Seyfarth Synopsis: Our recent blog post closely examined pivotal rulings by the U.S. Supreme Court in 2019, which was the second trend of the 16th Annual Workplace Class Action Litigation Report (WCAR). Today in the WCAR video series, watch Seyfarth partner Jerry Maatman’s analysis of the Supreme Court’s significant rulings in 2019. In addition to providing an overview of a groundbreaking year at the Supreme Court, Jerry also previews what employers should expect from the Court in 2020. Watch our video in the link below!

 

By Gerald L. Maatman, Jr., Jennifer A. Riley, Alex S. Oxyer, Andrew D. Welker

Seyfarth Synopsis: On January 15, 2020, in Guzman v. Chipotle Mexican Grill, Inc., No. 17-CV-02606-HSG, 2020 WL 227567 (N.D. Cal. Jan. 15, 2020), Judge Haywood Gilliam of the U.S. District Court for the Northern District of California denied a motion for class certification brought by Chipotle employees of Mexican and/or Hispanic national origin working in the company’s California restaurants. The plaintiffs alleged that Chipotle unlawfully subjected them to company-wide policies requiring that they only speak English while working in the restaurants and that employees were only eligible for promotion if they can speak proficient English. The Court ultimately declined to certify the class because the plaintiffs failed to show that their experiences at the company were common to or typical of the class.

The decision is a must-read for corporate counsel on class action litigation over workplace policies in general, and Rule 23 defenses in particular.

Case Background

This case began when three plaintiffs brought individual and class claims of discrimination, harassment, and retaliation against Chipotle pursuant to California’s Fair Employment and Housing Act (“FEHA”). The plaintiffs sought to certify a class of all current and former employees of Hispanic and/or Mexican national origin working in Chipotle restaurants in California, which included approximately 43,000 employees across 400 restaurants.  Plaintiffs’ class certification motion focused on two allegations, that: (i) Chipotle allegedly maintained a discriminatory, unwritten policy that employees were required to only speak English while working in the restaurants; and (ii) Chipotle maintained a promotion policy that employees must demonstrate a subjective level of English proficiency to be eligible for promotion to management positions.

In their motion for class certification, plaintiffs argued they satisfied the numerosity, commonality, typicality, and adequacy of representation requirements for class certification outlined in Rule 23(a).  In support of their motion, plaintiffs submitted declarations from eight former employees outlining their experiences related to the alleged English-only and promotion policies. All eight former employees averred that their former managers spoke English; six asserted that they were told they could not speak Spanish at least some of the time in the restaurants; and six also claimed to have understood that they had to speak English proficiently to be eligible for further promotion.

Chipotle denied the truth of plaintiffs’ underlying allegations.  Further, in response to the motion, Chipotle argued that plaintiffs failed to satisfy the commonality, typicality, and adequacy of representation requirements of Rule 23, and that plaintiffs’ proposed class definition was overbroad.  Chipotle further argued that plaintiffs lacked the necessary Article III standing to bring their claims because they had failed to show how they were injured by the allegedly discriminatory policies.

The Court’s Decision

In its opinion, the Court addressed Chipotle’s argument that the plaintiffs lacked Article III standing. The Court reaffirmed the standard promulgated by the Ninth Circuit that putative class representatives must present evidence to establish Article III standing in motions for class certification and cannot rest on the allegations in a complaint.  However, the Court found that the affidavits accompanying the plaintiffs’ motion for class certification were sufficient to satisfy such obligations, because they contained specific examples of alleged discrimination and harassment.

Since Chipotle did not dispute the plaintiffs’ satisfaction of the Rule 23(a) numerosity requirement, the Court turned to the question of commonality, which it called “the crux of this case.” Id. at *8.  Plaintiffs argued that the commonality element was satisfied because the employees in the class were subjected to the same written and unwritten policies and, therefore, common questions of law and fact existed regarding the legality of those policies. The Court, however, rejected the plaintiffs’ argument, finding that their own affidavits showed that the employees all had different experiences with the alleged policies and how those policies were implemented was dependent on the discretion of Chipotle’s managers.  Thus, because individual inquiries would be required to establish the experiences and injuries of each individual class member, the Court concluded that the plaintiffs were unable to satisfy the commonality requirement. 

The Court also determined that the plaintiffs were unable to meet the typicality requirement for the same rationale.  The plaintiffs failed to offer sufficient evidence to convince the Court that the experiences of the named plaintiffs were typical of those of the class or that the alleged discriminatory policies existed on a company-wide basis. Because the plaintiffs did not satisfy the commonality or typicality requirements, the Court denied their motion for class certification.

At the same time, the Court went on to reject Chipotle’s argument that some of the plaintiffs were not adequate representatives of the class because, as former managers, they may have participated actively in administering the allegedly discriminatory policies.  The Court reasoned that Chipotle had not submitted any evidence supporting that claim or cited any legal support showing that such participation would result in a conflict of interest.

Implications For Employers

This case is a departure from the growing trend of decisions granting class certification motions (a trend that we addressed in our 16th Annual Workplace Class Action Report, a summary of which is here). The Court’s ruling is also a reminder that plaintiffs must demonstrate common questions of law and fact and that their experiences are typical to the class to warrant class certification. The opinion further affirms that plaintiffs may not simply rely on the complaint’s allegations to demonstrate standing on class certification, but must support such allegations with evidence. This case provides helpful guidance for employers seeking to defeat class certification, particularly in the discrimination context where employees may have differing experiences and the implementation of company policies may be subject to some level of discretion by employee supervisors. 

 

 

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: The second key trend from our 16th Annual Workplace Class Action Litigation Report involves rulings by the U.S. Supreme Court. Over the past few years, the Supreme Court has issued a number of rulings that impacted the prosecution and defense of class actions in significant ways. Today, we provide readers with an outline of the most important workplace rulings issued by the Supreme Court in 2019, as well as which upcoming decisions employers should watch for in 2020.  Read the full breakdown below!

The Impact Of U.S. Supreme Court Rulings

Over the past decade, the U.S. Supreme Court led by Chief Justice John Roberts increasingly has shaped the contours of complex litigation exposures through its rulings on class action and governmental enforcement litigation issues.

Many of these decisions have elucidated the procedural requirements for pursuing employment-related class actions under Rule 23 of the Federal Rules of Civil Procedure. These rulings are very important to success or failure in class action litigation. Outcomes on procedural issues often have an outsized influence on class certification rulings and appeals.

The 2011 decision in Wal-Mart Stores, Inc. v. Dukes and the 2013 decision in Comcast Corp. v. Behrend are the two most significant examples. Those rulings are at the core of class certification issues under Rule 23.

The 2018 ruling in Epic Systems Corp. v. Lewis is another example. It green-lighted a gateway device to block prosecution of class and collective actions in the judicial system and force adjudication of claims on an individual, bi-lateral basis in arbitration. Epic Systems built upon a group of pro-employer, pro-arbitration rulings over the past decade – including AT&T v. Concepcion, Italian Colors v. American Express, and this past year’s ruling in Lamps Plus v. Varela – that allow defendants to manage the risks of class actions through arbitration agreements with class action waivers.

To that end, federal and state courts cited Wal-Mart in 641 rulings in 2019; they cited Comcast in 219 cases in 2019; and they cited Epic Systems in 177 decisions by year’s end.

Given the age of some of the sitting Justices of the Supreme Court, President Trump may have the opportunity to fill additional seats on the Supreme Court in 2020 and beyond, and thereby influence a shift in the ideology of the Supreme Court toward a more conservative and strict constructionist jurisprudence. In turn, this is apt to change legal precedents that shape and define the playing field for workplace class action litigation.

Rulings In 2019

In terms of decisions by the Supreme Court impacting workplace class actions, this past year was no exception. In 2019, the Supreme Court decided six cases two employment-related cases and four class action cases that will influence complex employment-related litigation in the coming years.

The employment-related rulings came in two wage & hour collective actions, whereas the class action rulings involved appeal rights, settlement requirements, class arbitration, and removal rights under the Class Action Fairness Act. A rough scorecard of the decisions reflects one distinct plaintiff/worker-side victory, defense-oriented rulings in three cases, and two rulings that may impact all litigants equally.

New Prime, Inc. v. Oliveira, et al., 139 S. Ct. 532 (2019) – Decided on January 15, 2019, this collective action under the Fair Labor Standards Act involved a driver for a trucking company under an agreement that classified him as an independent contractor and contained a mandatory arbitration provision with a class/collective action waiver. Defendant invoked the Federal Arbitration Act (“FAA”), arguing that questions regarding arbitrability should be resolved by the arbitrator. Agreeing that a court should determine whether the FAA’s exclusion in § 1 applies before ordering arbitration, the Supreme Court reasoned that the FAA does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Because a “contract of employment” refers to any agreement to perform work, the Supreme Court concluded that Plaintiff’s contract fell within that exception. The Supreme Court opined that at the time of the adoption of the FAA in 1925, the phrase “contract of employment” was not a term of art and did not require a formal employer-employee relationship, as Congress used the term “contracts of employment” broadly.

Nutraceutical Corp. v. Lambert, et al., 139 S. Ct. 710 (2019) – Decided on February 26, 2019, this class action involved allegations that Nutraceutical’s marketing of a dietary supplement violated California consumer protection law. After decertification of the class, Plaintiff had 14 days under Rule 23(f) to ask for permission to appeal the order. Instead, Plaintiff moved for reconsideration more than 14 days later, and the motion was subsequently denied. Fourteen days thereafter, Plaintiff petitioned the Ninth Circuit for permission to appeal the decertification order. The Ninth Circuit held that Rule 23(f)’s deadline should be tolled because Plaintiff had acted diligently and it reversed the decertification order. A unanimous Supreme Court reversed on the basis that Rule 23(f) is “a non-jurisdictional claim-processing rule,” which is not subject to equitable tolling. The Supreme Court concluded that the Federal Rules of Civil Procedure express a clear intent to compel rigorous enforcement of Rule 23(f)’s deadline, even where good cause for equitable tolling might otherwise exist. As a result, the decision provides bright-line clarity for time limits on Rule 23(f) appeals of class certification orders.

Frank, et al. v. Gaos, 139 S. Ct. 1041 (2019) – Decided on March 20, 2019, this case involved a class action brought against Google claiming violations of the Stored Communications Act (Plaintiffs alleged that when an Internet user conducted a Google search and clicked on a hyperlink listed on the search results, Google transmitted information, including the terms of the search, to the server that hosted the selected webpage). As the Act prohibits a person or entity providing an electronic communication service to the public from knowingly divulging to any person or entity the contents of a communication while in electronic storage by that service, Plaintiffs brought a class action for breach or privacy. The parties negotiated a class-wide settlement that required Google to include disclosures on three of its webpages and to pay $8.5 million, whereby most of the money would be distributed to cy pres recipients (in a class action, cy pres refers to distributing settlement funds not amenable to individual claims or meaningful pro rata distribution to non-profit organizations whose work indirectly benefits class members). The Ninth Circuit affirmed approval of the settlement without addressing standing issues that had been the subject of dispute. On review, the U.S. Supreme Court vacated the order. Although the Supreme Court had granted certiorari to decide whether a class action settlement that provides a cy pres award but no direct relief to class members is fair, reasonable, and adequate for purposes of Rule 23(e)(2), it concluded that there is a substantial open question about whether any named Plaintiff had standing. As a proposed class settlement cannot be approved if the reviewing court lacks jurisdiction over the dispute, and jurisdiction might be lacking if no named Plaintiff had standing, the Supreme Court did not decide the cy pres question. As a result, the decision underscores that standing is always a required element of class certification, either as to the contested claim or settlement.

Lamps Plus, Inc., et al. v. Varela, et al., 139 S. Ct. 1407 (2019) – Decided on April 24, 2019, this case involved a data breach involving approximately 1,300 employees of Defendant. After a fraudulent federal income tax return was filed in the name of Plaintiff, he filed a putative class action on behalf of employees whose information had been compromised. Relying on the arbitration agreement in Plaintiff’s employment contract, Defendant sought to compel arbitration on an individual rather than a class-wide basis. The Ninth Circuit affirmed the rejection of the individual arbitration request, and thereby authorized a class arbitration. Although Supreme Court case law precedents held that a court may not compel class-wide arbitration when an agreement is silent on the availability of such arbitration, the Ninth Circuit concluded that those case law precedents did not apply because Defendant’s agreement was ambiguous, not silent, concerning class arbitration. The Supreme Court reversed. It held that under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2, an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration. It reasoned that class arbitration, unlike the individualized arbitration envisioned by the FAA, sacrifices the principal advantage of arbitration (its informality) and makes the process slower, more costly, and more likely to generate procedural problems than final judgment. The Supreme Court held that consent to participate in class arbitration cannot be inferred absent an affirmative contractual basis for concluding that the party agreed to do so. Therefore, contractual silence is not enough and ambiguity does not provide a sufficient basis to infer consent. As a result, the opinion confirms that an employer cannot be coerced into a class arbitration without signing an arbitration agreement with an unambiguous contract provision expressly stating its intent to do so.

Home Depot U.S.A., Inc. v. Jackson, et al., 139 S. Ct. 1743 (2019) – Decided on May 28, 2019, this case involved the interpretation of the Class Action Fairness Act (“CAFA”). Citibank had filed a state court debt collection action, alleging that consumer was liable for charges incurred on a Home Depot credit card. The consumer responded by filing third-party class action claims against Home Depot and another entity, alleging that they had engaged in unlawful referral sales and deceptive and unfair trade practices under state law. Home Depot filed a notice to remove the case pursuant to the CAFA. Finding that controlling precedent barred removal by a third-party counterclaim Defendant, the District Court dismissed the case (which was reversed by the Fourth Circuit). The U.S. Supreme Court affirmed on the basis that the general removal provision at 28 U.S.C. § 1441(a) does not permit removal by a third-party counterclaim Defendant. The Supreme Court opined that § 1453(b) of the CAFA did not alter § 1441(a)’s limitation on who can remove, suggesting that Congress intended to leave that limit in place. As a result, removal under the CAFA is not allowed for third-part counterclaims.

Parker Drilling Management Services, Ltd. v. Newton, et al., 139 S. Ct. 1881 (2019) – Decided on June 10, 2019, this employment class action concerned work on drilling platforms off the California coast where workers received pay for on-duty time, but not time spent on stand-by, during which they could not leave the platform. Plaintiff filed a class action, alleging that California laws required compensation for stand-by time. The platforms were subject to the Outer Continental Shelf Lands Act (“OCSLA”), which provides that all law on the Outer Continental Shelf (“OCS”) is federal law and deems an adjacent state’s laws to be inferior to federal law only to “the extent that they are applicable and not inconsistent with” federal law under 43 U.S.C. 1333(a)(2)(A). A unanimous Supreme Court vacated a decision of the Ninth Circuit in favor of Plaintiff on the grounds that where federal law address the relevant issue, state law is not adopted as surrogate federal law on the OCS. The Supreme Court rejected Plaintiff’s proposed preemption analysis and ruled that federal law is the only law on the OCS and there is no overlapping state and federal jurisdiction. The Supreme Court held that as Plaintiff’s claims were premised on California law requiring payment for all stand-by time, the Fair Labor Standards Act already addressed that issue and provides for a minimum wage.

The decisions in New Prime, Lambert, Frank, Lamps Plus, Jackson, and Parker Drilling are sure to shape and influence workplace class action litigation in a profound manner.

New Prime and Lamps Plus further elucidate arbitration principles, and when coupled with Epic Systems, these decisions may turn out to be one of the most important trio of workplace class action decisions over the last several decades in terms of their ultimate impact on class action litigation dynamics.

Rulings Expected In 2020

Equally important for the coming year, the Supreme Court accepted three additional cases for review in 2019 that will be decided in 2020 that also will impact and shape class action litigation and government enforcement lawsuits faced by employers.

All three cases are ERISA class actions.

The Supreme Court undertook oral arguments on two of these cases in 2019; the other case underwent oral argument in early 2020.

Retirement Plans Committee Of IBM v. Jander, et al., No. 18-1165 – Argued on November 6, 2019, this ERISA class action concerns whether and in what circumstances the “more harm than good” pleading standard from Fifth Third Bancorp. v. Dedenhoeffer can be satisfied by general allegations relative to the harm of inevitable disclosure of alleged fraud increases over time. The ultimate ruling by the Supreme Court likely will determine the relative difficulty of prosecuting and defending ERISA class actions based on how 401k plans are impacted by corporate disclosures and the viability of ERISA stock drop cases.

Intel Corp. Investment Policy Committee v. Sulyma, et al., No. 18-1116 – Argued on December 4, 2019, this ERISA class action involves application of the proper statute of limitations and what quantum of information triggers the date on which an employee has knowledge of the breach or violation of the statute. The ultimate decision likely will determine the ease or difficulty that Plaintiffs have in suing over ERISA issues and establish whether workers get three years or six years to file ERISA class actions.

Thole, et al. v. U.S. Bank, N.A., No. 17-1712 – Argued on January 13, 2020, this ERISA class action poses the issue of whether plan participants or beneficiaries may seek injunctive relief against fiduciary misconduct without demonstrating actual or imminent financial loss. The Supreme Court’s ultimate ruling is apt to establish significant guideposts for standing defenses in ERISA class actions and the contours of fiduciary duty class actions against fully funded defined benefit plans..

The Supreme Court is expected to issue decisions in these cases by the end of the 2019/2020 term in June of 2020.

Rulings in these cases will have significance for employers in complying with the ERISA and in defending class action litigation.

Implications For Employers

Each decision outlined above may have significant implications for employers and for the defense of high-stakes class action litigation. As always, we will closely monitor all Supreme Court case developments and report them to our readers. Stay tuned!

By Gerald L. Maatman, Jr., Christina M. Janice, and Alex W. Karasik

Seyfarth Synopsis:  In Ituah, et al. v. Austin State Hospital, a federal magistrate judge in Texas recently recommended the denial of a motion for class certification brought by patients alleging disability discrimination against a state psychiatric hospital for failing to make reasonable accommodations to protect them from sexual assault. The Court denied class certification on the grounds that that the named Plaintiff failed to demonstrate that other class members even existed.

For employers opposing motions for class certification, this ruling provides a helpful primer on why an individual plaintiff’s anecdotal allegations of intentional discrimination alone do not satisfy the requirements of Rule 23.

* * *

Case Background

In Ituah, et al., v. Austin State Hospital, et al., Case No. 18-CV-11 (W.D. Tex. Jan. 3, 2020), an adult female patient at Austin State Hospital (“ASH”) was purportedly raped by a male patient.  After the incident was reported internally, no rape kit was conducted, the police were not notified, a staff member instructed the patient to “go take a shower,” and her bed sheets were not preserved as possible evidence.  Id. at 2.

Plaintiff brought individual and class claims that ASH violated Section 504 of the Rehabilitation Act and the Americans With Disabilities Act because it, “intentionally discriminated against [Plaintiff] and the Class on the basis of their disability by failing to make reasonable accommodations to protect them from sexual assault, by refusing to adequately investigate their reports of sexual assault, by failing to adequately train or supervise their agents and authorities in the proper prevention and investigation of sexual assaults at ASH, and by systemically discrediting reports of rapes at the ASH.”  Id. at 4.  She moved to certify two sub-classes under Rule 23(a) and 23(b)(2), including: (i) all women who were sexually assaulted in Austin State Hospital (the “Female Victim Sub-class”); and (ii) all patients who reported a sexual assault at Austin State Hospital but whose allegation was not adequately investigated by ASH because of ASH’s negligent and discriminatory policies (the “Inadequate Investigation Sub-class”).

Apart from anecdotal evidence of her own experience, Plaintiff supported her motion by citing to state data that since 2007 over 700 sexual assault allegations were made at ASH; as such, she contended that patients’ reports of assault were not taken seriously and ASH regularly failed to preserve any evidence.  Id. at 2-3.  Plaintiff further alleged that ASH failed to implement safety measures that would prevent sexual assaults, and failed to adequately investigate assaults when they occurred.

The Court’s Decision

The Court recommended denying Plaintiff’s motion for class certification.  To support her motion for class certification, Plaintiff presented testimony and documentary evidence specific to her own assault allegations, as well as a table of investigations by the Texas Department of Family and Protective Services from 2010-2015.  The Court concluded that Plaintiff failed to sustain her burden for class certification under the standards articulated in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350-52 (2011), as she submitted insufficient evidence warranting class treatment for intentional discrimination claims.

First, regarding Rule 23(a)(1)’s numerosity prong, the Court held that Plaintiff failed to present evidence that supported her estimated class size of 227 persons.  Id. at 10.  Regarding commonality, the Court opined that, “[i]t is not enough that class members suffer the same type of injury or have been subject to a violation of the same law; rather, a plaintiff must identify a unified common policy, practice, or course of conduct that is the source of their alleged injury.”  Id. at 12 (citation omitted).  As a result, the Court held that factual disputes related to Plaintiff’s own assault demonstrated that resolution of individualized issues would not resolve class-wide issues.  Id. at 14.

Turning to the typicality requirement of Rule 23(a)(3), the Court held that because Plaintiff did not demonstrate any facts with respect to any other class members’ claim, she could not show her claims are typical of those of other class members.  Id. at 16.  As to the adequacy requirement pursuant to Rule 23(a)(4), noting that neither Plaintiff nor her guardian attended the class certification hearing and further raising questions relative to the mental competency of Plaintiff and class members, the Court held that it had “significant concerns about [Plaintiff’s] and her guardian’s, ability and willingness to take an active role in and control the litigation and to protect the class members’ interests.”  Id at 17.  Accordingly, the Court held that Plaintiff failed satisfy Rule 23(a)(1)’s requirements.

The Court further held that Plaintiff did not show that class certification was appropriate under Rule 23(b)(2).  Plaintiff argued that the Rule 23(b)(2) standard was met because ASH’s policies were the same as to each class member such that the injunctive relief she sought would be appropriate as to the class as a whole.  ASH responded that Plaintiff could not show that ASH acted on grounds that apply generally to the class or that injunctive relief was appropriate as to the class as a whole.  Id. at 18.  The Court held that for the same reasons that Plaintiff failed to show commonality and typicality of the class, she failed to show that final injunctive relief or declaratory relief was appropriate respecting the class as a whole based on the predominance of individualized issues.  Id. at 20.

Accordingly, in denying Plaintiff’s motion for class certification, the Court held that, it “will not recommend a class certification that is based solely on Plaintiff’s speculation that other class members may exist, especially considering the factual issues that exist as to Plaintiff’s own claims.”  Id. at 21.

Implications For Employers

This ruling is instructive in terms of defending a motion for class certification brought solely on the strength of one plaintiff’s individual claims.  Although the factual allegations here were unique (and disturbing), the Court’s analysis provides significant insight for attacking class certification motions that ultimately seek authorization of fishing expeditions for additional claimants in the class discovery phrase.

Seyfarth Synopsis: Our latest blog gave readers a detailed breakdown of the second trend of our 16th Annual Workplace Class Action Report (“WCAR”), which was class certification rulings in 2019.  Plaintiffs attained higher than ever rates of success in wage & hour litigation certification, and continued with high certification rates in the areas of ERISA and in the employment discrimination space. In today’s video, Seyfarth partner Jerry Maatman explains the reasoning behind these developments, and provides his perspective on potential outcomes in 2020 with regards to class certification.  Check out Jerry’s in-depth analysis in the link below!

Seyfarth Synopsis: As detailed in our 2020 Workplace Class Action Litigation Report, 2019 was an interesting year for employers in terms of class certification rulings. Plaintiffs achieved the highest numbers of initial conditional certification rulings of wage & hour collective actions in the last decade, and likewise increased their success rates in ERISA and employment discrimination class actions

Anecdotally, surveys of corporate counsel confirm that complex workplace litigation – and especially class actions and multi-plaintiff lawsuits – remains one of the chief exposures driving corporate legal budgetary expenditures, as well as the type of legal dispute that causes the most concern for companies.

The prime component in that array of risks is indisputably complex wage & hour litigation.

The circuit-by-circuit analysis of 303 class certification decisions in all varieties of workplace class action litigation is detailed in the following map:

Wage & Hour Certification Trends

Plaintiffs achieved robust numbers of initial conditional certification rulings of wage & hour collective actions in 2019, while employers secured less defeats of conditional certification motions and decertification of § 216(b) collective actions.[1] The percentage of successful motions for decertification brought by employers saw a slight increase in 2019 to 58%. This compared to 52% in 2018, an increase of 6%. At the same time, this was 5% less than the figure of 63% in 2017.

Most significantly, for the fourth year in a row, wage & hour filings in federal courts decreased; moreover, the number of filings in 2019 were at the lowest level in the past decade. That being said, the volume of FLSA lawsuit filings for the preceding four years – during 2015, 2016, 2017, and 2018 – were at the highest levels in the last several decades. Many of these cases remain in the pipeline within federal courts, and the result is a burgeoning case load of wage & hour issues.

To be sure, an increase in FLSA filings over the past several years has caused the issuance of more FLSA certification rulings than in any other substantive area of complex employment litigation – 271 certification rulings in 2019, as compared to 273 certification rulings in 2018, 257 certification rulings in 2017, 224 certification rulings in 2016, and 175 certification rulings in 2015.

The analysis of these rulings – discussed in Chapter V of this Report – shows that a high predominance of cases are brought against employers in “plaintiff-friendly” jurisdictions such as the judicial districts within the Second and Ninth Circuits. For the first time in a decade, however, rulings were equally voluminous out of the Fifth and Sixth Circuits, which also tended to favor workers over employers in conditional certification rulings.

This trend is shown in the following map:

The statistical underpinnings of this circuit-by-circuit analysis of FLSA certification rulings is telling in several respects.

First, it substantiates that the district courts within the Second, Fifth, Sixth and Ninth Circuits are the epi-centers of wage & hour class actions and collective actions. More cases were prosecuted and conditionally certified – 36 certification orders in the Sixth Circuit, 36 certification orders in the Second Circuit, 31 certification orders in the Ninth Circuit, and 31 certification orders in the Fifth Circuit – in the district courts in those circuits than in any other areas of the country. For the first time in recent memory, the Sixth Circuit – which encompasses the states of Kentucky, Michigan, Ohio, and Tennessee – had as many or more certifications than either the Second or Ninth Circuits.

Second, as the burdens of proof reflect under 29 U.S.C. § 216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (199 of 245 rulings, or approximately 81%) in 2019, which was even higher than the 2018 numbers (196 of 248 rulings, or approximately 79%, which was the highest percentage of plaintiff wins ever recorded in the last decade). Furthermore, in terms of “second stage” decertification motions, employers prevailed in roughly 58% of those rulings (15 of 26 rulings).

Overall, these statistics show robust numbers for the plaintiffs’ bar. The “first stage” conditional certification statistics for plaintiffs at 81% in 2019 were even more favorable to workers than in 2018, when plaintiffs won 79% of “first stage” conditional certification motions (and relative to 2017, when plaintiffs won 73% of “first stage” conditional certification motions). However, employers fared better in 2019 on “second stage” decertification motions. Employers won decertification motions at a rate of 58%, which was up from 52% 2018 (although down from 63% in 2017).

The following chart illustrates this trend for 2019:

Third, this reflects that there has been an on-going migration of skilled plaintiffs’ class action lawyers into the wage & hour litigation space for close to a decade. Experienced and able plaintiffs’ class action counsel typically secure better results. Further, securing initial “first stage” conditional certification – and foisting settlement pressure on an employer – can be done quickly (almost right after the case is filed), with a minimal monetary investment in the case (e.g., no expert is needed, unlike when certification is sought in an employment discrimination class action or an ERISA class action), and without having to conduct significant discovery in accordance with the case law that has developed under 29 U.S.C. § 216(b).

As a result, to the extent litigation of class actions and collective actions by plaintiffs’ lawyers is viewed as an investment of time and money, prosecution of wage & hour lawsuits is a relatively low cost investment, without significant barriers to entry, and with the prospect of immediate returns as compared to other types of workplace class action litigation.

Hence, as compared to ERISA and employment discrimination class actions, FLSA litigation is less difficult or protracted for the plaintiffs’ bar, 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 2019 confirm these factors.

The great unknown for workplace class action litigation is the impact of the Epic Systems ruling, and whether it reduces class action activity in the judicial system and depresses settlement values of workplace lawsuits. At least insofar as 2019 is concerned, the fact that there were less conditional certification rulings suggests that a percentage of lawsuits were exited from the court systems either voluntarily or via motions to compel arbitration before courts ever passed on motions for conditional certification. Likewise, employers achieved many key victories in precluding class and collective actions from being litigated in federal courts (and conversely, successfully compelling such disputes to be litigated on a single plaintiff, bi-lateral basis in arbitration).

At the same time, a future Congress may effectuate a legislative response to abrogate or limit the impact of workplace arbitration agreements with class action waivers, but that will be dependent upon ideological and political dynamics based on future elections.

As a result, Epic Systems may well impact case filing numbers in the near term.

Employment Discrimination & ERISA Certification Trends

Against the backdrop of wage & hour litigation, the ruling in Wal-Mart also fueled more critical thinking and crafting of case theories in employment discrimination and ERISA class action filings in 2019.

The Supreme Court’s Rule 23 decisions have had the effect of forcing the plaintiffs’ bar to “re-boot” the architecture of their class action theories.[2]

At least one result was the decision three years ago in Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036 (2016), in which the Supreme Court accepted the plaintiffs’ arguments that, in effect, appeared to soften the requirements previously imposed in Wal-Mart for maintaining and proving class claims, at least in wage & hour litigation.

Hence, it is clear that the playbook on Rule 23 strategies is undergoing a continuous process of evolution.

Filings of “smaller” employment discrimination class actions have increased due to a strategy whereby state or regional-type classes are asserted more often than the type of nationwide mega-cases that Wal-Mart discouraged. Plaintiffs’ counsel are more selective, strategic, and savvy relative to calibrating the focus of their cases and aligning the size of the proposed class to the limits of Rule 23 certification theories.

In essence, at least in the employment discrimination area, the plaintiffs’ litigation playbook is more akin to a strategy of “aim small to secure certification, and if unsuccessful, then miss small.”

In turn, the plaintiffs’ bar did considerably better in 2019 in employment discrimination class actions, as success on certification motions in 2019 was more than double over the year before. In 2019, 7 of 11 motions were granted and 4 of 11 motions were denied. This was a significant uptick as compared to 2018 when only 3 of 11 motions were granted for plaintiffs and 8 of 11 motions were denied. Instead, the past year was more closely comparable to 2017, when 7 of 11 motions were granted and 4 of 11 motions were denied.

The initial certification rate of 64% was one of the highest on record over the last decade for employment discrimination class actions. That being said, in the 4 decertification motions brought in this substantive area, employers won 100% of those motions.

The following map demonstrates the array of certification rulings in Title VII and ADEA discrimination cases:

In terms of the ERISA class action litigation scene in 2019,[3] the focus continued to rest on precedents of the U.S. Supreme Court as it shaped and refined the scope of potential liability and defenses in ERISA class actions.

The Wal-Mart decision also has changed the ERISA certification playing field by giving employers more grounds to oppose class certification.

The decisions in 2019 show that class certification motions have the best chance of denial in the context of ERISA welfare plans, and ERISA defined contribution pension plans, where individualized notions of liability and damages are prevalent.

While plaintiffs were more successful than employers in litigating certification motions in ERISA class actions, their success rate was on par with previous years. In 2019, plaintiffs won 11 of 17 certification rulings, a success rate of 65%. By comparison, in 2018 plaintiffs won 11 of 17 certification rulings for a nearly identical success rate; in contrast, in 2017, plaintiffs won 17 of 22 certification motions, with a success rate of 77%.

A map illustrating these trends is shown below:

Overall Trends

So what conclusions overall can be drawn on class certification trends in 2019?

In the areas of wage & hour, employment discrimination, and ERISA claims, the plaintiffs’ bar is converting their case filings into certification of classes at a high rate. To the extent class certification aids the plaintiffs’ bar in monetizing their lawsuit filings and converting them into class action settlements, the conversion rate is robust.

Whereas class certification for employment discrimination cases (7 motions granted and 4 motions denied in 2019) and in ERISA cases (11 motions granted and 6 motions denied in 2019) showed an approximate 64% to 65% success rate for plaintiffs, the plaintiffs’ success rate factor in wage & hour litigation (with 199 conditional certification motions granted and 46 motions denied) is pronounced.

The following bar graph details the win/loss percentages in each of these substantive areas:

–          a success rate of 64% for certification of employment discrimination class actions (both Title VII and age discrimination cases);

–          a success rate of 65% for certification of ERISA class actions; and,

–          a success rate of 81% for conditional certification of wage & hour collective actions.

Obviously, the most certification activity in workplace class action litigation is in the wage & hour space.

The trend over the last three years in the wage & hour space reflects a steady success rate that ranged from a low of 70% to a high of 81% (with 2019 representing the highest success rate ever) for the plaintiffs’ bar, which is tilted toward plaintiff-friendly “magnet” jurisdictions where the case law favors workers and presents challenges to employers seeking to block certification.

The key statistic and bright spot in 2019 for employers was an increase in the odds of successful decertification of wage & hour cases to 58%, as compared to 52% in 2018 (and comparatively, of 63% in 2017).

Comparatively, the trend over the past five years for certification orders is illustrated in the following chart:

While each case is different and no two class actions or collective actions are identical, these statistics paint the all-too familiar picture that employers have experienced over the last several years. Plaintiffs have done exceedingly well in certification proceedings.

The new wrinkle to influence these factors in 2019 was the Supreme Court’s ruling in 2018 in Epic Systems. Overall case filing numbers were down. This reflects that lawsuits moved out of the court system and into arbitration at greater rates than ever before. The bottom line is that the most effective tool to defeating class action litigation is to avoid lawsuits altogether (where plaintiffs’ lawyers voluntarily agree to proceed to arbitration) or to win a motion to compel arbitration before a certification motion is ever litigated.

Lessons From 2019

There are multiple lessons to be drawn from these trends in 2019.

First, while the Wal-Mart ruling undoubtedly heightened commonality standards under Rule 23(a)(2) starting in 2011, and the Comcast decision tightened the predominance factors at least for damages under Rule 23(b) in 2013, the plaintiffs’ bar has crafted theories and “work arounds” to maintain or increase their chances of successfully securing certification orders in ERISA, wage & hour, and employment discrimination lawsuits. In 2019, their certification conversion rate for ERISA and employment discrimination cases was 65% and 64% respectively, while wage & hour cases showed an 81% conversion rate. This was the highest conversion rate ever for FLSA and employment discrimination cases.

Second, the defense-minded decisions in Wal-Mart and Comcast have not taken hold in any significant respect in the context of FLSA certification decisions for wage & hour cases. Efforts by the defense bar to use the commonality standards from Wal-Mart and the predominance analysis from Comcast have not impacted the ability of the plaintiffs’ bar to secure first-stage conditional certification orders under 29 U.S.C. § 216(b). If anything, the ruling three years ago in Tyson Foods has made certification prospects even easier for plaintiffs in the wage & hour space, insofar as conditional certification motions are concerned. The conversion rate of successful certification motions hit an all-time high of 81% in 2019, which further confirms this evolution of the case law in this space.

Third, while monetary relief in a Rule 23(b)(2) context is severely limited, certification is the “holy grail” in class action litigation, and certification of any type of class – even a non-monetary injunctive relief class claim – often drives settlement decisions. This is especially true for employment discrimination and ERISA class actions, as plaintiffs’ lawyers can recover awards of attorneys’ fees under fee-shifting statutes in an employment litigation context. In this respect, the plaintiffs’ bar is nothing if not ingenuous, and targeted certification theories (e.g., issue certification on a limited discrete aspect of a case) are the new norm in federal and state courthouses.

Fourth, during the certification stage, courts are more willing than ever before to assess facts that overlap with both certification and merits issues, and to apply a more practical assessment of the Rule 23(b) requirement of predominance, which focuses on the utility and superiority of a preclusive class-wide trial of common issues. Courts are also more willing to apply a heightened degree of scrutiny to expert opinions offered to establish proof of the Rule 23 requirements.

Finally, employers now have an effective weapon to short-circuit the decision points for class action exposure through use of mandatory workplace arbitration agreements. Based on the Epic Systems ruling, a class waiver in an arbitration agreement is now an effective first-line defense to class-based litigation. Throughout 2019, employers used arbitration defenses to fracture class actions and convert them into individual, bi-lateral arbitration proceedings.

In sum, notwithstanding these shifts in proof standards and the contours of judicial decision-making, the likelihood of class certification rulings favoring plaintiffs are not only “alive and well” in the post-Wal-Mart and post-Comcast era, but also thriving.

The battle ground is likely to shift in the coming years, as employers may create a bulwark against such class-based claims based on the Epic Systems ruling.

Seyfarth Exclusive! In Person Event & Live Webinar

You are invited to join Erin Mulvaney, Senior Legal Reporter at Bloomberg Law, and Seyfarth Partner Gerald (“Jerry”) L. Maatman, Jr. for a panel discussion marking the release of Seyfarth’s 16th Annual Workplace Class Action Litigation Report. Please click here to register. For those of you in the Midwest, please join us in person, meet Erin and network with like-minded attendees.

As we move into a shifting landscape of policy and litigation developments, employers are seeking insights to prepare for the challenges of the future workplace. At this important event, the presenters will provide their analyses of significant class action litigation trends of 2019, and a look ahead to likely developments in 2020. Jerry will also discuss the top class action rulings in 2019 and hot topics for 2020, including key trends in class certification, government enforcement litigation, and the U.S. Supreme Court.

In Person Panel Discussion:

Thursday, February 13th

11 a.m. – Noon Program
Noon – 1 p.m. Lunch

Seyfarth Shaw LLP
233 South Wacker Drive
Suite 8000
Chicago, Illinois 60606

Webinar:

Thursday, February 13th

Noon – 1 p.m. Eastern
11 a.m. – Noon Central
10 a.m. – 11 a.m. Mountain
9 a.m. – 10 a.m. Pacific

Speakers:

 

 

 

Erin Mulvaney is a senior legal reporter on Bloomberg Law’s labor team in Washington, D.C.. She specializes in employment law, covering legal developments around the country that have implications in the workplace from state laws to the ripple effects of Supreme Court rulings. She previously covered labor at the National Law Journal and the economy at the Houston Chronicle.

Gerald L. Maatman, Jr. is one of Seyfarth’s preeminent class action litigators, co-chair of our Class Action Litigation Practice Group, and the Editor of the Workplace Class Action Litigation Report, which is recognized as the nation’s most complete guide to workplace-related complex litigation.

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: Seyfarth’s 16th Annual Workplace Class Action Litigation Report analyzes 1,467 rulings and is our most comprehensive Report ever at 800 pages.

Click here to access the microsite featuring all the Report highlights. You can read about the five major trends of the past year, order your copy of the eBook, and download Chapters 1 and 2 on the 2020 Executive Summary and key class action settlements.

The Report has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We are humbled and honored by the recent review of our 2019 Annual Workplace Class Action Litigation Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. Here is what EPLiC said: “The Report is a must-have resource for legal research and in-depth analysis of employment-related class action litigation. Anyone who practices in this area, whether as a corporate counsel, a private attorney, a business execu­tive, a risk manager, an underwriter, a consul­tant, or a broker, cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States. It is the sole compendium that analyzes workplace class ac­tions from ‘A to Z.’ In short, it is ‘the bible’ for class action legal practitioners, corporate coun­sel, employment practices liability insurers, and anyone who works in related areas.”

The 2020 Report analyzes rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2019 for employment discrimination, wage & hour, ERISA class actions, and statutory workplace laws, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

We hope our loyal blog readers will enjoy it!

Executive Summary

The prosecution of workplace class action litigation by the plaintiffs’ bar has continued to escalate over the past decade. Class actions often pose unique “bet-the-company” risks for employers. As cost-effective approaches to class action litigation involve complex variables, these risks have grown exponentially since 2010. At the same time, the prosecution and defense of class action litigation has been transformed over the past decade. As has become readily apparent in the #MeToo era, an adverse judgment in a class action has the potential to bankrupt a business. Further, adverse publicity eviscerate a company’s market share. Likewise, the on-going defense of a class action can drain corporate resources long before the case even reaches a decision point. Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices in numerous jurisdictions at the same time. This risk is particularly acute in wage & hour cases. Hence, workplace class actions can impair a corporation’s business operations, jeopardize the careers of senior management, and cost millions of dollars to defend.

For these reasons, workplace class actions remain at the top of the list of challenges that keep business leaders up late at night worrying about compliance and litigation.

Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making this challenge any easier for companies. They are continuing to develop new theories and approaches to the successful prosecution of complex employment litigation and government-backed lawsuits. New rulings by federal and state courts have added to this patchwork quilt of compliance problems and litigation management issues. In turn, the events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses are continuing to accelerate at a rapid pace while also undergoing significant change. Notwithstanding the business-friendly policies of the Trump Administration, governmental enforcement litigation pursued by the U.S. Equal Employment Commission (“EEOC”) and other federal agencies continue to manifest an aggressive agenda. Conversely, litigation issues stemming from the U.S. Department of Labor (“DOL”) reflected a slight pull-back from previous efforts to push a pronounced pro-worker/anti-business agenda.

The combination of these factors are challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. These challenges are especially acute for businesses in the context of complex workplace litigation. Adding to this mosaic of challenges in 2020 is the continuing evolution in federal policies emanating from the Trump White House, the recent appointments of new Supreme Court Justices and lower federal court judges, and the uncertainty over impeachment inquiries and the upcoming Presidential election.

Furthermore, while changes to government priorities started on the previous Inauguration Day and are on-going, others are being carried out by new leadership at the agency level who were appointed over this past year. As expected, many changes represent stark reversals in policy that are sure to have a cascading impact on private class action litigation.

While predictions about the future of workplace class action litigation may cover a wide array of potential outcomes, one sure bet is that the plaintiffs’ class action bar will continue to evolve and adapt to changes in case law precedents. As a result, class action litigation will remain fluid and dynamic, and corporate America will continue to face new litigation challenges

Key Trends Over The Past Year

An overview of workplace class action litigation developments in 2019 reveals five key trends.

First, the plaintiffs’ bar was successful in prosecuting class certification motions at the highest rates ever as compared to previous years in the areas of ERISA and wage & hour litigation, as well as employment discrimination class actions. While evolving case law precedents and new defense approaches resulted in many good outcomes for employers in opposing class certification requests, federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar in 2019 than in any other year in the past decade. Plaintiffs’ lawyers continued to craft refined class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). As a result, in the areas of wage & hour and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in federal courts in 2019 (over comparative figures for 2018 and 2017). Class actions were certified in significantly higher numbers in “magnet” jurisdictions that continued to issue decisions that encourage or, in effect, force the resolution of large numbers of claims through class-wide mechanisms. Furthermore, the sheer volume of wage & hour certification decisions in 2019 equated to similar levels as last year, while plaintiffs fared better in litigating those class certification motions in federal court than in the prior year. Of the 271 wage & hour certification decisions in 2019, plaintiffs won 199 of 245 conditional certification rulings (approximately 81%), and lost 15 of 26 decertification rulings (approximately 58%). By comparison, there were 273 wage & hour certification decisions in 2018, where plaintiffs won 196 of 248 conditional certification rulings (approximately 79%) and lost 13 of 25 decertification rulings (approximately 52%). In sum, employers lost more first stage conditional certification motions in 2019, while bettering their odds – an increase of nearly 6% – of fracturing cases with successful decertification motions.

Second, class action litigation has been shaped and influenced to a large degree by recent rulings of the U.S. Supreme Court. Over the past several years, the U.S. Supreme Court has accepted more cases for review than in previous years – and as a result, has issued more rulings – that have impacted the prosecution and defense of class actions and government enforcement litigation. The past year continued that trend, with several key decisions on complex employment litigation and class action issues that were arguably more pro-business than decisions in past terms. Among those rulings, Lamps Plus v. Varela and Nutraceutical Corp. v. Lambert reflected a conservative, strict constructionist reading of statutes and class action procedures. Furthermore, a case decided last year – Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), which upheld the legality of class action waivers in mandatory arbitration agreements – proved to be a transformative decision that is one of the most important workplace class action rulings in the last two decades. In 2019, it had a profound impact on the prosecution and defense of workplace class action litigation, and in the long run, Epic Systems may well shift class action litigation dynamics in critical ways. Coupled with the possibility of more appointments to the Supreme Court by the Republican-controlled White House, litigation may well be reshaped by Supreme Court decisional law in ways that change the playbook for prosecuting and defending class actions.

Third, while filings and settlements of government enforcement litigation in 2019 did not reflect a head-snapping pivot from the ideological pro-worker outlook of the Obama Administration to a pro-business, less regulation/litigation viewpoint of the Trump Administration, the numbers began to trend downward in terms of a diminishment in the aggressive agenda of prior government enforcement litigation. As an example, the EEOC brought 144 lawsuits in 2019, as compared to 199 lawsuits in 2018, and 184 lawsuits in 2017 (though the 2019 numbers still outpaced 2016, the last year of the Obama Administration, when the EEOC filed 86 lawsuits). Furthermore, the settlement value of the top ten settlements in government enforcement cases decreased dramatically to $57.52 million, which was down from $126.7 million in 2018 and from $485.25 million in 2017. The explanations for this phenomenon are varied, and include the time-lag between Obama-appointed enforcement personnel vacating their offices and Trump-appointed personnel taking charge of agency decision-making power; the number of lawsuits “in the pipeline” that were filed during the Obama Administration that came to conclusion in the past two years; and the “hold-over” effect whereby Obama-appointed policy-makers remained in their positions long enough to continue their enforcement efforts before being replaced in the last half of 2018 or in 2019. This is especially true at the EEOC, where the Trump nominations for the Commission’s Chair, two Commissioners, and its general counsel did not reach the Senate floor until the second half on 2019. These factors are critical to employers, as both the DOL and the EEOC have had a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue. As 2020 opens, it appears that the content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration will continue to tilt away from the pro-employee/anti-big business mindset of the previous Administration. Trump appointees at the EEOC and the DOL are slowly but surely “peeling back” on aggressive litigation enforcement tactics that were the watchwords under the Obama Administration. As a result, it appears inevitable that the volume of government enforcement litigation and the value of settlement numbers from those cases will decrease even further in 2020.

Fourth, the monetary value of the overall aggregate workplace class action settlements increased slightly in 2019, but as compared to the last several years, it was one of the lowest marks for settlements after those values plummeted to their lowest level ever in 2018. For most of the past decade, these settlement numbers had been increasing on an annual basis, and reached all-time highs in 2017. The 2019 numbers, showed increases in settlement values for ERISA and wage & hour class action settlements, while there were large drop-offs in the values of settlements for employment discrimination and other workplace statutory class actions. The plaintiffs’ employment class action bar and governmental enforcement litigators were exceedingly successful in monetizing their case filings into large class-wide settlements this past year, but they did so at decidedly lower values in 2019 than in previous years. The top ten settlements in various employment-related class action categories totaled $1.34 billion in 2019, as compared to $1.32 billion in 2018 (and a stark decrease of over $1.38 billion from the $2.72 billion total in 2017 and a decrease of $410 million from the $1.75 billion total in 2016). At the same time, the settlement figure of $449.05 million in wage & hour class actions constituted nearly a 50% increase in value – up from $253 million in 2018 (while considerably less, however, from the high-water mark of $525 million in 2017); ERISA class actions also saw an increase to $376.35 million from $313.4 million in 2018 (but still a far cry from the 2017 level at $927 million). Conversely, the top employment discrimination class actions decreased to $139.2 million (down from 216 million in 2018). Finally, government enforcement litigation settlements registered a significant decrease to $57.52 million (as compared to $125.8 million in 2018, and $485.2 million in 2017). Whether this is the beginning of a long-range trend or a short-term aberration remains to be seen as 2020 unfolds.

Fifth and finally, as it continues to gain momentum on a worldwide basis, the #MeToo movement is fueling employment litigation issues in general and workplace class action litigation in particular. On account of news reports and social media, it has raised the level of awareness of workplace rights and emboldened many to utilize the judicial system to vindicate those rights. Several large sex harassment class-based settlements were effectuated in 2019 that stemmed at least in part from #MeToo initiatives. Likewise, the EEOC’s enforcement litigation activity in 2019 focused in large part on the filing of #MeToo lawsuits while riding the wave of social media attention to such workplace issues. Of the EEOC’s 2019 sex discrimination lawsuit filings, 28 cases included claims of sexual harassment, and 57 of the 84 Title VII lawsuits were based on gender discrimination allegations. The total number of sexual harassment filings decreased slightly in 2019 as compared to 2018 and 2017, when sexual harassment claims accounted for 41 and 33 filings, respectively.

Implications For Employers

The one constant in workplace class action litigation is change. More than any other year in recent memory, 2019 was a year of great change in the landscape of Rule 23. As these issues play out in 2020, additional chapters in the class action playbook will be written.

The lesson to draw from 2019 is that the private plaintiffs’ bar and government enforcement attorneys at the state level are apt to be equally, if not more, aggressive in 2020 in bringing class action and collective action litigation against employers.

These novel challenges demand a shift of thinking in the way companies formulate their strategies. As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel. Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel’s priorities list for 2020.

By Gerald L. Maatman, Jr.Christopher J. DeGroffMatthew J. Gagnon, Ala Salameh

Seyfarth Synopsis: Stepping into a new year always gives one a chance to reflect on the lessons and trends of the prior year. In that spirit, we are pleased to present our annual selections for the five most intriguing developments in EEOC litigation during 2019, as well as a preview of our annual report on developments and trends in EEOC-initiated litigation. This year’s book, entitled EEOC-Initiated Litigation: FY 2019, examines the EEOC’s filings in 2019, and analyzes the significant legal decisions and trends impacting EEOC litigation in 2020. We hope that employers will benefit from this deeper dive into how the EEOC’s priorities play out in litigation, and in the process, undertake optimal compliance strategies during FY 2020 and beyond.

The EEOC prosecutes dozens of cases across the country annually guided by its strategic enforcement priorities and objectives. Each year, we analyze those new case filings and legal decisions handed down by courts across the country. That analysis sheds light on new areas of focus for the EEOC’s ever-changing enforcement agenda. Our analysis is published in a comprehensive yearly report entitled EEOC-Initiated Litigation: FY 2019. In the report, we outline how the Commission interpreted and pursued its objectives this year and identify noteworthy trends.

Our goal is to assist clients in utilizing this information to ensure compliance with existing laws, and to protect themselves against becoming future targets of enforcement. Our annual report is designed for HR professionals, corporate counsel, and other corporate decision-makers. We hope that it continues to provide useful and helpful commentary and analysis.

A preview of this year’s book is available here.The full publication will be offered for download as an eBook. To order a copy, please click here.

Now, without further ado, we are pleased to present our list of the top five most intriguing developments of 2019:

Intriguing Development 1: LGBT Discrimination Reaches The Supreme Court

The U.S. Supreme Court heard oral arguments for three cases relating to LGBT employee protections including R.G. & G.R. Harris Funeral Homes, Inc. v. EEOC, Bostock v. Clayton County, Georgia, and Altitude Express, Inc. v. Zarda.

In these three cases, the Supreme Court will finally decide whether transgender and sexual orientation discrimination are prohibited under Title VII as forms of sex discrimination. Harris Funeral Homes involves a claim of transgender discrimination. Bostock and Zarda involve claims of sexual orientation discrimination. All three were argued on the same day – the first week of the Supreme Court’s 2019 term – in two arguments (Bostock and Zarda were argued together). During oral argument, the Supreme Court’s four liberal justices appeared to voice support for a broader interpretation of Title VII, which would include these types of discrimination, while the Court’s conservative Justices expressed concern that it should be Congress, not the courts, that make this determination.

However, one of the newest conservative Justices, Justice Gorsuch, called this a “really close” question, and at times appeared sympathetic to the view that discrimination on the basis of gender identity or sexual orientation is necessarily discrimination on the basis of sex. It is therefore impossible to predict how the Supreme Court will rule on this issue. However, when these cases are decided, they will likely have a significant impact on the American workforce and society at large.

Intriguing Development 2: Limits To EEOC’s Attempts To Police Employers’ Use Of Arrest And Conviction Records

On April 25, 2012, the EEOC issued its enforcement guidance concerning the use of arrest and conviction records in employment decisions. That guidance purported to direct employers across the country that they may not deny someone employment due to criminal history information without considering the nature and gravity of the offense, the time passed since the conviction or completion of the sentence, and the nature of the job held or sought. That guidance was immediately challenged in court by the State of Texas, which argued that it had standing because it was an employer subject to the guidance just like any other employer.

In State of Texas v. EEOC, the Fifth Circuit held that the EEOC is limited in its rulemaking and enforcement powers with respect to Title VII; it may issue procedural regulations implementing Title VII, but it may not promulgate substantive rules. According to the Fifth Circuit, the guidance was a final agency action and a substantive rule subject to the Administrative Procedure Act’s notice and comment requirement, and that the EEOC overstepped its authority in issuing the guidance as it did. The end result – the Fifth Circuit ruled that the EEOC may not treat the guidance as binding in any respect. This decision could have a lasting impact on the EEOC’s rulemaking authority, and how it approaches that authority.

Intriguing Development 3: Preemptive Disability Determination Theory Blocked

In 2019, the Eleventh Circuit held that an employer’s fear that an employee might contract Ebola during a planned, future trip to Ghana, could not give rise to a claim of disability discrimination. In EEOC v. STME, LLC, the Commission argued that the employee should be regarded as having a disability because her employer believed that she would become disabled in the future. However, the Eleventh Circuit held that the “regarded as having” a disability prong of the ADA requires that a disability be a present physical or mental impairment. That prong did not extend to an employer’s belief that an employee might contract or develop an impairment in the future. In other words, there is no disability discrimination when an employee does not have a disability at the time of termination.

Intriguing Development 4: Joint Employment And Temporary Workers

In EEOC v. Global Horizons, Inc., the Ninth Circuit held as a matter of first impression that it would apply the common law agency test to determine joint employer liability under Title VII. Further, the Ninth Circuit expressly rejected application of the test applied to determine joint-employer liability under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act because those statutes intentionally expanded the definition of employment beyond the common law understanding.

Under the common law test, the principal guidepost is the extent of control that the putative employer exercises over the details of the work of the putative employee. Applying that conception of joint employment, the Ninth Circuit reversed the decision of the District Court, which held that fruit growers employing foreign guest workers in their orchards were not responsible for issues relating to those employees’ housing, transportation, and meals. According to the Ninth Circuit, because the foreign guest worker program places the obligation of providing those benefits on the owners of the farms where the temporary foreign workers work, the fruit growers retained control over those aspects of employment.

Intriguing Development 5: The Whirlwind Of EEOC Pay Data Collection

On March 4, 2019, in National Women’s Law Center v. Office of Management and Budget, the U.S. District Court for the District of Columbia vacated the Office of Management and Budget’s decision to stay implementation of the Obama-era rule that required employers to submit to the EEOC detailed pay data as part of their EEO-1 reporting obligations. That rule had come under fierce opposition by pro-business groups, prompting the OMB, per its authority under the Paperwork Reduction Act, to stay the rule as one of the first regulatory reversals under the Trump administration. But the District Court held that the OMB’s decision to stay the regulation was unsupported by any analysis and lacked the reasoned explanation that the administrative procedure act requires.

The District Court then ordered the EEOC to resume pay data collection under the Obama-era rule for the 2017 and 2018 reporting years. The District Court continues to monitor and exercise control over the EEOC’s efforts to collect this information, and on October 29, 2019, the court ordered the EEOC to continue its collection activities through January 31, 2020. The end result is that the EEOC at the end of this process will have access to two years of pay data from a broad swath of employers across the country. What, if anything, it chooses to do with that data once that collection is complete, is anyone’s guess, and one of the issues employers should look out for in FY 2020 and beyond.

Summing It All Up

FY 2019 presented a series of challenges for the EEOC. Between a four-month political stalemate resulting in a loss of quorum, and a roughly one-month government shutdown, the Commission was not firing on all cylinders for a significant part of the year. However, despite these setbacks, the EEOC has continued to pursue aggressive litigation and close out settlements at high rates. New political appointees at the EEOC are now settled into their roles. This means that FY 2020 is likely to finally reveal the changes in the EEOC’s strategic direction employers can expect under the Trump administration.

We will of course continue to monitor these developments. And we look forward to sharing our thoughts and analysis in the year to come.

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

By Gerald L. Maatman, Jr., Alex S. Oxyer, Andrew D. Welker

Seyfarth Synopsis: After over a decade of litigation between the EEOC and trucking company CRST Van Expedited, the Eighth Circuit recently affirmed a federal district court’s order requiring the EEOC to pay $3.3 million in attorneys’ fees to CRST for pursuing claims that it knew or should have known were frivolous and failing to satisfy its pre-suit obligations under Title VII. As such, it is the largest fee award entered against the Commission in 2019.The ruling is EEOC v. CRST Van Expedited, Inc., No. 18-1446 (8th Cir. Dec. 10, 2019).

This is the latest in a series of favorable rulings in this case for employers and provides a useful tool in future litigation where the EEOC fails to fulfill its pre-suit obligations.  We have chronicled the developments of this case in our previous blog posts, which can be found here.

Case Background

The case began in 2007 when the EEOC filed suit against CRST after a female driver alleged that two male trainers sexually harassed her during a training trip. The EEOC eventually sued CRST under § 706 on behalf of a group of approximately 270 female employees, claiming that CRST was responsible for severe or pervasive sexual harassment and that it subjected its female employees to a hostile work environment.  The district court ultimately barred the EEOC from seeking relief for individual claims on behalf of all but 67 of the women, found that the EEOC had not established a pattern or practice of tolerating sexual harassment, and dismissed the suit.  Finding that CRST was the prevailing party and that the EEOC had failed to satisfy its pre-suit obligations, the district court entered a startling attorneys’ fee sanction of nearly $4.7 million against the EEOC .

On appeal, the Eighth Circuit affirmed the dismissal of all claims but those pertaining to two women and vacated the fee award, determining that CRST was no longer the “prevailing party” because the EEOC now had active claims.  On remand, the EEOC settled one claim and withdrew the other. Thereafter, CRST again sought attorneys’ fees and was again awarded over $4 million.  However, on the second appeal, the Eight Circuit again reversed the district court’s fee award, holding that CRST was not a prevailing party under Title VII because the dismissal of the claims concerning EEOC’s failure to satisfy its pre-suit obligations was not a ruling “on the merits.” In addition, the Eighth Circuit reversed the fee award because the district court failed to make individualized findings in granting summary judgment against the other 78 women. The Eighth Circuit directed the district court to make such individualized findings and barred it from awarding fees for the claims that had been dismissed as a result of the EEOC’s failure to satisfy its pre-suit obligations.

CRST appealed the ruling to the U.S. Supreme Court, which reversed and remanded. The Supreme Court held that a favorable judgment on the merits is not a requirement to be a “prevailing party” for purposes of awarding attorneys’ fees. On remand, the Eighth Circuit vacated its prior judgment and remanded back to the district court for additional proceedings consistent with the Supreme Court’s opinion.

In 2017, the district court, after engaging in an individualized inquiries, found that most of the EEOC’s claims on behalf of 78 claimants for sexual harassment were “frivolous, unreasonable, and/or groundless.”  It further found that the dismissal of the 67 other claims as a result of the EEOC’s failure to satisfy its pre-suit obligations constituted a “material alteration” of the parties’ legal relationship, thereby justifying a fee award.  After settling on a method of fee calculation, which involved a “per-claimant-average-fee,” the district court ultimately issued a fee award of $3,317,289.17. Subsequently, the EEOC appealed the fee award again to the Eighth Circuit.

The Court’s Decision

On December 10, 2019, the Eighth Circuit affirmed the district court’s $3.3 million fee award against the EEOC, holding that the district court did not abuse its discretion in calculating the fee award. Citing the Supreme Court’s Christiansburg opinion (which held that fee awards to a prevailing defendant are permissible if the plaintiff’s lawsuit was “frivolous, unreasonable, or without foundation”), the Eighth Circuit found that, after conducting individualized inquires, the district court did not abuse its discretion in determining that 71 of the claims it had dismissed on summary judgment were frivolous and that a fee award was warranted.

The Eighth Circuit also upheld the district court’s method of fee calculation pursuant to the Fox standard.  In Fox v. Vice, 563 U.S. 826 (2011), the Supreme court held that “a court may grant reasonable fees to the defendant” where “the plaintiff asserted both frivolous and non-frivolous claims,” “but only for costs that the defendant would not have incurred but for the frivolous claims.” The Supreme Court made it clear that trial courts have “wide discretion” in applying this standard.  The appeals court took no issue with the district court’s fee calculation method, as it determined that the district court “carefully and thoroughly examined the supporting documentation that CRST … provided in support of its fee request” in crafting its calculation.

The EEOC made several arguments against both the determination that it had brought frivolous claims and the method used to calculate the fee award. Most notably, the EEOC argued that its lawsuit was not frivolous because it reasonably believed it had satisfied the Title VII pre-suit requirements and that the district court erred in granting fees because CRST had not established that any fees were incurred solely in defense of a frivolous claim.

The Eighth Circuit rejected the EEOC’s arguments. It opined that the EEOC could not hold a reasonable belief that it satisfied its pre-suit obligations when it actually “wholly failed to satisfy them.” The Eighth Circuit also determined that the district court’s methods of calculating the fee award, which involved subtracting unrecoverable amounts from the original fee award and then creating an average fee per claimant, achieved “rough justice” and was acceptable under Fox. In so holding, the Eighth Circuit reiterated that “frivolous claims may increase the cost of defending a suit in ways that are not reflected in the number of hours billed,” and that CRST was not required “to provide detailed, minute-by-minute documentation of the work it specifically performed on each individual claim that the court has determined are frivolous, unreasonable and/or groundless.”

Implications For Employers

Even despite the reduction in the attorneys’ fees award from $4.7 million to $3.3 million, the Eighth Circuit’s ruling is a stunning victory.  This case continues to serve as a warning to the EEOC to avoid rushing through its mandatory pre-suit duties in an effort to catch employers off-guard in litigating claims.  When the EEOC engages in these tactics, this ruling can be used by employers to hold the agency accountable