200px-NDAla_sealSeyfarth Synopsis: An Alabama district court granted a temporary staffing company’s motion to dismiss all claims in one of the EEOC’s most high-profile lawsuits asserting hiring discrimination and abuse of vulnerable workers. The ruling illustrates the procedural defenses that employers possess to ensure that pre-lawsuit investigations undertaken by the EEOC accord with its obligations under the law.

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A recent mission of the EEOC has been to aggressively pursue lawsuits on behalf of “vulnerable workers” who may not always be aware of their rights. A result of the EEOC’s recent aggressiveness is that the Commission often neglects to fulfill its pre-suit obligations under Title VII and overlooks jurisdictional requirements when racing to the courthouse. These tactics came under scrutiny in EEOC v. Labor Solutions of Alabama, Inc. f/k/a East Coast Labor Solutions, No. 16-CV-1848 (N.D. Ala. Mar. 17, 2017), where Judge Virginia Emerson Hopkins of the U.S. District Court for the Northern District of Alabama granted Labor Solutions of Alabama, Inc.’s (“LSA”) motion to dismiss the EEOC’s complaint. The Court found that the EEOC lacked subject-matter jurisdiction and failed to exhaust its administrative remedies after suing LSA for alleged conduct that occurred by its supposed predecessor before LSA was ever formed.

This ruling is a signal victory for employers involved in EEOC litigation regarding potential successor liability, as well as any employer involved in EEOC litigation where the Commission fails to exhaust its pre-suit duties under Title VII.

Case Background

The EEOC investigated charges of discrimination against a company called East Coast Labor Solutions, LLC (“East Coast”), alleging that East Coast discriminated against the charging parties on the basis of their national origin and failed to accommodate their disabilities. Following its investigation, the EEOC issued East Coast a letter of determination finding reasonable cause to believe that Title VII and the ADA were violated with respect to the charging parties and a class of current and former employees. Id. at 8.  The EEOC thereafter unsuccessfully attempted to conciliate with East Coast.  In November 2013, East Coast ceased operations.  LSA was formed in October 2014.

Despite the fact that LSA was not in existence when the alleged misconduct occurred, the EEOC filed a Complaint alleging that LSA subjected the Claimants to discriminatory treatment based on their national origin and failed to accommodate their disabilities. While East Coast partnered with its owner Labor Solutions (a different entity than LSA), the only Defendant named in the lawsuit was LSA.  Thereafter, LSA moved to dismiss the Complaint because it failed to allege that LSA employed the Claimants, thereby meaning the Complaint should be dismissed for lack of subject matter jurisdiction and failure to state a claim under Title VII and the ADA. Id. at 9.  LSA also argued that the EEOC failed to exhaust administrative prerequisites, noting that LSA was not named in the original EEOC charge or in any amendment thereto.

The Courts Decision

The Court granted LSA’s motion to dismiss. First, the Court addressed the EEOC’s argument that it alleged plausible facts to infer so-called “successor liability.” Id. at 11.  After thoroughly examining various Eleventh Circuit precedents regarding successor liability, the Court explained that “[a]lthough the Court agrees with the EEOC that successorship does not have to be conclusively determined at this stage of the litigation, that does not absolve the agency from pleading facts which make its existence plausible.” Id. at 26.

Applied here, the Court determined there were “no facts suggesting substantial (or even any) continuity in business operations from East Coast to LSA. The Complaint contains no allegations that there was any sale of East Coast, or any of its assets, to LSA.”  Id. at 27.  Finding there was no successor liability, the Court further reasoned that East Coast had been defunct nearly an entire year before LSA was formed; there was no allegation that LSA employed substantially the same work force and/or supervisors as East Coast; the Complaint did not allege that LSA operated at the same location as East Coast; there was no allegation as to whether East Coast could have provided relief before or after any alleged sale or transfer; and there was no allegation as to whether LSA could provide any relief now.

The Court further rejected the EEOC’s argument that East Coast and LSA were both temporary staffing agencies and that both entities shared the same managing officers, principal office address, and company email accounts, holding this was not enough to demonstrate continuity when one considered the break in time between when East Coast ceased operations and LSA began. Finally, the Court opined that even if the Complaint had plausibly alleged that LSA was the successor to East Coast, it would still be dismissed since it was undisputed that LSA was not named in the original EEOC charge, or in any subsequent amendment.  Accordingly, the Court granted LSA’s motion to dismiss, but noted the EEOC may file an amended complaint to attempt to cure its deficiencies.

Implications For Employers

For employers with intricate corporate structures and ties to defunct entities, this ruling is a major victory. Employers with corporate officers who previously worked at a similar but defunct entity can use this ruling to as a roadmap to navigate EEOC lawsuits concerning allegations from before their business was ever formed. In sum, this is yet another example of a court pumping the brakes on procedurally improper EEOC litigation.

Readers can also find this on our EEOC Countdown Blog here.

EEOCWhile the government enforcement lawsuits brought by the DOL and EEOC in 2016 were in line with their aggressive platforms, by sheer numbers of cases, their enforcement activities were arguably limited in their effectiveness, at least when measured by lawsuit filings and recoveries compared to previous years. Settlement numbers for government enforcement litigation in 2016 decreased substantially as compared to 2015, as did the litigation dockets of the DOL and the EEOC. This trends is aptly illustrated by a comparison of settlement recoveries over the past 7 years. Settlement recoveries in 2016 were the second lowest of any year during that period.

Top 10 Government Enforcementsettlement amounts by class action type

This trend is critical to employers, as both agencies have a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue. The content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration remains to be seen; most believe there will be wholesale changes, which may well prompt the private plaintiffs’ class action bar to “fill the void” and expand the volume of litigation pursued against employers over the coming year.

In our sixth, and final, installment outlining the top workplace class action litigation trends from 2016, we analyze the reduced suit filings by government agencies tasked with enforcing workplace regulations, as well as their ambitious enforcement goals and the industries that are most targeted.

 

 

subpoenaBy Gerald L. Maatman, Jr., Christopher DeGroff, and Alex W. Karasik

Seyfarth Synopsis: The U.S. Court of Appeals for the Tenth Circuit recently held that a district court did not abuse its discretion when it declined to enforce a far-reaching EEOC administrative subpoena relating to one employee’s charge of disability and pregnancy discrimination. The case is important for all employers involved in EEOC investigations.

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Employers facing EEOC litigation are often confronted with requests for information and subpoenas that ask for a substantial amount of personnel information, even if the investigation concerns a single employee’s charge of discrimination.  After the EEOC sought to enforce an administrative subpoena requesting information about a large number of employees of TriCore Reference Laboratories (“TriCore”) over a period of several years, the U.S. District Court for the District of New Mexico declined to enforce subpoena.  Following the EEOC’s appeal – in EEOC v. TriCore Reference Labs., No. 16-2053 (10th Cir. Feb. 27, 2017) – the Tenth Circuit affirmed the district court’s ruling, finding the subpoena was overly broad and not relevant to the EEOC’s investigation of a single employee’s charge of discrimination. In the immortal words from the Jerry Seinfeld show, the Tenth Circuit said — “no subpoena for you!”

In anticipation of the U.S. Supreme Court’s upcoming decision in EEOC v. McLane Co., Inc., No. 15-1248 (2017), which will likely determine the standard of review for appellate courts considering district court decisions to either quash or enforce EEOC subpoenas (as we blogged about here), this ruling is an excellent victory for employers facing overly broad EEOC subpoenas.  Further, this ruling deals a blow to the EEOC’s aggressive strategy of using far-reaching subpoenas in investigations.

Case Background

In 2011, Kellie Guadiana began working at the Albuquerque, New Mexico location of TriCore as a phlebotomist.  Id. at 4.  In November 2011, Guadiana requested accommodations to her work schedule and responsibilities due to her rheumatoid arthritis, which she asserted was exacerbated by her pregnancy.  After reviewing the doctors’ notes that Guadiana submitted in support of her requests, TriCore determined that she could not safely perform the essential functions of her position. TriCore offered Guadiana the opportunity to apply to other positions within the company for which she was qualified and whose essential functions she could perform.  On May 5, 2012, after Guadiana did not apply to a new position, TriCore terminated her employment.  One month later, Guadiana filed a charge of discrimination with the EEOC alleging that TriCore had discriminated against her due to her disability (rheumatoid arthritis) and sex (pregnancy).  Id. at 5.  In response, TriCore said it provided Guadiana a reasonable accommodation by offering her the chance to apply for other positions.

Based on evidence uncovered during the EEOC’s investigation of the underlying charge, the EEOC informed TriCore that the scope of its investigation was expanded to include a “[f]ailure to accommodate persons with disabilities and/or failure to accommodate women with disabilities (due to pregnancy).”  Id. at 6.  As part of its expanded investigation, the EEOC sent TriCore a letter requesting: (1) a complete list of TriCore employees who had requested an accommodation for disability, along with their personal identifying information; and (2) a complete list of TriCore employees who had been pregnant while employed at TriCore, including the employees’ personal identifying information and whether they sought or were granted any accommodations. The EEOC sought that information for a four-year time frame.  TriCore refused to comply, contending the EEOC did not have an actionable claim of discrimination.  On February 23, 2015, the EEOC submitted another letter seeking the same information but limited to a three-year time frame.  After TriCore again refused to comply, the EEOC subpoenaed the information it had sought in its letter.  TriCore petitioned the EEOC to revoke the subpoena, arguing it was unduly burdensome and a “fishing expedition.”  Id. at 7.  The EEOC denied TriCore’s petition.

After TriCore refused to comply with the EEOC’s subpoena, the EEOC submitted an application to the district court requesting an order to show cause why the subpoena should not be enforced.  TriCore responded by arguing the information requested was not relevant to Guadiana’s charge.  The district court viewed the question as a “close call,” but ultimately denied the EEOC’s application, noting that the “EEOC’s real intent in requesting this [information was], in fact, difficult to pin down.”   Id. at 8.  The district court noted that to the extent the subpoena sought evidence to show TriCore had a pattern or practice of discrimination, Tenth Circuit case law did not support such a request.  Further, to the extent the subpoena sought evidence to compare Guadiana with other TriCore employees, the pregnancy request would not provide evidence of relevant comparators.  The EEOC appealed the denial of its application to enforce the subpoena.

The Decision

The Tenth Circuit affirmed the district court’s denial of the EEOC’s application to enforce its subpoena.  As an initial matter, the Tenth Circuit explained that to show subpoenaed information is relevant, the EEOC must show that it has a realistic expectation that the information requested will advance its investigation, and must further establish the link between its investigatory power and the charges of discrimination. On appeal, the EEOC argued that the district court erred in not enforcing: (1) the disability request, which was relevant to investigate whether TriCore had a policy of discrimination (i.e., pattern-or-practice evidence), and (2) the pregnancy request, which was relevant to investigate whether TriCore treated Guadiana less favorably than similarly situated employees (i.e., comparator evidence).  Id. at 9.

First, the Tenth Circuit held that the district court did not abuse its discretion in determining that the EEOC had not satisfied its burden to justify its expanded investigation, noting “[t]he EEOC has not alleged anything to suggest a pattern or practice of discrimination beyond TriCore’s failure to reassign Ms. Guadiana.”  Id. at 15.  Second, the EEOC argued that the district court erred in denying the comparator-evidence pregnancy request.  The Tenth Circuit initially noted that the EEOC limited its comparator-evidence argument exclusively to the pregnancy request.  While the Tenth Circuit disagreed with the district court and found that the pregnancy request may uncover information that is potentially relevant to Guadiana’s charge, it nonetheless held that the EEOC did not present these relevance arguments in district court and therefore failed to meet its burden of explaining how the pregnancy request would offer information relevant to Guadiana’s charge.  Finally, the Tenth Circuit noted that even if the EEOC provided such an explanation regarding relevancy, its request was nonetheless overbroad because it sought information having no apparent connection to Guadiana’s charge, such as information about pregnant employees who never sought an accommodation.  Accordingly, the Tenth Circuit affirmed the district court’s denial of the EEOC’s request to enforce the subpoena.

Implications For Employers

For employers, responding to requests for information and subpoenas in EEOC litigation can be time-consuming and expensive.  Employers confronted with EEOC subpoenas that request a disproportionate amount of personnel information in relation to a single employee’s charge of discrimination can use this ruling to support arguments that such overly broad subpoenas should not be enforced.  Nonetheless, with the issue percolating before the U.S. Supreme Court, employers will continue to have to fight EEOC subpoenas at the investigation stage until the Supreme Court provides further clarity regarding the scope of this often abusive tactic.

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

2017 EEOC Book Cover Design (3)Seyfarth’s Annual EEOC Litigation Report Webinar is Wednesday, March 1, 2017.  Over 1,000 clients are currently registered, and space is still available.  Click here to register and attend.  It’s free!  Our webinar will be facilitated by Gerald L. Maatman, Jr., Christopher J. DeGroff, and Matthew J. Gagnon, who will provide in-depth analysis exclusively focused on EEOC-related litigation. Highlights include:

  • A Corporate Counsel’s Guide to the Stages of EEOC Litigation: Developments in FY 2016
  • Overview and Analysis of the Substantive Theories Focused on in FY 2016
  • Industry-By-Industry Trends
  • Important Legislative and Political Developments
  • On the Horizon for EEOC Litigation
  • Significant Court Decisions Categorized by Subject Matter
  • Categorization of developments and trends in EEOC Litigation by SEP Enforcement Priority

Wednesday March 1, 2017

1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

Speakers 
Christopher J. DeGroff – Seyfarth Shaw
Matthew J. Gagnon – Seyfarth Shaw
Gerald L. Maatman, Jr. – Seyfarth Shaw

seventh circuitBy Gerald L. Maatman, Jr., Mark W. Wallin, and John S. Marrese

Seyfarth Synopsis: After an employee lost his employer-funded health insurance because he failed to complete a medical examination required by his employer, the EEOC sued the employer under the ADA’s ban on involuntary medical examinations. The U.S. Court of Appeals for the Seventh Circuit affirmed dismissal of the suit, not on the merits, but because the relief sought was “unavailable or moot.”

In EEOC v. Flambeau, Inc., No. 16-1402 (7th Cir. Jan. 25, 2017), the EEOC filed suit against Flambeau, Inc. (“Flambeau”) in the U.S. District Court for the Western District of Wisconsin on behalf of a former Flambeau employee.  Flambeau had terminated the employee’s health insurance because he failed to complete a “health risk assessment” and biometric testing, which Flambeau required of employees to participate in its employer-subsidized health plan.

The parties cross-moved for summary judgment.  The district court granted summary judgment for Flambeau and denied summary judgment for the EEOC. The district court found that Flambeau’s program was exempted from liability for involuntary medical examinations under the ADA’s safe harbor provision for the administration of a bona fide benefits plan.  On appeal, the Seventh Circuit declined to decide the case on the merits, but nonetheless affirmed on the grounds that the relief sought by the EEOC was unavailable or moot.

The Seventh Circuit’s opinion provides useful guidance on the issues of punitive damages and mootness in the employment context.  In particular, courts are hesitant to award punitive damages against an employer where plaintiff pursues an unsettled theory of liability, which is the case even if the EEOC has issued guidance that the employer has not followed.  With respect to mootness, an employer’s pre-suit cessation of an allegedly illegal activity may moot a claim where the employer can show it did so for reasons other than impending litigation.

Case Background

In 2012 and 2013, Flambeau required its employees to participate in a wellness program, which included a “health risk assessment” and biometric testing, in order to obtain Flambeau’s employer-subsidized health insurance.  Id. at 3.  Dale Arnold (“Arnold”), a Flambeau employee, failed to complete the assessment and testing prior to the 2012 benefit year deadline, so Flambeau terminated his insurance coverage. Id. Arnold filed complaints with the U.S. Department Of Labor (“DOL”) and the EEOC alleging a violation of the Americans With Disabilities Act (“ADA”) and the Family & Medical Leave Act. Id. at 3-4. After discussions with the DOL, Flambeau agreed to reinstate Arnold’s insurance retroactively once he completed the testing and paid his share of premiums. Id. at 4.  Arnold did both, and Flambeau restored his insurance.  Id.

Before the 2014 benefit year began, Flambeau ended the mandatory assessment and testing, finding that it was not cost-effective. Id. In March 2014, Arnold resigned from Flambeau.  Id.  Nonetheless, six months later, the EEOC sued Flambeau.  The EEOC alleged that Flambeau’s mandatory testing violated the ADA’s prohibition of involuntary medical examinations Id. (citing 42 U.S.C. § 12112(d)(4)).  EEOC enforcement guidance at the time further provided: “A wellness program is ‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate.”  Id. at 10 (citations omitted).  The EEOC sought compensatory and punitive damages on behalf of Arnold as well as an injunction preventing Flambeau from operating such a program.

Flambeau and the EEOC filed cross-motions for summary judgment. Id. at 4.  Flambeau argued that its wellness plan was covered by the ADA’s insurance safe harbor, which exempts the administration of a bona fide benefits plan from liability for involuntary medical examinations. Id. at 4 (citing 42 U.S.C. § 12201(c)(2) & (c)(3)). The EEOC, meanwhile, argued that the safe harbor provision was inapplicable to Flambeau’s program.  Id. at 4. The district court sided with Flambeau, finding that the safe harbor provision “could cover at least some wellness programs,” and Flambeau’s was one such program. Id. at 5.

The Decision

On appeal, the U.S. Court of Appeals for the Seventh Circuit affirmed the judgment in favor of Flambeau.  Id. at 15. However, its decision was not based on the merits of the case, i.e., whether the district court properly ruled that Flambeau’s wellness program was exempted under the ADA.  Instead, the Seventh Circuit found that the EEOC’s claim was moot. Id. at 5-6.

Article III of the Constitution limits federal courts’ jurisdiction to “live controvers[ies].”  Id. at 5 (citations omitted).  Accordingly, a case is moot if a party “lacks a personal stake” in the outcome.  Id. (citations omitted).  The EEOC argued that: (a) Arnold had a personal stake in the outcome because he had both compensatory and punitive damages; and (b) the EEOC had a stake because voluntary cessation of illegal conduct – here, Flambeau’s wellness program – typically does not moot a case.  The Seventh Circuit rejected both arguments.

First, the Seventh Circuit ruled that Arnold failed to establish compensatory damages because he did not actually pay the $82.02 in medical expenses he incurred while without Flambeau’s insurance. Id. at 6. Arnold also failed to establish any damages for emotional distress. Id. at 6-7.

Furthermore, the Seventh Circuit held that Arnold was not entitled to punitive damages.  Punitive damages are recoverable under the ADA where an employer acts “with malice or reckless indifference to the federally protected rights of an aggrieved individual.”  Id. at 7 (citing 42 U.S.C. § 1981a(b)(1)).  The Seventh Circuit explained that Flambeau did not act with reckless indifference to Arnold’s federally protected rights because whether or not the ADA’s safe harbor covered Flambeau’s wellness plan was an unsettled question when Flambeau utilized it (and remains one today).  Id. at 7-8.  Punitive damages are not available under the ADA where plaintiff’s theory of liability is “novel or otherwise poorly recognized.” Id. at 7 (citations omitted).  Importantly, the Seventh Circuit noted that the fact that Flambeau’s program potentially contravened the EEOC’s guideline on wellness programs did not amount to reckless indifference.  Id. at 10-11 (“An employer’s or its attorney’s disagreement with EEOC guidance does not by itself support a punitive damages award, at least where the guidance addresses an area of law as unsettled as this one.”).

Second, the Seventh Circuit found that Flambeau’s voluntary cessation of its wellness program mooted the case because there was no reasonable expectation Flambeau would reinstate the program. Id. at 11. The record showed that Flambeau dropped the program because, based on two years of experience, its economic costs outweighed its benefits. Id. at 12. Moreover, Flambeau’s pre-suit cessation of the program evidenced that it was a genuine business decision and not a mere litigation tactic. Id.  This distinguished it from cases wherein an employer stopped its illegal activity abruptly in relation to litigation and without a sufficient alternative explanation.  Id. at 13.

In closing, the court noted that prudential concerns also weighed against deciding the case on the merits.  Id. at 14.  Given the prevalence of wellness programs among employers, such a decision would have wide-ranging implications.  Id.  Moreover, the EEOC had promulgated further regulations on the issue after this case’s events.  Id. (citing 29 C.F.R. § 1630.14).  As such, the court felt that the “issues should be decided . . . in a case where the answers will matter to the parties.” Id. at 15.

Implication For Employers

This decision illustrates the importance of employer vigilance with respect to company-wide programs, particularly where such a program touches on unsettled areas of the law.  Where an employer can show attempts to consult and comply with the law, it will be in a better position to defend government agency action, which can include requests for punitive damages and impactful injunctive relief.  That is so even where the employer’s action does not necessarily conform with government agency guidance on the topic.

f41e0e294d1b6ebf550c2badccce4b68Seyfarth Synopsis: In the high-profile EEOC race discrimination litigation against Bass Pro, the Court denied the EEOC’s motion for a ruling that would have allowed it to include in its § 706 claims those individuals who had not yet applied to work for Bass Pro when the mandatory Title VII conciliation process took place.

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The latest chapter of the EEOC’s race discrimination case against Bass Pro (which we blogged about here and here) involves yet another attempt by the government to cast a broad net and increase the number of claimants in its lawsuit.  This week, in EEOC v. Bass Pro Outdoor World, LLC, et al., Case No. 11-CV-3425 (S.D. Tex. Jan. 3, 2017), Judge Keith P. Ellison of the U.S. District Court for Southern District of Texas denied the EEOC’s motion for a ruling that would have allowed it to include claims in its lawsuit for individuals who had not yet applied to work for Bass Pro at the time conciliation took place, which is a mandatory pre-suit duty under Title VII.

For employers confronted with EEOC litigation, this ruling is positive in that shows how courts may be unwilling to allow to the EEOC to add claimants with whom it never conciliated.

Case Background

The EEOC brought a lawsuit alleging discriminatory hiring practices in violation of Title VII on behalf of a group of individuals allegedly discriminated against on the basis of their gender or race, both as a representative action (under § 706) and based on a pattern or practice theory (under § 707).  On March 4, 2014, the Court issued several rulings (which we blogged about here) regarding whether the EEOC had satisfied Title VII’s pre-suit requirements.  Id. at 1.  At the outset, the Court ruled that it must undertake a distinct analyses of the EEOC’s § 706 and § 707 claims on the issue of conciliation.  Accordingly, the Court held that while the EEOC had satisfied Title VII’s conciliation requirements with regards to its § 707 claims, it failed to do so with its § 706 claims.  The Court thus ordered a stay as the remedy for the EEOC’s failure to properly conciliate the § 706 claims.  Id. at 1-2.  Further, the Court dismissed from the case all individuals who had not yet applied to work for Bass Pro by April 26, 2010, the date on which the EEOC issued its Letter of Determination (hereinafter “post-LOD applicants”).  The Court reasoned that the EEOC could not have possibly conciliated the claims of these individuals as they had not yet applied to work for Bass Pro at the time the conciliation took place.

On July 30, 2014, in reversing an earlier ruling, the Court held (as we blogged about here) that the EEOC may prove its § 706 claims using the framework established in Franks v. Bowman Transportation Company, Inc., 424 U.S. 747 (1976), and later refined in International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977).  Id. at 2.  The Court further held that the EEOC had satisfied its Title VII administrative prerequisites (including its duties to investigate and conciliate) with regards to its § 706 claims, even for individuals not specifically identified in the investigation.  After this ruling was affirmed by the Fifth Circuit, the EEOC argued that the post-LOD applicants must be restored to eligibility in the § 706 class. 

The Decision

The Court denied the EEOC’s motion for a ruling that the post-LOD applicants were eligible to participate with respect to the EEOC’s § 706 claims.  The EEOC claimed that Court’s dismissal of the post-LOD applicants was fundamentally tied to two rulings that were subsequently overturned: (1) that the § 706 and § 707 claims must be analyzed separately on the issue of conciliation, and (2) that the Franks/Teamsters model could not be applied to § 706 claims.  The Court rejected this argument, noting that when it dismissed the post-LOD applicants, it made no reference to those arguments and instead focused on the proper sequence of EEOC enforcement under Title VII.  Id. at 3.  Referencing its March 4, 2014 order, the Court explained that because by definition the post-LOD applicants applied after the EEOC’s investigation was completed, the EEOC could not possibly have conciliated their claims.  Accordingly, the Court opined that its reversal on the issues of separate conciliation and the application of the Franks/Teamsters model had no effect on the dismissal of the post-LOD applicants.  Thus, the Court denied the EEOC’s motion and held that the post-LOD applicants remained ineligible for the § 706 claims.

Implications For Employers

For employers facing EEOC litigation, any ruling that limits the size of the case is no doubt favorable in terms of minimizing potential financial exposure.  While employers should be encouraged by this Court’s willingness to hold the EEOC to its obligation to conciliate, there are several recent cases that argue that the courts’ review of the EEOC’s Title VII pre-suit duties remains limited.  Ideally, this ruling will send the EEOC a message that it must abide by the conciliation process or risk losing its ability to bring suit on behalf of claimants with whom it did not conciliate.

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

2017 EEOC Book Cover Design (3)We are once again pleased to offer our loyal readers our annual analysis of the five most intriguing developments in EEOC litigation in 2016, along with a pre-publication preview of our annual report on developments and trends in EEOC-initiated litigation. That book, titled EEOC-Initiated Litigation: FY 2016, is a thorough analysis of the lawsuits that were filed by the EEOC in FY 2016 (spanning October 2015 through September 2016), and the major decisions impacting EEOC litigation.

We have analyzed those filings and decisions to provide our loyal readers with a comprehensive examination of trends affecting EEOC litigation. Every employer wants to avoid becoming a target of a government lawsuit. We believe the best way to do that is to develop a clear understanding of the EEOC’s enforcement agenda, litigation activities, and priorities. Our annual report is intended to give corporate counsel, HR professionals, and other decision-makers the tools they need to keep their companies out of the line of fire.

This year’s report once again analyzes enforcement trends impacting employers in the retail, hospitality, manufacturing, healthcare, national resources/construction, and business services industries. That analysis can be found here.

We have also organized the substantive developments according to the EEOC’s strategic priorities. FY 2016 was the last year of the EEOC’s 2012 Strategic Enforcement Plan (SEP). Now is a perfect time to look back and take stock of what the EEOC has actually done with respect to each of those priorities over the past four years.  We think our readers will benefit from understanding how the EEOC interpreted and advanced those priorities over the past four years, especially since the new SEP (covering FY 2017-2021) identifies the exact same priorities.

The full publication will be offered for download as an eBook. To order a copy, please click here.

We always like to end our year with a look back at some of the most interesting decisions and developments of the year. Here is our list of the “top five” most intriguing developments of 2016:

FY 2017-2021 Strategic Enforcement Plan

In FY 2016, the EEOC created and announced a new SEP for fiscal years 2017 through 2021. The new SEP establishes the enforcement priorities that will guide its enforcement efforts over the next four years. Our readers can read all about it here.  We closely monitored how the EEOC adjusted its tactics and enforcement agenda in light of its previous SEP and found that it was a reliable guide to how the EEOC pursues its enforcement agenda. The same will probably be true of the new SEP as well.

The new SEP identifies the same six priorities as the earlier SEP. However, it added two substantive areas of focus regarding what it sees as developing and emerging issues in the workplace. Those include “complex” employment relationships, such as temporary workers, staffing agencies, independent contractor relationships, and those that arise in the on-demand economy. The EEOC also identified “backlash discrimination” against Muslims, Sikhs, and other persons of Arab, Middle Eastern, or South Asian descent. Employers that operate within any of the “complex” employment relationships identified by the EEOC, or who employ sizable populations of Muslim or Middle Eastern workers, should take heed.

Continuing Impact Of Mach Mining v. EEOC, 135 S. Ct. 1645 (2015).

In Mach Mining, LLC v. EEOC, the Supreme Court unanimously held that the EEOC’s statutorily-required conciliation activities are subject to judicial review. At the same time, however, the Court outlined a very narrow scope of that review. The Court then left it to the lower courts to harmonize those two aspects of its ruling. Despite some initial victories for employers, courts deciding cases in FY 2016 have tended to find that the EEOC had met its obligation, even when the evidence amounted to little more than the EEOC’s say-so and was contradicted by the employer. The die is not cast just yet, but if this trend continues, it may become much more difficult for employers to contest the EEOC’s “take it or leave it” approach to the conciliation process. Our analysis of this trend can be found here.

Continued Focus On LGBT Discrimination

The EEOC has expended considerable effort advocating for the protection of LGBT rights under the existing anti-discrimination laws. In 2012, it decided – in its own administrative decision – that transgender discrimination is a form of sex discrimination because it is tantamount to discrimination on the basis of a perceived failure to adhere to gender stereotypes. Over the next few years it successfully used that decision to obtain favorable precedent in the federal courts. The EEOC is now using the same tactics to try to establish that Title VII prohibits discrimination on the basis of sexual orientation. On July 15, 2015, the EEOC issued another administrative opinion, which held that Title VII extends to claims of sexual orientation discrimination. It then filed two lawsuits in FY 2016 that allege sexual orientation discrimination, one of which survived a motion to dismiss. Employers should expect that these LGBT issues will remain a centerpiece of the EEOC’s enforcement agenda under the new SEP. Our discussion of these developments can be found here.

New EEO-1 Reporting Requirements

The EEO-1 Report requires employers with more than 100 employees (and federal contractors or subcontractors with more than 50 employees) to collect and provide to the EEOC certain demographic information in each of ten job categories. On February 1, 2016, the EEOC proposed changes to the EEO-1 report, which would require employers to submit employee compensation data by gender, race, and ethnicity. Unless implementation is delayed or stopped, employers will have to start filing these new reports on March 31, 2018. Many employers expect and fear that the EEOC will use this new data to bring more lawsuits under the EPA and Title VII alleging wage discrimination. We discuss these new regulations here.

Political Changes

The most significant political development that will shape the EEOC’s agenda in the coming years is the election of Trump as the next president of the United States. For at least the first two years of Trump’s administration, he will have a Republican majority in both houses of Congress. The EEOC has increasingly relied on large, high-impact “systemic” cases to push forward its strategic goals. These types of cases can have a big impact because they tend to affect a larger number of employees and employers. But those tactics have also been roundly criticized by Republican members of Congress and are a likely target for reform under the new Republican leadership. At minimum, the new administration will bring significant changes to the high-level leadership at the EEOC. That alone will have a significant impact on the EEOC’s strategic direction. Our predictions regarding these changes can be found here.

FY 2016 is shaping up to be a fulcrum year in terms of the EEOC’s enforcement agenda. Not only does it mark the end of the FY 2013-2016 SEP and the beginning of a new SEP, but also it brings with it the uncertainty of an entirely new political climate and a change-over in the party occupying the White House. In that kind of environment, the only thing that is certain is change itself. We do not know exactly what to expect, but we look forward to reporting on those changes as they happen.

We wish all a happy and safe New Year!

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

th870JF4SQSeyfarth Synopsis: The EEOC recently released its annual Performance and Accountability Report for the fiscal year 2016, a must-read for employers regarding statistical data on EEOC litigation. Continuing a trend from recent years, the EEOC has reaffirmed its commitment to targeting companies in high-profile systemic litigation, albeit with uninspiring results.

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On November 16, 2016, the EEOC released its annual 2016 Performance and Accountability Report (“PAR”) (the Report is here). The PAR highlights the progress of the EEOC’s continued efforts to meet the performance goals that are articulated in its 2012 Strategic Enforcement Plan (“SEP”), including its systemic litigation initiative. As the saying goes, the numbers speak volumes.

The PAR functions as a statistical “scorecard” for the EEOC. It provides a report on its activities during the past fiscal year, from October 1, 2015 through September 30, 2016, including its progress toward meeting the goals outlined in the SEP. While the PAR typically provides a preview of what we can expect to see from the EEOC in the upcoming months, this year’s edition notably avoids speculating as to the future of the EEOC under a new President.

The EEOC’s Overall Results

The EEOC reports that it increased the number of charges resolved to 97,443 charges, up 6.5% from the 91,503 last year. In FY 2014 and FY 2015, the EEOC received 88,778 and 89,385 charges respectively, so the number of charges filed is up slightly over past years.

One of the major goals the EEOC identified in its 2012 SEP was to increase 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.)  In FY 2016, the EEOC asserts it “meets or exceeded” five of the seven measures outlined in the SEP, while it “partially met” the other two.

The EEOC noted that it filed 18 systemic lawsuits in FY 2016, which represents a slight increase from 17 in 2014 and 16 in 2015.  Nevertheless, the number of pending systemic cases declined slightly, with 47 cases on its litigation docket (versus 54 in FY 2013, 57 in  FY 2014, and 48 in  FY 2015). Finally, the EEOC reports it recovered approximately $38 million in relief for victims of systemic discrimination (down from $40 million in FY 2015, but up from $13 million in FY 2014).

Charges: Breezin’ Through The Backlog

The EEOC reduced the charge workload by 3.8% to 73,508, a 3,100 charge reduction compared with FY 2015.  As of the end of FY 2015, the EEOC had a backlog of 76,408 charges, which was an increase of 750 charges over the backlog at the conclusion of FY 2014. The EEOC also noted that it responded to over 585,000 calls to its toll-free number and more than 160,000 inquiries to field offices.

The EEOC resolved over 15,800 discrimination charges through the agency’s administrative processes – comprised of settlements, mediations, and conciliations. This included 273 resolutions of systemic investigations, obtaining more than $20.3 million in remedies. The agency’s mediation program achieved a success rate of over 76%. Regarding conciliation, the EEOC notes that its success rate has remained at 44% over the past two fiscal years.

Settlements: Slowing Down

The EEOC secured more than $482.1 million in total relief in FY 2016. For victims of discrimination in private, state and local government, and federal workplaces, the EEOC obtained $347.9 million through mediation, conciliation, and settlements, again a slight decrease from the $356.6 million it collected in FY 2015 (but an increase from the $296.1 million that it collected in FY 2014). Litigation recoveries also decreased, as the EEOC recovered $65.3 million in FY 2015 while recovering only $52.2 million in 2016.

Lawsuits: Less Litigation

The number of lawsuits filed by the EEOC took a sharp decline, dropping from 142 merits lawsuits (including 100 individual suits, and 42 suits involving discriminatory policies or multiple victims) in FY 2015 to only 86 lawsuits in FY 2016 (including 58 individual suits and 29 suits involving multiple victims or discriminatory policies). Further, at the end of the fiscal year, the EEOC had 165 cases on its active docket. At the end of FY 2015, the EEOC had 218 cases on its active district court docket. This data illustrates how the EEOC has refocused its agenda to put its eggs into ever larger baskets.

Systemic Investigations

The number of systemic investigations completed by the EEOC remained the same. In FY 2016, EEOC field offices resolved 273 systemic investigations and obtained over $20.5 million in remedies in those resolutions (with 71 of the FY 2016 resolutions resulting from successful conciliations). In addition, the agency issued reasonable cause determinations finding discrimination in 113 systemic investigations. By comparison, in FY 2015, the agency reported that it completed 268 systemic investigations; issued 109 cause findings; and resolved 70 systemic investigations by voluntary conciliation agreements, obtaining over $33.5 million in remedies as a result of its systemic initiative.

Accordingly, although the EEOC completed roughly the same number of systemic investigations in FY 2015 and FY 2016 and issued a similar number of reasonable cause determinations in those years, FY 2016 collected a substantially lower amount of money as a result of these larger pattern and practice cases.

Implications For Employers

While the numbers confirm our predictions from 2015 (here) and 2014 (here) that the EEOC would continue its pursuit of high-profile systemic litigation, whether that agenda has been a success is an open question. For example, the EEOC’s financial recoveries have not markedly increased. If and how the EEOC adjusts its tactics to adapt to the incoming Trump administration remains to be seen. If that administration moves in a more employer-friendly direction, or restricts the EEOC’s funding, that could cause the EEOC to rethink its priorities and  its approach to its enforcement program.

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

Seal_of_the_President_of_the_United_States_svgSeyfarth Synopsis: The Trump Presidency will undoubtedly impact how the EEOC pursues its enforcement agenda. Although it is impossible to predict exactly what changes are in store, we think that it is a good bet that they will be driven by changes in personnel, resources, and substantive and procedural focus.

President-elect Trump is on his way to serving his first term in the White House. For at least the first two years of Trump’s administration, he will have a Republican majority in both houses of Congress. This has left employers (and our loyal blog readers) wondering how a Trump Presidency will impact the EEOC.

We have compiled our thoughts as to the top five ways that this political development could affect the agency and its enforcement priorities.

Changes In Personnel: President Trump will have the opportunity to appoint several high-ranking personnel that could, in turn, impact staffing decisions at all levels in the EEOC chain of command. Jenny Yang was named Chair of the EEOC by President Obama on September 1, 2014. Chair Yang has taken an active role in steering the strategic direction of the EEOC, including a focus on pay equity and a vigorous move to apply Title VII to workplace discrimination claims based on gender identity and sexual orientation. President Trump will have the opportunity to designate a new Chair. In addition, the EEOC’s General Counsel, David Lopez, announced in October that he would be leaving the EEOC in December. Mr. Lopez has faced an intense level of scrutiny by Republican members of Congress for the way that the EEOC has focused on and pursued systemic cases, especially against employers where no aggrieved person has filed a discrimination charge. His impending departure means that President Trump will have an early opportunity to appoint his successor. These leadership changes at the highest levels of the EEOC will undoubtedly impact the direction the agency takes in the future.

Change In Resources: The EEOC is likely to face tighter budget scrutiny under a Trump administration. In the Bush administration, for example, the EEOC’s budget was held flat for years.  If this trend is repeated or accelerated, then the agency may have to find creative ways to do more with less. Historically, the EEOC adapted by focusing its enforcement efforts on systemic litigation, meaning targeting high-impact cases that address policies or patterns or practices that have a broad impact on a region, industry or entire class of employees or job applicants. The theory was that large, high-profile cases, settlements, and judgments would have a greater deterrent effect, and would therefore affect a larger number of workers and industries. If the incoming administration and Congress tighten the EEOC’s budget again, the agency may be forced to find new and creative ways to adapt its enforcement program (and its own political viability) to the new reality.

Change In Substantive Focus: Over the past two years, the EEOC has made equal pay a top priority. Incoming Vice-President, Mike Pence, however, has publicly opposed new pay equity legislation. On February 16, 2016, the EEOC issued proposed regulations that would involve major revisions to the Employer Information Report (EEO-1). Those changes are expected to go hand-in-hand with an increased focus on pay equity issues. The new reports would require employers to provide aggregate compensation data and hours for all employees organized by 10 EEO-1 categories, 7 sex and race/ethnicity categories, and 12 specified pay bands. The EEOC approved the new EEO-1 reports along party lines. The changes are set to become effective in March 2018. Under any new Republican-appointed Commissioners, the EEOC could seek to revise or rescind these new regulations before they come into effect.

Change In Procedures: Under General Counsel David Lopez, the EEOC delegated individual EEOC district offices significant autonomy to oversee their litigation agenda and to develop their enforcement priorities. Given the level of criticism that Congress has levied against the EEOC, it would not be surprising if a Republican-led Congress subjected the EEOC’s enforcement program to heightened scrutiny and oversight. Legislative proposals are already out there. On March 24, 2015, the Subcommittee on Workforce Protections of the House Committee on Education and the Workforce held a hearing to examine a number of legislative proposals intended to provide greater transparency and accountability to the EEOC, including one proposal that would require the EEOC to make “good faith efforts to endeavor” to resolve cause findings by “bona fide conciliation.” Other proposals have called for the EEOC to focus on its enormous backlog of unresolved cases. Under a Republican administration, some of those proposals could ripen into actual legislation.

Unsettled Times Translate To Unsettled Action:  The Trump Presidency will certainly impact the EEOC, but it is not yet clear what those changes will be or how they will impact employers. This state of flux could precipitate short-term EEOC reaction. The administration change could actually galvanize the EEOC to launch pending litigation on an accelerated timetable while it is still protected by the Obama Presidency, especially cases that are considered high-value for accomplishing the EEOC’s current set of priorities. Historically, the EEOC has doggedly pushed the edge of the envelope despite shifting political winds, and the new Administration change may actually result in more, not less, enforcement activity in the short term. On the other hand, the events of this week could make some EEOC regions more cautious in taking on additional litigation given the uncertainty of whether future resources will be available to take those cases the distance.

Implications For Employers

With the White House and both chambers of Congress poised to shift to Republican control, there is every reason to believe that significant changes are in store for the EEOC. Exactly what those changes will be remains to be seen. What we have seen in the past – and what we are likely to see again – is that the EEOC will remain committed to driving forward its enforcement priorities, even if that means changing tactics and adapting its approach. We will continue to monitor this developing situation for our loyal blog readers.

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

th9L3810CUSeyfarth Synopsis: Following a major victory for an airline-industry employer over the EEOC in a Title VII action regarding religious accommodations, the Court denied the EEOC’s motion for a new trial. The decision is a blueprint for employers on turning the tables on the Commission’s litigation tactics.

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After the EEOC brought an action alleging that airplane cabin cleaning company JetStream Ground Services, Inc. (“JetStream”) refused to hire five Muslim women due to their request to wear religious clothing, a jury in the U.S. District Court for the District of Colorado ruled in favor of JetStream following a 14-day trial.  After the EEOC moved for a new trial, in EEOC v JetStream Ground Services, Inc., Case No. 13-CV-02340 (D. Colo. Nov. 3, 2016), Judge Christine M. Arguello of the U.S. District Court for the District of Colorado denied the EEOC’s motion.

While this employer victory over the EEOC is encouraging, employers should nonetheless be cognizant of how employee requests to wear religious clothing at work can potentially affect their business in the Title VII litigation context.

Case Background

In a high-profile case that we have blogged about extensively here and here, five Muslim females who worked as cabin cleaners applied for and were denied cabin cleaning positions with JetStream after the company assumed the contract of the women’s former employer.  Id. at 1-2.  The women alleged that JetStream refused to hire them for discriminatory reasons after they requested to cover their heads with a hijab and wear long skirts for religious purposes.  They also alleged that JetStream retaliated against employees and applicants who wore hijabs for engaging in protected activity in seeking a religious accommodation for their clothing and/or for complaining about discrimination.

On summary judgment, the Court ruled that the former employees had met their burden to show that hijabs that were tucked into a shirt and secured to an employee’s head presented no safety problems, thus holding that accommodating such hijabs posed no undue hardship for JetStream.  Id. at 2.  However, the Court also found that JetStream had presented sufficient evidence to create a disputed issue of fact as to whether it would pose an undue hardship for JetStream to permit its cabin cleaners to wear long skirts while working.  After the parties disputed the type of expert testimony that would be allowed, the EEOC ultimately withdrew several claims while JetStream agreed not to use certain experts, thus leaving only the hijab accommodation claims for trial.

On April 29, 2016, after a fourteen-day jury trial, the jury found in favor of JetStream and against the EEOC.  Id. at 3.  Thereafter, under Rules 59 and 60, the EEOC brought a motion for a new trial, arguing it was justified for several reasons including: (1) evidence regarding safety hazards was confusing and distracting to the jury, and was designed to incite jurors’ fear and prejudice of Muslims; (2) new evidence was disclosed at trial; (3) JetStream’s counsel committed misconduct throughout the trial; (4) the Court erred in denying sanctions for the destruction of evidence; and (5) the Court erred in deciding not to allow the EEOC to use a juror questionnaire prior to trial and in denying the EEOC’s motion to strike two jurors for cause.

The Decision

The Court denied the EEOC’s motion for a new trial.  Addressing the relevant legal standard under Rule 59, the Court noted that only errors that have caused substantial harm to the losing party justify a new trial, and that the verdict must stand unless it is clearly, decidedly, or overwhelmingly against the weight of the evidence.  Id. at 5 (citations omitted).  Regarding Rule 60, the Court opined that relief under this rule is extraordinary and may only be granted in exceptional circumstances.

First, regarding the EEOC’s argument that the introduction of safety-related evidence at trial was confusing, distracting, and prejudicial, the Court held that the EEOC’s failure to object to such statements during the jury trial weighed heavily against granting it relief.  Id. at 16.  Next, the Court similarly rejected the EEOC’s argument that it was prejudiced by new evidence that was introduced at trial, again noting that the EEOC missed its opportunity to object or move to strike.  Id. at 19-20.

The EEOC also claimed it was entitled to a new trial due to the alleged misconduct of JetStream’s attorney, alleging that “defense counsel ‘intentionally exploited the jury’s potential stereotypes about ignorant immigrants,’” and that “defense counsel engaged in ‘personal attacks’ and ‘maligned’ Plaintiffs’ attorneys, in arguing that Plaintiffs would have been working for JetStream but that their attorneys prevented this from happening.”  Id. at 24-27.  The Court rejected these assertions, along with several other allegations of misconduct, again noting the EEOC failed to object or raise any of these issues at trial.  Id. at 28.

Addressing the EEOC’s argument that the Court erred by not sanctioning JetStream for destroying evidence that included a list of employee recommendations made by the company who previously employed the cabin cleaners, the Court found that the EEOC’s motion provided no evidence of bad faith destruction.  Id. at 30.  Finally, the EEOC noting that, “anti-Muslim bias has become increasingly pervasive in American society,” the EEOC argued that the Court erred in denying its motion for a juror questionnaire and failing to strike two jurors.  The Court rejected these arguments, noting that it expanded its customary voir dire procedures in lieu of issuing the questionnaire, and that various sentiments expressed by jurors did not warrant their striking.  Id. at 31-40.  Accordingly, the Court denied the EEOC’s motion for a new trial.

Implications For Employers

This ruling cements a major EEOC defeat.  While the employer was victorious at trial here, other businesses should still be cautioned that juries are unpredictable in EEOC lawsuits  Thus, employers should attempt to minimize exposure to Title VII liability through policies and practices that eradicate discrimination.  With a diverse workforce that includes employees from a wide range of religions, employers must be diligent when considering the reasonableness of any accommodation sought.  Given the recent aggressiveness of the EEOC, employers absolutely need to be proactive in creating and abiding by non-discriminatory policies, or risk ending up in costly litigation.

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