By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth SynopsisAfter a federal district court dismissed the EEOC’s unlawful-interference claim against a private college that had sued a former employee for allegedly breaching a settlement agreement by filing an EEOC charge, the Tenth Circuit reversed the dismissal of the EEOC’s unlawful-interference claim, citing the employer’s introduction of a new case theory relative to the EEOC’s still-pending retaliation claim.

This ruling serves a cautionary tale for employers regarding the timing of their assertion of new case theories in EEOC litigation involving multiple claims.

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After CollegeAmerica resolved a dispute with a former employee by entering into a settlement agreement, upon belief that the employee breached the settlement agreement, CollegeAmerica sued the employee in state court.  Id. at *1-2.  Thereafter, the EEOC sued CollegeAmerica in federal court alleging that CollegeAmerica’s interpretation and enforcement of the settlement agreement was unlawfully interfering with statutory rights of the former employee and the EEOC.  Following the U.S. District Court for the District of Colorado’s dismissal of the EEOC’s claim for unlawful-interference with statutory rights, on appeal in EEOC v. CollegeAmerica Denver Inc., No. 16-1340, 2017 U.S. App. LEXIS 17094 (10th Cir. Sept. 5, 2017), the Tenth Circuit reversed the dismissal, holding that the EEOC’s unlawful-interference claim should not have been dismissed as moot in light of a new theory asserted by CollegeAmerica prior to its trial regarding the EEOC’s pending retaliation claim.

Employers should keep this ruling in mind when preparing trial theories that may have implications on claims that had previously been dismissed as moot.

Case Background

The EEOC brought a claim for unlawful-interference with statutory rights, which the District Court ultimately dismissed as moot.  Regarding the EEOC’s retaliation claim, which remained for trial, CollegeAmerica presented a new theory against the employee: that she had breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica.  In response, the EEOC argued that by presenting this new theory, CollegeAmerica was continuing to interfere with the statutory rights of the former employee and the EEOC.  As such, the EEOC appealed the dismissal of its unlawful-interference claim, arguing that the claim was no longer moot in light of CollegeAmerica’s new theory.

The Tenth Circuit’s Decision

The Tenth Circuit reversed the dismissal of the of the EEOC’s unlawful-interference claim.  First, the Court instructed that in determining whether a claim is moot, a special rule applies when the defendant voluntarily stops the challenged conduct.  Id. at *4-5.  When the conduct stops, the claim will be deemed moot only if two conditions exist: (1) it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur, and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation.  In arguing that the case was moot, CollegeAmerica submitted two declarations from its general counsel assuring that CollegeAmerica would not take the “positions known to trouble the EEOC.”  Id. at *6.  In response, the EEOC argued that the declarations should not be relied upon since CollegeAmerica presented a new theory after the filing of the declarations–that the employee had breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica–an argument that continued CollegeAmerica’s unlawful interference with statutory rights.  The Tenth Circuit held that because CollegeAmerica planned to present its new theory in its state court suit, the potential for CollegeAmerica to repeat its allegedly wrongful behavior remained, and CollegeAmerica thus did not satisfy its burden of demonstrating the absence of a potential for reoccurrence.  Id.

Next, the Tenth Circuit rejected CollegeAmerica’s argument that the case was moot because the outcome “would not affect anything in the real world.”   Id. at *7.  The Tenth Circuit noted that in its state court suit, CollegeAmerica planned to argue that the employee breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica. The EEOC alleged that this argument would constitute unlawful-interference with the employee’s rights, and thus sought a permanent injunction prohibiting CollegeAmerica from unlawfully interfering with the statutory rights of the employee and the EEOC.  The Tenth Circuit accepted the EEOC’s argument, holding that if the EEOC prevailed on the merits and obtained an injunction, CollegeAmerica could not present its new theory in the state court suit against the employee, which “would constitute an effect in the real world.”  Id.

Finally, the Tenth Circuit declined to consider CollegeAmerica’s argument that the EEOC’s unlawful-interference claim brought under 29 U.S.C § 626(f)(4) failed as a matter of law since it could not be used as an affirmative cause of action, noting the District Court had not yet ruled on the issue and therefore it was to consider that issue on remand.  Id. at *7-8.  The Tenth Circuit also refused to consider CollegeAmerica’s argument that the EEOC sought overly broad, unauthorized injunctive and declaratory relief, explaining it would not consider this issue since it was raised on appeal for the first time.  Accordingly, the Tenth Circuit reversed and remanded the District Court’s dismissal of the EEOC’s unlawful-interference claim.

Implications For Employers

For employers facing litigation, this ruling provides an important lesson: when considering the defense of one claim, it is imperative to be cognizant of how that argument can impact the defense of another claim, even if the other claim has been dismissed.  Further, this decision illustrates the EEOC’s willingness to combat employers who bring causes of action against former employees who may have breached settlement agreements by asserting discrimination claims.  As such, employers should be cautious when suing former employees who later file EEOC charges, and must exercise further caution when considering how their strategies to defend one claim may affect another.

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

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.

250px-US-CourtOfAppeals-10thCircuit-SealBy Gerald L. Maatman, Jr., and Alexis P. Robertson

On March 16, 2015, in EEOC v. Beverage Distributors Co., LLC, No. 14-1012 (10th Cir. 2014), the U.S. Court of Appeal for the Tenth Circuit held that the U.S. District Court for the District of Colorado erred by providing improper jury instructions on the direct-threat defense under the Americans With Disabilities Act (“ADA”). In rendering its decision, the Tenth Circuit clarified the direct-threat standard in a manner favorable to employers. The ruling is instructive for all employers involved in ADA litigation with the EEOC.

Case Background

A former employee of Beverage Distributors Corporation filed a charge of discrimination with the EEOC after he was unable to secure employment in a new position with the company. The employee was legally blind. After his original position with Beverage Distributors was eliminated, he was able to secure a new job with the company. However, his new employment was conditioned upon passing a physical examination. Although he passed the physical exam, the examining doctor stated that the employee would require workplace accommodations to mitigate the risks from his impaired vision. Beverage Distributors concluded that it could not reasonably accommodate his conditions and rescinded the job offer. The employee subsequently filed a charge of discrimination with the EEOC against Beverage Distributors. The EEOC then sued Beverage Distributors, on the employee’s behalf, under ADA.

At trial, amongst other things, Beverage Distributors asserted that the employee’s impaired vision created a significant risk of harm to him and others and no reasonable accommodation could reduce or eliminate that risk. The jury found that Beverage Distributors was liable for discrimination and that the employee’s condition did not pose a direct threat.  Beverage Distributors appealed to the Tenth Circuit, arguing that the direct-threat jury instruction constituted reversible error.

The Decision Of The Tenth Circuit

The Tenth Circuit ruled that the direct-threat jury instruction constituted reversible error because the district court inaccurately conveyed the direct-threat standard to the jury. Under the ADA, an employer may assert as an affirmative defense to a claim of discrimination, that it declined to hire an individual because the individual posed a “direct threat to the health or safety of themselves or others.” Id. a 4. “A direct threat involves a significant risk of substantial harm to the health or safety of the person or others that cannot be eliminated or reduced by reasonable accommodation.” Id.

The Tenth Circuit reasoned that direct-threat instruction, as delivered by the district court, did not accurately convey the direct-threat standard because it failed to communicate that proof of an actual threat was unnecessary.  The Tenth Circuit reasoned that Beverage Distributors should have avoided liability “if it had reasonably believed the job would entail a direct threat.” Id. at 6.  It should not have been required to prove that the employee posed an actual direct threat.  The jury instruction overstated Beverage Distributors’ burden. Further, the second portion of the jury instruction – which stated that the jury was to consider the reasonableness of Beverage Distributors’ belief regarding the existence of a direct threat – did not cure the error because the jury was never told why it was to consider the reasonableness of what Beverage Distributors thought. Therefore, the Tenth Circuit concluded that the error was not cured by the instruction regarding the reasonableness of the company’s subjective belief. The Tenth Circuit held that it had to reverse the jury’s verdict, because the jury could have been misled by the erroneous instruction.

Implications For Employers

This is a significant case in that it clarifies the direct-threat standard in a manner that is favorable for employers. As illustrated above, the key inquiry for the defense is the reasonableness of the employer’s belief regarding the direct-threat, and not whether there was in fact a direct threat posed. Employers and defense lawyers should take notice of this ruling and add it to their tool box when litigating cases under the ADA cases.

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

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

On May 7, 2014, the First Circuit issued its decision in Jones, et al. v. City of Boston, et al., No. 12-2280 (1st Cir. May 7, 2014), and vacated an order granting summary judgment in favor of the City and, instead, entered partial summary judgment in favor of Plaintiffs.

In doing so, the First Circuit found that Plaintiffs’ failure to demonstrate the “practical significance” of a statistical disparity did not preclude them from establishing a prima facie case of disparate impact.  Id. at 30.  The First Circuit’s rejection of practical significance sets it apart from others, notably the Tenth Circuit. (Read our post discussing the Tenth Circuit’s view here.) 

This is a key issue for employers in workplace class actions.

With a large enough data set, even very small differences can be statistically significant. (For example, if you flip a coin one million times and get tails 50.1% of the time, the deviation from the expected 50% result is statistically significant.) As a result, statisticians generally recognize that not all statistically significant results are practically significant or “practically meaningful or important.” Id. at 20-21. 

Nevertheless, after struggling with a method for gauging practical significance as a matter of law, the First Circuit ultimately found that any “theoretical benefits” of inquiring as to practical significance were outweighed by the difficulty of doing so “in any principled and predictable manner.” Id. at 30. In other words, because it could not define an acceptable test, the First Circuit opted to jettison the requirement altogether. 

Factual Background

Between 1999 and 2006, the City of Boston subjected its officers and cadets in its Police Department to annual drug tests using samples of their hair. Id. at 4. Pursuant to a collective bargaining agreement, the City analyzed employees’ hair for exposure to five substances — cocaine, marijuana, opiates, PCP, and amphetamines. Id. at 5.

Although the City tested more white officers and cadets, it found more black employees positive for cocaine during the relevant period. For instance, in 2003, 6 of 529 black officers and cadets tested positive, or 1.1%, while 3 of 1260 white officers and cadets tested positive, or 0.2%. Id. at 6-7. 

Plaintiffs argued that the racial differential in outcomes did not result from chance. Id. at 12. They asserted that black individuals tend to have higher levels of melanin in their hair and that melanin causes cocaine and associated chemicals to bind to hair at a higher rate. Id. Plaintiffs also claimed that hair treatments more common in the black community made it more likely that “aerosolized powder” from snorted or smoked cocaine would deposit on the hair of non-users. Id. at 12-13.

The City disputed any correlation between positive test results and melanin levels, asserting that many Caucasians and most Asian -Americans have melanin levels as high or higher than those of Plaintiffs. Id. at 13. Pointing to studies, the City also claimed that the relative rates of positive drug tests for black and white individuals remain materially constant across different methods of testing, specifically hair, urine, and blood. Id.  

On September 28, 2012, the district court granted summary judgment to the City on all claims. Id. at 14. Plaintiffs appealed.

The First Circuit’s Opinion

The First Circuit reversed. The First Circuit found that plaintiffs identified the challenged employment practice as the “hair test” and presented evidence that the results had a statistically significant correlation with race.  Plaintiffs showed that, in at least three of the eight years during the relevant period, as well as during the eight years aggregated, the differential between positive results for black and white employees was statistically significant. Id. at 16.

Rather than challenging Plaintiffs’ math, the City attacked Plaintiffs’ methodology. The City apparently did not question Plaintiffs’ showing of causation or claim that Plaintiffs failed to control for any number of other potentially contributing factors such as age. Id. at 19-20. Instead, the City raised other objections.

First, the City claimed that employees who opted to avoid termination in the wake of a positive test by undergoing drug rehabilitation were “correctly identified” and, therefore, should have been excluded from Plaintiffs’ statistical analysis. Id. at 17. The First Circuit found no evidence that altering the raw numbers in such a way would produce any material difference. It also found the accuracy of the identification process irrelevant to disparate impact – accuracy “is a different matter, perhaps relevant to the business necessity defense.” Id. at 17-18. 

Second, the City objected to plaintiffs’ aggregation of data from the first eight years of the program. Id. at 18-19. The First Circuit noted that some form of aggregation was necessary to sustain the claims of plaintiffs who tested positive in years with no statistically significant disparity.  The City, however, did not raise the argument in support of its motion for summary judgment and did not sufficiently develop it in the district court. Id.

Third, the City argued – and the district court found – that the statistically significant disparities did not show disparate impact because they were not sufficiently large or “practically significant.” Id. at 20. The First Circuit acknowledged that, with a large enough data set, even small differences can be statistically significant, therefore, not all statistically significant results are “practically meaningful or important.” Id. at 21. 

The First Circuit nevertheless refused to apply a practical significance requirement due to the practical difficulties.  The concept of practical significance is “impossible to define in even a remotely precise manner.” Id. at 25. Accordingly, with no objective measure, “courts would find it difficult to apply such an elusive, know-it-when-you-see-it standard, let alone instruct a jury on how to do so, and parties may find it impossible to predict results.” Id. at 25.

The First Circuit also rejected the City’s reliance on the EEOC’s “four-fifths rule” as a gauge for measuring practical significance. Id. It noted that it, as well as its sister circuits, have minimized the rule’s importance and criticized it directly.  The rule can lead to anomalous results, and its consequences can vary in “seemingly arbitrary ways” depending on the magnitude of the selection rates at issue. Id. at 28. The rejection of the four-fifths rule left “no statute, regulation, or case law proposing any other mathematical measure of practical significance.” Id. at 29.    

The First Circuit noted that its confidence in rejecting a practical significance requirement was “bolstered” by two other requirements. First, although the appellate court rejected the City’s aggregation argument, it noted that the need to show statistical significance “will eliminate small impacts as fodder for litigation in many instances because proving that a small impact is statistically significant generally requires large sample sizes.” Id. at 31.  Second, a prime example of unpredictability, the First Circuit pointed to job relatedness – an employer “may rebut a prima facie case of disparate impact by showing that its use of the challenged practice is ‘job related . . . and consistent with business necessity.’” Id.

Implications For Employers

Given the inconsistencies within the decision – and its inconsistencies with the approach of other Circuits – the decision seems prime for a motion for reconsideration or motion for en banc review. If the decision stands, it smooths the road for plaintiffs looking to establish disparate impact in the First Circuit. If that occurs, employers are sure to face the citation of the case by plaintiffs in other circuits as they argue for  this analysis in other disparate impact lawsuits. As the First Circuit itself noted, when the size of a disparity is negligible, it is not meaningful. Nevertheless, because neither the parties nor the appellate court found an acceptable way to quantify “negligible,” at least for the time being, the decision opens the door for plaintiffs to pursue “practically meaningless” statistical disparities in the First Circuit.

By Reema Kapur and Alexis P. Robertson

On May 6, 2014, the U.S. Court of Appeals for the Tenth Circuit in Miller v. Basic Research, LLC, No.13-4048 (10th Cir. May 6, 2014), dismissed defendant’s appeal of a district court’s order enforcing a class settlement agreement, over defendants objection. The Tenth Circuit held that the case was an impermissible interlocutory appeal and that it therefore had no jurisdiction.

The ruling is important for employers in the process of settling workplace class actions. It illustrates that once material terms of settlement have been agreed upon, later attempts to abandon the agreement may be unsuccessful and notice may be sent to class, over defendant’s objection, before appellate review.

Background

Defendant, Basic Research, a manufacturer of a weight-loss dietary supplement called Akävar 20/50, marketed its drug as follows: “Eat all you want and still lose weight.” A class of purchasers filed suit, alleging that they relied on the marketing pitch, and that the slogan constituted false and misleading advertising.

The district court certified a class “limited to those persons who purchased Akavar in reliance on the slogan ‘Eat all you want and still lose weight.’” After class certification, the parties entered into mediation. Following negotiations, defendants’ counsel drafted and all parties signed a handwritten “Proposed Terms” document outlining the terms of an expected class settlement. The parties then filed a notice of settlement with the district court.  The notice stated that the mediation was “successful” and that the parties were preparing a formal settlement agreement.

At some point, defendants stopped participating in the drafting process. Plaintiffs subsequently moved to enforce what they argued was a binding contract. The district court granted plaintiffs’ motion. It concluded that the parties had agreed to the material terms of a settlement and that any ongoing disagreements concerned only “linguistic changes.” Miller v. Basic Research, LLC, 2013 WL 1194721, at *1 (D. Utah, Mar. 22, 2013). Defendants appealed, arguing that, amongst other things, their interests would be harmed by sending out notice of settlement prior to appellate review.

The Tenth Circuit Opinion

The Tenth Circuit never made it to the merits of the appeal. The Tenth Circuit focused its opinion on whether it had jurisdiction to hear the matter and concluded that it did not. The Tenth Circuit reasoned that because the district court had not yet reached its final decision, which would entail approving the proposed settlement, and because the defendants were unable to prove an exception to the final judgment rule, it lacked appellate jurisdiction.

The Tenth Circuit rejected defendant’s argument that granting enforcement of the settlement was the functional equivalent of issuing an injunction under 28 U.S.C. § 1292(a)(1) (providing appellate jurisdiction to review district court orders “granting, continuing, modifying, refusing or dissolving injunctions.”) Further, the Tenth Circuit did not find that it had appellate jurisdiction under the collateral order doctrine. The Tenth Circuit was not persuaded that delaying appellate review imposed serious consequences or that the district court’s decision would evade appellate review. The Tenth Circuit further stressed that the fairness to the plaintiff class would be addressed at the Rule 23 hearing.

Implications for Employers

This case is a cautionary tale for companies involved in class action settlements. A defendant has an interest in settling a class action, but it faces potential problems if it backs out of a “deal” when the parties’ memorandum of understanding is deemed enforceable and its terms disadvantage the defendant. As a matter of contract law, if material terms have been agreed upon, complete abandonment of the settlement negotiation by a defendant will not serve to kill the settlement. The agreement, although not final, may be far enough along to be enforced by the district court and such enforcement will not be immediately appealable. In the context of class settlement, this may result in class notice being issued notwithstanding defendants’ objections and prior to any appellate review.

By Gerald L. Maatman, Jr. and Howard M. Wexler

We previously reported here on the EEOC’s stunning defeat in the Tenth Circuit in the case of EEOC v. Abercrombie & Fitch, No. 11-5110 (10th Cir. Oct. 1, 2013), concerning a job applicant who was not hired because she wore a hijab in violation of Abercrombie’s “Look Policy.” In this decision, the Tenth Circuit not only overturned the grant of summary judgment to the EEOC, but also, in a complete 180 degree turn, held that Abercrombie was actually entitled to summary judgment. In announcing the standard that it would apply to religious accommodation cases going forward, the Tenth Circuit held:

In sum, we hold that, in order to establish the second element of their prima facie case under Title VII’s religion-accommodation theory, ordinarily plaintiffs must establish that they initially informed the employer that they engage in a particular practice for religious reasons and that they need an accommodation for the practice, due to a conflict between the practice and the employer’s work rules. As noted, we recognize that some courts have taken a different path on this questions. However, we are confident that our approach is the sounder one.

Id. at 45-46. (emphasis added).

On December 4, 2013 the EEOC filed a Petition for Rehearing En Banc. In the Petition, the EEOC advances three grounds in support of its position:

1. “The majority’s decision – that an employer’s awareness of a potential conflict [between an applicant’s religious practices and a work requirement] is insufficient to support a prima facie case of failure to make a reasonable accommodation – raises a question of exceptional importance because it creates a conflict with the decisions of other courts of appeals.”

2. “Second, the majority’s rigid definition of the notice element of a prima facie case conflicts with decisions of the Supreme Court and this Court, each of which requires courts to interpret the prima case requirements flexibility.”

3. “Third, the majority’s decision conflicts with this Court’s recognition that when an employer takes an adverse action against an individual ‘based solely on his religious practices without an attempt to accommodate him, assuming it could have done so without undue hardship, it committed an illegal act.’”

Id. at 1-2.

Given the magnitude of the EEOC’s defeat, we are not surprised that it has decided to seek en banc review. We will be sure to keep our loyal readers updated on further developments on this case, and whether the Tenth Circuit decides to grant the EEOC’s Petition and revisit the panel’s decision that Abercrombie did not engage in religious discrimination.

Stay tuned!

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

By Gerald L. Maatman Jr. and Howard M. Wexler

As we have previously reported, the EEOC and Abercrombie & Fitch Stores have been entrenched in a nearly decade long battle over Abercrombie’s “Look Policy.” On September 23, 2013, the EEOC and Abercrombie entered into a comprehensive settlement of two separate religious discrimination lawsuits filed on behalf of Muslim teens who wear hijabs (religious headscarves) and who allegedly had adverse employment actions taken against them as a result. As part of this settlement, Abercrombie created an appeals process for denials of religious accommodation requests and agreed to inform applicants during interviews that accommodations to the “Look Policy” may be available and to incorporate headscarf scenarios into all manager training. 

Expressly excluded from this settlement was a third lawsuit brought by the EEOC against Abercrombie – EEOC v. Abercrombie & Fitch, Case No. 09-CV-00602 (N.D. Okla.) – concerning an applicant who was not hired because she wore a hijab. In July 2011, the U.S. District Court for the Northern District of Oklahoma granted summary judgment to the EEOC, finding that Abercrombie engaged in religious discrimination. In a comprehensive 95-page decision issued yesterday, the U.S. Court of Appeals for the Tenth Circuit not only overturned the grant of summary judgment to the EEOC, but also, in a complete 180 degree turn, held that Abercrombie is actually entitled to summary judgment.

The Decision

The EEOC’s lawsuit was based on Abercrombie’s decision not to offer employment to Samantha Elauf, a 17-year old female who applied for a Model position at an Abercrombie store in Tulsa, Oklahoma. Id. at 5. Ms. Elauf has worn a hijab on her head since she was thirteen and testified that she does so for religious reasons. Id. at 6. Although facts in the record indicated that they suspected as such, the two managerial employees who played a part in the decision to deny Ms. Elauf employment based on her wearing of a hijab had no particularized knowledge of the following information: that she was a Muslim, that she wore the hijab for religious reasons and felt obligated to do so; and would therefor need an accommodation to address the conflict between her religious practice and the “Look Policy.” Id. at 8.

It was this lack of knowledge concerning the reasons that Ms. Elauf wore the hijab that the Tenth Circuit held was fatal to the EEOC’s case. According to the Tenth Circuit, “A plaintiff must establish that he or she initially informed the employer that he or she adheres to a particular practice for religious reasons and that he or she needs an accommodation for that practice, due to a conflict between the practice and the employer’s neutral work rule.” Id. at 30. This is so because, “[a]n applicant or employee may engage in practices that are associated with a particular religion, but do so for cultural or other reasons that are not grounded in that religion. If so, an employer’s discrimination against that individual for engaging in that practice – though possibly reprehensible and worthy of condemnation – would not contravene Title VII’s religion-discrimination provisions. Id. at 21-22.

The Tenth Circuit expressly rejected the less restrictive approach advanced by the EEOC, namely, that in religious accommodation cases, “[t]he employer’s obligation is to attempt reasonable accommodation (where no undue hardship would result) when it has notice – be it from an affirmative statement by the individual, or some other source – of an individual’s religious belief that conflicts with a work requirement.” Id. at 31. The Tenth Circuit rejected this less restrictive approach because, “[a]n applicant or employee – should not be able to impose liability on an employer for failing to accommodate his or her religious practice on the ground that the employer should have guessed, surmised, or figured out from the surrounding circumstances, that the practice was based upon his or her religion and that the plaintiff needed an accommodation for it. Id. at 41. Here, since Abercrombie had no particularized, actual knowledge that Ms. Elauf’s wearing of a hijab stemmed from her religious beliefs and that she needed an accommodation based on this religious belief, the Tenth Circuit held that Abercrombie was entitled to summary judgment. Therefore, in announcing its standard it will apply to religious accommodation cases, the Tenth Circuit determined that:

In sum, we hold that, in order to establish the second element of their prima facie case under Title VII’s religion-accommodation theory, ordinarily plaintiffs must establish that they initially informed the employer that they engage in a particular practice for religious reasons and that they need an accommodation for the practice, due to a conflict between the practice and the employer’s work rules. As noted, we recognize that some courts have taken a different path on this questions. However, we are confident that our approach is the sounder one.

Id. at 45-46.

In reaching this decision, the Tenth Circuit addressed the inherent “catch 22” employers face in these situations, and explained that its ruling is consistent with the very guidance issued by the EEOC as to how employers should address religious accommodation issues at the workplace. The Tenth Circuit noted, that, “if under Title VII an employer is affirmatively discouraged from asking applicants or employees whether their seemingly conflicting practice is based on religious beliefs, and, if so, whether they actually will need an accommodation for the practice, because it is inflexible (i.e., truly conflicting), and the employer also is discouraged by the EEOC from speculating about such matters, then the interactive accommodation process ordinarily only can be triggered when applicants or employees first provide the requisite information to the employer.” Id. at 56-57.

Implications For Employers

The decision in EEOC v. Abercrombie & Fitch is welcome for all employers – especially those within the confines of the Tenth Circuit – who often feel that they are damned if they do and damned if they don’t when it comes to religious accommodation cases. On the one hand Title VII limits the ability of employers to inquire about an applicant/employee’s religious beliefs while at the same time employers must reasonably accommodate those very same religious beliefs. The Tenth Circuit’s holding puts on the onus on job applicants/employees to inform employers of their religious beliefs, and how based on such beliefs an accommodation is needed because the employers’ neutral policy conflicts with their ability to adhere to such beliefs. While employers still must be tread carefully when dealing with any accommodation request, whether based on a disability (under the ADA) or religious belief, the Tenth Circuit’s decision should go a long way in helping employers navigate these murky waters.

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

250px-US-CourtOfAppeals-10thCircuit-Seal.pngBy Gerald L. Maatman, Jr. and Laura J. Maechtlen 

On January 15, 2012, the U.S. Court of Appeals for the Tenth Circuit upheld a district court order denying class certification in a nationwide Title VII gender discrimination action in Tabor, et al. v. Hilti, Inc., 703 F.3d 1206 (10th Cir., 2013). While the decision is favorable for employers, it demonstrates the realities of a common workplace problem: varied and irregular application of a company-wide policy, and inadequate record-keeping in compliance with the same. 

Despite such a problem, the employer in this case was lucky. The varied application of the policy meant that plaintiffs could not meet the elements of Rule 23 to support class certification. As such, the Tenth Circuit’s ruling is one of the leading workplace class action decisions so far this year.

Relevant Facts And Procedural Background

Plaintiffs worked as Inside Sales Representatives at Hilti, a tool manufacturer. Id. at 1211. Inside sales employees at Hilti are often promoted to Account Manager, where they are responsible for outside sales or field sales, including site visits to customers within an assigned territory. Id. at 1212. 

Hilti established a performance management and reporting process called “Global Develop and Coach Process” (“GDCP”), which included multiple components that tracked aspects of an employee’s readiness to promote. Id. The GDCP process included a priority rating (“P” rating) that indicated management’s subjective assessment of an employee’s promotion-readiness based on certain competencies. Id. A “P1” rating indicated the employee was ready for promotion, while a “P5” indicated the employee was ineligible for promotion. Id. A second component was a mobility rating (“M” rating), which indicated the employee’s willingness to relocate. Id. Another component was the employee’s own career goals. Id.

Although Hilti considered GDCP the “official” method for identifying employees who would be promoted internally, Hilti did not maintain careful records. Id. Hilti’s applicant flow log data showed that Hilti’s 282 individuals were promoted between 2005 and 2008, but fewer than 24% had been assigned a P rating at the time of promotion; fewer than 37% of promoted employees were assigned “M” ratings; fewer than 8% of individuals who were promoted to outside sales positions had actually identified outside sales as a future career goal; and more than 64% of employees were missing both “P” rating and “M” rating at the time of promotion. Id. Moreover, Hilti managers did not always follow the GDCP ratings in making promotion decisions. Id. Of the promoted employees who had been assigned a “P” rating at the time of promotion, only 28% had a “P1” rating, and 33 promoted employees were assigned a “P” rating of “P5” at the time of promotion (indicating they were ineligible for promotion). Id

Plaintiffs each filed individual claims for gender discrimination under Title VII, retaliation and disparate impact, and moved to certify a class comprised of “all women employed by Hilti in the United States denied promotion to Account Manager.” Id. at 1215. Plaintiffs alleged that male Inside Sales Representatives were promoted through “tap on the shoulder” promotions, without posting positions and/or allowing women to apply, and that ineligible male candidates were allowed — or even invited — to apply for Account Manager positions, while female employees were told they could not apply until they earned a “P1” rating.  Id.  

The district court granted summary judgment for Hilti on plaintiffs’ individual claims, and refused to certify the class, finding that plaintiffs failed to meet the numerosity requirement under Rule 23(a)(1), or any condition of Rule 23(b). 

The Tenth Circuit’s Opinion

On appeal, the Tenth Circuit affirmed the district court’s grant of summary judgment on certain individual claims of plaintiffs, while it reversed with respect to others.   Notably, however, it affirmed the district court’s refusal to certify the class on the ground that plaintiffs failed to show questions of law or fact common to the class under Rule 23(a)(2). 

Relying on Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and despite the “official” GDCP process, the Tenth Circuit determined that plaintiffs challenged a “highly discretionary policy” for granting promotions, and failed to demonstrate a “common mode of exercising discretion that pervaded the entire company.”  Id. at 1228 (citing Wal-Mart, 131 S.Ct. at 2254-55).  It found that Hilti failed to maintain a GDCP system in any uniform manner, and — despite the fact that plaintiff’s statistical evidence demonstrated (at least facially) that the haphazard policy caused an overall disparate impact on women — they failed to show that discriminatory promotion choices were common across the class.  Id.

The Tenth Circuit also found that plaintiffs could not meet Rule 23(b)(3), the only sub-section of Rule 23(b) raised in the appeal.  Rule 23(b)(3) requires questions of law or fact common to class members predominate over any questions affecting only individual members.   The Tenth Circuit agreed with the district court in finding that “defendants allege that both named plaintiffs were denied promotion for specific, objective and individualized reasons,” and that “Hilti’s promotion decisions involve ‘highly individualized’ facts and defenses that cannot be effectively resolved in a class suit.” Id. at 1229-1230.  

Implications For Employers

In relying on the commonality rationale set forth in Wal-Mart v. Dukes to demonstrate how the varied and irregular application of a national policy implemented by an employer raises “highly individualized” facts, the Tenth Circuit highlights a key defense for employers facing class certification motions. Although implementation of a company policy can be strong evidence of a “common” practice to support class certification in many cases, strong evidence that the a common policy was implemented on an individualized basis, differently among managers, or in a varied way, could defeat a motion class certification.     

250px-US-CourtOfAppeals-10thCircuit-Seal.pngBy Gerald L. Maatman, Jr. and Jennifer Riley

On August 27, 2012, the Tenth Circuit issued its opinion in Apsley v. Boeing Co., No. 11-3238, 2012 WL 3642800 (10th Cir. Aug. 27, 2012), in a large-scale age discrimination lawsuit. In a positive decision for employers, the Tenth Circuit rejected Plaintiffs’ statistical evidence and affirmed summary judgment in favor of defendants – The Boeing Company and Spirit Aerosystems – on claims that they engaged in a pattern or practice of discrimination against older workers. 

In a unanimous opinion, the Tenth Circuit held that, although Plaintiffs showed a statistically significant disparity in the treatment of older and younger workers, the disparity in absolute terms was too small to demonstrate a systemic pattern or practice of age discrimination or a significant disparate impact on older workers. 

Factual Background

On June 16, 2005, Boeing terminated its 10,671-member workforce at its Wichita Division and sold the Division to Spirit. Id. at *3. The following day, Spirit rehired 8,354 employees selected for rehire by Boeing managers. Although older workers predominated in the workforce before and after the sale, Spirit rehired a lower percentage of older workers and, following the sale, the average age of the workforce decreased by about five months. Id.

Plaintiffs brought a putative class action on behalf of about 700 employees who Spirit did not rehire. Plaintiffs asserted, among other things, claims for age discrimination in violation of the ADEA under both pattern or practice and disparate impact theories. Id. The district court conditionally certified a class, and then dismissed most of Plaintiffs’ claims. Id. at *3-4.

Although Plaintiffs’ individual claims for disparate treatment remained pending, the district court granted the parties’ motions to certify its orders for appellate review under Rule 54(b). Id. at *4. The Tenth Circuit affirmed.

The Tenth Circuit’s Opinion

The Tenth Circuit held that, although Plaintiffs introduced evidence of age discrimination, Plaintiffs failed to prove that the companies engaged in a pattern or practice of age discrimination or that their hiring practices had a significant disparate impact on older workers. Id.

Plaintiffs presented expert statistical evidence that, viewing the workforce as a whole, the difference between the number of employees over age 40 who should have been recommended in the absence of discrimination (8,028) and the number who were recommended (7,968) was greater than five standard deviations. And, the difference between the number who should have been hired in the absence of discrimination (7,285) and the number who were hired (7,237) was over four standard deviations. Id. at *6. 

The Tenth Circuit found that the disparities identified by Plaintiffs lacked practical significance. Id. at *9. It explained that, in light of the thousands of total recommendations and hires at issue, the observed disparities were small; “it is precisely because we are looking at thousands of hiring decisions that the statistics are noteworthy.” Id. The companies recommended and hired over 99% of the older employees who they would have been expected to recommend and hire in the absence of any discrimination; in fact, if Spirit had recommended 60 more employees over the age of 40, or if Spirit had hired 48 more people over the age of 40, the discrepancies would have disappeared. Accordingly, the Tenth Circuit concluded that no reasonable trier of fact could have found that discrimination was the companies’ “standard operating procedure – the regular rather than the unusual practice.” Id. at *10. 

Plaintiffs also pointed to statements by company managers reflecting concern about an aging workforce and desire to save money on pension costs. Id. at *12. The Tenth Circuit concluded that, whereas some of the comments suggested that discrimination “may have occurred,” across a workforce of over 10,000 people in three locations, the handful of statements constituted only evidence of “isolated or sporadic discriminatory acts by the employer, which are insufficient to establish a prima facie case of a pattern or practice of discrimination.” Id. at *13.

The Tenth Circuit also upheld summary judgment on Plaintiffs’ disparate impact claim. It noted that, although the Plaintiffs’ statistics revealed a “highly unlikely disparity in the treatment of older and younger workers,” the disparity, in absolute terms, was “very small.” Id. at *16. Thus, Plaintiffs also failed to show that the divestiture caused a significant disparate impact on older workers. Id.

Implications

The Tenth Circuit in Apsley refused to rely merely on superficial statistical disparities and took a deeper look at the practical implications of the evidence. In this respect, the decision is a positive one for employers faced with pattern or practice and disparate impact claims, particularly those extending across large workforces. 

The Tenth Circuit’s decision, however, is somewhat disappointing for employers in that it stopped short of blessing the district court’s decision-making group analysis. The evidence showed that only four of the 21 director groups studied had statistically significant differences adverse to older employees. Id. at *6. The district court held that Plaintiffs “would, at a minimum, have to show that in a significant number of director groups older workers were adversely affected at a statistically significant level.” Id. at *11. 

The Tenth Circuit noted that, like Plaintiffs’ use of aggregated data,  the “divide and conquer” approach “has not escaped academic criticism.” Id. The Tenth Circuit focused its attention on the company-wide aggregated data presented by Plaintiffs and declined to resolve the issue. 

250px-US-CourtOfAppeals-10thCircuit-Seal.pngBy Christopher DeGroff and Gerald L. Maatman, Jr.

This past week the Tenth Circuit affirmed another fee sanction against the EEOC, and struck down the EEOC’s attempt to litigate questionable (at best) issues under the Americans With Disabilities Act in EEOC v. TriCore Reference Laboratories, No. 11-CV-2096 (10th Cir. 2012). The Tenth Circuit affirmed the U.S. District Court for the District of New Mexico’s grant of summary judgment to the employer, TriCore, and dismissed the EEOC’s lawsuit. The three-judge panel also affirmed the District Court’s grant of $140,571.62 in attorneys’ fees against the Commission. Perhaps most significant, the Tenth Circuit ordered the EEOC to pay additional attorneys’ fees for the Commission’s unfounded appeal.

The Tenth Circuit’s decision joins a substantial and growing line of case law authority reflecting judicial intolerance for hardline litigation tactics by the EEOC. Just a month earlier, the Tenth Circuit dismissed a similar lawsuit where the EEOC asserted that the defendant discriminated against its employee in violation of the ADA. See EEOC v. The Picture People, Inc., No. 11-CV-1306 (10th Cir. 2012), discussed here and here.

Background Of The Case

In EEOC v. TriCore, an employee, Wagoner-Alison, has surgery on her foot and ankle and took leave under the FMLA to recover. Id. at 3. Wagoner-Alison exhausted her FMLA leave, and TriCore granted her additional time off to comply with her doctor’s orders. Id. at 4. Her doctor indicated that once Wagoner-Alison returned to work, she would have certain restrictions – including keeping her foot elevated. Id. at 4. Upon Wagoner-Alison’s return to work, she could not perform the essential functions of her job. Although not required by under the ADA, TriCore assigned Wagoner-Alison a new set of duties – essentially creating a job for her. Id. During Wagoner-Alison’s thirty-day trial period, she made “many errors that threatened patient safety[.]” TriCore coached her about the errors and after she did not improve, it placed Wagoner-Alison on unpaid leave for three weeks. At that point, TriCore encouraged Wagoner-Alison to apply for other internal positions with the company. Id. However, she did not do so. Rather, Wagoner-Alison applied – and received – Social Security disability benefits. TriCore later fired Wagoner-Alison.

The EEOC sued and claimed that TriCore failed to reasonably accommodate Wagoner-Alison’s disability and ultimately terminated her based on her disability in violation of the ADA. TriCore moved for summary judgment, arguing that Wagoner-Alison could not perform the essential functions of her job, with or without accommodation. Id. at 5. The District Court granted TriCore’s motion, finding the EEOC offered nothing to refute TriCore’s evidence demonstrating it provided reasonable accommodations to the employee and that her poor performance was a legitimate, nondiscriminatory reason for her termination.

TriCore filed a motion for an “Order Deeming the EEOC’s Claims as Frivolous, Unreasonable, or Without Foundation.” Faulting the EEOC’s continued litigation, despite having received notice and evidence from TriCore that the Commission’s claims were meritless, the District Court granted TriCore’s motion. Subsequently, TriCore filed a Motion for Attorneys Fees totalling $140,571.62, which the District Court granted – and about which we previously blogged about here.

On appeal, the EEOC argued that the District Court abused its discretion in granting attorneys’ fees to TriCore because neither the EEOC’s “termination claim nor its accommodation claim were frivolous at any point in the proceedings.” Id. at 11.

Basis Of The Tenth Circuit’s Ruling

Noting that the EEOC continued to litigate its claims “after it became clear that there were no grounds upon which to proceed[,]” the Tenth Circuit affirmed the District Court’s award of attorneys’ fees to TriCore. The Tenth Circuit reasoned that the EEOC ignored clear signs that it should have stopped pursuing its ADA claims. The Tenth Circuit explained that through discovery, Wagoner-Alison and the EEOC admitted that she could not stand or walk – both of which are essential functions of her job. TriCore even sent a letter to the EEOC explaining why its claims were factually insufficient and notifying the EEOC that it “would file a motion for summary judgment and would ask for attorney’s fees if the EEOC did not dismiss the lawsuit.” Id. at 12-13. Based on those key facts, the Tenth Circuit affirmed the District Court’s award of $140,571.62 in fees and costs.

The Tenth Circuit also held that under Fed. R. App. P. 38, the Court “may award damages and costs if an appeal is frivolous.” Id. at 13. The Tenth Circuit hung its hat on TriCore’s argument that the EEOC’s appeal was frivolous because it did “not even argue that the district court erred in determining the EEOC failed to establish a prima facie case of ADA discrimination.” Id. at 13. Agreeing with TriCore, the Tenth Circuit remanded the case to the District Court for a determination of additional attorneys’ fees.

Implications For Employers

The ruling in EEOC v. TriCore joins a growing number of cases that suggest a growing intolerance for the EEOC’s unfounded litigation tactics. On our blog, we have tracked awards of defense fees in litigation with the EEOC. For example, in EEOC v. Peoplemark, Inc., No. 08-CV-907 (W.D. Mich. Mar. 31, 2011), the Court awarded the employer $219,350.17 in attorneys’ fees for the EEOC’s questionable litigation tactics (discussed here). More recently, in EEOC o/b/o Serrano, et al. v. Cintas Corp., No. 04-CV-40132, 2012 U.S. Dist. LEXIS 86228 (E.D. Mich. Aug. 4, 2011), the Court ordered the EEOC to pay over $2.6 million in fees and costs (discussed here). The Court relied on the ruling in EEOC v. CRST Van Expedited, Inc., 257 F.R.D. 513 (N.D. Iowa 2012), rev’d and remanded, 679 F.3d (8th Cir. 2012), where the court entertained motions for $4.5 million in attorneys’ fees (discussed here, here, and here). Employers should add EEOC v. TriCore to the list of decisions that hold the Commission liable for what at least this Court called “frivolous” and “unfounded” litigation tactics.

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