Workplace Class Action Litigation

By Gerald L. Maatman, Jr. and Jennifer A. Riley

After suffering a serious blow to its systemic investigation and conciliation tactics last week, the EEOC received a better result on May 11, 2012, when Judge Ruben Castillo of the U.S. District Court for the Northern District of Illinois rejected defense arguments in EEOC v. United Road Towing, Inc., Case No. 10-CV-06259 (N.D. Ill. May 11, 2012), holding that the EEOC had satisfied its pre-suit investigation requirements. 

In sharp contrast to the Eighth Circuit’s recent ruling in EEOC v. CRST Van Expedited, Inc., Case Nos. 09-3764, 09-3765 & 10-1682 (8th Cir. May 8, 2012) (discussed here, here, and here), Judge Castillo denied the employer's motion for partial summary judgment, concluding that the EEOC's failure to investigate the claims or disclose the identities of each claimant in a systemic lawsuit did not support dismissal for failure to satisfy its pre-suit obligations under § 706 of Title VII. 

While the EEOC continues to challenge the Eighth Circuit’s May 8, 2012 ruling, Judge Castillo’s opinion may foreshadow a split among the circuits that will support a potential bid for resolution in the U.S. Supreme Court. 

Factual Background Of EEOC v. URT

On July 23, 2009, Hazel Holmes filed a charge alleging that United Road Towing (URT) violated the Americans With Disabilities Act (ADA) by denying her a reasonable accommodation, terminating her employment, and refusing to rehire her. On September 26, 2009, another former employee, William Snyder, filed a charge with similar allegations. Id. at 2. 

On July 22, 2010, the EEOC issued a determination letter to URT stating that it had reasonable cause to believe that URT had committed three violations against Holmes and Snyder and against “a class of disabled individuals.” Id.  In particular, the EEOC alleged that URT discriminated against such individuals by applying its unpaid leave policy, denying them reasonable accommodation, and failing to rehire them. The EEOC identified only Holmes and Snyder by name. Id.

The EEOC invited URT to engage in conciliation efforts to resolve the three violations that it identified, and informed URT that it was seeking $2 million in monetary relief for the charging parties and “all affected class members.” Id. at 3. The EEOC also proposed that URT “bear the costs of searching for additional class members . . . not yet identified due to [URT’s] failure to maintain medical leave request records for employees ineligible for [FMLA].” Id. After receiving the EEOC’s demand, URT declined to participate in further conciliation. Id. at 4. 

Subsequently, the EEOC brought suit on September 30, 2010. During discovery, the EEOC disclosed 17 claimants in addition to Holmes and Snyder. URT filed a motion seeking summary judgment as to those 17 claimants on the ground that the EEOC failed to satisfy its administrative requirements before filing suit.    

Judge Castillo’s Decision

URT argued that summary judgment was appropriate because the EEOC failed to investigate or conciliate the claims of anyone other than Holmes or Snyder.

Judge Castillo rejected URT’s argument. As to pre-suit investigation, Judge Castillo reasoned that “the Seventh Circuit has made clear that courts may not review EEOC administrative investigations to determine whether a particular investigation sufficiently supports the claims that the EEOC brings in a subsequent lawsuit” because such an inquiry would shift the focus of employment discrimination litigation to the EEOC’s administrative efforts, rather than the validity of the actual claims. Id. at 7 (citing EEOC v. Caterpillar, 409 F.3d 831, 833 (7th Cir. 2005)). For this reason, Judge Castillo refused to inquire into whether the investigation adequately supported the claims of the 17 claimants on whose behalf the EEOC brought suit.

As to the conciliation requirement, Judge Castillo likewise rejected URT’s motion. He first noted that the Seventh Circuit has not decided whether a “deferential standard” or a “heightened scrutiny” standard should apply, but under either level of inquiry, the EEOC’s efforts were sufficient because: (1) the EEOC stated in its determination letter that it had found reasonable cause to believe that URT had committed violations against a class of disabled individuals; and (2) the EEOC identified the types of violations it was pursuing (i.e., application of its unpaid leave policy, denial of reasonable accommodations, and failure to rehire). Id. at 10. Judge Castillo also noted that, instead of requesting additional information or clarification when it received the EEOC’s $2 million settlement demand, URT terminated the conciliation; therefore, “any deficiencies in the conciliation process were caused by both parties.” Id. at 11. 

Although he concluded that summary judgment was not warranted, Judge Castillo stayed the proceedings for 14 days to permit the parties to attempt conciliation. 

Questions About The Court's Rationale

Query whether Judge Castillo focused on the correct issue in opining that he could not review EEOC administrative investigation to determine whether it sufficiently supported the claims that the EEOC brought in its subsequent lawsuit. The precise issue is whether the EEOC actually investigated the claims of the class, or simply used the threat of class claims to force a settlement higher than the case was worth. The Court neglected to analyze that issue. As a result, it gave a free pass to the tactic that many employers have - and courts - have criticized where the Commission makes an exorbitant settlement demand on behalf of "a class of allegedly injured persons," but fails to specify who, how many, or the extent of their alleged damages.

Lessons For Employers

The employer in EEOC v. United Road Towing, Inc., conceded in its briefing a key point - that the EEOC "may pursue relief in litigation for similarly situated claimants whose allegations were not individually conciliated but whom defendants were generally aware of during the conciliation process." Id. at 9. Given that concession, Judge Castillo's ruling is not all that surprising. Indeed, the Court faulted the employer for refusing to negotiate with the EEOC after receiving the $2 million demand, but then arguing that the case ought to be dismissed for failure to conciliate. Query whether the employer could have set up its defenses and made them stronger - and changed the result in the litigation - by responding to the EEOC's demand by requesting the names/the number of the alleged class members, their alleged injuries, and the specific amounts claimed for each person.

Implications

Judge Castillo’s decision stands in stark contrast to the Eight Circuit’s recent decision in EEOC v. CRST Van Expedited, Inc., Case Nos. 09-3764, 09-3765 & 10-1682 (8th Cir. May 8, 2012).  In that case, the EEOC similarly issued a vague determination that CRST had subjected “a class of employees” to sexual harassment, requested CRST’s assistance in identifying persons who might be part of a settlement, then brought suit without identifying or investigating the experiences of each purported class member.  A panel of the Eighth Circuit rejected the EEOC’s contention that it need only investigate, issue a cause finding, and conciliate “each type of discrimination alleged,” and affirmed dismissal of 67 claims that the EEOC failed to investigate.  Id. at 17-23. 

Judge Castillo did not address the Eighth Circuit’s decision in his ruling – or whether the EEOC must investigate only each “type” of claim – instead finding the scope of the EEOC’s investigation outside of his judicial review.  Judge Castillo’s approach effectively would leave employers no method to ensure that the EEOC conducts any investigation prior to suit and little check on the EEOC’s fulfillment of its other statutory prerequisites.  The EEOC already is touting the decision as authorizing its “sue now, ask questions later” tactics.    

As we previously predicted, the EEOC doubtless will exhaust every available avenue to undermine the Eighth Circuit’s decision and push for broad adoption of the hands-off approach applied by Judge Castillo.

By Gerald L. Maatman, Jr., Chris DeGroff, and Brian Wong

On the heels of its resounding loss on May 8, 2012 at the hands of an Eighth Circuit panel in EEOC v. CRST Van Expedited, Inc., Case Nos. 09-3764, 09-3765 & 10-1682 (8th Cir. May 8, 2012), the EEOC has renewed its petition for rehearing - again requesting that the full U.S. Court of Appeals for the Eighth Circuit review the panel’s opinion and judgment - just one day after its loss.

We blogged about the implications of the Eighth Circuit's May 8 decision and how the ruling in EEOC v. CRST Van Expedited, Inc. is a significant defeat for the Commission's tactical approach to systemic litigation. Yesterday's salvo from the EEOC demonstrates how it views the stakes and that it will not be going down without a fight, and likely a shot at a petition for certiorari to the U.S. Supreme Court should the Eighth Circuit reject the Commission's bid for en banc review.

In a blow to the EEOC’s current investigation and conciliation tactics, a panel of the Eighth Circuit held on May 8 that the EEOC must engage in pre-lawsuit investigation and good-faith conciliation of each claim it intends to litigate in court under § 706 of Title VII, and that the EEOC may not use discovery in a later lawsuit as a fishing expedition to uncover additional violations. The May 8 opinion closely tracks the Eighth Circuit’s earlier February 22, 2012 opinion, which it vacated just one day before. Our prior analysis of these opinions can be found here and here.

After an invitation by the court clerk either to file a new petition for rehearing en banc or to rely on its previous April 9, 2012 rehearing petition, the EEOC opted to notify the Eighth Circuit on May 9 that it wished to apply for rehearing by relying on its prior petition.

With the future of its systemic litigation tactics hanging in the balance, the EEOC doubtless will exhaust every available avenue to undermine the Eighth Circuit’s decision and head off similar outcomes in other jurisdictions. Stay tuned.

By Christopher DeGroff and Robb McFadden

In the latest act of a nearly two-year drama that has played out in both the U.S. District Court for the Eastern District of Washington and the U.S. Court of Appeals for the Ninth Circuit, Judge Lonny R. Suko gave the EEOC a stark choice in a May 7, 2012 order - give up the immigration status of the women it represents in its sexual harassment lawsuit, or abandon any possible recovery on their claims.  

In EEOC v. Evans Fruit Co., Inc., Case No. CV-10-3033 LRS (E.D. Wash.), the EEOC is seeking back pay and emotional distress damages on behalf of 25 women who were allegedly sexually harassed by the company's managers. During discovery, Evans Fruit asked the EEOC to identify each person it claimed was an alleged victim of sexual harassment and provide information related to their claims for pecuniary and non-pecuniary damages, including their immigration status. The EEOC objected on Fifth Amendment grounds and sought a protective order to shield the claimants’ immigration status from discovery. The Court denied the EEOC’s motion for a protective order (and its subsequent motion for reconsideration), finding that discovery into the claimants’ immigration status was relevant to the issue of the amount of certain actual pecuniary damages to which they may be entitled and their alleged emotional distress damages. The EEOC petitioned the Ninth Circuit for interlocutory review, but on November 15, 2011, its petition was denied.

Following the Ninth Circuit’s denial of its petition for review, the EEOC continued to instruct several claimants to assert the Fifth Amendment privilege when asked about their immigration status.  In response, Evans Fruit filed a motion for sanctions pursuant to Fed. R. Civ. P. 37(b), arguing that the EEOC cannot use the Fifth Amendment as both a sword and a shield, i.e., by seeking pecuniary and non-pecuniary damages while simultaneously preventing the company from discovering information related to the damages sought by the Commission. In light of the EEOC’s violation of the Court’s prior discovery orders, Evans Fruit argued that the EEOC should be barred from recovery of damages for the non-disclosing claimants.

In a blunt and critical opinion, the Court found that “there are consequences” when the Fifth Amendment is asserted, even if the assertion is proper. Id. at 2. After the Ninth Circuit denied review, the Court stated that “it should have been apparent to the EEOC that some of the claimants now had a choice to make: either continue to be part of the litigation and provide answers in discovery subject to the protective order, or decline to … be part of the litigation.”  Id. at 2-3. The Court questioned whether the EEOC had even explained the consequences of asserting the Fifth Amendment to the claimants. Id. at 3. Accordingly, Judge Suko gave the claimants “a final opportunity to provide the answers sought by” Evans Fruit and ordered them to re-appear for further depositions — significantly, at the EEOC's expense — and to provide full answers to Evans Fruit’s written discovery requests concerning their immigration status within 10 days. Id. Any claimant who fails to respond and appear for their deposition will be barred from recovering any monetary damages. Id.

The ruling in EEOC v. Evans Fruit is significant for several reasons. First, it holds that Title VII claimants’ immigration status is relevant and discoverable in connection with claims for pecuniary and non-pecuniary damages. Additionally, while the EEOC might argue that claimants may be permitted to invoke the Fifth Amendment to prevent employers from discovering their immigration status, asserting the privilege may preclude the claimants from recovery any monetary relief. Lastly, Judge Suko’s ruling cautions litigants, including the EEOC, to think twice before disregarding a court's prior discovery orders. 

By Condon A. McGlothlen and Annette Tyman

On March 30, 2012, the EEOC issued its long-awaited and much anticipated regulations on the Age Discrimination in Employment Act (“ADEA”).

Most hoped that the regulations would provide clarity for employers relative to employment practices or policies that, without intentionally meaning to do so, adversely affect older workers. In our view, the EEOC's regulations raise more questions than providing answers, and leave employers more uncertain than ever regarding the steps they must take to meet the “reasonable factor other than age” (“RFOA”) defense set forth in the ADEA and recognized by the Supreme Court in Smith v. City of Jackson, 544 U.S. 228 (2005). 

While the regulations articulate five “non-exhaustive” factors to be considered to determine whether the employer has acted “reasonably,” the regulations make clear that employers have no guarantee of demonstrating an RFOA defense even if they comply with each and factor. Instead, the EEOC's regulations focus on the “particular facts and circumstances surrounding each individual situation.” In other words, employers will be required to establish a RFOA on a fact-intensive, case-by-case basis.  The regulations will undoubtedly be fodder for EEOC and the plaintiffs’ bar in bringing disparate impact collective action claims under the ADEA.

Background

In Smith v. Jackson, the Supreme Court determined that disparate impact claims are allowed under the ADEA. Disparate impact claims implicate policies or practices that, on their face, do not target older workers, but that in reality have a disproportionately negative affect on workers age 40 or above. At the same time, the Supreme Court also recognized that employers could escape liability for the unintended consequences of their policies or practices if such actions were based on an RFOA. 

A few years later, the Supreme Court ruled in Meacham v. Knolls Atomic Power Laboratories, 128 S. Ct. 2395 (2008), that the RFOA defense is an affirmative defense that an employer has the burden to prove. The Supreme Court went on to hold, however, that the employer’s burden under the ADEA was not as high as the employer’s burden under Title VII and criticized EEOC’s then existing ADEA regulations that required that an employer justify any disparate impact by demonstrating a “business necessity” for the challenged employment practice. 

As a result of the Supreme Court’s decisions in Jackson and Meacham, the EEOC’s current regulations were ostensibly drafted to: (i) make its regulations consistent with the Supreme Court’s decisions; and (ii) to explain the meaning of the RFOA defense.

The New EEOC Regulations

According to the new EEOC regulations, an employer meets its RFOA burden by proving that the challenged employment practice at issue was “both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known, to the employer.” The regulations then identify the following “considerations” that, although not outcome determinative, describe the most “common characteristics” of reasonable employment practices: 

1. The extent to which the factor is related to the employer’s stated business purpose;
2. The extent to which the employer defined the factor accurately and applied the factor fairly and accurately, including the extent to which managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination;
3. The extent to which the employer limited supervisors’ discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes;
4. The extent to which the employer assessed the adverse impact of its employment practice on older workers; and
5. The degree of the harm to individuals within the protected age group, in terms of both the extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm, in light of the burden of undertaking such steps.

While the identified “considerations” are relevant guideposts of what the EEOC considers to be reasonable, employers should not expect that they will be able to prove the RFOA defense by demonstrating that they engaged in the stated practices. Alternatively, the EEOC's regulations provide that in some cases, an employer need not demonstrate that it took all the above factors into account in order to prove the RFOA defense.      

What This Means For Employers Facing ADEA Litigation

Whether courts will adopt the regulations established by the EEOC in whole or in part remains unknown. Similarly, although the regulations have an “effective date” of April 30, 2012, it is not clear whether courts will apply the regulations (if at all) to conduct engaged in prior to April 30, 2012. To be sure, EEOC and the plaintiffs’ bar will argue that the regulations apply retroactively because they purportedly merely restate and/or explain existing law. 

Employers should also expect increased challenges and scrutiny from private litigants and EEOC alike in high stakes ADEA litigation. In fact, although the EEOC regulations were purportedly designed to provide clarity on the RFOA defense, the regulations seemingly provide a roadmap for avenues of potential attack over what an employer “should have” done to ensure that employment policies and/or practices do not adversely impact older workers. 

For further information on the new EEOC regulations, see our One Minute Memo on this development.

By Christopher DeGroff and Gerald L. Maatman, Jr.

It’s that time of the year again. 

On Tuesday, March 6, 2012 at 12:00pm Central / 1:00pm Eastern, Gerald L. Maatman, Jr. and Christopher DeGroff, co-chairs of the firm’s Complex Discrimination Litigation group, will host an interactive webinar on Seyfarth Shaw's recently published White Paper entitled EEOC-Initiated Litigation: Case Law Developments In 2011 And Trends To Watch For In 2012. And best of all, it’s free!

Topics to be discussed include:

• The EEOC's commitment to pursue bigger, higher-profile cases. Large-scale cases were a major theme in 2011, which was the second straight year of a record number of class-like federal court filings. Indeed, for the past five years, the EEOC’s public strategy has been to further its agenda through prosecution of large-scale cases that will attract media attention, with the hope that this brand of class litigation will channel employers’ behavior.
• The "mixed bag" of judicial rulings in EEOC cases, range from the employer-friendly to those that sent chills through the employment community. We'll focus on our picks for the most intriguing EEOC-related decisions handed down this past year.
• More aggressive EEOC systemic investigations. It is virtually certain that employers will see even more aggressive EEOC systemic investigations (and related subpoena enforcement actions) in the coming year. With recent wins on the scope of the EEOC’s investigative power, we expect the EEOC to undertake broader and deeper investigations that will help avoid repeat performances of the sanctions the Commission absorbed in 2011 in cases where federal judges called the EEOC to task for not doing its homework. Furthermore, despite the EEOC’s questionable position that it serves as a "neutral" in the investigation stage, its 2012-2016 public strategic plan states that it will pursue "an integrated, holistic approach to enforcement from beginning to end, without separating the investigation and conciliation stage of the EEOC’s work from its litigation stage."
• New partnerships and alliances. We foresee the EEOC joining forces with other parties to achieve its objectives. As one example, in November 2011, the EEOC and the OFCCP promised to coordinate their enforcement efforts and share discrimination claim information. We also observed an unprecedented amount of coordination between the EEOC and the private plaintiffs’ class action bar in 2011, and expect that trend to continue into year ahead.
• The role of ADA claims in the EEOC's 2012 agenda. Employers also can expect disability discrimination claims to figure significantly in the EEOC’s 2012 agenda. The Commission has stated publicly that enforcing ADA claims is a key goal, and the number of ADA cases in 2011 demonstrates that goal is well on its way to becoming a reality.

Over 1,000 clients have already registered for the webinar. There is still time to reserve a slot. To register, please follow this link.

By Christopher DeGroff and Gerald L. Maatman, Jr.

The U.S. Court of Appeals for the Eighth Circuit gave the EEOC a potential reprieve from a stunning $4.467 million fees and expenses award this past week in EEOC v. CRST Van Expedited, Inc., Case Nos. 09-3764, 09-3765 & 10-1682 (8th Cir. Feb. 22, 2012), but in the process the decision dealt the agency a significant blow to the way it litigates class-like cases. As such, the ruling ought to be required reading for any corporate counsel facing the EEOC in litigation.

The Commission filed suit on September 27, 2007 on behalf of a charging party and “a class of approximately 270 similarly situated female employees” who the EEOC alleged had suffered sexual harassment in violation of Title VII. Id. at 2. The charging party later intervened in the lawsuit, as did two other individual plaintiffs. CRST moved for summary judgment on a number of grounds, including that the alleged victims were not subjected to conduct rising to the level of harassment and had not availed themselves of the company’s complaint mechanisms. CRST also argued that certain class members and the EEOC were precluded from pursuing the claim because of a failure to disclose the claims in earlier bankruptcy proceedings. Importantly, CRST also sought dismissal of all claims based on the EEOC’s failure to identify, investigate, and conciliate on behalf of dozens of its purported “class” members. Id. at 14. The District Court ruled in CRST’s favor and dismissed the entire action. It subsequently entered a whopper of a fee sanction award - of nearly $4.5 million against the EEOC - in EEOC v. CRST Van Expedited, Inc., 257 F.R.D. 513 (N.D. Iowa 2010).

Key Holdings Of The Eighth Circuit 

On appeal, in a 2 to 1 ruling over a vigorous dissent, the Eighth Circuit affirmed in part, and reversed in part.

Significantly, the Eighth Circuit affirmed the District Court's holding that the EEOC had failed to adequately conciliate on behalf of 67 purported class members before filing suit. Id. at 24. In reaching its decision, the Eighth Circuit acknowledged that “the EEOC enjoys wide latitude in investigating and filing suits relate to charges of discrimination,” but that the EEOC “must discover [its class members] during the course of its investigation.” Id. at 19-20. It noted that the EEOC’s pre-litigation conciliation efforts were limited, as reflected in its Letter of Determination that provided CRST with no notice as to the size of the class of employees who it claimed suffered sexual harassment. Id. at 21. Specifically, during the conciliation process, the EEOC did not (and could not) provide the employer with the names of the class members or even a general indication of the size of the class. Id. As a result, the Eighth Circuit established a critical distinction between facts developed during the EEOC's pre-lawsuit administrative investigation (upon which the Commission may sue) as opposed to "new facts" learned during the discovery phase of the lawsuit, which the EEOC may not use "as a fishing expedition" to uncover more claims. Id. at 20-21.

The Eighth Circuit further noted that the EEOC’s complaint also failed to identify the number of alleged similarly-situated employees, and that only after the commencement of the lawsuit and through discovery did the EEOC seek to ascertain the size of the class. Id. at 21-22. The Eighth Circuit agreed with the District Court finding that the EEOC’s litigation strategy was “untenable” because it forced CRST to litigate a “moving target” of allegedly aggrieved persons and created a risk for “never-ending” discovery.  Id. at 22.

The Eighth Circuit also determined that the EEOC had not reasonably investigated the class allegations of harassment during its investigation and, thus, failed to provide the employer with an opportunity to meaningfully conciliate those claims. Id. at 22-23. In short, the Eighth Circuit decision admonished that the EEOC cannot use discovery as a way to find its class members, but instead the EEOC must identify its class members during its investigation and then must conciliate those claims. Id. at 24.

On the other hand, the Eight Circuit reversed the District Court’s grant of summary judgment on the EEOC’s claims as to the charging party who had failed to disclose her claims in bankruptcy proceedings, holding that the EEOC sued in its own capacity, and was not bound to a judicial estoppel theory applicable to the claimant/intervenor. It also reversed the District Court’s grant of summary judgment  against one claimant because a genuine issue of material fact existed regarding the severity or pervasiveness of the alleged harassment she suffered. Id. at 43. Because the Eighth Circuit reversed these portions of the District Court’s case, it also determined that CRST was not a “prevailing party” in the case at large, and reversed the award of fees and expenses. Id. at 53. It did so without prejudice, however, leaving the possibility for a future fee award. Id.

In sum, the Eighth Circuit affirmed in part, reversed in part, and remanded the case to the District Court for further proceedings consistent with the Eighth Circuit's holdings.

The EEOC's Immediate Reaction To The Ruling

We were in attendance at a recent meeting of the ABA Section of Labor and Employment Law where EEOC General Counsel David Lopez gave a presentation. His remarks included his reactions to the Eighth Circuit's ruling on the same day as his presentation; his comments were reported in BNA's Class Action Report last night (subscription required). Mr. Lopez asserted that the Eighth Circuit's decision is "unprecedented," and "rewards employers for recalcitrance" in the investigative stage. In essence, Mr. Lopez followed the reasoning of the dissent. Mr. Lopez also asserted that the EEOC is presently reviewing the case to determine "what our next steps are and how it will affect our work." He warned that employers may see more aggressive investigations and subpoena actions if the EEOC is required to name every claimant at the charge stage.   

Clearly, the Eighth Circuit grabbed the attention of the Commission's decision-makers at its highest levels. 

Implications Of The Eight Circuit's Ruling

The impact of  EEOC v. CRST could be profound. The decision will put significant pressure on the EEOC to identify each and every class member it seeks to represent before filing suit - something it rarely does in practice.

As a tactical matter, employers should invoke the EEOC v. CRST decision, and push the EEOC to identify all class members throughout the investigatory process. Arguably, this decision arguably applies only to representative cases (or "Section 706" actions) - not pattern and practice cases (under "Section 707") where the EEOC is claiming that discrimination is a company’s “standard operating procedure.” As we have noted in other recent posts here and here, a different set of rules apply to pattern or practice claims. Ultimately, EEOC v. CRST represents a potential game-changing decision for employers targeted by the EEOC in class-like representative actions.

By Christopher DeGroff and Annette Tyman

In the recent decision in EEOC v. Houston Funding II, Ltd., et al., Case No. H-11-2442 (S.D. Tex. Feb. 2, 2012), the U.S. District Court for the Southern District of Texas rejected a claim filed by the EEOC alleging that an employer unlawfully discriminated against a worker on the basis of her sex because she wanted to express breast-milk while at work. In its complaint, the EEOC alleged that the Houston Funding’s conduct violated Title VII of the Civil Rights Act of 1964 and Title I of the Civil Rights Act of 1991. In granting summary judgment to the employer, the Court disagreed, holding that “firing someone because of lactation or breast-pumping is not sex discrimination.” Id. at 2.

Background Facts

The dispute arose after an employee went on a maternity leave of absence. The employee’s leave began on December 1, 2008 and she gave birth ten days later. Although the employee was in contact with various managers and co-workers during her leave, she did not specify a date by which she would return to work. Thus, the Company terminated the employee for job abandonment effective on February 13, 2008. Several days later, the employee contacted the Company’s Vice-President to inform him that she had received a release to return to work and she asked about a private space to express breast-milk. During their conversation, the Vice-President informed the employee that she had been terminated for job abandonment and that her position had already been filled. In its complaint, the EEOC alleged that the issue of her termination came up only after the employee suggested using a private room to express breast-milk while at work. 

In a terse, three-page decision, the Court rejected the EEOC’s claim out of hand. The Court reasoned that even assuming that the “real reason” the worker was fired was because she wanted to pump breast-milk at work, the employee was “no longer pregnant and her pregnancy-related conditions ended” and that “lactation is not pregnancy, childbirth, or a related medical condition.” Id.

What This Means For Employers

The Court’s decision makes clear that expressing breast-milk is not protected under federal anti-discrimination laws and is yet another example of overreaching by the EEOC. Nonetheless, the decision has garnered the attention of numerous opponents who have filed scathing protests with the Court calling for appellate review and reversal of the Court’s decision.   

Further, the EEOC is not apt to "give up" on this front. On February 15, 2012, the EEOC hosted a meeting at its headquarters on a range of issues relative to pregnancy discrimination. The Commission promptly posted the hearing record on its website. Clearly, these issues remain front and center on the EEOC's radar.

Employers also should take care that they do not run afoul of other statutes that do address issues related to nursing mothers. For instance, the Fair Labor Standards Act requires that employers allow non-exempt nursing mothers “reasonable time” and a private place for expressing milk that is not a bathroom. Similarly, at least 24 states, including California, Georgia, Illinois, and New York, as well as the District of Columbia and Puerto Rico, have laws related to expressing breast-milk in the workplace. 

By Gerald L. Maatman, Jr. and Laura Maechtlen

Our colleagues "on the other side of the table" - the plaintiffs' class action bar who specialize in workplace class actions - are nothing if not resourceful, creative, and capable of outside-the-box thinking when it comes to prosecution of their litigation claims. As we predicted here, the plaintiffs' class action bar is increasingly focused on re-booting their class action stratagems in the wake of Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).

One angle on their evolving approach played out in the media this week. We call it "attack by a thousand cuts." By this tactic, the plaintiffs’ bar unbundles their array of claimants by filing multiple EEOC charges in different regions of the country. Counsel for plaintiffs in the Dukes litigation announced this past week that more than 500 current and former female Wal-Mart employees who were part of the now decertified Dukes class action have lodged sex discrimination charges against the company with the U.S Equal Employment Opportunity Commission. Claims of individual putative class members were tolled while the class action was pending for the equal pay and management promotion claims potentially covered by the class action. By court order, January 27, 2012 was the deadline for women in Alabama, Arkansas, Georgia, Mississippi, and North Carolina to pursue administrative claims before the EEOC. Women in all other states have until May 25, 2012 to file their EEOC claims.

The "attack by a thousand cuts" strategy is multi-faceted. The plaintiffs' bar is seemingly trying to do various things, including: (i) attracting media attention on their clients' claims, thereby ratcheting up their pressure on the employer; (ii) foisting significant litigation costs on the employer, which is necessitated by having to respond to all of the EEOC charges; (iii) laying the procedural groundwork for assertion of multiple lawsuits - either as single plaintiff actions, multiple-plaintiff actions, or groupings of class actions - once the EEOC's administrative charge filing requirements are satisfied; and (iv) using the prospect of EEOC involvement - either by way of a systemic investigation or by the prospect of the EEOC intervening in the private party litigation (or worse still, by the EEOC launching its own pattern or practice litigation) - to increase its litigation risks. Indeed, in announcing the EEOC filings, plaintiffs' counsel asserted that the 500 EEOC charges filed thus far are just the "down-payment" and they "expect to file thousands of additional charges by the May 25, 2012, deadline.”

Employers encountering this tactic face a range of litigation issues. At the very least, it poses the prospect of a "whipsaw" situation whereby the employer faces both private plaintiff claims as well as EEOC litigation. As evidenced by the EEOC’s record number of systemic investigations and class-like federal court filings spanning the last five years as discussed in our most recent posts here and here, the EEOC's public strategy has been to further its agenda through prosecution of large-scale cases. Accordingly, the recent filings made by putative plaintiffs in Dukes may further invigorate the already motivated agency to investigate and pursue more systemic discrimination claims. Notably, the EEOC does not have to satisfy Rule 23 requirements in a pattern or practice lawsuit because it is not acting as representative of class, but rather, is suing in its own name to redress a discriminatory practice. Likewise, so long as one employee has filed an administrative charge of discrimination, the EEOC may pursue relief on behalf of other similarly-situated workers.  This may well be one "work around" the SCOTUS ruling in Dukes sought by the plaintiffs' class action bar.

By Christopher DeGroff and Annette Tyman

The U.S. Equal Employment Opportunity Commission recently published its Draft Strategic Plan For Fiscal Years 2012 - 2016. In it, the EEOC outlines its four-year strategy for accomplishing its mission “to stop and remedy unlawful employment discrimination” and for achieving its vision of “justice and equality in the workplace.” The Plan focuses on three Strategic Objectives accompanied by targeted Outcome Goals and Performance Measures. The Plan is a must-read for employers and practitioners alike, as it provides a forecast of where the EEOC intends to focus its efforts over the next four years.

The EEOC’s first Strategic Objective is to combat employment discrimination through strategic law enforcement. Most of the agency’s financial and human resources will be focused on this Objective. The key strategies include:

• “Use administrative and litigation mechanisms to identify and attack discriminatory policies and other instances of systemic discrimination.” To this end, the EEOC’s Systemic Initiative remains a “top priority” for the EEOC.  As we have reported in the past, the Initiative is focused on identifying, investigating, and litigating pattern or practice, policy, and/or class cases. The EEOC’s strategy around this initiative includes a more rigorous and strategic pursuit of systemic discrimination case. Employers should take note – the EEOC intends to establish target percentages that will increase year over year to ensure that a “TBD% of the agency’s litigation docket are systemic cases” by the end of FY 2016. We expect to see those preliminary target percentages by the end of FY 2012 (on September 30, 2012).  
• Developing and implementing a Strategic Enforcement Plan. By September 2012, the EEOC intends to develop a Strategic Enforcement Plan that will replace the current National Enforcement Program prepared in 2006. In addition to articulating the EEOC’s high priority cases, the Enforcement Plan will outline the Commission's plan to “integrate” the EEOC’s investigation, conciliation, and litigation responsibilities for private employers and state and local government sectors. Although the EEOC’s stated position as a “neutral” at the investigation stage has long been questioned, the EEOC’s new Draft Plan makes it official - the EEOC is, in essence,  entitled to free discovery though its investigative powers to support its long-term litigation strategy. The lines that purportedly once existed between the EEOC’s investigative arm on the one hand and its litigation arm on the other will now be erased for all practical purposes.
• Ensure that remedies end discriminatory practices and deter future discrimination. The EEOC promises to seek “targeted equitable relief” for alleged victims of discrimination. Exactly what “targeted equitable relief” will mean for employers will be defined in the Strategic Enforcement Plan. It seems clear that such relief will go well beyond standard requests for compensatory damages or punitive damages that are common in current cases. The equitable relief sought will target all employees and job seekers as opposed to just the original charging parties and will be used by the EEOC to deter employers other than the Respondent from engaging in alleged unlawful discriminatory practices. Employers should expect to receive increased demands for ongoing management training and external monitoring, for example, among other “creative” remedies.       

The EEOC’s second Strategic Objective is to prevent employment discrimination through education and outreach. The EEOC’s two outcome goals are:

• Ensure that members of the public understand and know how to exercise their right to employment free discrimination; and
• Encourage employers, unions, and employment agencies to prevent discrimination and better resolve equal employment opportunity issues, thereby creating more inclusive workplaces.

Traditionally, the EEOC’s outreach programs were implemented through free education activities and training and, to a lesser extent, fee-based training through the EEOC’s Training Institute. The EEOC now intends to focus its outreach efforts on particular target groups that the EEOC believes have not been “equitably served by the Commission.” While the target groups are not yet defined, the EEOC suggests that “persons of color under 30, low-skilled workers, and new immigrants who may be unfamiliar with the nation’s employment laws” as well as small and new businesses will be part of the EEOC’s target audience. Not surprisingly, the protected-category workers at issues are the very groups on whose behalf the EEOC filed several large-scale actions in 2011.

To reach these groups, the EEOC indicates that it plans to shore up its internet and social media presence to conduct education and outreach activities. The EEOC will implement a “social media plan” by the end of FY 2014 and promises to make its website more “accessible and user-friendly.” In addition, the EEOC states that it will review and update “all current sub-regulatory guidance” with plain language materials. Such guidance includes an update to the EEOC Compliance Manual. 

The EEOC’s third Strategic Objective is to deliver excellent service through effective systems, updated technology, and a skilled and diverse workforce. This objective is largely operational in nature and will be further detailed in other publications. Nonetheless, at least one key initiative will be directed toward reducing the time it takes for the EEOC to investigate charges before issuing a determination. The EEOC anticipates that this strategy will result in the ability to focus the majority of its attention on meritorious discrimination charges.

Implications For Employers

The EEOC’s Strategic Plan continues to evidence the Commission is an agency with a laser-focus on pursuing systemic discrimination claims with more robust tools and strategies. In the face of Congressional action that reduced the Commission’s annual budget by $6.6 million in late 2011, the EEOC’s four-year plan makes clear that it will focus on getting the word out to currently underserved populations while at the same time harnessing its collective resources and investigative powers to identify, investigate, and litigate large discrimination claims to deliver the most “bang for its buck.”

By Jennifer Riley and Howard Wexler

The Seventh Circuit recently issued an opinion in EEOC v. Management Hospitality of Racine, Inc. d/b/a International House of Pancakes, et al., No. 10-3247 (7th Cir. Jan. 9, 2012) - substantially upholding a jury’s verdict that an employer allowed two teenage employees to be sexually harassed in violation of Title VII. In its ruling, the Seventh Circuit decided several key issues common in sexual harassment cases, setting precedent for future litigation and lessons for employers going forward. 

In EEOC v. Management Hospitality of Racine, Inc. d/b/a International House of Pancakes, et al., the EEOC brought suit against Management Hospitality, an International House of Pancakes (“IHOP”) franchisee, as well as its owner and its third-party management company, Flipmeastack, on behalf of two teenage servers, Katrina Shisler and Michelle Powell, who worked at an IHOP in Racine, Wisconsin. The EEOC alleged that the servers were harassed by an older, low-level manager, and that the company failed to respond to their complaints. A jury found in favor of the EEOC and awarded the servers compensatory and punitive damages. The Seventh Circuit largely upheld the jury’s verdict. 

Factual Background
Shisler began working at the Racine IHOP on March 3, 2005. According to Shisler, whenever she worked with the night manager, Gutierrez, he made sexually charged comments. She claimed that Gutierrez propositioned her for sex, stared at her body, pressed up against her, and “slap groped” her buttocks. Id. at 7. On March 18, 2005, she and two other servers reported Gutierrez’s behavior to an assistant manager, and the assistant manager “blew [them] off” and called them “silly girls.” Id. On March 27, 2005, Shisler reported the behavior to the general manager, who also responded with “deaf ears.” Id. The district manager eventually conducted his own investigation, determined that Shisler and Powell had complained to the general manager, and terminated the general manager for violating the sexual harassment policy. 

The jury found in favor of the EEOC on the sexual harassment and retaliation claims. The district court upheld the verdict, entered judgment in favor of the EEOC, and imposed an injunction on Flipmeastack. 

The Seventh Circuit’s Opinion 
The Seventh Circuit reversed in part and affirmed in part. The Seventh Circuit found that a rational jury could have found that Shisler was subjected to harassment that was both severe and pervasive. The Seventh Circuit found the 10-year age difference between Shisler and Gutierrez relevant, as well as Gutierrez’s position of authority over her. Although Shisler could only identify three specific instances of sexually harassing comments and conduct by Gutierrez over the four-week period of her employment, the Seventh Circuit determined that the three instances she identified – saying she was “kinky and liked it “rough,” propositioning her for sex, and “slap groping” her buttocks – were sufficiently severe to support a jury verdict. Id. at 16.

The Faragher/Ellerth Defense 
The Seventh Circuit also upheld the jury’s rejection of the Faragher/Ellerth affirmative defense. The Seventh Circuit held that a rational jury could have concluded that the Defendants exercised reasonable care by instituting a sexual harassment policy with a reasonable complaint mechanism, and by engaging in prompt and corrective action by investigating the complaints. However, it found that the evidence also was sufficient for the jury to reach the opposite conclusion. 

First, the Seventh Circuit noted that the “mere creation” of a sexual harassment policy will not shield a company from its responsibility to actively prevent sexual harassment in the workplace. Id. at 20. A rational jury could have found that the policy and complaint mechanism were not reasonably effective in practice. For example, Gutierrez violated the policy by engaging in sexual harassment, and the assistant manager and general manager failed to report the harassment after receiving complaints. 

Second, although management was required to take sexual harassment training, the evidence suggested that the training was inadequate. The assistant manager testified that she did not receive training herself, even though she was responsible for training new employees. Further, the assistant manager did not report Powell’s complaint because, in her opinion, Powell did not seem to be “afraid” of Gutierrez. Id. at 21.

Third, a rational jury could have concluded that the district manager’s investigation of Gutierrez’s sexual harassment was not prompt. Shisler complained twice in March, and Powell complained three times in April, and yet the company did not commence its investigation until late May. The Seventh Circuit opined that this "is not the type of response ‘reasonably likely to prevent the harassment from recurring.” Id. at 22.

Further, the Seventh Circuit found that a rational jury could have concluded that the policy was not reasonably effective on paper. It observed that an employer’s complaint mechanism must provide a clear path for reporting harassment, particularly where a number of the workers are teenagers. Flipmeastack’s sexual harassment policy did not provide a point person for complaints; in fact, neither the policy nor the Defendants’ posters identified any names or contact numbers to call in the event of sexual harassment. 

The Seventh Circuit also rejected Defendants’ argument that Shisler and Powell unreasonably failed to take advantage or preventative or corrective measures because they did not complain to the district manager. The Seventh Circuit concluded that this argument ignored the terms of Defendants’ own sexual harassment policy, which provided that an employee was required to report improper behavior to “[the employee’s] manager or company representative.” Id. at 23. Shisler and Powell first asked Gutierrez to stop his harassing behavior, then reported to the harassment to the assistant manager and general manager. 

Punitive Damages 
In these circumstances, the Seventh Circuit upheld the punitive damages award. It noted that, while Defendants’ sexual harassment policy is relevant to evaluating whether an employer engaged in good faith efforts to company with Title VII, “it is not sufficient in and of itself to insulate an employer from a punitive damages award.” Id. at 27. In fact, the Seventh Circuit noted that a rational jury could have concluded that certain policy language – i.e., noting the “severity of knowingly making a false accusation of discrimination or harassment” – was inserted to discourage complaints of sexual harassment.  Id. at 28.

Implications For Employers 
In the course of its opinion, the Seventh Circuit identified several deficiencies in Flipmeastack’s sexual harassment program from which employers can learn. For instance, in its policy, Defendants directed employees to report concerns to their managers or company representatives, yet did not ensure that such persons knew how to respond. Defendants likewise implemented a training program, but did not ensure that all managers participated. Defendants also required employees to sign an acknowledgement of the policy, while failing to make copies accessible to workers. As the Seventh Circuit reaffirmed, mere adoption of a policy is not enough – particularly where the protections offered by them can be viewed as illusory. 

By Christopher DeGroff and Matthew Gagnon

It is a fact of workplace litigation that trials of employment discrimination cases are rare - only an extremely small number of cases filed in federal district courts ever go to a jury. Most are disposed of by motions or out-of-court settlements. Given scarce funding and a dwindling government headcount, trials of EEOC-initiated lawsuits is even more of a rarity.  Earlier this month, however, the EEOC tried and won a high-profile ADA case that was once dead but resurrected on appeal. The case - EEOC v. Autozone, No. 07-CV-1154 (C.D. Ill. Nov. 8, 2011) - shows the unique risk factors in EEOC litigation whereby a trial loss ultimately translates into implementation of injunctive relief measures on top of a jury's verdict of monetary damages. The Court's post-trial injunctive relief order is a cautionary tale for employers.

In EEOC v. Autozone, No. 07-CV-1154 (C.D. Ill.), the EEOC claimed that auto parts retailer AutoZone violated the Americans With Disabilities Act ("ADA") by failing to accommodate an employee's disability at its Macomb, Illinois facility. The EEOC asserted that the AutoZone forced one of its sales managers to perform jobs that violated his medical procedures and that he ultimately experienced additional back and neck impairments. The case had a long and unusual history, having been dismissed on a pretrial motion in June 2009, but later given new life after the U.S. Court of Appeals for the Seventh Circuit resurrected the case based on the EEOC's appeal in 2010 - in EEOC v. Autozone, Inc., 630 F.3d 635 (7th Cir. 2010) - and sent the case back to trial level.

On June 3, 2011, a jury in the U.S. District Court for the Central District of Illinois found against the employer, and awarded the former Autozone manager lost wages, compensatory damages of $100,000, and $500,000 in punitive damages. Under the ADA, employers the size of AutoZone (of over 501 employees) can be held liable to a maximum of $300,000 in combined punitive and compensatory damages. The Court upheld the jury's $100,000 compensatory damages award, but reduced its punitive damages award from $500,000 to $200,000 to push the total employer limit of the ADA's damage cap; furthermore, the Court also awarded the employee $115,000 in back pay damages that are not affected by the statutory cap, as well as $9,045 in reimbursed litigation costs to the EEOC.

The EEOC then sought a post-trial injunction against the company designed to keep the employer from engaging in unlawful conduct in the future. The Court agreed with the EEOC's injunctive relief requests in part, and in its November 8 order found that "the conduct of the defendant's managerial employees at the highest level was clearly an intentional violation of the ADA" and was concerned with the "possibility of future infractions." Id. at 12, 25. The EEOC requested wide-ranging injunctive relief, including adoption of policies and procedures to comply with the ADA's reasonable accommodation provision; training of managers; posting of a notice about the verdict; keeping and retention of HR records relative to the ADA, and an on-going reporting obligation to the EEOC regarding reasonable accommodation requests by employees and Autozone's responses to those requests.

Autozone objected to the EEOC's in part on the grounds that the proposed injunctive relief was over broad; it sought to limit any injunction to the sole store that had been at issue in Macomb, Illinois. As it had revised its ADA reasonable accommodation policy after the trial and the lawsuit pertained to personnel decisions 8 years ago, Autozone argued that there was no need for an injunction to ensure its compliance with the ADA. The Court rejected Autozone's contentions. It determined that as upper level managers had dealt with the reasonable accommodation request at issue in the trial, the case was more than simply about "one employee, one store, and one supervisor. "Id. at 25.As a result, the Court entered an injunction covering all of AutoZone's stores in Central Illinois (that were subject to the Court's jurisdiction), and requiring the company to report all requests for accommodations by employees to the EEOC for three years, and to maintain certain company records for four years (including how Autozone responded to each request for a reasonable accommodation). Finally, the order granted access to the EEOC to view any such records during the term of the injunction on 48 hours notice. Id. at 26.

In its 2011 fiscal year, the EEOC filed 177 lawsuits on behalf of individual claimants, and collected over $364 million dollars for those it represented. Employers often succeed in disposing of workplace bias cases well before trial, but are nevertheless well-served to be mindful of how a case will ultimately play at trial and the potential down-side risks - such as injunctive relief - above and beyond a jury verdict in EEOC-initiated litigation.

By Gerald L. Maatman, Jr. and Christopher DeGroff

This past week the U.S. Equal Employment Opportunity Commission issued its FY 2011 Performance and Accountability Report. The Report was posted on line at the EEOC's website with a series of press releases. The agency's fiscal year ends on September 30th each year, and the Report details the EEOC's activities from October 1, 2010 to September 30, 2011. It is quite a Report, and very telling in the story told by the Commission. As such, it should be required reading for corporate counsel, business executives, and HR professionals who deal with employment-related litigation issues.

The Report details an inevitable by-product of our nation's economic woes. In FY 2011, the EEOC received a new record high of 99,947 discrimination charges against private sector employers. By comparison, the EEOC last year reported receiving a record high of 99,922 private sector discrimination charges in FY 2010. This statistic confirms what employers are experiencing - terminations and adverse employment decisions are increasingly high-risk situations, as workers who lose their jobs often file discrimination charges not only on account of believing themselves to be discrimination victims, but also out of a fear that self-preservation compels them to "sue now" if their prospects for re-employment are dim in today's economy. It also comes as no surprise then that the EEOC recovered a record $364 million for discrimination victims through administrative enforcement.  Title VII claims still dominate these filings, accounting for 75% of the charge filings in FY 2011, but ADA claims are also strongly represented, and represent a disproportionate portion of the overall settlements last year.

We think the more significant take-away from the Report, however, is the EEOC's focus and "trumpeting" of its systemic litigation initiative. The key passages in the Report are at pages 4, 19, 20, and 21. The EEOC's systemic program - in which the Commission emphasizes the identification, investigation, and litigation of discrimination claims affecting large groups of "alleged victims" - continues to grow. The key numbers reported by the EEOC include: 

• As of the close of the last fiscal year on September 30, the EEOC had 580 systemic investigations involving more than 2,000 charges under way. This is a significant bump from last year, which saw 468 active systemic investigations.
• During FY 2011, the EEOC filed 261 lawsuits, of which 23 involved claims of systemic discrimination "involving large numbers of people" and 61 cases involved multiple alleged discrimination victims of 1 to 20 individuals.
• The EEOC resolved 277 merits lawsuits in FY 2011, resulting in a total monetary recovery of $90.9 million.
• As of September 30, 2011, the EEOC had 443 cases on its active docket, of which 116 involved multiple aggrieved parties and 63 involved challenges to alleged systemic discrimination.
• The EEOC completed work on 235 systemic investigations in FY 2011, demonstrating an accelerated rate of handling these matters as the EEOC only cleared 165 such investigations in FY 2010. 
• The EEOC became more aggressive in subpoena enforcement actions associated with these investigations as well, filling a record 36 such actions, up from 28 last year. 
• These FY 2011 systemic investigations resulted in 96 "probable cause" determinations, and 35 settlements or conciliation agreements that yielded a total recovery of $9.6 million – a jump from $6.7 million in 2010. 
• The EEOC was not content with simply being reactive this past year, either.  In FY 2011, the EEOC initiated 47 charges on its own behalf.  These “Commissioners’ Charges” are up from only 39 in FY 2010.

These numbers are remarkable. They evidence an agency with a laser-focus on bigger, more high-impact litigation. The numbers of systemic investigations and lawsuits are the largest since adoption of the systemic program in 2006.  We expect employers will see even more high-impact litigation in FY 2012, as page 20 of the Report ominously predicts that “[b]ased on the large volume of systemic charges currently in investigation, the quantity of systemic lawsuits and their representation on the total docket is expected to steadily increase.” 

But there is also another reason for the EEOC pursuing (and at times, creating) large-scale cases: political survival.  We reported earlier this year that the EEOC was seeking more money for its 2012 budget to focus on its ever-increasing diet of "high impact" cases. This week, however, Congress approved a measure that cut $6.6 million from the Commission's annual budget. The systemic initiative was born out of the EEOC facing forced budget austerity in 2005 and 2006. To stay relevant, the EEOC has expressed that it will seek more large-scale cases to push its various initiatives and agendas. 

The bottom line is that there are more employment discrimination charges being filed, which necessarily will lead to more employment discrimination lawsuits; in addition, the EEOC is gearing up with more personnel and a focus on systemic "big case" investigations against employers, and while 2011 had more such systemic cases brought than ever before, employers can expect even more in 2012.

By Christopher DeGroff and Gerald L. Maatman, Jr.

The EEOC routinely claims that its subpoena power is extremely broad and vigorously resists any attempt to reign in that power. Some Courts share that belief, and have allowed the EEOC to cast a broad net for information, even when the charge allegations that the government is investigating are narrow. Our previous posts have noted that trend.

In EEOC v. Loyola University Medical Center, Case No. 11-CV-4456 (N.D. Ill. Oct. 13, 2011), however, Judge Charles Kocoras of the U.S. District Court for the Northern District of Illinois took a hard line with the EEOC, limiting the amount of information it could obtain via a subpoena stemming from an administrative investigation. The ruling is well worth a read by corporate counsel and HR professionals who deal with EEOC investigations.

The charging party in the EEOC v. Loyola case alleged that Loyola discriminated against her based on disability when it required her to submit to a fitness for duty examination ("FDE") consisting of a blood test, a breath alcohol test, and a medical exam. The EEOC sent Loyola a request for information as part of its administrative investigation, asking Loyola to divulge information relative to other employees who were ordered to take FDEs and the results and reasons for those examinations. Loyola partially responded to that request, noting that only one employee had been required to submit to an FDE for the supervisors specified by the EEOC’s information request. Not content with that answer, the EEOC issued a subpoena, expanding its demand for information to all employees subjected to an FDE during the relevant time period, and in so doing sought very sensitive details of those examinations.

Applicable EEOC regulations - 29 C.F.R. Sec. 1601.16 - require an employer to assert any objections to a subpoena within five (5) days. Loyola did not do so. Almost a month after the EEOC served its subpoena, Loyola wrote a letter to the government saying that it could not provide the requested information because it would violate federal and state medical confidentiality laws. Loyola did not file a petition to revoke the subpoena before sending its letter. The EEOC later filed a subpoena enforcement action, and the matter was assigned to Judge Kocoras.

This case involved some thorny procedural and substantive issues. The first item the Court tackled was a procedural issue that has historically worked against employers when addressing a subpoena. An employer seeking to revoke or modify a subpoena must do so within five days of its receipt. This is an extremely tight deadline for unwary employers, and missing this procedural step arguably waives all of a company’s objections - and the EEOC always argues waiver when an employer does not assert objections within the five day period. In this case, Loyola did not respond to the EEOC until weeks after the fact, nor did it actually file a petition, but instead sent only a letter to the EEOC. The EEOC claimed that Loyola’s procedural miscues meant that it waived any objections to the subpoena. Loyola responded with the argument that only patients can waive their confidentiality rights, regardless of the EEOC’s procedural arguments. The Court sided with Loyola, noting that there is no Seventh Circuit opinion that has held that it was bound by the EEOC regulations to ignore the merits of a subpoena challenge, and thus held that it would not ignore Loyola’s arguments. Id. at 5-6. 

Judge Kocoras then dug into the substance of Loyola’s argument by focusing on the relevance of the information the EEOC was seeking to the underlying charge.  The Court recognized that the EEOC’s subpoena powers are broad, but not unlimited. Id. at 4. The Court reasoned that granting too much authority to the EEOC that the relevance requirement “becomes a nullity.” Id. at 6-7. The Court reasoned that this case focused on whether Loyola’s FDE was job related. The medical records of other employees, Judge Kocoras determined, “shed no light whatsoever” on whether the FDE in this matter was job related to the charging party’s position. Id. at 7. Even under a broad reading of the EEOC’s subpoena power, the subpoena remained unenforceable because it was “not sufficiently tailored to the particular circumstances of the investigation.” Id. at 8. The EEOC’s request for all employee medical data - when the charge related to only one employee - was just too broad. Interestingly, the Court came to that conclusion without even addressing the question of whether the information sought was protected by confidentiality laws. Id at 9. 

The EEOC v. Loyola decision represents a small but increasingly important line of cases that have limited the EEOC’s authority to enforce overbroad subpoenas. That Judge Kocoras was willing to disregard the EEOC’s procedural regulations is also significant. The EEOC often cites to those regulations as controlling in all jurisdictions and forums, but as Judge Kocoras noted, there is no authority in the Seventh Circuit that prevented him from hearing the merits of the employer’s position, procedural challenges notwithstanding. 

By Christopher J. DeGroff and Gerald L. Maatman, Jr.

When the EEOC approached Congress for its FY2011 and 2012 budgets, it repeatedly emphasized that it planned to file more lawsuits, especially large-scale, systemic cases. The preliminary scorecard is now in, as the EEOC's fiscal year ended on September 30, 2011. Although the government is not scheduled to release its complete year end statistics until next month, Seyfarth Shaw’s survey of the EEOC’s year-end filings suggests that the EEOC has made good on this promise, and then some.

As we reported on September 13, 2011, the trajectory of the EEOC’s year-end filings was already startling, and on pace for a record high. Now that the dust is cleared, we see the results of a blizzard of EEOC filings from coast to coast. The EEOC filed an astonishing 175 lawsuits in the last eight weeks of its 2011 fiscal year (a period we call the “Red Zone”). Compared to a total of 250 EEOC suits filed in all of FY 2010 combined, the sheer volume of the cases filed by the Commission is significant by itself. 

Looking behind the numbers provides additional insight into the EEOC’s litigation plan. For instance, the types of EEOC claims filed in the Red Zone are notable. The trends we reported on in September continued through the month, with almost a full third of the EEOC’s new filings being ADA-related - far more than the year end 16% we saw in FY 2010. More importantly, of the 175 lawsuits, a whopping 59 were systemic cases or cases involving more than one claimant, consistent with the EEOC’s commitment to bring more large-scale lawsuits to effectuate its enforcement agenda. Until the year-end figures are in, it is difficult to see any particular geographic trends, as cases were filed in dozens of states. Large states like Texas and California still put up large numbers in the last few weeks (48 of the 175 cases), but we see new hot areas as well, like New Mexico (eight cases) and Minnesota (six cases). Interestingly, the EEOC also filed six cases against other state and local government units in the last two months.

But here is the kicker: despite this frenetic litigation activity, on September 14, 2011, the Senate Appropriations Committee approved a $359 million EEOC budget for FY 2012 - $7.3M less than the EEOC's fiscal 2011 budget. Translation:  the EEOC is now under even greater pressure to do more with less. Filing a federal court complaint is relatively inexpensive, but the government’s 175 new cases must now be staffed and fought, potentially straining the EEOC’s reduced resources to the breaking point. This is reminiscent of the high-pressure environment that spawned the EEOC’s Systemic Initiative in the first instance; an initiative that revolutionized the way the EEOC approached litigation.

It is not unreasonable to expect a shift in EEOC tactics and strategies to manage this high-pressure environment. We predict that the EEOC will have no choice but to focus on its large-scale cases or see them crumble under their own weight. With a shift of resources to big-ticket litigation, employers may have early-out opportunities in the single-claimant space, with the EEOC seeking Consent Decrees more readily in those relatively low-stakes matters.

At the same time, shifting resources to the larger cases may prove difficult. The year-end filing figures discussed above represent only new cases.  The EEOC has dozens of existing systemic cases in various stages of maturity in every region of the country (the EEOC filed 92 such actions last year). Employers now facing this litigation may be well-served to become more strategic in these cases. At a time when the EEOC is stretched thin, accelerated litigation schedules and push back on EEOC “war of attrition” tactics may well pay dividends. An early push by employers to make the EEOC fight all of the cases it has filed may have an aggregate effect on the amount of attention the EEOC can truly pay to any one case. In the end, the EEOC must be forced to put its money where its mouth is, and litigate the cases it has filed.

Time will tell if the EEOC’s shotgun approach to its Red Zone filings was wise. One thing is for certain: FY 2012 will be an interesting year, presenting unprecedented challenges – and perhaps opportunities – for employers targeted by EEOC litigation.

By Christopher J. DeGroff and Gerald L. Maatman, Jr.

With the end of the EEOC's fiscal year looming on September 30, 2011, employers across the country are feeling the government's urgency to achieve its year-end goals. The last six to eight weeks of the EEOC’s fiscal year - what we call the “Red Zone” - reveals an EEOC that is a beehive of activity on the litigation front. Surprise requests for information in systemic investigations, abrupt conciliation demands (and equally sudden issuances of notices of conciliation failures), and vague but broad “cause” letters of determination coming seemingly out of the blue are blasting out of the EEOC at a frantic pace. Understanding what the EEOC focuses upon during the Red Zone will help employers make sense of what may seem like some very odd behavior by this agency.

The EEOC's Agenda

There are at least three important elements driving the EEOC as it winds down FY2011. First, one of the EEOC’s most important initiatives for 2011 was to clear the number of backlogged charges. As the fiscal year closes, the EEOC is rapidly attempting to get these older charges off of its books. Not surprisingly, another measure of the EEOC’s effectiveness is the dollars collected through either litigation or settlement. The EEOC trumpets these figures to justify its budget requests and its efficacy over the past year. On a related point, the EEOC has made it clear since launching its Systemic Initiative in 2005 that it plans to use bigger and higher profile cases to execute on its agenda. As the EEOC highlighted in its 2011-2012 budget request, the "priority for agency resources continues to be litigation of systemic cases ...” Page 3 of the EEOC's submittal explicitly asserts that it desires to "prioritize spending for the Systemic Initiative…[since] systemic cases generate substantial media and other public notice, [and] they help to deter other employers from engaging in similar prohibited conduct." The EEOC's submittal also declared at page 23 that it expects to file more lawsuits in 2011 and 2012, and to increase the number of systemic lawsuits on its docket.

The Effects On Employers

The EEOC’s Fiscal Year Report will not issue until November of 2011, so much of what is happening in the Red Zone is anecdotal, but we do see trends reaching back over the last several years during this critical time period.

Conciliation Bonanza

During this period, employers often receive quick and significant conciliation demands, sometimes after months or even years of being dormant. Once the onion skin is peeled back from the posturing, the terms of ultimate agreements on conciliation agreements can be far more reasonable than other times of the year, with the EEOC willing to play ball on shorter agreement terms, reduced requests for monetary relief, and programmatic relief that is significantly less onerous than one sees in most EEOC Consent Decrees. Employers looking for a fire sale on certain charges should think carefully about a conciliation request made in the Red Zone, as those same terms may vanish after the close of the fiscal year.

Letters Of Determination And Right To Sue Letters

Formal conciliation is not technically supposed to happen until the EEOC has made a cause determination. Nonetheless, employers across the country are receiving surprise letters of determination, sometimes with only the vaguest explanation (if there is an explanation at all). They are often sent just moments before a demand for conciliation. As noted above, sometimes this fast-tracked conciliation can represent an opportunity for employers, but in other circumstances, these conciliation demands come as take-it-or-leave-it propositions, with very little flexibility on the terms. Employers pushing back on certain provisions or languages are often the recipients of a notice that conciliation has failed, again with little or no explanation. If conciliation is deemed to have failed, the result is often a right to sue letter, often leading employers to wonder why it engaged in the exercise of conciliation in the first place. The answer to that question, however, is the threat of litigation, as discussed below.

Meteoric Increase In Federal Filings

It is not always a story of happy resolution of charges or even more welcomed right to sue letters. At the time of this posting, the EEOC has filed 46 federal lawsuits since August 1, 2011. This is a stunning number, given that the total number of merits lawsuits in all of 2010 combined was 250. The math translates to the EEOC filing almost a third of its lawsuits in the Red Zone.

The sheer number of lawsuits alone is not the only interesting trend. For example, we see that during this peak filing period, nearly 40% of the filings allege ADA violations. Compared to the 2010 numbers, where only 16% of the total filings alleged disability discrimination, this is an insight into how the EEOC is targeting ADA violations at the close of its fiscal year. On the other hand, the number of Title VII filings is down from 77% in 2010 to just 48% of the Red Zone cases. Filings under other theories track roughly along the lines of last year. Critically, a full dozen of the EEOC’s 46 recent cases have class-like allegations involving multiple claimants and/or pattern or practice theories, making good on the EEOC’s promise to bring more systemic cases.  

Of course, a rush to the courthouse has cost the EEOC in the past. We have reported on several cases in 2011 where Courts have lost patience with EEOC tactics (see posts here, here, and here). The sheer number of cases filed in the Red Zone in 2011, however, suggests the EEOC has not become gun-shy in light of these stinging decisions.

The last few weeks of the EEOC’s fiscal year is a period of both opportunity and frustration for employers. The government operates under a different set of rules and motivations than private litigants, and that reality is certainly reflected in the Red Zone. Understanding what motivates the EEOC, particularly in this sensitive time frame, will help employers craft the most advantageous strategy.

By Christopher DeGroff and Gerald L. Maatman, Jr.

In the third of a trio of significant recent decisions arising out of EEOC v. JBS USA, LLC, No. 10-CV-02103 (D. Colo. August 8, 2011), Judge Phillip Brimmer granted in part and denied in part the EEOC’s motion to bifurcate trial and discovery. For our previous posts on the case, see here and here. This latest ruling addresses the statutory underpinnings of an EEOC pattern or practice case, and is a valuable read for employers facing large-scale EEOC litigation.

It is also a window into the EEOC's regular practice of seeking "punitive damages in stage 1" bifurcation, a device which entails significant litigation leverage depending on how a judge reacts to the litigation gambit.

Bifurcation Framework

In this latest decision, the Court tackled the knotty concept of bifurcation in EEOC pattern or practice claims. The EEOC can bring both representative claims (generally called “Section 706” claims) – where the EEOC stands in the shoes of one or more individual claimants to prove a violation of the law  –  and pattern or practice claims (typically termed “Section 707” claims), where the EEOC attempts to prove that discrimination or retaliation was systemic and the “standard operating procedure” of an employer. Section 706 claims use the familiar McDonnell-Douglas burden shifting method of proof; the same framework is used in individual discrimination claims. Section 707 claims, however, have a significantly different framework first articulated in the U.S. Supreme Court case of International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977). 

In a pattern or practice claim, the EEOC must first demonstrate in Phase I of a trial that unlawful discrimination has been a regular procedure or policy followed by an employer. If the EEOC carries this burden, the employer can attempt to defend itself by challenging the EEOC’s proof or providing non-discriminatory explanations for its procedures. If the employer cannot mount such a defense, the Court can conclude that a widespread violation of the law has occurred, and it is presumed that all of the members of the class are victims of that violation. In Phase II of the trial, an employer may rebut individual claims and or challenge the award of damages to individual claimants, but it is an uphill battle at that point given what is known as the "Teamsters presumption."

In EEOC v. JBS USA, LLC, the EEOC brought both Section 706 and Section 707 claims based on what it claimed was widespread religious discrimination against Muslims, harassment, and retaliation, all turning mainly on events surrounding Ramadan in 2008.

The EEOC’s Proposal And The Court’s Decision

The EEOC proposed to the Court that all of its pattern or practice claims be tried in the two-phase Teamsters model. The EEOC also pushed for the jury in Phase I to make a determination of punitive damages, before the employer was able to challenge individual claims in Phase II - the so-called "punitive damages in stage 1" bifurcation device. In addressing the EEOC’s proposal, the Court analyzed each of the EEOC’s pattern or practice claims in turn.

The Court first determined that the bifurcation model simply broke down for a pattern or practice harassment claim. Id. at 12. The Court held that the very nature of hostile work environment claims was too individualized to decide on a class-wide basis. The Court did not, however, decide what framework it intended to use for the harassment claims, tabling that issue for Phase II of any trial in the case.

Over JBS’s objections, however, the Court decided it would – for the most part – apply bifurcation to the religious accommodation, retaliation, and disparate treatment claims.  Id. at 13-15.  It excluded certain specific individualized or undeveloped allegations (e.g., whether employees were denied bathroom breaks) from the bifurcation model, though. In other words, the jury would decide in Phase I if there was widespread discrimination against Muslims, and if the EEOC met its burden, it would be presumed that all Muslim employees were victims of that discrimination. Those victims would move to Phase II with the presumption that they were entitled to damages, and the employer would be forced to attack those individual claims by each employee one by one.

Importantly, the Court held that the EEOC could not seek punitive or compensatory damages for individuals pursuant to its pattern or practice claims, noting that the statute’s plan language did not authorize those damages in a Section 707 claim. Id. at 16. Claims for those damages must come, if at all, in the more individualized Phase II proceedings. Id. at 18. 

Finally, the Court granted the EEOC’s request for bifurcated discovery, and set up specific parameters of depositions and written discovery to match up with the parties’ burdens at the two phases of the case. Id. at 17.

Implications Of The Court’s Decision 

This is a complicated and technical ruling. What it highlights, however, is that an EEOC pattern or practice claim is a powerful device, and litigation that poses significant risks for employers. Under the Teamsters model, a prima facie showing of a pattern or practice creates an early presumption that the employer violated the law for a broad class of alleged victims. It is potentially difficult to un-ring that bell at Phase II. Fortunately, the standard for demonstrating a pattern or practice in Phase I is high, and judges - like Judge Brimmer here - can and do narrow the bifurcated Teamsters framework to only those claims truly susceptible to class treatment.

JBS also argued in its legal papers - although Judge Brimmer did not focus on it in his order - that the so-called "punitive damages in stage 1" bifurcation device is improper due to additional statutory or constitutional grounds, especially in light of two rulings that have rejected the EEOC's strategy based on the Rules Enabling Act and the due process clause. See EEOC v. Sterling Jewelers,  2011 U.S. LEXIS  44255 (W.D.N.Y. April 25, 2011); EEOC v. McCormick & Schmick's, 2008 U.S. Dist. LEXIS 112283 (D. Md. Nov. 4, 2008). Employers are well served to utilize those arguments, for bifurcation with "punitive damages in stage 1" can be a "game-changer" for defense of these types of claims.

By Christopher DeGroff and Gerald L. Maatman, Jr.

On June 14, 2011, we reported the decision from the U.S. District Court for the District of Colorado called EEOC v. JBS USA, LLC, No. 10-CV-02103 (D. Colo. June 9, 2011) concerning a thorny set of administrative issues facing Judge Philip Brimmer. The case related to a religious discrimination pattern or practice suit brought by the EEOC, and the decision reflected a deep-dive into the often complicated administrative prerequisites for individual plaintiffs to join that kind of EEOC lawsuit.

One of the key issues in any EEOC pattern or practice lawsuit is whether individuals who had not filed their own EEOC charges can join the case and intervene as individual plaintiffs, even though none filed a charge of discrimination – ordinarily a necessary step before filing a federal discrimination case.  These would-be plaintiffs typically rely on the “single filing rule” that, in certain circumstances, allows those who have not filed a charge to “piggyback” on a timely charge filer’s submission to the EEOC. 

In EEOC v. JBS USA, LLC, the Court called for more briefing on this subject, since it was unclear whether the employees who desired to intervene were similarly situated enough to the existing claimants (for whom the EEOC had sued) to piggyback on their charges.

On August 4, 2011, Judge Brimmer entered another decision in this case, and allowed over 100 additional parties to join the case as intervening parties, since they were able to show that their “claims [arose] out of the same discriminatory treatment, and allegedly occurred within the same time frame” as the exiting plaintiffs. Id. at 2. 

The Court added an additional curve-ball in the decision, though. The Court had already decided that the intevenors could join the case. JPS, however, had apparently vigorously opposed the timeliness of two of the existing plaintiffs’ charges: Salad and Mohammed. Although it did not have to, the Court noted that “given the attention that the parties have paid” to those two plaintiffs’ charges, it would address the timeliness of those claims as well. 

The decision chronicles how Salad and Mohamed had submitted intake questionnaires with the EEOC 300 days before their termination, but did not necessarily ask the EEOC to do anything with those claims. Other cases have held that a document that requests the EEOC to take action could be considered a “charge.” Id. at 4. Here, even though not explicit from the questionnaire, the EEOC apparently understood the questionnaires as a call for action, and drafted and sent formal charges to Salad and Mohamed, but not until after the expiration of the 300 day deadline (arguably making them untimely). Judge Brimmer determined that because the EEOC “treated the intake questionnaires as a request for agency action,” that was enough to convert them to a valid “charge.” In short, the Court decided that Salad and Mohamed “should not be penalized for the EEOC’s failure to return the charges in a timely manner.” Id. at 5. 

Although this final point was somewhere between dicta and afterthought, parties could rely on the rulings in this case to push for even more lax interpretations of what is considered a timely charge, or what is enough to be called a “charge” at all. Other Courts have taken a more strict view of these administrative prerequisites. The take-away from this ruling is that employers should understand that the EEOC will not always be required to play by even its own internal procedural rules, and judges are apt to err on the side of a liberal interpretation of procedural rules to allow allegedly injured individuals to participate in an EEOC pattern or practice lawsuit. 

By Gerald L. Maatman, Jr. and Christopher J. DeGroff

Courts around the country have signaled an intolerance to questionable EEOC litigation tactics over the last 12 months (previously discussed in our blog here and here). Judge George C. Smith of the U.S. District Court for the Southern District of Ohio bucked that trend on July 6, 2011, in his ruling in EEOC v. JP Morgan Chase Bank, N.A., No. 09-CV-00864 (S.D. Ohio July 6, 2011). Judge Smith gave the EEOC the benefit of the doubt concerning its duty to notify an employer of the scope of its investigation, and adopted an exceedingly broad view of what satisfies the EEOC’s duty to conciliate a matter in good faith before filing a lawsuit.

The investigation in this case started ordinarily enough: in June 2008, Amiee Doneyhue filed an EEOC charge claiming that her boss – Ray Wile – treated male mortgage consultants better than Doneyhuw. In August 2008, Doneyhue filed an amended EEOC charge claiming that Wile had also sexually harassed her and when she complained, the company fired her. Chase vigorously denied the allegations. The EEOC attempted to broker a deal before it investigated the case, but those efforts failed. The EEOC investigator subsequently launched her investigation, including witness interviews of other employees in Doneyhue’s department. The EEOC seemed to focus its investigation on current and former co-workers that had worked for Wile. Months after the charge was filed, the EEOC sent an email to Chase mentioning for the first time that Doneyhue also had made class allegations. The company asked the EEOC where those allegations could be found in the charge, and the EEOC simply noted that Doneyhue had alleged that other similarly-situated women were victims of discrimination.

After Chase and the EEOC tangled over the scope of various information requests, the EEOC issued a letter of determination (“LOD”) and a proposed conciliation agreement indicating that the EEOC had determined that a class of female employees were victims of discrimination. The agreement demanded $300,000 for Doneyhue and $2 million to be distributed among class members – a class the EEOC admitted it could not identify at the time and would require Chase to assist in locating. During negotiations the EEOC repeatedly refused to identify the members of the class. Chase also made several attempts to meet with the EEOC in person to discuss the conciliation demand, and was rebuffed each time. The EEOC dealt with Chase only over the phone and in writing, and ultimately demanded a “last and best offer” from Chase. When Chase gave the EEOC an offer that it emphasized was “subject to negotiation,” the EEOC declared that conciliation was over and additional efforts would be “futile or non-productive.”

The EEOC then filed suit, claiming that Chase had discriminated against a class of employees at its Polaris Park facility. Chase filed a motion for partial summary judgment as to the class allegations, arguing that the EEOC’s suit was well beyond what it investigated at the administrative stage (or at least beyond what it told Chase it was investigating) and that it had not conciliated in good faith. Judge Smith rejected both arguments.

The Defense Claimed That The Lawsuit Exceeded The Scope Of Investigation
Chase claimed that the EEOC had not truly investigated a class beyond employees reporting to Doneyhue’s manager Wile, or that even if it did, the EEOC had not told Chase of it. The Court acknowledged that in the Sixth Circuit, an EEOC complaint must be limited to the investigation reasonably expected to grow out of the charge of discrimination. The Court found, however, that the EEOC had clearly looked at the circumstances of employees outside of Wile’s chain of command, and rejected Chase’s argument. Chase’s second argument – that it must be notified of the scope of the charge – relied on EEOC v. Outback Steak House of Florida, 520 F. Supp. 2d 1250 (D. Colo. 2007). Judge Smith differentiated that case, noting that in EEOC v. Outback, the EEOC had attempted to base a nationwide lawsuit on a strictly regional investigation. Judge Smith reasoned that it could be inferred from the EEOC’s testimony and information requests that Chase was informed of expanded class claims and denied Chase’s motion on that basis.

EEOC’s Duty To Conciliate In Good Faith
Perhaps more significantly, the Court also gave the EEOC virtually free reign to define for itself what is “good faith” conciliation. The Court noted, without explanation, that the EEOC’s conciliation demand was “on its face made in good faith.” Id. at 16-17. Judge Smith went on to hold that once Chase rejected the EEOC's demand, the Commission was “under no duty to attempt further conciliation….” Id. at 17. The decision concludes that “it is not for this Court to second guess the approach taken by [the EEOC] in attempting to conciliate the matter. As long as its effort was made in good faith, it is not subject to judicial review.” Id. On this basis, the Court rejected Chase’s motion for partial for summary judgment.

Implications For Employers
This is a disturbing case for employers. A strategy informed by EEOC v. JP Morgan Chase suggests that employers should push the EEOC for clear articulation of its position at every stage. Where, for example, the EEOC makes class allegations, but refuses to identify the class members, an employer should still insist the EEOC at least identify the scope of the class (by work unit or supervisor, for example). If the EEOC continues to stonewall, the employer should memorialize what it believes is the scope of the class, so there is no mistake what the employer did or did not know during the investigation and conciliation stage. 

As for a conciliation strategy, it is difficult to suggest steps beyond those taken by the employer here. Naturally, when the EEOC refuses to come to the negotiation table, it is difficult to bargain. Demonstrating to the Court that an employer at least attempted to engage in the method of negotiating proscribed by the EEOC is one suggestion (here, providing the EEOC with a more comprehensive offer). Nevertheless, it is difficult to conceive of a situation where the EEOC could be considered to have acted improperly using this decision’s view of the “good faith” standard. Fortunately, there are other decisions that take an evenhanded view of the good faith obligation that can be cited in other jurisdictions. 

By Ellen McLaughlin

The EEOC held a public meeting this morning (Wednesday, June 8) to examine the use of leave as a reasonable accommodation under the Americans With Disabilities Act. The Commission provided a platform for invited panelists to discuss and analyze the use of leave as a reasonable accommodation and on compliance with relevant ADA regulations. While EEOC regulations make it clear that there is a duty to “modify workplace policies” as a reasonable accommodation, there is little definitive guidance as to exactly what this means or requires. The EEOC's meeting sought clarification from regional EEOC counsel as well as a small number of employee and employer stakeholders.

As Chair of Seyfarth's Absence Management and Accommodations Team, I was one of two employer stakeholders asked to speak at the EEOC's meeting. My written submission to the EEOC is here.

The two panels this morning included: 

• Panel 1 – EEOC’s Current Position and Policy Statements: Christopher Kuczynski, Assistant Legal Counsel of the EEOC; and John Hendrickson, Regional Attorney of the Chicago District Office of the EEOC.
• Panel 2 – How to Comply with the Law and Appropriately Permit Leave to Employees: Brian East, Senior Attorney, Texas Disability Rights; Claudia Center, Director, Disability Rights Program, Legal Aid Society Employment Law Center; Edward Isler, Partner, Isler Dare Ray Radcliffe & Connolly, P.C.; and myself.

This is an area of intense focus by the EEOC, and a subject over which the EEOC has litigated some of its largest pattern or practice lawsuits.

ADA leave of absence lawsuits resulted in one of the largest EEOC settlements in 2009 - the case of EEOC v. Sears, Roebuck & Co., Case No. 04-CV-7282 (N.D. Ill. Sept. 28, 2009) (approval of consent decree stemming from an EEOC pattern or practice lawsuit alleging that Sears violated the ADA by maintaining a workers compensation leave exhaustion policy that terminated employees instead of providing them with reasonable accommodations) - and the largest EEOC settlement to date in 2011 - the case of EEOC v. Supervalu, Case No. 09-CV-5637 (N.D. Ill. Jan. 5, 2011) (approval of consent decree stemming from an EEOC pattern or practice lawsuit alleging that Supervalu violated the ADA by its alleged practice of terminating employees with disabilities at the end of leaves of absence rather than bringing them back to work with reasonable accommodations).

What this increased attention means for employers is that leave practices must be reexamined in light of the EEOC’s recent enforcement efforts so as not to find themselves the subject of the next class action.

As a result of today's discussion in Washington, D.C., here are five immediate action items employers should consider:   

1. Determine whether your leave policies and practices could be construed as having an identifiable “maximum” leave period or an “automatic” cut-off, and consider what policy or practice changes are needed in light of the EEOC’s recent enforcement efforts.
2. Review all leave policies and practices and assess whether you utilize a case-by-case assessment when determining the duration of an employee’s leave, and whether holding an employee’s position open while on leave causes an undue hardship.
3. If you do not already have one, create a reasonable accommodation policy that includes a clear procedure for making a request for accommodation. Review your interactive process when considering a reasonable accommodation request to make certain it complies with EEOC’s expectations and that your efforts are well-documented to defend against any claim.
4. Keep abreast of EEOC’s positions in the leave area, as well as case law developments related to reasonable accommodations under the ADA when dealing with a workplace accommodation issue.
5. When faced with an EEOC charge on leave issues, proceed with caution and contact counsel to make certain the individual charge does not evolve into a class case.

The bottom line is that employers with ill-prepared or non-compliant leave programs will remain in the cross-hairs of the EEOC's enforcement litigation program and susceptible to class claims.

By Gerald L. Maatman, Jr. and Christopher DeGroff 

On October 1, 2009, the EEOC issued a press release that it had sued the Picture People ("TPP")  – a nationwide chain of photography studios – alleging that it had harassed and discharged a deaf employee in violation of the Americans With Disabilities Act.  Nearly two years later, Judge Philip Brimmer of the U.S. District Court for the District of Colorado granted summary judgment  for the employer in EEOC v. The Picture People, Inc., No. 09-CV-2315 (D. Colo. May 9, 2011). The ruling stands in stark contrast to the EEOC's press release, and marks another loss in the Commission's litigation program this year, which we have previously analyzed here and here.

Picture People hired Jessica Chrysler in 2007 understanding that she was deaf.  TPP hired Chrysler as a “performer,” a job that involved photography, sales, lab work, front desk duties and interacting with customer.  Chrysler performed a number of the job duties of the position, but was later moved primarily into the lab.  Chrysler repeatedly demanded an interpreter to assist at meetings, and complained that she was treated poorly because of her disability.  After the 2007 holiday season,  PPT cut Chrysler’s hours,  and later she stopped working for the company altogether.

The EEOC sued under a number of theories, the thrust of which alleged that TPP had not done enough to make the studio an environment where she could succeed.  After extensive discovery, TPP moved for summary judgment.  The company did not dispute that Chrysler was disabled under the ADA.  Instead, TPP argued that she was not qualified to perform the essential functions of the performer positions because she could not communicate orally. 

Picture People focused on its job description for a performer, which emphasized that “strong communication skills” was a job qualification.  The Court observed that an employer’s job description is not always the final word on what is an essential job function, but as long as the description was job-related, uniformly enforced, and consistent with business necessity, it would not second guess those job functions.  TPP insisted that the ability to speak with customers throughout their visit to the studio was necessary to the position.  The EEOC countered that requiring oral speech was just the sort of stereotype that the ADA was designed to combat.  But TPP made what the Court ultimately found was an important distinction, as the company argued that it was not concerned that non-oral speech was somehow off-putting to customers (as the EEOC implied), but rather it was the speed of oral communication that was so important to its business.  The Court agreed, and held that oral communication was an essential function of the performer job.

Thus, the case turned on whether Chrysler could do the job when factoring in a reasonable accommodation.  The EEOC argued strategies like written notes, gestures, and other non-oral communication could take the place of oral speech.  The Court disagreed, holding that TPP was not required to alter the essential job function of oral speech.  In this respect, the Court’s decision not to require TPP to re-write its core job functions was fatal to the EEOC case. 

The EEOC also brought a handful of related claims, including hostile work environment, unlawful discharge and retaliation.  Although the EEOC was able to provide certain anecdotal instances and statements where Chyrsler’s disability was in play in the workplace, none of these other claims survived summary judgment either. 

In the end, the Court dismissed the EEOC's entire case, entering summary judgment on behalf of the employer. 

After the recent ADA amendments, most battles in litigation brought by the EEOC will not be waged over whether an individual is or is not disabled, as they had in the past.  Instead, we can expect to see more cases like EEOC v. The Picture People, testing whether and/or what accommodations are reasonable in a competitive marketplace.  The EEOC has promised to aggressively litigate these issues, and the EEOC v. The Picture People case demonstrates that it will make good on that promise.  In this instance, however, given the compelling evidence the employer marshaled and the nature of its business, the Court held that the accommodations the EEOC was proposing simply went too far. 

By Eric J. Janson and Richard Sloane

On April 26, 2011, in EEOC v. Xerxes Corporation, No. 10-1156 (4th Cir. April 26, 2011), the U. S. Court of Appeals for the Fourth Circuit emphasized the importance of responsiveness and, where appropriate, prompt remedial action by employers in addressing allegations of harassment by co-workers.  In a unanimous opinion (with two concurring opinions), the Fourth Circuit affirmed in part, vacated in part, and remanded the District Court’s grant of summary judgment in favor of the employer.

Xerxes is a fiberglass tank manufacturer based in Minneapolis, Minnesota.  In July 2008, the EEOC filed a lawsuit on behalf of three current or former African-American employees of Xerxes’ manufacturing plant in Williamsport, Maryland.  The complaint alleged a hostile work environment on the basis of race in violation of Title VII of the Civil Rights Act of 1964.  Specifically, the complaint asserted that the employees were the targets of racial slurs and racially derogatory comments, pranks and practical jokes, and threatening notes from their co-workers.  The alleged harassment included name-calling such as “Black Polack,” “Buckwheat,” and “boy;” White co-workers’ frequent used of the N-word; and the discovery of a note (delivered on a piece of fiberglass) in the locker of an African-American employee that included the following language:  “KKK plans could result in death, serious personal injury….”

As of at least 2006, the company had an anti-harassment policy in place, prohibiting “Sexual, Racial, and Other Objectionable Conduct or Unlawful Harassment.”  The policy provided specific examples of prohibited conduct and, among other directions, instructed employees to “Immediately report the incident to your supervisor and plant manager.” 

When the employees reported these incidents to Xerxes, the company conducted investigations, took disciplinary action against the alleged harassers, and thereafter conducted company-wide training on its anti-harassment policies and complaint procedures.  Additionally, the company reported the threatening notes to local law enforcement officials.  The District Court found these measures to provide a sufficient basis to grant Xerxes’ motion for summary judgment on the EEOC's multiple claims of co-worker racial harassment.  The District Court held that “whenever Xerxes learned of harassment, it acted quickly and reasonably effectively to end it.” 

On appeal, the Fourth Circuit indicated that, to survive summary judgment on a claim of a racially hostile work environment, the EEOC “must demonstrate that a reasonable jury could find [the] harassment (1) unwelcome; (2) based on race; and (3) sufficiently severe or pervasive to alter the conditions of employment and create an abusive atmosphere.” Additionally, the EEOC was required to present “sufficient evidence of a fourth element:  that there is some basis for imposing liability” for the harassment on the employer. In focusing on this critical fourth element, the Fourth Circuit examined the point at which Xerxes knew or should have known of the alleged harassment. 

In making this inquiry, the Fourth Circuit looked to a variety of factors, including the timeliness of a complaint following an alleged act of harassment, any evidence of undue delay by the employer in responding, and a determination as to whether the employer’s response was proportional to the seriousness and frequency of the alleged harassment.  For example, this involves a consideration of the repetition of unlawful conduct to demonstrate the unreasonableness of prior responses.  The Fourth Circuit reasoned that while Title VII requires employers to take steps reasonably likely to stop the harassment, the statute does not require an employer to “dispense with fair procedures for those accused or to discharge every alleged harasser.” Thus, an employer should conduct a thorough investigation into allegations of unlawful activity.  Even if a jury later concludes that harassment occurred, an employer may escape liability with a finding of a reasonable and proportional response to the alleged activity.  The Fourth Circuit determined that through this process, the rights of the victim, the alleged harasser, and the employer are balanced. 

In reviewing the factual record, the Fourth Circuit concluded that there was a genuine issue of material fact as to the point at which Xerxes had notice of alleged racial slurs and pranks at its Maryland plant – enough for the EEOC's case to survive the company’s motion for summary judgment. 

In his concurring opinion, Judge Wilkinson noted that: “The undisguised ugliness of the incidents alleged here stands as a rebuke to complacency and a reminder that the task of racial reconciliation in our country remains incomplete.”  In her separate concurring opinion, Judge Motz recalled that none of the alleged harassers were management officials, noting:  “If an employer’s president or another management official … had perpetrated this harassment, it would certainly be imputable to the employer.”  Had that been the case, the EEOC would have had much stronger evidence to have placed the employer on notice. 

The Fourth Circuit’s decision to vacate part of the District Court’s grant of summary judgment provides an important reminder to employers as to the significance of a prompt and appropriate response to allegations of unlawful conduct such as harassment, retaliation, or discrimination.  Of course, it is important for employers to have anti-discrimination policies in place, and that such policies are broadly and regularly communicated to all company employees.  Likewise, employers need well-defined complaint reporting and investigative procedures so that an appropriate response can be crafted and implemented to nip a problem in the bud.  The Xerxes decision should serve as a “wake up” call to employers as to the potential perils of slow responses to allegations of harassment, discrimination, or retaliation, and the fact that the EEOC views such situations as top litigation targets for pattern or practice lawsuits against companies. 

Co-authored by Christopher J. DeGroff and Gerald L. Maatman, Jr.

Joining a growing line of cases reflecting judicial intolerance for questionable litigation tactics, the recent ruling in EEOC v. Peoplemark, Inc. (W.D. Mich. Mar 31, 2011), represents solid support for employers targeted by questionable government-initiated litigation.

In EEOC v. Peoplemark, Inc., the EEOC alleged that the staffing company’s policy of not hiring individuals with a criminal record had a disparate impact on African-Americans.  Notably, the EEOC has repeatedly signaled that it intends to attack these blanket criminal background policies as disproportionally and discriminatorily affecting minorities.  Indeed, the Court in Peoplemark, Inc. noted that an EEOC Commissioner had even highlighted this case in a public meeting in 2008, noting that the Commission had unanimously approved the case against Peoplemark.

The problem with the EEOC’s theory was its assertion that Peoplemark’s had a blanket no-hire policy was simply not true.  In fact, of the 286 individuals the EEOC purported to represent in this case, only 22% actually had been hired and placed by Peoplemark.  Significantly, the Court found that even after the EEOC knew that was the case, it proceeded with the litigation anyway.

The EEOC based its claims on a three-year investigation into a charge filed by Sherri Scott.  Scott was a two-time felon with convictions for housebreaking and larceny who Peoplemark chose not to hire because of her criminal record.  After hotly contested subpoena enforcement actions, the company gave the EEOC over 18,000 pages of documents with the detailed personnel information of the group the EEOC sought to represent.  Based on its investigation, the EEOC filed suit on May 29, 2008 claiming that Peoplemark had a blanket policy of not hiring anyone with a criminal record.  Peoplemark denied that it had such a categorical policy.  The EEOC litigated the case for a total of 3 1/2 years, based almost exclusively on the fact that Scott had not been hired, and some “early statements” by a company witness.  In April 2009, the EEOC finally identified the 286 individuals it claimed it represented (and only after it was forced to do so by the Court).  Peoplemark’s expert was able to determine that 22% of these individuals had actually been hired and placed by the company.  Even after the EEOC had the materials showing that this was the case, it still pursued the matter.  It was only after the EEOC failed to designate a statistical expert per a scheduling deadline that it finally folded and agreed to dismiss the case. 

In its Motion for Fees, Costs, and Sanctions, Peoplemark argued that the EEOC had deliberately caused the company to incur attorneys' fees and expert fees when it should have known that the company did not have the blanket no-hire policy.  The Court agreed.  Citing the longstanding case of Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), the Court noted that it had the authority to assess fees against the EEOC if the action it brought was “frivolous, unreasonable, or without foundation….”  In the Court’s view, if the EEOC had done the investigation it should have done with its own represented individuals, it should have known that Peoplemark had, in fact, hired a number of the allegedly injured individuals, thereby undercutting the EEOC’s central “blanket policy” position.  Indeed, the Court suggested that the EEOC should have known this critical flaw before it even filed the case, after three years of an intense administrative investigation. 

The Court's decision found that the final nail in the EEOC’s coffin was its failure to identify a statistical expert to champion its disparate impact claim.  The Court noted that the EEOC knew from the day it filed this case that it would rely heavily on expert statistical testimony, and that it would “carry a major price tag for both sides.”  Nevertheless, the EEOC failed to identify an expert within the time period set in the Court’s schedule, even after receiving significant extensions.  The EEOC’s failure to pursue the statistical component of its case led the Court to find that an award of “attorneys’ fees is appropriate because of the unnecessary burden imposed on defendant.”

The remainder of the Court’s decision is a detailed analysis of how it would calculate the fees award.  After making some minor deductions for duplicative or vague requests, the Court awarded Peoplemark $219,350.17 in attorneys’ fees.  The larger component of the sanction, however, was $526,172.00 in expert fees.  The EEOC challenged the expert fees as being too high, citing what it had paid its (notably, unused) expert.  The Court found that the EEOC’s argument was like comparing “apples to oranges” and rejected its position.  After adding in some additional miscellaneous expenses, the Court ordered the EEOC to pay Peoplemark a total of $751,942.48. This is one of the largest sanction awards ever against the Commission.

EEOC v. Peoplemark, Inc. joins cases like EEOC v. Bloomberg L.P., EEOC o/b/o Serrano, et al v. Cintas Corp., and EEOC v. CRST that suggest a growing intolerance for the EEOC's "shoot-first, aim later" tactics in large-scale pattern or practice cases.  The Court in Peoplemark concluded that the stakes in these systemic cases are high, and expense of litigating them should not be taken lightly.  Employers are well-served to pressure-test the EEOC’s theories from the onset of a case by requiring the EEOC to “show its work” in all aspects of its claims.  Faced with case authority like EEOC v. Peoplemark, Inc., however, the EEOC will find it far more difficult to stonewall the targets of its litigation.

Co-authored by Gerald L. Maatman, Jr. and David B. Ross

As readers of our Blog know, Dukes, et al. v. Wal-Mart Stores is one of the most closely watched cases in years given the stakes for employers in employment discrimination class actions. The oral argument before the U.S. Supreme Court is set for March 29, 2011. As the argument date approaches, the case has garnered significant press - even overseas media attention - as the expected ruling is likely to shape workplace litigation for years to come.

This afternoon Plaintiffs filed their merits brief with the U.S. Supreme Court in Dukes, et al. v. Wal-Mart [link to Plaintiffs' brief]. In a somewhat unusual move, the consortium of law firms representing Plaintiffs also issued a press release describing the arguments within their Supreme Court submission [link to press release].

In their merits brief, Plaintiffs argue that the facts in the record show that the district court judge did not abuse his discretion in certifying the class, and that Wal-Mart's legal arguments to the contrary are inconsistent with prior precedents interpreting Rule 23. In sum, Plaintiffs contend the district court undertook a rigorous and thorough Rule 23 analysis, and its order was a proper exercise of its discretion.

Of significant interest is Plaintiffs' argument-by-argument rebuttal to Wal-Mart's Rule 23 challenges. Two arguments at the heart of the case focus on the expert testimony under-girding Plaintiffs' statistical showing of the Rule 23 elements and the impact of Plaintiffs' theories on Wal-Mart's ability to defend the claims for damages.

While admitting that the district court judge did not expressly invoke Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), in analyzing the expert presentations relating to the Rule 23 requirements, Plaintiffs contend that the Ninth Circuit found this to be no abuse of discretion, and that it did not matter because the district court judge was "guided by Daubert," concluded that the expert opinions were "based on valid principles," and were "sufficiently probative" of the Rule 23 requirements. The defense and commentators alike have criticized the certification theories, at least in part, as based on junk science.

On the due process and Rule 23 arguments underlying Wal-Mart's ability to defend against the certification theories in Dukes, Plaintiffs contend that an employer has no right to defend an employment discrimination class action on an "individual-by-individual" basis. Instead, Plaintiffs argue that the certification order properly accounted for Wal-Mart's rights even though individualized hearings would not be afforded the Defendant. Plaintiffs assert that where, as they allege, the employer's system was "infected with subjective decision-making and lacks records to document the employment decisions at issue," relief can be afforded based on expert economic models. In effect, Plaintiffs urge that a "trial-by-expert-modeling" approach is not improper.

Amicus briefs supporting Plaintiffs are due in 7 days, and after Wal-Mart submits its reply brief, the case is due to be argued on March 29, 2011.  Stay tuned!

Co-authored by Gerald L. Maatman, Jr., Jennifer A. Riley, and Brandon L. Spurlock

In a series of nationwide pattern or practice cases the EEOC has litigated since adoption of its systemic litigation program in April of 2006, the Commission has maintained that it is generally unencumbered by the 300-day statute of limitations in Section 706 of Title VII that applies to private litigants (which frames any Title VII lawsuit as limited to events occurring within 300 days preceding the filing on an EEOC charge with the EEOC). Typically, the EEOC argues that it can sue an employer back to the start of the allegedly illegal pattern or practice (e.g., a discriminatory practice of denying promotions to female employees) irrespective of the date when a charging party filed his or her EEOC administrative charge. This raises the stakes for employers in this type of litigation, since the EEOC's theory expands the parameters of the case and sweeps in large numbers of claimants for whom the Commission seeks damages.

The EEOC has a mixed track record of success in convincing the courts to adopt its view of the statute of limitations issue. A recent decision in EEOC v. Freeman, No. 09-CV-2573, 2011 WL 337339 (D. Md. Jan. 31, 2011) [ruling link], rejects the Commission's views, and gives employers a new statute of limitations argument in pattern or practice litigation brought by the EEOC. 

In EEOC v. Freeman, an African-American woman filed a charge of discrimination with the EEOC in January of 2008 claiming that Freeman discriminated against her on the basis of her race when it rejected her employment application based on her credit history.  Sometime after it began investigating the charge, the EEOC expanded its investigation to include Freeman's use of criminal history information for all applicants.  The EEOC eventually brought suit against Freeman alleging an on-going, nationwide pattern or practice of discrimination against Black, Hispanic, and male job applicants based on the use of criminal background checks. 

Freeman's initial responsive pleading raised a statute of limitations defense by arguing that the EEOC could not seek to recover on claims based on unlawful employment decisions that occurred more than 300 days before the filing of the original charge.  The Court's decision on that motion - EEOC v. Freeman, No. 09-CV-2573, 2010 WL 1728847 (D. Md. Apr. 26, 2010) [ruling link] - soundly rejected the EEOC's theory.

After limited discovery, Freeman then brought a motion for partial summary judgment contending that, for claims that were not part of the original charge, the 300 days should run - not from the date of the original charge - but from the date that the EEOC notified the company that it was expanding its investigation to encompass new claims.  The Court agreed, holding that the "relevant date" for purposes of the 300-day time bar is the "date of notice" of the new charges.  Freeman, 2011 WL 337339, at *4.  The Court rejected the EEOC's argument that the "plain language of Title VII" compels a different result, concluding that the EEOC's right to expand its investigation without a new charge is a right carved out by case law "and not addressed in the statutory language."  Id.  The Court also rejected the EEOC's argument that Freeman should be required to demonstrate "substantial prejudice" from the delay in notification, finding that "it is plain" that Freeman would be prejudiced by the addition of ten claims resulting from an expanded investigation of which it was not made aware for eight months.  Id. at *5.  Finally, the Court rejected the EEOC's arguments that:  (i) the original charge provided sufficient notice, (ii) Freeman "understood" that its use of criminal information was at issue, and (iii) Freeman had "independent notice" via the EEOC's published guidance documents.  Id. at *5-7.  In particular, the Court noted that Freeman's provision of information to the EEOC regarding all aspects of its background check policy did not establish Freeman's knowledge that its use of criminal history information was under challenge or investigation.  Id. at *6. 

Whereas the implications of the Court's decision in EEOC v. Freeman are not yet clear, it gives employers defending pattern or practice claims new ammunition against the EEOC, particularly where the Commission delays in disclosing the parameters of an expanded investigation encompassing new claims or theories.

The year just ended was a seismic one for employment-related class action litigation, paving the way for more far-reaching judgments, court rulings, and changes to class action law in 2011. Furthermore, in 2010, the value of major employment discrimination class action settlements increased four-fold over the prior year and the top ten settlements of wage & hour, ERISA, and governmental enforcement class actions increased to $1.16 billion, the highest amount ever.

The “tipping point” aspect of these changes is featured in the 2011 edition of Seyfarth Shaw’s Workplace Class Action Litigation Report. The 664-page Report, our Seventh Annual Edition, examines 849 decisions rendered in 2010 against employers in state and federal courts, including private plaintiff and government enforcement actions. The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become to "go to" research and resource guide for businesses and their corporate counsel facing complex litigation.

A preview copy is available here, and can be ordered here.

While shareholder and securities class action filings experienced only a slight uptick in 2010, employment-related class action filings increased dramatically.  Anecdotally, surveys of corporate counsel confirm that workplace litigation – and especially class actions, multi-plaintiff lawsuits, and government enforcement litigation – continues to drive corporate legal budget expenditures, as well as the type of legal dispute that causes the most concern for their companies.

In terms of key decisions, there was no class action ruling in 2010 quite like Dukes, et al. v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010), a Title VII gender discrimination case challenging pay and promotions involving 1.5 million class members.  On April 26, 2010, an en banc panel of the Ninth Circuit affirmed the certification order in Dukes by a 6 to 5 vote.  A detailed analysis of the Ninth Circuit ruling in Dukes is contained in Appendix I at page 617 of the Report.  Wal-Mart subsequently filed a petition for certiorari with the U.S. Supreme Court, which was granted on December 6, 2010.  A future ruling by the Supreme Court in Dukes is likely to be one of the top class action developments in 2011 and beyond.

Employment discrimination, ERISA, and FLSA litigation filings increased over the past year.  FLSA and employment discrimination cases spiked sharply, and outpaced ERISA filings.  Based on statistics from PACER filings with the Administrative Office of the U.S. Courts, employment discrimination lawsuits increased to 14,559 in 2010 from 13,720 in 2009; ERISA lawsuits increased to 9,038 in 2010 from 8,944 in 2009; and FLSA lawsuits increased to 6,761 in 2010 from 6,120 in 2009.  Since the majority of FLSA filings were on behalf of groups of employees, wage & hour class actions and collective actions out-paced filings of class actions for employment discrimination and ERISA violations.  In turn, while plaintiffs continued to achieve initial certification of wage & hour collective actions, employers also secured several significant victories in defeating conditional certification motions and obtaining decertification of § 216(b) collective actions.  Given the trickle-down phenomenon of class action settlements (and the increased awareness of wage & hour issues by workers), it is expected that the pursuit of nationwide FLSA collective actions by the plaintiffs’ bar will continue in 2011.

A new case law trend in 2010 focused on workplace arbitration agreements and their enforceability and impact in the class action context. While no one suggests that the sun is setting on workplace class actions, the Supreme Court’s ruling in Stolt-Nielsen S.A., et al. v. Animalfeeds International Corp., 130 S. Ct. 1758 (2010), arms employers with additional ammunition to confront class action litigation through drafting of comprehensive workplace arbitration programs. Stolt-Nielsen quickly spawned several rulings in employment discrimination and wage & hour class actions, thereby demonstrating the importance of this development for employers utilizing arbitration agreements.  This development is likely to accelerate, as the Supreme Court considers state law limits on class action waivers in Concepcion, et al. v. AT&T Mobility, a case scheduled for decision in the Spring of 2011.

On the wage & hour front, a confluence of factors contributed to an ever-increasing number of claims. In one respect, 2010 might be termed the “Year of the Misclassified Worker” class action lawsuit based on end-of-the-year figures that show a sharp increase in crackdowns this year by state and federal authorities, and filings by class action lawyers in pursuing private lawsuits against companies that allegedly misclassify employees.  Employers utilizing independent contractors were the focus of intense litigation scrutiny on these fronts. Approximately 20 states and scores of municipalities passed laws in the past two years that make it easier to force employers to reclassify independent contractors as employees and seek unpaid taxes, or authorizing claims for “wage theft.”  Likewise, the DOL’s enforcement litigation resulted in employers paying $6.5 million in back wages to 5,261 employees in fiscal 2010, up sharply from $2.6 million obtained for 2,190 employees in 2009.  The DOL and Internal Revenue Service (“IRS”) also increased their budgets and staffs to identify and audit employers and their classifications of workers, as well as implementing its new “Plan/Prevent/Protect” enforcement strategy.

Due to the enormous financial stakes, trials of class actions continue to be rare, and verdicts in these trials rarer still.  However, 2010 witnessed the largest employment discrimination class action trial verdict ever – the $250 million verdict in Velez, et al. v. Novartis Pharmaceuticals Corp., Case No. 04-CV-9194 (S.D.N.Y.) following a seven-week trial in the Spring of 2010.  After the verdict, the parties promptly settled the class action for $175 million on July 14, 2010.  The settlement is one of the largest employment discrimination class action settlements ever.

If trials of class actions were rare, settlements of class actions in 2010 reflected a continuing trend from past years, in which significant monetary payments were made in mega-class actions with nationwide classes.  Settlements in FLSA collective actions and ERISA class actions once again outpaced employment discrimination class action settlements in terms of overall settlement values.  In turn, settlement amounts in wage & hour class actions and government enforcement lawsuits experienced significant increases over 2009 figures.  In closing the year, plaintiffs secured a $57 million verdict in a wage & hour class action in Rekhter, et al. v. Washington Department of Social And Health Services, Case No. 07-2-895-5 (Thuston County, WA), on December 20, 2010.

Finally, case law developments under the CAFA accelerated in 2010.  The statute has had profound effects on litigation strategy and the structuring of underlying class actions.  In this context, the CAFA’s impact on workplace class actions is both varied and evolving.  Class actions and collective actions under Title VII, the ADEA, the FLSA, and ERISA typically are brought in federal court.  The CAFA may have limited impact on strategic decisions in those cases relative to choice of venue in a federal court or state court.  Class actions in state law-based wage & hour litigation are another matter.  The plaintiffs’ bar and defense bar alike continue to confront novel CAFA issues in wage & hour cases, as the fight over venue is often a key driver of exposure and risk.  On the one hand, employers sued in state law wage & hour class actions are increasingly confronted by plaintiffs’ lawyers seeking to avoid removal to federal court by various stratagems, including prayers for relief of less than $5 million, the filing of multiple “baby” class action claims on behalf of fewer than 100 plaintiffs, and limiting the scope of the class to residents of one state.  On the other hand, defense counsel seeking (often successfully) to dismiss state law claims pursued by plaintiffs with FLSA claims in “hybrid” wage & hour class actions in federal court argue that judges should not exercise supplemental jurisdiction over the state law claims.  Federal courts, in turn, are increasingly confronted with questions of whether original jurisdiction exists under the CAFA over such hybrid state law claims, and employers also may face a two front litigation war – one in federal court and the other in state court – depending on resolution of those CAFA issues.  These litigation issues continue to shape class action practice and defense strategy, and are likely to do so for the foreseeable future.

Co-authored by Christopher J. DeGroff and Brandon L. Spurlock

The EEOC just published its FY 2010 statistics. Its FY 2010 Performance and Accountability Report is dated November 15, and was posted on line at the EEOC's website this week. View Report.

The EEOC report demonstrates that more employment discrimination charges are being filed against employers. The EEOC had the highest number of discrimination charges filed in FY 2010 than ever before in its history - 99,922 charges, which was an increase over the levels in 2008 and 2009, which were the highest levels ever since the EEOC's establishment in 1964. The EEOC brought 250 new lawsuits in 2010, and resolved 285 existing cases in 2010 for over $85 million. Overall, the EEOC recovered $319.3 million for allegedly injured parties, an increase of over $25.2 million over the previous year.  These across-the-board increases make good on the EEOC's promises it made last year to reduce its charge backlog.  Acting Chairman Stuart Ishimaru noted in his message at the end of 2009 that the EEOC would address this backlog by "working smarter and harder" in 2010, and noted that this is "just the start."  View Message.

 The EEOC Report also underscores the new focus and direction of the EEOC relative to class-wide, systemic charges and claims. The EEOC's docket of "systemic" class-wide investigations has increased dramatically. For example, there were 39 Commissioner’s charges being investigated, compared with 15 Commissioner’s charges in April 2006, the month before the EEOC established its systemic discrimination program.  In addition, the EEOC’s docket of systemic, pattern or practice cases more than doubled over the prior year - with 60 active pattern or practice cases. Most tellingly, the EEOC now has a current docket of 465 active systemic investigations and hired 39 new investigators in 2010. Clearly, the Commission is gearing up for more enforcement.

The bottom line is that there are more employment discrimination charges being filed, which necessarily will lead to more employment discrimination lawsuits; in addition, the EEOC is gearing up with more personnel and a focus on systemic "big case" investigations against employers, and while 2010 had more such systemic cases brought than ever before, employers can expect even more in 2011.

The biggest news on the class action front is that the Supreme Court heard oral argument yesterday in AT&T Mobility v. Concepcion. That case presents the issue of whether class action waivers in consumer contracts are enforceable even when state contract law bars such waivers. The company is challenging a Ninth Circuit ruling in AT&T Mobility v. Concepcion., 584 F.3d 849 (9th Cir. 2009), which struck down its class action waiver in a consumer arbitration agreement as unconscionable under California law. The Ninth Circuit held that the Federal Arbitration Act ("FAA") does not preempt California law on this issue. California law invalidated the class action waiver on the basis of unconscionability where the agreement is a contract of adhesion drafted by the party with superior bargaining power, individual disputes predictably involve small amounts of damages, and the party with superior bargaining power has prohibited class claims to avoid facing a large number of small claims.

Though the case involves consumer fraud issues in cell phone contracts involving claims of less than $10, the stakes are high and the Supreme Court's eventual ruling also may impact employers. At issue is whether the Federal Arbitration Act preempts states from conditioning the enforcement of an arbitration agreement on the availability of particular procedures — in this instance, class-wide arbitration — when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims. Multiple amicus groups for employees have submitted briefs arguing that a ruling in favor of AT&T Mobility ultimately will harm employees and insulate employers from class claims if they bind workers to arbitration agreements which do not allow for class-wide litigation. The oral argument on November 8 mentioned this potential impact; Justice Kagan's questioning referred to the supposed evils of class arbitration and how no business would want it (due to limited review of an arbitration ruling,, etc.), and Justice Scalia made the interesting point that the real issue to him is whether corporate defendants are being coerced into abandoning regular arbitration. In essence, this boils down to a policy choice: because no rational business would agree to explicit class arbitration, if the Supreme Court rules for the consumer side, arbitration may be dead if the only way to have an enforceable arbitration agreement is to allow for class-wide dispute resolution.

The National Workrights Institute, an advocacy group for employee rights, filed an amicus brief in support of Plaintiffs; it argued that class actions like the one filed by the Concepcions are an essential procedure for the vindication of the rights of claimants of modest means with modest claims. The group argued that without the option of participating in class action litigation, employees with comparatively small claims against employers would be at a disadvantage in pursuing claims for discrimination or wage and hour violations.

On the other hand, the Equal Employment Advisory Council, an association of employers, submitted an amicus brief contending that permitting class arbitration where the parties have agreed not to do so would defeat one of the most mutually advantageous purposes of arbitration - lower cost resolution of disputes. The EEAC argued that the Ninth Circuit's ruling, in effect, establishes an across-the-board ban on class arbitration waivers, and also undermines most, if not all, of the practical benefits that inure to employers and employees alike by agreeing to arbitrate workplace disputes."

Stay tuned - this future ruling will be important to all employers with workplace arbitration agreements.

The EEOC is ratcheting up its systemic investigations like never before. Employers are increasingly facing nationwide requests for personnel data and company-wide investigations of their personnel practices. The EEOC is also resorting to its subpoena power to force employers to turn over their HRIS data. In a case of significant importance rendered on September 7, the Third Circuit in EEOC v. Kronos, Inc. narrowed an EEOC’s third-party administrative subpoena and adopted the defendant’s broad confidentiality proposal. The Third Circuit overturned part of the decision, affirmed part of it, and remanded the confidentiality issue back for further deliberations.

The case arose out of a disability discrimination claim by Vicky Sandy, who is hearing and speech impaired. She applied for a job as a cashier, bagger, and stocker with Kroger Food Stores and was not hired. Kroger utilized a test created by Kronos in determining whether or not to hire Ms. Sandy. It was this test and its possible disparate impact that became the focus of the EEOC’s investigation. The EEOC sought information on the use of the test in hiring from Kronos through a third-party subpoena. The EEOC also expanded its investigation to include race discrimination, even though Ms. Sandy’s complaint had not alleged race discrimination.

The Third Circuit allowed the EEOC’s administrative subpoena requesting information about the test used by Kroger as it related to the claim of disability discrimination. However, it rejected the EEOC's request for information regarding the test as it related to a race discrimination claim. The Third Circuit reasoned that "[w]e conclude that the inquiry into potential race discrimination is not a reasonable expansion of Sandy’s charge. Instead, the EEOC’s subpoena for materials related to race constitutes an impermissible ‘fishing expedition.’” The Third Circuit also vacated the District Court’s confidentiality order and remanded the issue so that the District Court could conduct a “good faith balancing test” before reissuing a new order.

EEOC v. Kronos, Inc. is fertile source for employers seeking to narrow and opposed unreasonable request for information from the EEOC. We expect the decision to received significant citation in employer briefs challenging the EEOC's discovery requests and subpoenas in systemic investigations.