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

Seyfarth Synopsis:  In EEOC v. Konos, Inc., Case No. 1:20-CV-973 (W.D. Mich. June 3, 2021), the EEOC filed a lawsuit on behalf of a claimant against her employer, alleging it subjected to her to a hostile work environment and retaliation after she was sent home for complaining about a supervisor’s sexual harassment.  The Court denied the employer Defendant’s motion to dismiss both claims, holding that when taking all factual allegations as true, the EEOC’s complaint sufficiently plead violations of Title VII of the Civil Rights Act of 1964.

This ruling exemplifies that based on the low notice pleading threshold under Rule 8(a)(2), it is very difficult for employers to dispose of EEOC-initiated lawsuits at the responsive pleading stage.

Factual Background

The claimant started working for Defendant on or about April 12, 2017 as an egg inspector at its facility in Martin, Michigan.  Id. at 1.  Shortly thereafter, a supervisor allegedly began sexually harassing the claimant.  The harassment included text messages soliciting an intimate relationship, which she rejected.  In addition, he sexually assaulted her on three separate occasions, including forced kissing, groping, and vaginal penetration.  The claimant reported the assault to Defendant and the police, and obtained a personal protection order against him.  The supervisor was prosecuted and pled no contest to fourth degree criminal sexual conduct.  After the claimant complained about the alleged sexual harassment, Defendant the sent the claimant home, and she never returned to work.

On October 9, 2020, the EEOC filed a lawsuit on behalf of the claimant alleging that: (1) the Defendant violated Title VII of the Civil rights Act of 1964 by subjecting the claimant to a hostile work environment, and (2) that it violated Title VII by retaliating against her for objecting to and complaining about a sexually hostile work environment.  Id. at 2.  Defendant moved to dismiss both claims, arguing that the EEOC failed to allege specific facts demonstrating a hostile work environment based on sexual harassment, and failed to allege specific facts to establish a claim for retaliation under Title VII.

The Court’s Decision

The court denied Defendant’s motion to dismiss.  First, the Court explained that to succeed on a hostile work environment claim, a plaintiff must show that (1) he or she was a member of a protected class; (2) he or she was subjected to unwelcome sexual harassment; (3) the harassment complained of was based on sex; (4) the charged sexual harassment created a hostile work environment; and (5) the employer is liable.  Id. at 4 (citation omitted).

Defendant argued that the EEOC did not sufficiently plead the fourth and fifth elements of a hostile work environment claim.  In regards to the fourth element, the Court explained that a hostile work environment occurs, “when the workplace is permeated with discriminatory intimidation, ridicule, and insult that is sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.”  Id. at 4 (citation omitted).  Applied here, the Court noted that the EEOC alleged that the claimant was subjected to unwanted text messages, forced kissing, groping, and vaginal penetration by a supervisor.  Rejecting Defendant’s argument, the Court held that while these instances of sexual harassment varied in their severity, when viewed in their totality, they were sufficient to state a claim for relief under Title VII.

Turning to the fifth element of a hostile work environment claim, Defendant argued that in order to establish this element, the EEOC must prove either a supervisor participated in the harassment that created the hostile work environment, or that the employer was negligent in discovering or remedying the harassment.  The Court explained that although the EEOC did not specify in its complaint whether the supervisor was claimant’s actual supervisor, employer liability may still be established if the employer knew or should have known of a non-supervisor’s charged sexual harassment, and failed to implement prompt and appropriate corrective action.  Id. at 5.  The EEOC alleged that after the claimant complained about the harassment, she was sent home.  Accordingly, this employer response (taken as true for Rule 12(b)(6) purposes) manifested indifference in light of the alleged harassment regardless of whether he was claimant’s direct supervisor, and thus satisfied the fifth element. The Court therefore denied Defendant’s motion to dismiss the hostile work environment claim.

The Court also rejected Defendant’s argument that the complaint failed to allege specific facts to establish a claim for retaliation under Title VII.   Id. at  6.  To establish a claim for retaliation under Title VII, a plaintiff must establish (1) an individual has engaged in protected activity; (2) the individual suffered a materially adverse employment action; and (3) a causal link between the protected activity and the adverse employment action.  Id. (citation omitted).  Defendant argued that the EEOC failed to establish any of these elements.

In regards to the first element, the Court noted that a protected activity includes “complaining to anyone (management, unions, other employees, or newspapers) about allegedly unlawful practices.”  Id. at 6 (citation omitted).  Since the EEOC alleged that the claimant reported the sexual harassment to Defendant, the Court held that the first element was established.  Second, the Court held that the EEOC properly plead a materially adverse employment action since the claimant was sent home.  Third, the Court held that the EEOC sufficiently plead that a causal link existed between the protected activity (complaining about harassment) and the adverse employment action (being sent home).  Accordingly, the Court denied Defendant’s motion to dismiss the retaliation claim.

Implications For Employer

For employers facing EEOC-initiated litigation, this ruling illustrates that at the pleading stage, courts will not wade into the merits of whether each element of a claim are proven, but rather will analyze whether they were sufficiently alleged.  Accordingly, when preparing a responsive pleading strategy, employers should consider this ruling to assess whether filing a motion to dismiss will be a cost effective defense tactic.

 

By Gerald L. Maatman, Jr.,  Thomas E. Ahlering and Andrew R. Cockroft

Seyfarth Synopsis: New York City’s new biometric privacy ordinance creates a private right of action for individuals that could subject local businesses to potentially millions of dollars in liability.  Employers who do business in New York City should carefully review this new ordinance as well as any technology they be using that has the potential to collect biometric information.  

As Seyfarth previously blogged, on January 1, 2021, New York City passed a new biometric privacy ordinance.  The ordinance, found here, goes into effect on July 9, 2021.

Overview Of New York City’s Ordinance

The ordinance places new obligations on businesses to notify customers and potential customers if they collect biometric information.  It holds that “[a]ny commercial establishment” that collects “biometric identifier information” from “customers” must disclose such collection “by placing a clear and conspicuous sign near all of the commercial establishment’s customer entrances notifying customers in plain, simple language” that customers’ biometric information is being collected.  A “commercial establishment” is a place of entertainment, a retail store, or a food or drink establishment and a “customer” is a purchaser or lessee, or a prospective purchaser or lessee, of goods or services from a commercial establishment.

The ordinance further makes it “unlawful to sell, lease, trade, share in exchange for anything of value or otherwise profit from the transaction of biometric identifier information.”

The law provides that individuals “aggrieved by” a violation of the ordinance may file a private right of action, but places some conditions on this right.

If the individual alleges the business collected their biometric information without making the required disclosures, the individual can only initiate a private action if they first provide written notice to the business of their intent to sue and provide the business 30 days to cure the violation by placing clear and conspicuous notice at their establishment.  If the business does not cure within 30 days, the individual may sue and recover $500 for “each” violation.

If the individual alleges the business shared their biometric information in exchange for something of value or otherwise profited from the “transaction,” then the individual may sue without any prior notice to the business.  The individual may recover $500 for “each” negligent violation of this section and may recover $5,000 for “each” intentional or reckless violation of this section.

Implications For Companies

While the ordinance appears to be straight forward, there are potential areas for expansive interpretation of the law.  For starters, the ordinance’s “aggrieved by” language may permit civil actions over small, technical violations.  Illinois’ Biometric Information Privacy Act (“BIPA”) also limits the private right of action to individuals “aggrieved by” a violation of that Act.  Yet, the Illinois Supreme Court has held that even allegations of mere technical violations of BIPA are sufficient for an individual to be “aggrieved by” a violation.

Furthermore, while the ordinance provides businesses an opportunity to cure, this opportunity  only applies if the individual limits their allegation to the improper collection of biometric information.  If the individual alleges that the business also “shared” the biometric information for “anything of value,” then no notice is required before an individual can assert a claim.  In Illinois, most (if not all) plaintiffs routinely allege both improper collection and improper dissemination as a matter of course.  Accordingly, the opportunity to cure may not prevent many of these actions from ultimately being filed.

*****

Businesses in New York City should be mindful of this new ordinance and act accordingly.  Such businesses with compliance questions should contact a member of Seyfarth Shaw’s Biometric Privacy Compliance & Litigation Practice Group.

By Gerald L. Maatman, Jr., Alex S. Oxyer, and Lisa L. Savadjian

Seyfarth Synopsis: In Richardson v. City of New York, No. 17 Civ. 9447, 2021 WL 1910689 (S.D.N.Y. May 12, 2021), a putative class of Plaintiffs alleged that the Fire Department of New York was discriminatory in its hiring, promotion, and compensation decisions relative to its civilian workforce. Citing the U.S. Supreme Court’s landmark decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 352 (2011), the U.S. District Court for the Southern District of New York denied Plaintiffs’ motion for class certification, holding that plaintiffs seeking to litigate a class action involving a large number of individual employment decisions must establish “some glue holding the alleged reasons for all those decisions together” in order to satisfy the commonality requirement of Rule 23(a)(2). This case is a must-read for employers facing class claims and another addition to the arsenal for opposing class certification of employment discrimination claims.  

Case Background

In Richardson, the named plaintiffs filed a putative class action alleging that the Fire Department of New York (“FDNY”) engaged in discriminatory hiring, promotion, and compensation decisions with respect to FDNY’s civilian workforce, which is distributed across six main job groups, including: Management Specialists, Science Professionals, Health Professionals, Clerical Supervisors, Clerical, and Craft. The plaintiffs alleged that these decisions had not produced equal outcomes across racial groups, and claimed that FDNY’s hiring processes had resulted in a significant “underutilization” of African Americans in its civilian workforce. Id. at *3.

The named Plaintiffs brought disparate impact and disparate treatment claims on behalf of two putative classes of employees. The first class proposed by the named Plaintiffs included all African-Americans who passed any applicable Department of Citywide Administrative Service tests, possessed all other posted requirements for any posted FDNY civilian vacancy, and applied and were rejected by FDNY for any such position in the relevant time period, and the second class was all African-Americans who were otherwise already employed in a civilian full-time position in FDNY in the relevant time period.

After two years of litigation, the City brought a partial motion for summary judgment and motion to strike the plaintiffs’ claims, arguing in part that a number of the named Plaintiffs’ claims for injunctive and declarative relief were mooted when they retired from FDNY, thus precluding them from serving as representatives of the one of the proposed classes, and that the plaintiffs’ disparate impact claims were legally deficient. Around the same time, the Plaintiffs filed a motion to certify their proposed classes.

The Court’s Decision

The Court’s opinion first addressed the City’s motions for partial summary judgment and to strike. The Court agreed that the retirements of several of the named Plaintiffs from the FDNY rendered their claims for equitable relief moot, as the relief sought would not redress any of the alleged injuries of the retired individuals.

As to the City’s arguments that the Plaintiffs’ disparate impact claims were insufficiently pleaded and were foreclosed by the Supreme Court’s holding in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and thus, should be stricken, the Court declined to consider such arguments in the context of a motion to strike and found that the sufficiency of class allegations should be determined on a motion for class certification.

The Court next addressed the Plaintiffs’ motion for class certification. In briefing the motion, the parties mainly addressed whether the Plaintiffs’ claims presented questions of law and fact common to the proposed classes. The City had argued that the complaint failed to allege that FDNY relied upon a “common mode of exercising discretion” over its hiring, promotion, and compensation processes and failed to “pinpoint facially neutral policies that are applicable to the putative class.” The Court considered whether the Plaintiffs established that African-Americans at FDNY were subjected to “a common mode” or “general policy” of discrimination or whether, instead, FDNY has a “policy against having uniform employment practices.”

First, relative to their disparate impact claims, the Court found that the Plaintiffs failed to show that the involvement of various departments at the City in hiring, promotion, or compensation decisions was sufficiently “consistent,” “pervasive,” or “classwide” to produce common questions and answers across the putative classes. Instead, the Court found that the roles of the various offices varied substantially with respect to FDNY’s employment procedures and that the putative class members would have had varied experiences in applying for promotions and with respect to compensation decisions. Ultimately, the Court found that even if the various offices of the City discriminated against FDNY employees or applicants, the Plaintiffs failed to show that all of their proposed class members would have been subjected to the same mode of discrimination.

Further, the Court rejected the Plaintiffs’ argument that the FDNY EEO Office’s failure to impose a “system for evaluating and rewarding managers based on compliance with EEO policies” support certification of a class, finding that the complaint boiled down to an allegation that supervisors were allowed too much discretion to make employment decisions. However, “too much discretion, as Dukes explains, is ‘the opposite of a uniform employment practice that would provide the commonality needed for a class action.’” Id. at *9. The Court also found that the Plaintiffs’ statistical analysis even undermined the idea that a uniformly applied, common practice was driving the outcomes at issue, as the plaintiffs failed to identify any practice that would have disparately impacted all members of their proposed classes. Accordingly, the Court denied class certification with respect to the disparate impact claims.

Second, with respect to the disparate treatment claims, the Court explained that the Plaintiffs needed only to show that FDNY engaged in “widespread acts of intentional discrimination against individuals,” or that “intentional discrimination was [FDNY’s] standard operating procedure.” Id. To do so, the Plaintiffs presented statistical evidence demonstrating that African-Americans were under hired at a statistically significant degree in only seven of the 32 titles that had attracted at least 15 African-American and white job-seekers. Recognizing the statistical analysis the Plaintiffs presented was “troubling,” and noting that it could suggest that African-American applicants to seven job titles faced discrimination, the Court nevertheless found the evidence did not suggest the kind of pattern or practice of discrimination that would create common questions across the proposed class. The Court further reaffirmed that “[i]n the wake of Dukes, courts have been skeptical of “aggregated statistical evidence … derived from hundreds of employment decisions made by myriad decision makers, at different times, under mutable procedures and guidelines, in different departments, … [and] concerning employees at varying levels of experience, responsibilities, and education.” Id. Thus, while statistics alone may be sufficient to establish a pattern or practice of discrimination, they must also be of a level that makes other plausible non-discriminatory explanations for the statistical results very unlikely.

Finally, the Court believed the Plaintiffs’ anecdotal evidence could not salvage their disparate treatment claims, stating that specific testimony about discrimination rarely supports an organization-wide remedy and that the anecdotal evidence offered was thin or purely speculative. Accordingly, the Court denied to certify any class with respect to the discriminatory impact claims and ultimately denied the Plaintiffs’ motion for class certification in its entirety.

Implications For Employers

The ruling in Richardson is noteworthy for employers as the latest in a significant line of decisions indicating that the U.S. Supreme Court’s landmark Wal-Mart v. Dukes decision from 2011 remains a critical defense in employment discrimination class actions.  When plaintiffs attempt to certify classes with putative class members who were allegedly harmed by a multitude of managers or departments in an organization, employers can point to Wal-Mart v. Dukes to illustrate why class treatment is not appropriate. Though the Plaintiffs in Richardson were armed with potentially “troubling” statistical evidence and additional anecdotal evidence related to hiring, promotion and compensation decisions, the lack of “glue holding the alleged reasons for all those decisions together” precluded them from certifying a class.

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

Seyfarth Synopsis:  In EEOC v. Schuster Co., No. 13-CV-4063, 2021 U.S. Dist. LEXIS 79815 (N.D. Iowa Apr. 13, 2021), the EEOC alleged that Defendant’s use of a strength test had disparate impact on female job applicants for driving positions.  After both parties moved for summary judgment, the Court denied both motions, holding that the “4/5 Rule” relied upon by Defendant served as a general benchmark as opposed to a dispositive measuring stick, and material issues of fact remained as to the business necessity of the test.

This ruling is instructive for employers facing EEOC-initiated litigation involving disparate impact allegations, and demonstrates how both Courts and the Commission may interpret statistical defenses stemming from expert reports and testimony.

Case Background

The EEOC alleged that Defendant’s use of a isokinetic strength test (the “CRT Test”) had a disparate impact on female job applicants.  Id. at *3.  In its motion for partial summary judgment, the EEOC alleged that from June 2014 to present, Defendant violated Title VII by refusing to hire women who failed a pre-employment physical test that had a disparate impact on women.  The EEOC further claimed that under Title VII, if a plaintiff demonstrated that an employer uses a selection device that has a disparate impact on women, then the employer has the burden of proving that the selection device is job–related and consistent with business necessity.  Id. at *4.

In support of its motion for summary judgment, the EEOC’s cited its expert’s opinion that Defendant’s use of the CRT test had a statistically significant, adverse, disparate impact on women.  The EEOC argued that Defendant could not raise an issue of fact as to whether the CRT test was job–related and consistent with business necessity when, (1) it cannot explain how the test is scored or whether the passing score relates to the physical demands of the job; (2) the test did not accomplish Defendant’s stated goals of reducing workers’ compensation injuries or costs; and (3) Defendant retained incumbent drivers who failed the test.  Id. at *4.  Finally, the EEOC asserted that Defendant hired many males who failed the CRT test, but refused to hire more than two dozen women who failed the test, yet scored higher than the males who passed.

In Defendant’s motion for summary judgment, the company argued it was entitled to summary judgment because: (1) the CRT test did not have a disparate impact on female applicants for the position of truck driver; (2) it was entitled to use a physical abilities test that has been validated; (3) its use of the CRT test was job related and consistent with business necessity; and (4) the EEOC failed to demonstrate the existence of reasonable alternatives that would effectively serve Defendant’s needs while resulting in hiring more female applicants.  Id. at *5.

The Court’s Decision

The Court denied both parties’ motions for summary judgment.  As a preliminary matter, the Court explained that in order to establish a prima facie case in a disparate impact lawsuit, a plaintiff must identify a facially-neutral employment practice, demonstrate a disparate impact upon the group to which he or she belongs, and prove causation.  Id. at *6. 

Here, the EEOC’s expert, a labor economist, opined that during the period of June 2, 2014 to February 10, 2020, 95% of CRT tests taken by male conditional hires to the driver position received a passing score, whereas only 76.6% of tests taken by female conditional hires to the driver position received a passing score.  Id. at *6-7.  In its opposition brief, Defendant relied on the “4/5 Rule,” which states that, “a selection rate for any race, sex, or ethnic group which is less than four-fifths (4/5) (or eighty percent) of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact, while a greater than four-fifths rate will generally not be regarded by Federal enforcement agencies as evidence of adverse impact.”  Id. (quoting 29 C.F.R. § 1607.4(D)).  Defendant thus argued that the EEOC did not establish that its use of the CRT test had a disparate impact on female conditional hires.

Analyzing Defendant’s application of the “4/5 Rule,” the Court held there was no dispute that it met the test, since even the EEOC’s expert noted that 95% of males passed, while only 76.6% of females passed.  Id. at *8-9.  However, the Court also held that Defendant overreached in applying the 4/5 Rule because: (1) it ignored the part of the rule indicating, “[s]maller differences in selection rate may nevertheless constitute adverse impact, where they are significant in both statistical and practical terms or where a user’s actions have discouraged applicants disproportionately on ground of race, sex, or ethnic group”; (2) Defendant’s own calculations were just above 80% and barely met the 4/5 Rule; and (3) although the “4/5 Rule” is generally a benchmark, both the U.S. Supreme Court and EEOC have emphasized that courts should not treat the rule as generally decisive.  Id. at *9-10.

Finally, considering the issues of Defendant’s burden to demonstrate that the CRT test is related to safe and efficient job performance and is consistent with business necessity, and the EEOC’s demonstration of an alternative selection method that has substantial validity and a less disparate impact, the Court held there were material facts in dispute precluding summary judgment for either party.  Accordingly, the Court denied both parties’ motions for summary judgment.

Implications For Employers

In EEOC-initiated litigation involving claims of disparate impact, this decision is instructive in terms of how courts may assess expert testimony and statistical data.  Specifically, the Court’s refusal to strictly apply the 4/5 Rule signals that parties in these types of cases should not necessarily expect a summary judgment victory just because the percentages cut in their favor.  Employers who satisfy the 4/5 Rule can likely expect the EEOC to tout this decision to oppose motions for summary judgment in disparate impact cases.

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

By:  Gerald L. Maatman, Jr. and Matthew J. Gagnon

Seyfarth Synopsis: On April 5, 2021, in Abe v. Virginia Department of Environmental Quality, the U.S. District Court for the Eastern District of Virginia held that Fourth Circuit precedent supports the use of prior salary by employers as an affirmative defense to an Equal Pay Act claim. In so doing, it rejected the Ninth Circuit’s holding in Rizo v. Yovino, which held that prior salary, by itself, can never justify a pay disparity because allowing that defense would only serve to perpetuate the historical sex-based pay disparity that the Equal Pay Act was meant to rectify. The ruling is a must read for all employers for purposes of compliance strategies on equal pay issues.

Background

One of the most hotly contested issues in Equal Pay Act litigation over the past few years has been the extent to which employers can point to employees’ past salaries to justify a pay disparity among employees who perform “equal work,” as defined by the Equal Pay Act (“EPA”). The issue was framed recently by the Eastern District of Virginia in Abe v. Virginia Department of Environmental Quality, No. 3:20-CV-270 (E.D. Va. Apr. 5, 2021), this way: “Does using prior salary as a factor in setting an employee’s starting salary constitute a per se violation of the Equal Pay Act . . .?” Id. at 1.

The Ninth Circuit recently held in Rizo v, Yovino, 950 F.3 1217 (9th Cir. 2020), that prior salary history can never, by itself, amount to a “factor other than sex” to justify a pay disparity because the use of such salary history would only serve to perpetuate the historical sex-based pay disparity that exists between men and women. According to the Ninth Circuit, this would undermine the purpose of the EPA because that historical pay disparity is the very evil that the EPA was meant to counteract. The Seventh Circuit and other Courts of Appeals have held the opposite, that prior salary history can be a legitimate “factor other than sex” justifying a pay disparity.

In Abe, four named plaintiffs and twenty opt-in plaintiffs alleged that their employer’s “past practice of using pay history to determine new hire’s salary perpetuates the gender wage gap and violates the EPA.” Abe, No. 3:20-CV-00270, at 2. They argued that the Court should adopt the reasoning of the Ninth Circuit and hold that prior salary history can never constitute a “factor other than sex” under the EPA, either alone or in combination with other factors. Id. at 3.

The Court’s Decision

The Court in Abe declined to do so. The Court agreed with plaintiffs that the Fourth Circuit “has not delineated the precise circumstances under which an employer may rely on prior salary as an affirmative defense in an EPA case.” Id. at 4. But it nevertheless held, relying on Spencer v. Virginia State University, 919 F.3d 199, 202-03 (4th Cir. 2019), that the Fourth Circuit “has clearly indicated that it does not prohibit an employer from doing so.” Abe, at 4 (emphasis in original).

The Court in Abe noted that Spencer involved a female sociology professor who alleged that she had been discriminated against in terms of her compensation because she was paid less than two comparable male professors whose salary was set as a percentage of their previous salaries as administrators at the same university. The Fourth Circuit determined that the university’s decision to set starting salaries for those purported comparators in that way established that the alleged pay differential was due to a factor other than sex. The Court in Abe interpreted this to mean that “at minimum, the Fourth Circuit does not prohibit employers from raising prior salary as an affirmative defense in an EPA case.” Id. at 4-5.

The Court further rejected plaintiffs’ argument that the employer should at least have to prove that its use of salary history is job-related, as they argued the Fourth Circuit held in another case, EEOC v. Maryland Insurance Administration, 879 F.3d 114 (4th Cir. 2018). The Court in Abe sidestepped the issue. It opined that it need not resolve that question because it was not necessary to do so to decide the narrow issue before the Court; namely: “May [defendant] raise prior salary as an affirmative defense?” Abe, at 6. Based on the Fourth Circuit’s decision in Spencer, the Court held that it could and denied Plaintiff’s motion to strike the employer’s affirmative defense that was based on prior salary.

Implications For Employers

The use of prior salary history to justify a pay disparity continues to be a hot button issue in Equal Pay Act litigation. As noted above, the Courts of Appeals are divided over this issue. The implications for employers are difficult to overstate. First, employers often rely on prior salary to set starting salaries and, in fact, often argue that they must do so in order to attract top talent to their company. Employees do not often leave their current positions for less money. Second, if the use of prior salary was widespread within a company, that potentially presents a ready-made method to bind claims of putative collective or class action members together, making it easier for plaintiffs and their counsel to certify class or collective actions and to keep them certified through trial. A more in-depth analysis of this issue, and many other issues impacting equal pay litigation, can be found in Seyfarth’s annual publication, Developments in Equal Pay Litigation.

 

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

Seyfarth Synopsis:  In Handloser v. HCL Technologies LTD, No. 19-CV-1242, 2021 U.S. Dist. LEXIS 45183 (N.D. Cal. Mar. 9, 2021), Plaintiffs alleged that an Indian-based company with its U.S. headquarters in California gave preferential hiring treatment to foreign visa-holders over U.S. citizens.  Citing the U.S. Supreme Court’s landmark decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 352 (2011), a California federal court denied Plaintiffs’ motion for class certification, holding that plaintiffs seeking to litigate a class action involving a large number of individual employment decisions must establish “some glue holding the alleged reasons for all those decisions together” in order to satisfy the commonality requirement of Rule 23(a)(2).  Id. at *9.

For employers facing class actions alleging discriminatory hiring practices, this ruling provides an excellent roadmap to defend such cases, especially when hiring decisions are made by a large number of managers across a vast geographic area.

Factual Background

Defendants were an Indian consulting and information technology company, with their headquarters in Noida, India, and their United States headquarters in Sunnyvale, California.  Plaintiffs, a group of job applicants from the United States who did not obtain positions, alleged that during the hiring process Defendants screened local applicants through “culture fit interviews.”  Id. at *3.  According to Plaintiffs, “culture fit” was a pretext for screening out non-Indian local candidates.  Plaintiffs further alleged that Defendants employed a uniform, companywide policy regarding how to prioritize candidates for open onsite positions, gave first consideration for open positions to visa-ready Indian candidates, and only considered local United States candidates if no visa-ready Indian candidates were available.

Plaintiffs filed a lawsuit against Defendants on March 7, 2019, alleging three claims, including: (1) disparate treatment on the basis of race and citizenship in violation of 42 U.S.C. § 1981; (2) disparate treatment on the basis of race and national origin in violation of 42 U.S.C. § 2000e, et seq.; and (3) disparate impact on the basis of race and national origin in violation of 42 U.S.C. § 2000e, et seq.  Id. at *5.

Plaintiffs moved for class certification, seeking to represent a class comprised of, “[a]ll individuals who are not of South Asian race, or Indian national origin, or visa holders who applied for positions with (or within) HCL in the U.S. and were not hired.”  Id.

The Court’s Decision

The Court denied Plaintiffs’ motion for class certification.  First, the Court held that Plaintiffs satisfied numerosity under Rule 23(a)(1) since Plaintiffs alleged that the putative class would have roughly 43,000 members.  Id. at *8.  Defendants did not dispute that Plaintiffs’ putative class was sufficiently numerous under Rule 23(a)(1).

Most significantly, however, the Court held that Plaintiffs failed to establish commonality under Rule 23(a)(2).  Id. at *9.  Citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 352 (2011), the Court explained that in the context of an employment discrimination class action, plaintiffs seeking to litigate a class action involving a large number of individual employment decisions must establish “some glue holding the alleged reasons for all those decisions together” in order to satisfy the commonality requirement of Rule 23(a)(2).  Id. at *9-10.  Plaintiffs argued that they had established commonality for the putative class for both their disparate treatment and disparate impact claims by alleging that: (1) Defendants had a companywide policy of prioritizing visa-ready Indian candidates when filling open United States positions at HCL; (2) when hiring United States job applicants, Defendants had a companywide policy of screening out non-Indian local candidates through “culture fit” interviews; and (3) gross statistical disparities evinced the systematic discrimination at HCL.

The Court rejected Plaintiffs’ arguments and held that they did not establish commonality, “for at least seven reasons.”  Id. at *11.  Some of those reasons included: (1) over 1,000 job requests during the proposed class period explicitly excluded visa holders from consideration, including some that were required by law to be filled with a citizen or green card holder; (2) for roughly 50% of job requests, HCL did not fill an open position with any candidate because either the client withdrew the job request, the client filled the job request with its own direct applicant, or the position was filled by a competitor; (3) there were reasons that job candidates were not hired that are independent of Defendants’ alleged discriminatory hiring practices; (4) Plaintiffs failed to provide the requisite “glue” because Defendants’ hiring processes took different forms for job candidates depending on the positions for which they applied and the different hiring managers involved; (5) Defendants utilized roughly 1,800 different hiring managers across the country, each of whom was empowered with discretion to make staffing and hiring decisions; (6) employment decisions took place in 47 states, involved roughly 16,000 job searches, and concerned approximately 200 job types; and (7) Plaintiffs failed to establish that Defendants’ employment policies and procedures constrain discretion or follow a “common direction” from HCL’s management.  Id. at *11-15.  Accordingly, the Court held that Plaintiffs failed to establish commonality under Rule 23(a)(2).

The Court also opined that Plaintiffs failed to establish typicality under Rule 23(a)(3).  One named Plaintiff worked in sales since 2003, had experience with the outsourcing services offered by HCL, and unsuccessfully applied to work at HCL five times between 2017 and 2018.  The second named Plaintiff was an engineering professional with 35 years of experience, who unsuccessfully applied to work at HCL on four occasions between 2018 and 2019.  The Court held that the named Plaintiffs failed to establish that they were injured by the same conduct that injured other class members.  Id. at *17 (citations omitted).  Accordingly, the Court held that because Plaintiffs have failed to satisfy the requirements Rule 23(a)(3).

The Court further concluded that Plaintiffs failed to establish predominance under Rule 23(b)(3).  Id. at *18.  The Court determined that the unique experiences of the two named Plaintiffs alone exemplified the need for individual inquiries, which would predominate over common questions of law or fact to the putative class.  Id. at *18-19.  The Court further noted that many putative class members were evaluated by an HCL client as part of the hiring process, and the candidate’s adverse employment decision may be attributable to a client’s feedback.  Accordingly, the Court held that individual inquiries will predominate over common questions of law or fact to the putative class.  Id. at *19-20.

Finally, the Court ruled that Plaintiffs failed to satisfy the requirements of Rule 23(c)(4), which provides that, “when appropriate, an action may be brought or maintained as a class action with respect to particular issues.”  Id. at *20 (citing Fed. R. Civ. P. 23(c)(4).)  The Court noted that Plaintiffs devoted only a single paragraph to their justification for certification under Rule 23(c)(4), which it found to be a perfunctory argument.

In sum, the Court denied Plaintiffs’ motion for class certification, holding they failed to satisfy the requirements of Rules 23(a)(2), 23(a)(3), and 23(b)(3) with respect to their putative class, and that Plaintiffs likewise failed to satisfy the requirements of Rule 23(c)(4).  Id. at *21-22.

Implications For Employers

The decision in Handloser v. HCL Technologies LTD is noteworthy for employers for two primary reasons.  First, it signals that the U.S. Supreme Court’s landmark Wal-Mart v. Dukes decision from 2011 remains a primary defense in major employment discrimination class actions.  When plaintiffs attempt to increase the size of such cases by seeking to certify nationwide classes with thousands of putative class members  who were allegedly harmed by thousands of managers, employers can point to Wal-Mart v. Dukes (and now, the decision here) to illustrate why class treatment is not appropriate.

Second, the facts in Handloser involved an emerging trend of reverse discrimination lawsuits.  Some businesses, especially in the technology sector, have been confronted with similar lawsuits alleging that visa-holders from foreign countries are given preferential treatment in hiring situations over United States citizens.  Businesses defending such claims would be prudent to keep this decision tucked away in the event they are faced with a similar class action.

By Karla Grossenbacher, Thomas E. Ahlering & Andrew R. Cockroft

Seyfarth Synopsis: Both Portland and New York City have followed the example set by Illinois’ Biometric Information Privacy Act (“BIPA”), a statute that has spawned thousands of cookie-cutter class action suits regarding the alleged collection of biometric information. Like BIPA, these new ordinances create a private right of action for individuals that could subject local businesses to potentially millions of dollars in liability. Businesses in these cities should carefully review these new ordinances as well as any technology they be using that has the potential to collect biometric information.

For several years now, businesses operating in Illinois have become well accustomed to the myriad lawsuits being filed, and harsh and unwavering penalties being imposed, under Illinois’ Biometric Information Privacy Act (“BIPA”). Despite the toll on businesses imposed by the ever-increasing class action and appellate litigation brought on by the statute, other jurisdictions have enacted similar legislation.

As of January 1, 2021, Portland, OR and New York City have become the newest jurisdictions to pass laws placing restrictions on the collection and/or use of biometric technology by businesses. Although the Portland and New York City ordinances differ from each other (as well as BIPA) in significant ways, they each share a common feature: a private right of action. Accordingly, these new laws have the potential to bring on a rash of high-stakes class action litigation in each of these cities.

The specifics of each ordinance are detailed below:

Portland, OR

Portland’s ordinance bans private entities from using any “facial recognition technology” in any “places of public accommodation,” with limited exceptions, such as when it is necessary to comply with federal, state, or local laws, for individuals to access their smart devices (like facial recognition on iPhones) and for use in social media applications.

The ordinance creates a private right of action “against the Private Entity in any court of competent jurisdiction for damages sustained as a result of the violation or $1,000 per day for each day of violation, whichever is greater and such other remedies as may be appropriate,” as well as attorneys’ fees to a prevailing party.

While at first reading it may appear that the law only covers the use of facial recognition in public places, the ordinance is not so narrowly drafted. Private entities are subject to the ordinance if they constitute a “place[] of public accommodation,” which is defined in the ordinance to include “any place or service offering to the public accommodations, advantages, facilities, or privileges whether in the nature of goods, services, lodgings, amusements, transportation or otherwise” but excludes “an institution, bona fide club, private residence, or place of accommodation that is in its nature distinctly private.”

Accordingly, if a facility constitutes a “place of public accommodation,” then it could be liable for facial recognition technology employed anywhere in the facility regardless of whether it is public facing. Although a narrower reading of the statute may be more reasonable, courts in Illinois have routinely broadened the scope of BIPA and it is possible Portland courts would do the same.

New York City

New York City’s newly passed biometric privacy legislation has been pending before the city council for several years. Indeed, Seyfarth previously detailed this ordinance while it was still pending legislation.

The ordinance orders that “[a]ny commercial establishment” that collects biometric information from “customers” must disclose such collection “by placing a clear and conspicuous sign near all of the commercial establishment’s customer entrances notifying customers in plain, simple language” that customers’ biometric information is being collected. The ordinance further makes it “unlawful to sell, lease, trade, share in exchange for anything of value or otherwise profit from the transaction of biometric identifier information.”

The law provides that individuals “aggrieved by” a violation of the ordinance may file a private right of action, but places some conditions on this right.

  • If the individual alleges the business collected their biometric information without making the required disclosures, the individual can only initiate a private action if they first provide written notice to the business of their intent to sue and provide the business 30 days to cure the violation by placing clear and conspicuous notice at their establishment. If the business does not cure within 30 days, the individual may sue and recover $500 for “each” violation.
  • If the individual alleges the business shared their biometric information in exchange for something of value or otherwise profited from the “transaction,” then the individual may sue without any prior notice to the business. The individual may recover $500 for “each” negligent violation of this section and may recover $5,000 for “each” intentional or reckless violation of this section.

Only the biometric information of “customers” is protected under the law and the law also makes clear that “‘customer’ means a purchaser or lessee, or a prospective purchaser or lessee, of goods or services from a commercial establishment.”

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Businesses in Portland, OR, and New York City should be mindful of these new laws and act accordingly. Such businesses with compliance questions should contact a member of Seyfarth’s Biometric Privacy Compliance & Litigation Practice Group.

 

By: Gerald L. Maatman, Jr., Christopher DeGroff, Matthew J. Gagnon, and Alex S. Oxyer

Seyfarth Synopsis: The EEOC recently released its enforcement and litigation statistics for Fiscal Year 2020. Notably, the statistics indicate that 2020 saw a dramatic drop in filed charges, with the lowest number of charges filed in over 20 years. For example, despite the #MeToo movement remaining an enforcement priority for the Commission in 2020, the number of gender discrimination charges fell even lower than last year, which was the lowest number since 1997. However, monetary benefits recovered by the Commission in FY 2020 surged. Given the flip of the White House from red to blue and the commitment of the Biden Administration to enhanced enforcement of workplace bias laws, the EEOC’s enforcement data is a “must-read” for all employers.  

On February 26, 2021, the EEOC released its comprehensive enforcement and litigation statistics for Fiscal Year 2020 (available here). In addition to enforcement and litigation activity, the data breaks down charge statistics by allegation and state – showing which charges are being filed and where. The dip in the number of charges that employers saw in 2018 and 2019 continued through 2020, with the number of charges reaching its lowest point since 1997. The prominence of gender discrimination charges seen in 2018 due to the #MeToo movement has all but disappeared, with sex discrimination charges remaining in the fourth-place position and dropping to their lowest number in over 20 years.

Charges Were Down Overall

In total, 67,448 charges were filed in FY 2020, down from 72,675 charges filed in FY 2019 and 76,418 charges that filed in FY 2018. FY 2019 previously saw the fewest charges filed for all fiscal years going back to FY 1997 (the second lowest, 75,428 charges, occurred in FY 2005). Putting these numbers in perspective, the number of charges filed exceeded 80,000 per year in every year from FY 2007 until FY 2018, sometimes by wide margins.

Consistent with this overall decline, there was a decrease in almost every category of charges in FY 2020 as compared to FY 2019, with the exception of a modest increase in charges alleging claims under the Americans with Disabilities Act (“ADA”), charges alleging claims of color discrimination under Title VII,  and, most notably, charges alleging claims under the Genetic Information Non-Discrimination Act (“GINA”), which doubled since FY 2019 and reached the highest number of charges filed since the Act was passed in 2008. The categories that decreased the most were race and sex discrimination. That this does not necessarily mean that fewer individuals are reaching out to the EEOC. This dip could be attributed, at least in part, to the agency’s implementation of new charge intake procedures in an effort to increase efficiencies or as a result of the COVID-19 pandemic. The dramatic change in workplace environments could have also contributed to the charge drop.

Texas And Florida Are Still Hot Spots, And Illinois Falls From The Top Five

Looking at the states where the most charges were filed, the hot spots largely remained the same in FY 2020 as in FY 2019 and 2018. Like FY 2019, Texas (with 10.2 % of all charges filed) and Florida (with 8.7%) were the top two states for charges in FY 2020.

Texas and Florida are no surprise, given their relative populations.

But population is still not everything when it comes to charges. For example, Pennsylvania (at number 3) and Georgia (at number 5, behind California) have more charges filed than New York. Notably, Illinois remained out of the top five states this year, at sixth place with 5.5% of all charges filed.

Retaliation Charges Remain Predominate, With Disability Discrimination Charges Remaining At Second

In total, 37,632 retaliation charges were filed with the EEOC in FY 2020. As has been the case for over six years, this made retaliation the most frequently filed charge in FY 2020. Behind retaliation were disability, race, and sex discrimination charges, each alleged in approximately 32%-36% of the charges filed with the EEOC. As the EEOC’s report noted, the percentages total more than 100 because some charges allege multiple bases of discrimination.

Disability discrimination was again the second-most-often alleged theory of discrimination, seeing the highest percentage of charges filed since 1997 at 36.1%. Race discrimination came in a close third. Interestingly, sex discrimination charges (which would include pregnancy discrimination, gender discrimination, and sexual harassment) remained as the fourth most frequently filed charge, which was where it was in FY 2017, despite continued media attention on such issues.

EEOC Saw A Surge in Overall Recoveries

As we reported here, during FY 2020, the EEOC recovered a record amount of $535.4 million on behalf of alleged discrimination victims. By comparison, the EEOC recovered approximately $486 million in FY 2019; approximately $505 million in FY 2018; and approximately $484 million in FY 2017. However, despite the EEOC’s efforts to enhance and improve its mediation and conciliation programs during FY 2020, the amount recovered through mediation, conciliation, and settlement dropped again from $354 million in FY 2019 to $333.2 million in FY 2020. Conversely, litigation recoveries increased from $39.1 million in FY 2019 to $106 million, the highest in 16 years. The EEOC credits this surge in litigation recovery to its resolution of 165 lawsuits in FY 2020 and states that it achieved “favorable results” in approximately 96% of district court resolutions.

Implications For Employers

Despite the dips in the overall number of charges, the EEOC’s enforcement efforts should not be considered as waning. Employers should treat these statistics as an early warning system that shows where the Commission’s enforcement efforts may be heading next – to that end, it is notable that retaliation and disability discrimination issues are firmly in the forefront, particularly in light of the issues caused by the COVID-19 pandemic. By continuing to set the culture in their workplaces with sound human resources practices, employers can guard against these issues and avoid hefty settlements and litigation with the EEOC.

 By Gerald L. Maatman, Jr. and Thomas E. Ahlering

Seyfarth Synopsis: Following in the footsteps of New York, Maryland recently introduced a standalone biometric information privacy bill, House Bill 218, that mirrors Illinois’ highly litigious Biometric Information Privacy Act (740 ILCS § 14/1 et seq., “BIPA”) in many respects.  Most notably, as presently drafted, Maryland’s proposed bill, like Illinois’ BIPA, provides for a private right of action, statutory penalties, and plaintiffs’ attorneys’ fees – which has spawned thousands of class actions in the Land of Lincoln.  If enacted, the Maryland bill would become only the second biometric privacy act in the United States to provide a private right of action and plaintiffs’ attorneys’ fees for successful litigants.  This represents a significant development for companies and employers operating in Maryland in light of the explosion of class action litigation that has arisen from Illinois’ BIPA in recent years.  Moreover, the recent introduction of such bills in Maryland and New York signal that states are increasingly modeling proposed biometric privacy litigation on Illinois’ BIPA.  Employers must take notice and monitor such developments to avoid being subject to a class action lawsuit – particularly as the purposes for utilizing such technology continue to expand.

Details of Maryland’s Proposed Legislation

Like New York’s proposed legislation that mirrors Illinois’ BIPA in many respects which we previously blogged about here, Maryland has proposed a similar bill entitled “Commercial Law – Consumer Protection – Biometric Identifiers and Biometric Information Privacy.”  The proposed law, like Illinois’ BIPA, prohibits private entities from capturing, collecting, or storing a person’s biometrics without first implementing a policy and obtaining written consent, implements standards of care for the handling of biometrics, and prohibits disclosure of biometrics without consent.  Most notably, the proposed bill provides for identical remedies to BIPA, whereas an aggrieved person under the proposed bill will be afforded a private right of action with the ability to recover $1,000 for each negligent violation, $5,000 for each intentional or reckless violation, and reasonable attorneys’ fees and costs. 

However, Maryland’s proposed legislation does differ from Illinois’ BIPA in a couple of respects.  For example, the definition of “biometric identifiers” is arguably even broader, extending to “data of an individual generated by automatic measurements of that individual’s biological characteristics such as fingerprint, voiceprint, genetic print, retina or iris image, or any other unique biological characteristic that can be used to uniquely authenticate the individual’s identity.”  Moreover, the proposed legislation also clarifies that the broader definition of “biometric information,” which includes “any information regardless of how it is captured, converted, stored, or shared based on an individual’s biometric identifier used to identify an individual,” does not include “information derived from an item or a procedure excluded under the definition of a biometric identifier,” such as photographs or information captured from a patient in a health care setting or information collected, used, or stored for health care treatment, payment, or operations under HIPAA.  Unlike Illinois’ BIPA, the proposed Maryland legislation also clarifies that a policy regarding retention/destruction of biometrics need not be made “publicly available” if the policy “applies only to the employees of the private entity,” and “is used solely for internal company operations.” 

Implications For Companies

Companies that are already familiar with the Illinois BIPA are undoubtedly aware of the threats that the proposed Maryland biometric privacy bill poses.  While the Illinois BIPA was enacted in 2010, it has seen an explosion in class action litigation over the past few years brought by employees and consumers alleging that their biometric data was improperly collected for timekeeping, security, and consumer transactions.  In fact, between 2015 and 2020 alone, there were over 1,000 Illinois BIPA class action complaints filed across the United States, with additional new filings continuing to be initiated every day. 

It remains to be seen if Maryland’s biometric privacy bill will pass as drafted.  However, if enacted as it is currently drafted, companies in Maryland can also expect to experience an onslaught of biometric privacy litigation.  Compliance is key, and there no better time to think about your company’s biometric privacy compliance than right now.  Companies with Maryland operations that are utilizing anything that could be considered biometrics, for any reason, should consider audit their practices, policies, and procedures to avoid potentially costly exposure in the event that the bill ultimately passed.   Businesses with compliance questions should contact a member of Seyfarth Shaw’s Biometric Privacy Compliance & Litigation Practice Group.

While this proposed bill was only recently introduced, Seyfarth Shaw will provide immediate updates on its progress when available.

By: Gerald L. Maatman, Jr., Ian Morrison, Brett Bartlett, and Kerry Friedrichs

Seyfarth Synopsis: Please join us on Tuesday, February 23rd for the 17th Annual Workplace Class Action Litigation Report webinar! Register now to secure your spot and review the workplace class action developments of 2020 and what employers should expect for 2021.

In Seyfarth’s 17th Annual Workplace Class Action Litigation Report Webinar, speakers will provide an interactive analysis of 2020 class action decisions and emerging trends in 2021. The developing trends in workplace class action litigation continue to evolve, morph, and adjust to the modern realities of the American workplace. These trends require corporate counsel to plan and re-order their compliance strategies to stay ahead of and mitigate these risks and exposures throughout the year.

Click here to register and attend!

The Report’s author, Gerald L. Maatman, Jr., along with Kerry Friedrichs, Ian Morrison, co-chair of our ERISA class action group, and Brett Bartlett, co-chair of the Wage & Hour group, will cover this changed national landscape in workplace class action litigation.

Date/Time:

Tuesday, February 23, 2021
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

Speakers:

Gerald L. Maatman, Jr., Partner, Seyfarth Shaw LLP
Brett C. Bartlett, Partner, Seyfarth Shaw LLP
Kerry M. Friedrichs, Partner, Seyfarth Shaw LLP
Ian H. Morrison, Partner, Seyfarth Shaw LLP