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

Top 10 Government Enforcementsettlement amounts by class action type

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

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

 

 

washington-monument-754745_960_720Seyfarth Synopsis: Governmental enforcement litigation was a mixed bag in 2016. The U.S. Department of Labor (“DOL”) and the Equal Employment Opportunity Commission (“EEOC”) continued their aggressive enforcement programs, but their effectiveness was down “by the numbers” as compared to previous years. What does this mean for 2017?  In the 6th and final installment in our series of blog postings on workplace class action trends, we examine what employers are likely to see in 2017 on the government enforcement litigation front.

Introduction

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

Top 10 Government Enforcement

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

Governmental Enforcement Litigation Trends In 2016

On the governmental enforcement front, both the EEOC and the DOL intensified the focus of their administrative enforcement activities and litigation filings in 2016.  At the same time, the number of lawsuits filed and the resulting recoveries by settlement – measured by aggregate litigation filings and the top 10 settlements in government enforcement litigation – were less than half of what the EEOC and DOL achieved in 2015.

The EEOC’s lawsuit count dropped precipitously. By continuing to follow through on the systemic enforcement and litigation strategy plan it announced in April of 2006 (that centers on the government bringing more systemic discrimination cases affecting large numbers of workers), the EEOC filed less cases overall but more systemic lawsuits. This manifested the notion that the Commission’s limited budget and bandwidth are best deployed to matters where a systemic focus is most needed and the largest numbers of alleged victims are at issue.  As 2016 demonstrated, the EEOC’s prosecution of pattern or practice lawsuits is now an agency-wide priority backed up by the numbers.  Many of the high-level investigations started in the last three years mushroomed into the institution of EEOC pattern or practice lawsuits in 2016. These numbers are shown by the following chart:

EEOC Systemic Cases: Filed, Resolved, And On Active Docket
FY 2013 – 2016

Cases Filed

The Commission’s 2016 Annual Report also announced that it expects to continue the dramatic shift in the composition of its litigation docket from small individual cases to systemic pattern or practice lawsuits on behalf of larger groups of workers.  The EEOC’s FY 2016 Annual Report detailed the EEOC’s activities from October 1, 2015 to September 30, 2016.  The EEOC’s Report indicated that:

  • The Commission completed work on 273 systemic investigations in FY 2016, which resulted in 21 settlements or conciliation agreements that yielded a total recovery of $20.5 million for systemic claims; six of the settlements involved 50 alleged victims or more, and 13 settlements included 20 or more alleged victims. The FY 2016 recoveries represent a decrease of systemic recoveries in FY 2015 when the Commission netted $33 million based on resolution of systemic investigations.
  • The EEOC recovered $347.9 million for alleged victims of employment discrimination in FY 2016 through mediation, conciliation, and settlements. This represented a decrease of $10.4 million as compared to FY 2015, when the Commission garnered $356.6 million for its enforcement efforts.
  • For its lawsuits, the EEOC secured $58.3 million in recoveries in FY 2016.  This figure was down $7 million as compared to the FY 2015 recoveries of $65.3 million. However, the EEOC resolved fewer lawsuits than it did last year, and recovered less money from those cases.  Specifically, the EEOC resolved 139 lawsuits during FY 2016 for a total recovery of $52.2 million; by comparison, the EEOC resolved 155 lawsuits in FY 2015 for a total recovery of $65.3 million.
  • The EEOC filed only 86 lawsuits in 2016 (down significantly from the 139 lawsuits it filed in 2015), of which 31 were “multiple victim” lawsuits, with 18 cases involved claims of systemic discrimination on behalf of 20 or more workers, and 13 cases involved multiple alleged discrimination victims of up to 20 individuals.  The EEOC had 165 cases on its active lawsuit docket by year end (down from FY 2015, when it had 218 cases on its docket, of which 48% involved multiple aggrieved parties and 28.5% involved challenges to alleged systemic discrimination).  Overall, this represented increases in these categories in terms of the make-up of the Commission’s litigation being tilted more heavily toward systemic cases.
  • The EEOC also received 91,503 administrative charges of discrimination, which was slightly up from the FY 2015 total of 89,385 charges and the FY 2014 total of 88,778 charges. Thus, charge activity was one of the heaviest in the 52 year history of the Commission.
  • The EEOC also encountered significant criticism in the manner in which it enforced anti-discrimination laws.  This criticism took various forms in terms of judicial sanctions, suits against the Commission by private litigants and States, and questioning by Congress over the EEOC’s alleged lack of transparency.

While the inevitable by-product of these governmental enforcement efforts is that employers are likely to face bigger lawsuits on behalf of larger groups of workers in 2017, the EEOC’s systemic litigation program is not without its detractors.  Several federal judges entered significant sanctions against the EEOC – some in excess of seven figures – for its pursuit of pattern or practice cases that were deemed to be without a good faith basis in fact or law. The U.S. Supreme Court in EEOC v. CRST Van Expedited, Inc., 136 S. Ct. 1642 (2016), examined the propriety of the $4.7 million fee sanction, the largest fee sanction ever leveled against the Commission; while the EEOC had been successful in its initial appeal in reversing the sanction before the Eighth Circuit, the Supreme Court unanimously rejected the EEOC’s position, remanded the fee sanction issue for review, and gave new life to the employer’s efforts to recoup millions of dollars against the Commission.

Fiscal year 2016 also marked another year in the EEOC’s 2012-2016 Strategic Enforcement Plan (“SEP”).  The SEP was created in 2012 as a blueprint to guide the EEOC’s enforcement activity.  Its most controversial and perhaps most far-reaching effect on the agency’s activity is the priority it gives to systemic cases: those pattern or practice, policy, or class-like cases where the alleged discrimination has a broad impact on an industry, profession, company, or geographic area.  Systemic cases have been the main driver of EEOC litigation over the past few years, and likely will be well into the future.  The EEOC is now fighting challenges to its power to bring those cases on a number of fronts.  Among other things, it is aggressively challenging any court’s ability to review how it conducts certain statutorily-mandated procedures before bringing suit, including how it investigates its cases and tries to conciliate those cases with employers.  If successful in those efforts, the EEOC will have greatly eased its path to pursuing systemic cases.

The EEOC is not only expanding its reach in procedural terms, but also it is attempting to broaden the scope of its authority through an expansion of the scope of anti-discrimination laws themselves.  In a number of recent cases, the EEOC has advanced novel legal theories that would, among other things, expand anti-discrimination protections to cover transgender employees and require employers to reasonably accommodate pregnant employees, even those who are experiencing normal pregnancies.  The EEOC continued to push the edge of the legal envelope in 2016, viewing itself as an agency that not only enforces the law, but also one that expands the scope of those laws as it deems appropriate.

For this and other reasons, the agency has come under increasing scrutiny and criticism by Republican members of Congress, business groups, and critics of an allegedly activist agency wasting the taxpayers’ dollars.  Such criticism is unlikely to stem the tide of systemic cases or deter the EEOC from continuing to try to expand its enforcement powers.  Subject to policy-directed changes mandated by the Trump Administration, employers can expect the EEOC will use the next year to continue to push for expansion of its procedural and substantive limits.

The DOL also undertook aggressive enforcement activities in 2016.

The Wage & Hour Division (“WHD”) kept up its aggressive enforcement actions in 2016, particularly in the hotel, restaurant, and retail industries.  Much of WHD’s enforcement and other activities took place under the umbrella of “fissured industries” initiatives, which focus on industries with high usage of franchising, sub-contracting, and independent contractors.  At the conclusion of those enforcement actions, WHD continued to increase its use of civil money penalties, liquidated damages, and enhanced compliance agreements.

Legislatures and government agencies in various states and municipalities also increased their activities on the wage & hour front.  Whether increasing the minimum or living wage, enacting scheduling laws and ordinances, implementing wage theft prohibitions, or increasing the minimum salary level required for exemption, many have already revised or are actively planning to revise laws and rules governing how businesses pay employees in 2017.

With the approaching ten-year anniversary of the last time Congress enacted a minimum wage increase (2007), advocates of a minimum wage increase are likely to turn up the volume on their requests for an increase to the federal minimum wage in 2017.  This may well depend on the politics of the debate, for the incoming Republican Administration appears opposed to such an increase.

Finally, if history is a guide, the incoming Administration is likely to return to the decades-old practice of issuing opinion letters in response to specific requests, which had been abandoned by the Obama Administration’s decision-makers at the DOL.

Over the past several years, the DOL’s Wage & Hour Division (“WHD”) fundamentally changed the way in which it pursues its investigations.  Suffice to say, the investigations are more searching and extensive, and often result in higher monetary penalties for employers. According to the DOL, since early 2009, the WHD has closed 200,000 cases nationwide, resulting in more than $1.8 billion in back wages for over 2 million workers.  In FY 2016, the WHD collected more than $266.5 million in back pay wages, an increase of $20.5 million over the past year. Hence, in 2016, employers finally saw the impact of these changes on the WHD’s enforcement priorities, and 2017 is apt to bring much of the same absent a stark change in priorities under the Trump Administration.

The DOL also focused its activities in 2016 on wage & hour enforcement on what it terms “24/7.” The WHD’s Administrator, Dr. David Weil, was an architect of the WHD’s fissured industry initiative.  This initiative focuses on several priority industries, including food services (both limited service/full service establishments), hotel/motel, residential construction, janitorial services, moving companies/logistics providers, agricultural products, landscaping/horticultural services, healthcare services, home healthcare services, grocery stores, and retail trade.  In FY 2016, the WHD reported recoveries of $143,274,845 for nearly 19,000 workers within these fissured industries.

Not to be outdone, the National Labor Relations Board (“NLRB”) undertook an ambitious agenda in 2016 too.  It reconsidered well-settled NLRB principles on joint employer rules and representative elections, entertained the possibility of extending the protections of the National Labor Relations Act (“NLRA”) to college athletes, and litigated novel claims seeking to hold franchisors liable for the personnel decisions of franchisees. More than any other area impacting workplace litigation, the NLRB also remained steadfast in its view that workplace arbitration agreements limiting class or collective claims are void under § 7 of the NLRA. It pursued a myriad of unfair labor practice charges against employers for alleged violation of the NLRA for use of arbitration agreements with class action and collective action waivers.

Implications For Employers In 2017?

So what are employers likely to see in 2017 on the government enforcement litigation front? In the early days of the Trump Administration, clear direction on litigation policy remain unclear. Most pundits believe that employers can expect less litigation and less regulation than during the Obama Administration. Furthermore, the phenomenon of “regulation by enforcement litigation” is likely no longer the by-product of the DOL and the EEOC’s enforcement litigation programs. Most likely, control of agency budgets may well provide the lever that the Trump White House may use to force its policy choices upon the government enforcement litigation programs of the DOL and the EEOC.

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

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

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

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

Case Background

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

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

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

The Decision

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

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

Implications For Employers

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

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

FLSA 3 year graphicWage & hour litigation is a “hot button” issue for employers around the country. In our fifth installment video detailing the six key findings of the Workplace Class Action Report, we look at the numbers and implications behind wage & hour class action certification rulings in 2016 and discuss the FLSA regulations that impact employers in our current economy which has substantially changed since its inception in the 1930s.

As we previously discussed on our blog (here and here), and as profiled in our Workplace Class Action Report for 2017, wage & hour litigation filings decreased for the first time in over a decade in 2016. Nonetheless, wage & hour class action and collective action certification decisions outstripped all other types of certification orders over the past year. Of the 224 wage & hour certification decisions in 2016, there were 195 conditional certification rulings and 29 decertification rulings. In contrast, in 2015, there were 175 wage & hour certification decisions, including 153 conditional certification rulings and 22 decertification rulings. While plaintiffs’ lawyers won more conditional certification motions than compared to prior years, employers also won decertification motions at higher rates than as compared to 2015.

all cert graphic

FLSA 3 year graphic

 

Additional factors set to coalesce in 2017 – including litigation over the new FLSA regulations and the direction of wage & hour enforcement under the Trump Administration – are apt to drive these exposures for Corporate America. To the extent that government enforcement of wage & hour laws is ratcheted down, the private plaintiffs’ bar likely will “fill the void” and again increase the number of wage & hour lawsuit filings. This is especially relevant to the extent that litigation of class actions by plaintiffs’ lawyers are viewed as an investment. Prosecution of wage & hour lawsuits is a relatively low cost investment without significant barriers to entry relative to other types of workplace class action litigation.

Top 10 Wage & Hour

Because the majority of wage & hour lawsuits are collective or class actions, and because the plaintiffs’ bar has shown increasing activity with regard to this type of litigation, employers can expect wage & hour litigation to have a substantial impact on their litigation exposures in 2017 and in years to come.

 

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

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

Wednesday March 1, 2017

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

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

#16-3836 2017 WCAR Front Cover for WordSeyfarth Synopsis: This is the fifth installment of our blog series on key trends for workplace class action litigation in 2016. In terms of the sheer number of rulings, a significant trend saw wage & hour class action and collective action certification decisions outstripping all other types of certification orders over the past year. This reflects the simple truism that with more wage & hour litigation case filings over the last 36 months than all other varieties of workplace class actions, there have been more conditional certification and decertification decisions in that space than in any other area of workplace class action litigation. The takeaway for employers is that the tidal wave of this type of workplace class action claim is not ending anytime soon.

Introduction

An undeniable fact of litigation statistics is that wage & hour certification decisions in 2016 increased geometrically as compared to last year. Of the 224 wage & hour certification decisions in 2016, there were 195 conditional certification rulings and 29 decertification rulings. In contrast, in 2015, there were 175 wage & hour certification decisions, including 153 conditional certification rulings and 22 decertification rulings. While plaintiffs’ lawyers won more conditional certification motions than compared to prior years, employers also won decertification motions at higher rates than as compared to 2015. At the same time, that led to a more rapid and robust development of case law on conditional certification and decertification issues in the wage & hour context.

The Story Behind The Numbers

While shareholder and securities class action filings witnessed an increase in 2016, employment-related class action filings remained relatively flat.

By the numbers, filings for employment discrimination and ERISA claims were basically flat over the past year, while the volume of wage & hour cases decreased for the first time in over a decade.

By the close of the year, ERISA lawsuits totaled 6,530 filings (down slightly as compared to 6,925 in 2015 and 7,163 in 2014), FLSA lawsuits totaled 8,308 filings (down as compared to 8,954 in 2015 and up from 8,066 in 2014), and employment discrimination lawsuits totaled 11,593 filings (an increase from 11,550 in 2015 and a decrease from 11,867 in 2014).

In terms of employment discrimination cases, however, the potential exists for a significant jump in case filings in the coming year, as the charge number totals at the EEOC in 2015 and 2016 reached record levels in the 52-year history of the Commission; due to the time-lag in the period from the filing of a charge to the filing of a subsequent lawsuit, the charges in the EEOC’s inventory will become ripe for the initiation of lawsuits in 2017.

By the numbers, FLSA collective action litigation filings in 2016 far outpaced other types of employment-related class action filings; virtually all FLSA lawsuits are filed and litigated as collective actions.  Up until 2015, lawsuit filings reflected year-after-year increases in the volume of wage & hour litigation pursued in federal courts since 2000; statistically, wage & hour filings have increased by over 450% in the last 15 years.

The fact of the first decrease in FLSA lawsuit filings in 15 years is noteworthy in and of itself. However, a peek behind these numbers confirms that with 8,308 lawsuit filings, 2016 was the second highest year ever in the filing of such cases (only eclipsed by 2015, when 8,954 lawsuits were commenced).

Given this trend, employers may well see record-breaking numbers of FLSA filings in 2017.  Various factors are contributing to the fueling of these lawsuits, including: (i) new FLSA regulations on overtime exemptions in 2016, which have been delayed in terms of their implementation due to legal challenges by 13 states; (ii) minimum wage hikes in 21 states and 22 major cities set to take effect in 2017; and (iii) the intense focus on independent contractor classification and joint employer status, especially in the franchisor-franchisee context. Layered on top of those issues is the difficulty of applying a New Deal piece of legislation to the realities of the digital workplace that no lawmakers could have contemplated in 1938. The compromises that led to the passage of the legislation in the New Deal meant that ambiguities, omitted terms, and unanswered questions abound under the FLSA (something as basic as the definition of the word “work” does not exist in the statute), and the plaintiffs’ bar is suing over those issues at a record pace.

Virtually all FLSA lawsuits are filed as collective actions; therefore, these filings represent the most significant exposure to employers in terms of any workplace laws.  By industry, retail and hospitality companies experienced a deluge of wage & hour class actions in 2016.

This trend is illustrated by the following chart:

FLSA filings

What The Numbers Should Mean To Employers

The story behind these numbers is indicative of how the plaintiffs’ class action bar chooses cases to litigate. It has a diminished appetite to invest in long-term cases that are fought for years, and where the chance of a plaintiffs’ victory is fraught with challenges either as to certification or on the merits. Hence, this reflects the various differences in success factors in bringing employment discrimination and ERISA class actions, as compared to FLSA collective actions.

Obtaining a “first stage” conditional certification order is possible without a “front end” investment in the case (e.g., no expert is needed unlike the situation when certification is sought in an ERISA or employment discrimination class action) and without conducting significant discovery due to the certification standards under 29 U.S.C. § 216(b).  Certification can be achieved in a shorter period of time (in 2 to 6 months after the filing of the lawsuit) and with little expenditure of attorneys’ efforts on time-consuming discovery or with the costs of an expert. As a result, to the extent that litigation of class actions by plaintiffs’ lawyers are viewed as an investment, prosecution of wage & hour lawsuits is a relatively low cost investment without significant barriers to entry relative to other types of workplace class action litigation. As compared to ERISA and employment discrimination class actions, FLSA litigation is less difficult or protracted, and more cost-effective and predictable. In terms of their “rate of return,” the plaintiffs’ bar can convert their case filings more readily into certification orders, and create the conditions for opportunistic settlements over shorter periods of time. The certification statistics for 2016 confirm these factors.

An increasing phenomenon in the growth of wage & hour litigation is worker awareness. Wage & hour laws are usually the domain of specialists, but in 2016 wage & hour issues made front-page news.  The widespread public attention to how employees are paid almost certainly contributed to the sheer number of suits.  Big verdicts and record settlements also played a part, as success typically begets copy-cats and litigation is no exception. Yet, the pervasive influence of technology is also helping to fuel this litigation trend. Technology has opened the doors for unprecedented levels of marketing and advertising by the plaintiffs’ bar – either through direct soliciting of putative class members or in advancing the overall cause of lawsuits. Technology allows for the virtual commercialization of wage & hour cases through the Internet and social media.

Against this backdrop, wage & hour class actions filed in state court also represented an increasingly important part of this trend.  Most pronounced in this respect were filings in the state courts of California, Florida, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania.  In particular, California continued its status in 2016 as a breeding ground for wage & hour class action litigation due to laxer class certification standards under state law, exceedingly generous damages remedies for workers, and more plaintiff-friendly approaches to class certification as well as wage & hour issues under the California Labor Code.  For the fourth year out of the last five, the American Tort Reform Association (“ATRA”) selected California as one of the nation’s worst “judicial hellholes” as measured by the systematic application of laws and court procedures in an unfair and unbalanced manner.  Calling California one of the worst of the worst jurisdictions, the ATRA described the Golden State as indeed that for plaintiffs’ lawyers “seeking riches and the expense of employers …” and where “lawmakers, prosecutors, and judges have long aided and abetted this massive redistribution of wealth.”

#16-3836 2017 WCAR Front Cover for WordBy Lorie Almon, Gerald L. Maatman, Jr., and Ian Morrison

Seyfarth’s Annual Workplace Class Action Report Webinar is next Tuesday, February 21, 2017. Click here to register and attend. It’s free!

As we face a new year, Seyfarth is pleased to offer strategic guidance through our 13th Annual Workplace Class Action Litigation Report. Across all varieties of workplace litigation, class action dynamics increasingly have been shaped and influenced by recent rulings in the U.S. Supreme Court. This past year the Supreme Court issued several key decisions on complex employment litigation issues and accepted more cases for review that are posed for rulings this coming year. Some decisions may be viewed as hostile to the expansive use of Rule 23, while others are hospitable and strengthen the availability of class actions against employers.

For an interactive analysis of 2016 decisions and emerging trends, please join us for our annual webinar. The Report’s author, Gerald L. Maatman, Jr., along with Lorie Almon, chair of our wage & hour group, and Ian Morrison, co-chair of our ERISA class action group, will cover a changed national landscape in workplace class action litigation.   In our workplace class action webinar, highlights from the Report will outline a number of key trends for employers in 2017, including:

  • The implications and fall-out from the Supreme Court’s key decisions on complex employment litigation and class action issues of 2016, and discussion of the cases accepted for review that are posed for rulings in 2017.
  • Lessons to be learned from the monetary value of the top employment-related class action settlements and why they declined significantly in 2016 after they reached all-time highs in 2014 and 2015.
  • The background on why more favorable class certification rulings for the plaintiffs’ bar were issued in 2016 than in past years.
  • How the private plaintiffs’ bar is likely to “fill the void” after the Trump inauguration and increase the number of wage & hour lawsuit filings in 2017, following case filing statistics reflecting that wage & hour litigation filings decreased over the past year for the first time in a decade.
  • Why there were more conditional certification and decertification decisions in the wage & hour space than in any other area of workplace class action litigation.
  • The dynamics behind the U.S. Department of Labor and Equal Employment Opportunity Commission’s continued aggressive litigation approaches in 2016 and what is in store for government enforcement litigation under the Trump Administration.

The date and time of the webinar is February 21, 2017:

1:00 p.m. to 2:00 p.m. Eastern Time

12:00 p.m. to 1:00 p.m. Central Time

11:00 a.m. to 12:00 p.m. Mountain Time

10:00 a.m. to 11:00 a.m. Pacific Time

Speakers: Lorie Almon, Gerald L. Maatman, Jr., and Ian Morrison

 

supreme-court-546279_960_720By Gerald L. Maatman, Jr., Tiffany Tran, and Julie Yap

Seyfarth Synopsis: Seyfarth Shaw submitted comments and oral testimony to the Federal Advisory Committee on Civil Rules regarding needed reform and guidance to Rule 23, the rule that governs class action litigation in federal courts. While the proposed amendments address important issues, our workplace class action group proposed four additional areas for consideration that are not currently addressed by the pending proposed rule amendments.

Rule 23 Changes

As some employers may be aware, changes are coming to Rule 23 class action requirements. What exactly those changes will be, and when those changes will go into effect, however, are still to be determined.

The Advisory Committee on Civil Rules (the “Committee”) for the Federal Courts, which is responsible for recommending amendments to Rule 23, has been contemplating possible changes for years now — we previously blogged about the potential changes here.  The Committee recently proposed specific rule changes that address important issues such as settlement class procedures and electronic notice to class members.

Various parties and groups submitted written comments to the Committee, including academics, worker and consumer advocacy groups, and corporate groups.

Seyfarth’s written submission is here.  Seyfarth’s comments were prepared by the team of Thomas Ahlering, Kate Birenbaum, Matthew Gagnon, Gerald L. Maatman, Jr., Hilary Massey, Jennifer Riley, Tiffany Tran, Julie Yap, and Kevin Young.

Seyfarth’s submission identified four additional areas that remain in need of reform and guidance to address the practical difficulties regularly encountered in class action litigation

Testimony To The Committee

The Committee also selected 11 individuals to testify before the Committee.

The Committee selected Gerald L. Maatman, Jr. (“Jerry”) co-chair of our class action defense group, to testify. Jerry gave testimony to the Committee on February 16. Seyfath was the only law firm representing employers to be selected to testify.

Other individuals who testified included Theodore Frank of the Competitive Enterprise Institute; Eric Issacson, of the Issacson Law Office; Peter Martin of State Farm Mutual Insurance Co.; Patrick Paul of Snell & Wilmer; Timothy Pratt of Boston Scientific Corp.; Michael Pennington of Bradley, Arant, Boult & Cummings; Professor Judith Resnik of Yale Law School; Richard Simmons of Analytics LLC; Ariana Tadler of Milberg LLP; and Steven Weisbrot of Angeion Group.

Consistent with Seyfarth’s written submission, Jerry testified that class action litigation would be aided by an express requirement that a party seeking class certification must submit a viable trial plan. This change makes sense from both a legal and practical perspective as it would help prevent unmanageable class actions from proceeding past the class certification stage to trial. Indeed, this amendment conforms to the California Supreme Court’s decision in Duran v. U.S. Bank National Association, 59 Cal.4th 1 (2014), which requires adequately developed trial plans at the class certification stage.

Jerry also advocated for a revision to Rule 23(f) to allow for an immediate right to appeal orders to certify, modify, or decertify a class. Jerry testified that an amendment to the current approach would ensure meaningful review of and guidance regarding class certification.

In addition, Jerry suggested that the Committee revisit the standards relating to class certification in the context of a settlement.  This would amend Rule 23 to acknowledge and address the unique and practical considerations and impacts of certification in the two very different contexts of actual litigation versus settlement.

Finally, Jerry recommended that the Committee provide additional, specific guidance regarding Rule 26’s “proportionality” requirement and its application to pre-certification class discovery.  Jerry shared Seyfarth’s collective experience in representing employers who face requests for discovery on class lists, contact information, and other information about potential class members.  Rule 26 requires that discovery be “proportional to the needs of the case,” which directly affects pre-certification class discovery. Nonetheless, federal courts have taken varying approaches to resolving these discovery disputes.  Jerry advocated the position that the Committee’s further guidance is needed to ensure a standard approach that fully considers the burden class discovery places on employers.

Implications For Employers

The Rule 23 amendments will have a significant impact on class action litigation and far-reaching consequences for employers.

Stay tuned for more updates regarding the proposed Rule 23 amendments as we continue to monitor developments on this important issue.

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On February 9, 2017, Seyfarth Shaw hosted a signal event regarding workplace class action litigation in 2016 and the implications for employers looking to anticipate and prepare for workplace trends in 2017.

Vickie Lipnic, the newly appointed Acting Chair of the Equal Employment Opportunity Commission, joined Jerry Maatman in launching Seyfarth’s 2017 Workplace Class Action Litigation Report. Vickie has been a Commissioner with the EEOC since 2010 and her knowledge of the focal points of the government agency tasked with enforcing employee civil rights offered guests a great deal of insight. The EEOC has been increasingly committed to systemic litigation and, while these types of cases are intended to have a broad impact, Vickie stressed the importance of single plaintiff litigation and the impact that single plaintiff lawsuits can have on an industry, company, or geographic area. Vickie also opined on the importance of bi-partisanship as a Commissioner. She is the one remaining Republican-appointee on the Commission with Democratic-appointee Jenny Yang, her successor as Chair of the EEOC, whose term is ending July 1, 2017. Vickie noted that there are currently 2 seats open on the Commission, and President Trump will be tasked with appointing two new Commissioners as well as filling the currently vacant General Counsel position. With regard to these shifting positions and the new Presidential administration, Vickie confirmed that the EEOC is steadfast in its mission to protect and enforce the civil rights of all employees and to ensure that employers are readily prepared to adhere to the laws protecting their employees from discriminatory practices.

Additionally, Jerry discussed the six key trends in workplace class action litigation for 2016 and how those trends will impact employers in 2017. First is the impact of the U.S. Supreme Court decisions in Tyson Foods, Inc. v. Bouaphakeo, et al., and Spokeo, Inc. v. Robins, et al., and how they will influence complex employment-related litigation in the coming years.  Equally important for the coming year, the Supreme Court has accepted five cases that are likely to be decided in 2017 that also will impact and shape class action litigation and government enforcement lawsuits faced by employers; chief among them is the issue of the legality of class action waivers in arbitration agreements. In terms of settlements in 2016, after reaching all-time highs in 2014 and 2015, the monetary value of aggregate top-ten employment class action settlement declined significantly overall, but wage & hour class action settlements sky-rocketed.  Another trend for 2016 was that federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar than in past years. Plaintiffs, for instance, secured certification in 76% of the time in wage & hour class and collective actions. However, for the first time in over a decade, case filing statistics for 2016 reflected that wage & hour litigation decreased over the past year. Additional factors set to coalesce in 2017 – including litigation over the new FLSA regulations and the direction of wage & hour enforcement under the Trump Administration – are apt to drive these exposures for Corporate America. To the extent that government enforcement of wage & hour laws is ratcheted down, the private plaintiffs’ bar likely will “fill the void” and again increase the number of wage & hour lawsuit filings. Also in 2016, Plaintiffs’ attorneys were extremely successful in certifying first stage conditional certification motions, which can mean filings are likely to go up in 2017.  Finally, the government enforcement lawsuits brought by the DOL and EEOC continued the aggressive litigation programs of both agencies, but by sheer number, lawsuit filings and recoveries were lower when compared to previous years.

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Thank you to Victoria for visiting us in Chicago for this hugely successful event. We hosted over 150 guests at our Seyfarth Shaw Chicago office and over 1,800 guests via our live Webcast.

Thank you to everyone who joined us either here in Chicago or via our live webcast. For those interested in viewing a video of the presentation, stay tuned. We will be posting a complete video of the event next week.

Readers can find more information about the event on Seyfarth’s Pay Equity Issues & Insights Blog here.

Additionally, if you have not yet registered for the upcoming WCAR webinar, you can do so by clicking here.