald expressed skepticism that the EEOC had sufficiently stated a claim. The EEOC then responded to interrogatories and provided information for 14 claimants and numerous comparators. The EEOC responses stated in conclusory terms that all of the attorney positions required the same skill, effort, and responsibility, but it still failed to provide any information about the specific content of the jobs. When the District Court asked during a pre-motion conference whether the EEOC was proceeding on the theory that “an attorney is an attorney is an attorney,” the EEOC agreed that this was true at the Port Authority. The District Court later granted the Port Authority’s Rule 12(c) motion for judgment on the pleadings, and the EEOC appealed.
The Second Circuit’s Decision
In EEOC v. Port Auth. of N.Y. & N.J., the Second Circuit held that the EEOC had utterly failed to meet the demanding EPA standard that the jobs compared be “substantially equal.” Id. at 18. The Second Circuit explained that the case law requires a plaintiff to establish “that the jobs compared entail common duties or content, and do not simply overlap in titles or classifications,” and it further noted that the EEOC’s own regulations and compliance manual emphasize that the content of the jobs determines whether they are substantially equal for purposes of the Equal Pay Act. Id. at 18-20. The Second Circuit found that the EEOC complaint and interrogatory responses, which were treated as a “functional amendment” to the complaint (id. at 10), failed to plead that the content of the jobs was similar. The Second Circuit commented that the EEOC set forth only “bland abstractions [which were] untethered from allegations regarding Port Authority attorneys’ actual job duties.” Id. at 23 (emphasis in original). The Second Circuit further characterized the EEOC’s contention that “an attorney is an attorney is an attorney” as a “broad generalization” that is not recognized by the EPA. Id.
Implications For Employers
The Second Circuit ruling is powerful precedent for employers defending EPA suits that a generalized comparison of jobs will not carry the day. Plaintiffs – and the EEOC – must plead and prove that the specific content of the jobs is substantially equal through discussion and analysis of particular job duties. The decision should also embolden employers to carefully review complaints, including those filed by the EEOC, and scrutinize whether they meet the Rule 8 pleading standard mandated by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
Readers can also find this post on the EEOC Countdown blog here.
In the words of the immortal bard Yogi Berra, “it’s like déjà vu all over again.”
As we have reported in years past (see here and here), the EEOC has a predictable trend of filing a flurry of lawsuits in the last days of its fiscal year, which ends on September 30. Fiscal year 2013-14 was no different. Like clockwork, the EEOC filed a spate of lawsuits as time ran out, yet again enmeshing dozens of employers across the country in government initiated litigation. Indeed, the EEOC filed an astonishing 58 lawsuits in September 2014 alone, up 10 lawsuits over September 2013. But does this year-end-rush accomplish the EEOC’s goals and square with its statutory mandate? The following post explores this annual governmental filing phenomenon and what it means to employers in its aftermath.
Different Year, Same Spike: FY 2014 Cases Filed By Month
As this graph shows, the year-end-rush is still a very real phenomenon for employers, with a gradual increase in filings throughout the year, punctuated by a final blast in September. Readers may note the uptick in December 2013. This was most likely due to clearing a backlog caused by the October 2013 government shut-down; we expect that, like most other government agencies, the EEOC needed a few weeks to get its legs back beneath it before it got back to business as usual.
The end-of-year rush pushed the total number of suits filed up a bit from last year, increasing to 142 from last year’s 134. But this is still a dramatic drop from the high point of 261 filings in 2011. This drop, however, is consistent with the EEOC’s 2012 strategic enforcement plan, which directed the regional offices to pursue more systemic, class-wide employment discrimination cases. In short, the EEOC continues to strive for getting the most bang for the taxpayer buck.
But with fewer total filings, what has consumed the EEOC’s resources this year? Where does the money go? We have developed some ideas based on our study of EEOC activity:
The EEOC Is Still Fighting The Giants From Previous Years
The EEOC has finite resources. Predictably, one problem the EEOC faces with an increased focus on systemic cases is that these whopper cases take up more resources and last longer than garden-variety matters. The EEOC is still fighting some of the same major cases that it filed during the high-water mark for filings. For example, the EEOC recently convinced U.S. District Judge Keith Ellison to reverse, at least in part, his earlier employer-friendly decision in EEOC v. Bass Pro Outdoor World, LLC, et al., Case No. 11-CV-3425 (S.D. Tex. July 30, 2014). That large-scale case still remains in its relative infancy, even though it was filed in 2011.
The EEOC has also continued its battle against employers – and at least one state – over the legality of using credit and criminal background checks to make hiring and employment decisions. We have blogged often about this beleaguered EEOC initiative over the past few years. At least one of those cases came to a spectacular end this year in a stunning defeat for the EEOC, while other battles continue to rage on. As we previously blogged about here, the EEOC recently lost a landmark case against Kaplan Higher Education Corp. where the Sixth Circuit upbraided the EEOC for the “homemade” methodology that the agency used to determine race in that case – namely, by asking “race raters” to assign race based on drivers’ license photographs – concluding that it was “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”
But this EEOC theory lives on in the EEOC v. Freeman case, which is up for appellate review before the Fourth Circuit, and in the November 2013 case that Texas brought to enjoin the enforcement of the EEOC’s criminal history guidance. As we discussed here, that suit was dismissed on August 20, 2014 in State of Texas v. EEOC, Case No.5:13-CV-255 (N.D. Tex. Aug. 20, 2014). The Court held that Texas lacked standing to maintain its suit because Texas did not allege that any enforcement action had been taken against it in relation to the EEOC’s guidance. While an important victory for the EEOC, this decision left untouched the important substantive issues regarding the EEOC’s guidance, which will have to be fought another day.
The key to this retrospective is that when analyzing EEOC activity, it is often necessary to look back at filings from previous years, as that activity impacts the EEOC’s resources and strategies today.
Clearing The Underbrush For An Enhanced Systemic Program
The EEOC also appears to be taking another strategic direction in FY2014: deploying considerable resources to litigate high-level, defining issues that will have a major impact on its ability to carry out its systemic initiative. As we previously blogged about here, in 2012 the EEOC issued its strategic enforcement plan that outlined the priorities for the Commission’s enforcement activity through 2016. We have dissected the potential ways that the SEP would guide enforcement priorities as it was implemented (see, e.g., here, here, and here). But by FY2014, we start to see the EEOC’s agenda snap into clearer focus, and note how the government has adjusted its activities to pursue the SEP objectives. Of course, one of the EEOC’s most important strategic objectives is an increased focus on pattern or practice, policy, or class cases where the alleged discrimination has a broad impact on an industry, profession, company or geographic area. These so-called “systemic” cases are developing into its single most important litigation driver.
But this year, the agency has focused substantial resources to tackle the legal issues that could, if the EEOC is successful, sweep away certain procedural prerequisites to filing suit that the EEOC believes just get in the way of its enforcement efforts, especially concerning systemic cases.
Perhaps chief among those procedural brake-pumps is the EEOC’s statutorily mandated obligation to conciliate in good faith before bringing suit against an employer. On June 30, 2014, the Supreme Court granted certiorari in Mach Mining, LLC v. EEOC (No. 13-1019). As we have discussed a length here, the outcome of that case could be a game-changer in EEOC litigation because the EEOC seeks to effectively immunize itself from any attack on its failure to meaningfully conciliate with an employer before bringing a lawsuit. The Seventh Circuit ruled in December 2013 that the EEOC’s failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit. The Court held that such pre-suit obligations were beyond judicial scrutiny as long as the EEOC’s complaint pleads it has complied with all procedures required under Title VII, and the relevant documents are facially sufficient. This decision is now up for review by the Supreme Court because of the conflict among the circuits created by the Seventh Circuit’s decision. As we previously blogged about here, Seyfarth Shaw submitted an amicus brief to the Supreme Court on behalf of the American Insurance Association, questioning the underpinning of the Seventh Circuit’s decision.
But conciliation is not the only procedural hurdle that the EEOC seeks to dismantle. It is also challenging the court’s ability to inquire into the scope of the EEOC’s pre-suit investigation as well. On March 10, 2014, in EEOC v. Sterling Jewelers Inc., Case No. 08-CV-706 (W.D.N.Y. Mar. 10, 2014), Judge Richard J. Arcara of the U.S. District Court for the Western District of New York dismissed the EEOCs’ entire case against Sterling Jewelers with prejudice. In so doing, the Court rejected the EEOC’s contention that a court may not inquire as to the scope of the EEOC’s pre-lawsuit investigation, and found no evidence that the EEOC had actually investigated the nationwide claims that it had brought against Sterling prior to bringing suit. The EEOC promptly appealed that decision, which is now being litigated at the Second Circuit.
Pushing The Envelope On Non-Substantive Legal Theories
Not content to continue to pursue the novel issues raised in prior years, the EEOC is also attempting to add new weapons to its enforcement arsenal. In EEOC v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill. Feb. 7, 2014), the EEOC challenged various provisions of CVS’s standard severance agreement, arguing that it violates Title VII because it interferes with an employee’s right to file charges, communicate voluntarily, and participate in investigations with the EEOC and other state agencies. In addition to the general release and the covenant not to sue – which were already areas of concern for the EEOC – the EEOC also challenged the agreement’s requirements that employees notify the company of any legal proceedings or administrative investigations, the non-disparagement provision, and the agreement’s prohibition on the disclosure of confidential information without the company’s consent. Although preliminary comments from the judge strongly suggest that this case will be dismissed, the EEOC is already pursuing a different employer under a similar theory in the District of Colorado. See EEOC v. CollegeAmerica Denver, Inc., Case No. 14-cv-01232-LTB-MJW (D. Colo.).
And in EEOC v. Supervalu, Inc. and Jewel-Osco, Case No. 1:09-CV-05637 (N.D. Ill.), the EEOC attacked an employer for supposedly failing to comply with the injunctive mandates that the employer had agreed to as part of a consent decree entered into with the EEOC. The EEOC had sued Supervalu, Inc. and Jewel-Osco (“Jewel”) in 2009, alleging that it engaged in a pattern or practice of violating the Americans with Disabilities Act. On January 14, 2011, the EEOC and Jewel entered into a three-year consent decree to resolve the case. Jewel agreed, among other things, to engage an “accommodations consultant” to assist in identifying possible accommodations for disabled employees.
But just a year later, on March 26, 2012, the EEOC sought civil contempt sanctions against Jewel for failing to follow the requirements of the consent decree. Magistrate Judge Mason of the Northern District of Illinois filed his Report and Recommendation on July 15, 2014, ruling that Jewel violated the terms of the consent decree by allegedly failing to follow its own procedures, including the use of an accommodations consultant, and failing to accommodate and ultimately terminating three disabled employees. The EEOC almost always insists on some form of injunctive relief when it settles a case through a consent decree. If enforcement of the terms of those decrees is the new cause of action de jour, then this poses an entirely new threat to employers, who could face substantial exposure even after a case is settled and “over.”
Finally, the EEOC has been steadily increasing its use of its subpoena power to gather as much information as possible from employers prior to filing suit. Fiscal year 2014 saw 24 subpoena actions versus the 17 that were filed last year. As we have discussed here, although some employers have been successful in reigning in the EEOC’s subpoena power, many courts continue to give the agency considerable leeway to conduct searching pre-suit investigations, even where those investigations have little or no connection to the underlying charge.
What Types Of Cases Did The EEOC Focus On In FY2014?
Of course, the legal shifts discussed above are not the only story coming out of the EEOC’s FY2014 filings. We can also discern significant trends in the types of cases that the EEOC is choosing to pursue. The following chart offers a breakdown of the EEOC’s filings by statute:
We continue to see a strong focus on disability issues: disability cases make up 34% of all EEOC filings this year, fairly close to the number of cases we saw filed last year (36% in 2013). Race cases were somewhat underrepresented this year when compared with past years (14 in 2014, as compared with 17 in 2013), but there has been a fairly sizable uptick in age discrimination filings (nine this year, compared with only five in 2013).
By far, sex and pregnancy issues are the dominant discrimination theories alleged in Title VII cases in FY2014. The Commission filed 6 pregnancy discrimination cases in September alone, and has repeatedly emphasized that this is a priority for the agency. In a recent case filing announcement, for example, the EEOC’s press release stressed that “[t]he law is clear – employers cannot refuse to hire or discharge women because of their pregnancy,” and that “[c]ombating pregnancy discrimination remains a priority.” Indeed, sex/pregnancy discrimination cases make up 61% of all Title VII cases filed in 2014:
Aggressive Regional Offices
Finally, as with prior years, FY2014 saw significant disparities in the number and types of filings coming out of the EEOC’s 15 districts. Five districts in particular are unusually aggressive in the number of cases they file, the types of cases they bring, and how aggressive they pursue those cases. Here is a breakdown of how many cases were filed where:
The EEOC’s Chicago district office, led by regional attorney John Hendrickson, remains one of the most aggressive in the country, pursuing not only a large number of cases (26 in FY2014), but also cases that are themselves large and important in terms of their impact on U.S. employers. CVS, Jewel, and Mach Mining, discussed above, all started in Chicago.
The Philadelphia office is also consistently active and aggressive. That office took the lead in a handful of cases alleging that employers’ use of criminal and credit history background checks had an adverse impact on minority applicants. Although one of those cases, EEOC v. Kaplan, Inc., resulted in a stinging defeat for the agency at the district court and the Sixth Circuit, another case, EEOC v. Freeman, lives on at the appellate level. The Fourth Circuit is set to decide that case after a Maryland federal judge granted summary judgment to the company.
The New York office has also been quite active, and is pursuing a handful of high profile pregnancy and sex discrimination cases that are still winding their way through the Courts. Chief among those are the Sterling case discussed above, which is now before the Second Circuit, and a pregnancy discrimination suit against Bloomberg LP, which was gutted by the district court in September 2013, and which the EEOC was forced to walk away from in August of this year.
Rounding out the list of hard-hitting regional offices are the Houston office and the Phoenix office, which are both known to file high-profile cases and aggressively pursue them. Those offices filed 9 cases and 14 cases respectively in 2014.
Insight For Employers
Fiscal Year 2014 was curious in many ways. We can see the unquestionable fingerprints of the 2012 SEP in the EEOC’s filings, and we can expect to see those trends continue. But we also see the agency making more nuanced, strategic decisions with how it uses its finite resources – choosing to fight a number of procedural issues that may pave the way (at least if the EEOC has its way) to an open door to the federal courthouse in years to come, unfettered by procedural prerequisites. The 2014 fiscal year has just ended, and we continue to process this data. The EEOC’s official published statistics are typically released in November, which will give us additional insight into this often confounding agency. Stay tuned, loyal blog readers.
Readers can also find this post on our EEOC Countdown blog here.
No federal statute explicitly prohibits employment discrimination based on gender identity or expression. Nevertheless, in recent years, the EEOC has advocated — including as part of its strategic plan — that it would pursue protections for transgender workers under Title VII’s prohibition against “sex” discrimination and harassment. Indeed, on April 20, 2012, the agency issued a landmark administrative ruling titled Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 0120120821 (April 23, 2012) in which it held that transgender individuals may state a claim for sex discrimination under Title VII. Read our prior analysis of the Macy decision here.
Following Macy, on September 25, 2014, the EEOC filed two separate lawsuits—EEOC v. Lakeland Eye Clinic, P.A. (Middle District of Florida, Tampa Division) and EEOC v. R.G. & G.R. Harris Funeral Homes Inc. (Eastern District of Michigan, Southern Division) — on behalf of transgender workers. The crux of the EEOC’s theory is that Title VII protects transgender workers based on “sex.”
Facts And Claims Alleged
In EEOC v. Lakeland Eye Clinic P.A., the EEOC asserts that the employer fired its director of hearing services, Brandi M. Branson, after she began wearing feminine clothing to work and informed the clinic she was transitioning from male to female. Managers and employees allegedly made derogatory comments about Branson’s appearance, and Branson was thereafter deprived of her client base by the employer. Branson was terminated, and the EEOC alleges that, two months after Branson was terminated, the clinic hired a male worker in the same position who conformed to traditional gender norms.
In R.G. & G.R. Harris Funeral Homes, the EEOC alleges that a Detroit-based funeral home illegally fired a funeral director and embalmer named Aimee Stephens, weeks after Stephens gave the funeral home a letter saying she was undergoing a gender transition from male to female. She was allegedly terminated, and told by the owner of the employer that what she was “proposing to do” was “unacceptable.”
In both cases, the EEOC alleges various theories of “sex” discrimination on behalf of the claimants. The EEOC alleges that the decision to terminate each of these employees was motivated by “sex-based” considerations because the employee is transgender, because of the employee’s transition from male to female, and/or because the employees did not confirm to the employers sex- or gender-based preferences, expectations or stereotypes.
Implications For Employers
The theories of liability articulated in these lawsuits clearly follow the EEOC’s prior ruling in Macy, in which the EEOC found that discrimination against a transgender worker was — per se — sex discrimination. See Macy at *6. The EEOC also uses as a basis for liability the decision in Price Waterhouse v. Hopkins, 490 U.S. 228, 239 (1989), in which the U.S. Supreme Court held that Title VII bars discrimination based on gender stereotypes, in other words, failing to act and appear according to expectations defined by gender — a form of sex discrimination that has since been described as “sex stereotyping,” and one alternative way of proving sex discrimination. The EEOC has made clear that, while gender identity and/or expression are not independent classifications for protection under federal law, the agency will attempt to establish a case of sex discrimination through a variety of different formulations.
In order to avoid potential pitfalls in this emerging area of law, employers must be mindful of issues related to gender identity and/or expression that might arise during interviewing, hiring, discipline, promotion and termination decisions. Employers should be particularly vigilant when an employee identifies as transgender, or announces a plan to undergo a gender transition. Moreover, the theories articulated in these cases are not just limited to transgender employees—many forms of “sex stereotyping” may give rise to actionable claims, not just discrimination or harassment against individuals who identify as transgender. Employers must also be aware that transgender individuals may be affirmatively protected under state or local laws (see our analysis of a recent California case here), and that any allegations concerning transgender discrimination, gender stereotyping or gender identity, require the same analysis, investigation and response as a traditional sex discrimination complaint. Finally, employers should consider whether to implement gender transition guidelines for human resources and/or management that define a process through which employees and management approach an employee gender transition in the workplace.
Readers can also find this post on our EEOC Countdown blog here.
Settling a workplace class action is far more complicated than resolving other types of litigation. Yet, the fundamental building blocks of settling a case – an offer, acceptance of precise terms, and substantiation of the agreement – are equally as important in resolving a simple as well as a complex piece of litigation.
On September 23, 2014, Judge Amy St. Eve of the U.S. District Court for the Northern District of Illinois in Craftwood Lumber Co. v. Interline Brands, Inc., No. 11-CV-4462 (N.D. Ill. Sept. 23, 2014) drove home this point; the Court held that, despite creating a “term sheet” outlining certain terms of a purported class action settlement, the parties had not reached an enforceable settlement.
This ruling illustrates that although parties may be bound to a class settlement prior to the creation of the final agreement, which is what occurred in the Tenth Circuit decision of Miller v. Basic Research, LLC, covered here that in order to be bound, the parties must have at least reached an agreement to the materials terms of the contract and exhibit the intent to be bound.
Though it is not an employment-related case, Judge St. Eve’s ruling in Craftwood Lumber ought to be required reading for any employer entering into settlement negotiations relative to a class action.
Plaintiff, Craftwood Lumber, brought a putative class action alleging that, defendant, Interline Brands, Inc., violated the Telephone Consumer Protective Act of 1999, 47 U.S.C. § 227, by sending at least 1,500 advertisements in at least 735,000 facsimile transmissions, some of which were received by Plaintiff. The parties attempted to settle the case through mediation. At the end of the one-day session, the parties and counsel hastily signed a one-page document titled “Term Sheet.”
In the following weeks the parties unsuccessfully attempted to negotiate a written settlement agreement. Defendant brought a motion to enforce the settlement, and in support, it provided the Court with a copy of the Term Sheet, arguing that the parties had entered in to a settlement agreement. Plaintiff’s counsel objected, asserting that there was no agreement and that it was a violation of the confidentiality agreement to produce the Term Sheet to the Court.
The Court’s Opinion
Judge St. Eve held that the Term Sheet failed to include several terms that were material to the class action settlement. The most significant omission was the amount per claim – what the Defendant would pay any class member for each fax recipient or each fax transmission. Additionally, the Term Sheet lacked any release terms and settlement class definition. The Court reasoned that the provisions upon which Defendant was basing its assertion that an agreement had been reached were insufficient to reasonably imply the missing terms. Judge St. Eve determined that she was unwilling to select those terms from the wide range of potential possibilities. Ultimately, the Court held that in addition to lacking materials terms, it was unclear whether the parties intended to be bound by the Term Sheet. On this basis, the Court held that the parties did not enter in to an enforceable settlement agreement.
Implications for Employers
This ruling illustrates what can go awry in terms of documenting an enforceable class action settlement. In order to secure an enforceable settlement agreement, the parties must reach an agreement on the material terms and evidence an intent to be bound. Normally, this situation is not a problem given that the parties normally will strive to achieve these ends in the settlement agreement. This translates into investing significant time and effort to craft a precise Term Sheet; covering all of key terms of the settlement (such as the class definition, the class pay-out distribution formula, and the myriad of other bells and whistles that make up a Rule 23 class-wide settlement); and not leaving the settlement/mediation session unless and until all of these issues are covered and both parties express their intent to be bound. Simple, but critical…
As we have blogged previously, the EEOC is increasingly wielding its subpoena power in pre-lawsuit investigations and subpoena enforcement proceedings to conduct expansive, nationwide investigations. While courts traditionally have given the EEOC wide latitude in exercising its subpoena power, in recent years numerous courts have curbed the EEOC’s efforts to push its subpoena power beyond reasonable limits (see, for example, here and here). As a recent decision by Judge James Moody of the U.S. District Court for the Middle District of Florida shows, however, some courts continue to give the EEOC virtually free reign to conduct open-ended investigations having little or no connection with the underlying charge that ostensibly served as the initial basis for the EEOC’s jurisdiction.
The ruling in EEOC v. KB Staffing, LLC, Case No. 14-MC-41 (M.D. Fla. Sept. 16, 2014), illustrates how difficult it can be for an employer seeking to protect itself from burdensome and seemingly over broad investigations by the EEOC.
Background To The Case
The EEOC’s investigation in EEOC v. KB Staffing, LLC stemmed from a charge filed by Rose Marie Porter, alleging that KB Staffing violated the Americans With Disabilities Act (“ADA”) by requiring job applicants to complete a pre-offer health questionnaire. The charge alleged that KB Staffing refused to hire her after she declined to complete the health questionnaire in connection with her application for employment in August 2012. By the time Ms. Porter filed her charge with the EEOC in February 2013, KB Staffing had already discontinued the use of the health questionnaire as of December 2012.
While the EEOC investigation was pending, Ms. Porter filed suit in Florida state court alleging that KB Staffing’s pre-offer health questionnaire violated Florida state law. The parties later settled Ms. Porter’s individual claim, and Ms. Porter withdrew her EEOC charge pursuant to the parties’ agreement on May 13, 2014. With Ms. Porter’s charge withdrawn and the employment practice at issue discontinued, the employer thought that the EEOC had no reason to continue its investigation. Notably, there were no class allegations raised in the charge, and the settlement seemingly resolved the issue.
Nevertheless, the EEOC issued a broad administrative subpoena against KB Staffing on May 23, 2014 — after Ms. Porter had already settled her claim and withdrawn her charge. The subpoena sought copies of the health questionnaires of every single person who applied for employment with KB Staffing within the three years prior to the date of Ms. Porter’s charge, as well as the health questionnaires for all current employees. KB Staffing filed a petition with the EEOC to revoke or modify the subpoena. KB Staffing asserted that the EEOC’s subpoena greatly exceeded the scope of the underlying charge, but the EEOC denied the petition and filed an administrative enforcement action in federal court to enforce the subpoena.
The Court’s Ruling
U.S. Magistrate Judge Anthony Porcelli enforced the EEOC’s subpoena. He found that the EEOC retained authority to continue its investigation even after the charging party withdrew the underlying charge, reasoning that the EEOC maintains discretion to vindicate the public interest in combating systemic discrimination because the EEOC’s authority is not “merely derivative” of the claims asserted by a charging party.
The Magistrate Judge also rejected the defendant’s argument that the EEOC lacked authority to seek information for three years prior to the date of the charge when the appropriate statute of limitations period was only one year. Indeed, as the defendant pointed out in its briefing, the limitations period had already run for any claims that other applicants might bring based on the questionnaire because KB Staffing had discontinued its use of the questionnaire well over a year before the date of the EEOC’s subpoena. The magistrate gave the defendant’s limitations argument short shrift, simply noting that any statute of limitations arguments may be asserted as a defense following initiation of a court action, rather than in response to the subpoena.
Despite the fact that the Magistrate Judge’s decision failed to explain how the EEOC’s investigation could combat systemic discrimination when the defendant had already discontinued the use of the pre-offer questionnaire, KB Staffing did not file Rule 72 objections to the order.
On September 16, 2014, Judge James S. Moody adopted the Report and Recommendation of Magistrate Judge Porcelli directing KB Staffing to comply with the EEOC’s subpoena. Judge Moody indicated that based on his independent review of the dispute, the Magistrate Judge did not abuse his discretion in ordering compliance with the Commission’s subpoena.
Implications or Employers
The ruling in EEOC v. KB Staffing is a disturbing ruling for employers dealing with EEOC investigations. If there was ever a situation where the facts suggested an overreach by the EEOC, the facts in this case seemed custom-made to do so. The decision by Judge Moody demonstrates that some courts remain willing to allow the EEOC to turn individual charges into open-ended nationwide investigations. The case is particularly troubling because it gives the EEOC a green light to go fishing through an employer’s files even after the underlying charge and the claims of any other potential claimants are moot.
Readers can also find this post on our EEOC Countdown blog here.