By: Matthew J. Gagnon

Seyfarth Synopsis: This is the third in a series of posts covering recent trends in equal pay litigation. This post discusses how plaintiffs have sought to expand the possibilities of an equal pay claim by whittling away the defenses allowed to employers. In particular, plaintiffs’ counsel have argued that an employer cannot rely on a policy or practice as a defense if that policy or practice is itself discriminatory in nature or effect. One highly visible example of this trend is plaintiffs’ sometimes-successful efforts to delegitimize the use of salary history to set starting salaries. Some courts and state legislatures have decided that this practice only perpetuates historical pay inequities. More recently, plaintiffs’ counsel have attempted to expand this concept to other seemingly gender-neutral practices that employers often use to justify pay disparities.

This is the third in a series of posts examining the new and developing trends in equal pay litigation identified in Seyfarth’s yearly publication, Developments in Equal Pay Litigation, 2022 Update. Our first and second posts examined the nature of the burden-shifting framework used to decide cases under the federal and state equal pay statutes and, in particular, courts’ efforts to clarify the parties’ respective burdens under that framework. This post examines employers’ available defenses to an equal pay lawsuit, but not as they relate specifically to the burden-shifting paradigm. Rather, this post examines plaintiffs’ recent efforts to expand the logic of a line of cases (and legislative action) that undercuts employers’ use of prior salary to set a new employee’s starting salary. The gist of the argument being pushed by the plaintiffs’ bar is this: employers may not rely on a policy or practice as a defense to an equal pay lawsuit if that policy or practice is itself tainted by bias.

Recent victories for plaintiffs on the salary history issue in some courts and statehouses arguably jump-started this trend. Different federal circuit courts have come to different conclusions about that practice. The Ninth Circuit has arguably taken the strongest stance against it, holding in a recent landmark decision, Rizo v. Yovino, that salary history, by itself, can never justify a wage disparity because that salary history may be reflective of historical wage disparities prevalent in the marketplace. Setting a new employee’s pay based on inequitable past compensation only perpetuates the inequity into the future.

Some equal pay plaintiffs have sought to capitalize on that reasoning to further narrow the scope of an employer’s defenses, arguing that an employer must show that any factor it uses to justify a pay disparity must be free of bias. For example, employers sometimes argue that disparities in starting pay are the result of the fact that some employees negotiate harder for a higher starting salary. Plaintiffs have increasingly challenged that defense, arguing that the negotiation process is inherently biased against women. Although this tactic has found some success in the courts, that is still the exception. Negotiation is still considered a viable defense in most cases where it plausibly explains a pay disparity.

But equal pay plaintiffs are continuing to push this line of argument. In one recent case, Douglas v. Alfasigma USA, Inc., No. 19-cv-2272, 2021 WL 2473790 (N.D. Ill. June 17, 2021), a pair of sales representatives alleged, among other things, that they were underpaid compared to their male colleagues. The employer argued that the complaint was self-defeating in that it acknowledged that the male comparators were given more favorable sales territories, which would explain the pay disparity: “[Employer] argues that Plaintiffs have pled themselves out of court by alleging that [supervisor] gave them unfavorable territory compared to their male counterparts. . . . [Employer] basically reads the complaint as an admission that Plaintiffs were less productive than their male counterparts.” Id. at *10. The court rejected this argument, holding that an employer cannot justify a wage disparity by pointing to actions that are themselves alleged to be discriminatory in nature, explaining that “[t]aking away sales opportunities cannot defeat a sex discrimination claim when taking away sales opportunities was an act of sex discrimination.” Id. at *11.

The reasoning of this decision presents a rather worrisome prospect for employers. In its most extreme form, such an argument would allow plaintiffs an angle to attack any factor justifying a wage disparity, however reasonable, simply by claiming that the factor itself is infected with bias. Thankfully, the state of the law is not yet so dire. Such arguments have been met with a critical eye in some courts. For example, in Spellers v. United States, No. 157 Fed. Cl. 171 (Ct. Fed. Cl. 2021), a female computer scientist brought an equal pay claim against the Department of the Navy. Even though she was paid according to a sophisticated and highly structured merit-based system (“STRL”), she argued that the system could not function properly without good data about her actual duties and her performance, both of which she alleged were infected with gender bias. The court dismissed those arguments, finding them to be nothing more than speculation: “Because plaintiff acknowledges that the STRL pay system is facially gender-neutral when functioning as intended and with good data, . . . she has conceded the viability of defendant’s affirmative defense.” Id. at 177.

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This trend has been developing for several years in the wake of the critical salary history line of decisions. It appeared first with respect to salary negotiation, which seems only slightly removed from the prior salary history issue. But recently, plaintiffs’ counsel are attempting to stretch the boundaries of this line of argument, thereby stretching the limits of a cognizable equal pay claim even further. The advantages for plaintiffs in doing so are clear. If they can sow doubt about an employer’s proffered justification for a wage disparity, they may more easily get their lawsuit over the hurdle of summary judgment. And as most employers know, once an employment case is inexorably headed for trial, the incentives to settle, even at a premium, increase dramatically.

These and other trends impacting equal pay litigation are discussed in much greater detail in Seyfarth Shaw’s yearly report, Developments in Equal Pay Litigation, 2022 Update. We highly recommend that report to any employer facing equal pay litigation, or who may simply wish to learn more about these trends so they can avoid such lawsuits in the future or keep abreast of changes in federal and state equal pay legislation. We look forward to continuing to share our analysis of these issues.

By Gerald L. Maatman, Jr., Jennifer Riley, and Sarah Bauman

Seyfarth Synopsis: On August 8, 2022, the U.S. District Court for the Northern District of Illinois granted Plaintiffs’ motion for class certification for a class of applicants who sought employment with the Cook County Department of Corrections.  The Plaintiffs argued that certain hiring examinations disparately impacted African-Americans, and were therefore discriminatory under Title VII of the Civil Rights Act. 

As we previously predicted here, disparate impact class actions premised on a theory of liability derived from entrance exams, such as physical abilities tests, are no longer flying under the radar.  It is important for employers to be informed on the implications of entrance exams if they require applicants to pass such tests during the hiring process.

Case Background

In Simpson v. Dart, the Plaintiffs initiated a putative class action claiming that the hiring practices of Correctional Officers at the Cook County Department of Corrections were racially discriminatory against African-Americans.  The hiring process at issue consists of various steps conducted by the Merit Board and Sheriff’s Office, including: (1) screening for minimum qualifications; (2) an initial written examination; (3) a second written examination; (4) a physical abilities test; (5) finger printing and drug testing; (6) a personal history questionnaire and follow-up interview; and (7) final review by the Merit Board members.  Applicants must successfully complete this process and obtain certification before they are eligible for hire.

At issue in the Plaintiffs’ motion for class certification were the Merit Board’s hiring examinations, such as the initial written examination, the second written examination, and the physical abilities test.  The Plaintiffs claimed that the hiring examinations disparately impact African-Americans in violation of Title VII.

The Court’s Decision

The Court considered the Defendant’s challenge to the Plaintiffs’ attempted extension of their Title VII class period relative to three of the four sub-classes at issue, by using a start date of July 2014.  Such a start date fell far earlier than 300 days from the filing of the underlying charge of discrimination (i.e., the applicable statute of limitations period).  In support of such a class period, the Plaintiffs relied on Lewis v. City of Chicago, Ill., 560 U.S. 205, 210-11 (2010), claiming that the unlawful hiring practice at issue involves the written and physical examinations, which took place in July 2014.

The Court disagreed. It found that Lewis stands for the proposition that later implementation of a policy that causes a disparate impact can qualify as a new, actionable employment practice.  Critically, the U.S. Supreme Court did not hold that a plaintiff can “reach back” to a testing date that falls outside of the 300-day statute of limitations window.  Accordingly, the Court limited the class period to 300 days from the date the charge was filed — March 2015.

The Court then analyzed whether Plaintiffs met the requirements of Rule 23 for certifying the classes at issue.  First, the Court held that the Plaintiffs established the commonality requirement because the hiring examinations constitute an employment policy that causes racial discrimination not justified by any business necessity.  Critical to the Court’s holding in this respect was that Plaintiffs pointed to employment actions that did not involve the exercise of discretion.  Second, the Court dismissed the Defendants’ argument that the claims of the named plaintiffs were not typical of the putative class.  The Court opined there was “no question the named plaintiffs’ claims arise from the standardized tests and are based on the same legal theory, disparate impact,” and Defendants’ contention that such a requirement could not be satisfied because they “prepared for the standardized tests in different ways” was unavailing.  Such “minor variances” made “no difference to the Court’s certification analysis.”

The Court similarly dismissed the Defendants’ arguments relative to the adequacy requirement.  Specifically, the Defendants claimed that the scope of certain merits issues relative to the charge of discrimination would be addressed at the summary judgment stage, but such issues had clear implications for class certification.  The Court held that since such an argument was — as Defendants admitted — suited for the summary judgment stage, the Court refused to consider the argument and held the Plaintiffs are adequate class representatives.

Finally, the Court considered whether there were common questions of law or fact that predominated over individual questions.  Defendants argued that an individualized analysis of each applicant would be necessary because there are more steps involved in the hiring process than just the standardized tests.  However, the Court held that, in the context of disparate impact cases, Title VII guarantees protected individuals the opportunity to compete equally based on hiring criteria, and losing an opportunity to compete equally (here, via the examinations) were actionable injuries.  Accordingly, the Court granted the Plaintiffs’ motion for class certification.

Implications For Employers

This case doubles down on the long-standing principle that a hiring or employment policy not carefully vetted for discriminatory effect can lead to class action problems.  Employers should be especially careful when subjecting applicants to certain tests or other criteria as a screening mechanism because, as demonstrated here, disparate impact lawsuits based on this theory appear to be making a comeback.

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

Seyfarth Synopsis:  In Savage, et al. v. The City of Springfield, Case No. 3:18-CV-30614, 2022 LEXIS 124587 (D. Mass. July 14, 2022), a federal court in Massachusetts recently denied Plaintiffs’ motion for class certification, holding that (1) Plaintiffs failed to establish that a putative class of Black and Hispanic firefighters met the numerosity requirement of Rule 23(a)(1); and (2) that the seminal ruling in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011), barred certification of a Rule 23(b)(2) class as sought by Plaintiffs.

This ruling is well worth a read by employers, and will be useful to cite when plaintiffs attempt to certify small class actions that hover near the 40-person threshold, as well as when potential damages may require an individualized analysis.

Case Background

On March 17, 1995, the City of Springfield, Massachusetts (the “City”) implemented an ordinance requiring many municipal employees to reside in the City as a condition of employment.  Id. at *3-4.  In May of 2016, Plaintiffs sued the City, the Springfield Fire Department, the Springfield Fire Chiefs Association, and others, alleging a long-standing non-compliance with the residency ordinance prompted by promotions of non-resident employees of the Fire Department to higher ranking positions.  Id. at *5.

In relevant part, Plaintiffs sought to certify a class of, “all current and former Black and Hispanic firefighters employed by the Springfield Fire Department since March 17, 1995.”  Id. at *26-27.  At oral argument, counsel for Plaintiffs identified the primary class claim as emanating from the City’s alleged arbitrary and capricious enforcement of the residency ordinance.  Plaintiffs further alleged that the City had a practice of maintaining a racially hostile and retaliatory work environment, and sought to include hostile work environment as a claim asserted on behalf of the class.  Following Plaintiffs’ motion for class certification, Defendants sought to exclude various pieces of evidence, including Plaintiffs’ expert declaration and supporting testimony, non-expert declarations, social media posts, and agency decisions.

The Court’s Decision

The Court denied Plaintiffs’ motion for class certification.  First, analyzing the Rule 23(a)(1) class certification requirement, the Court held that Plaintiffs’ calculation of fifty putative class members was insufficiently supported.  Id. a *30.   Specifically, the Court observed that Plaintiffs cited to three paragraphs of their expert’s declaration that were not directed at the question of how many minority firefighters were denied promotional opportunities, but rather, the racial composition of the ranks of lieutenant, captain, and above.  The Court opined that one of Plaintiff’s declarations made no effort to explain how he arrived at the estimate of 50 potential class members, and at most, he established there would be 32 class members, which was below the 40 class member threshold required by Rule 23.  Accordingly, the Court held that the numerosity requirement was not met.  Id. at *35.

Second, the Court addressed the commonality requirement per Rule 23(a)(2).  Id.  Plaintiffs argued “that the common questions of law and facts are whether the City discriminated against Black and Hispanic firefighters in the Springfield Fire Department, in violation of the First and Fourteenth Amendments of the U.S. Constitution, Title VII of the Civil Rights Act of 1964 . . . and 42 U.S.C. §§ 1981, 1983, and 1988 by maintaining a racially hostile work environment and allowing white applicants to violate the City’s valid and enforceable residency law for well over 20 years, and retroactively excusing white firefighters from compliance with the residency law after Plaintiff filed lawsuits challenging the City’s enforcement practices.”  Id.  After addressing and dismissing the constitutional challenges, the Court held in relevant part that pursuant to Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011), it was “not sufficient for Plaintiffs to merely allege ‘that they have all suffered a violation of the same provision of law,’ id., 564 U.S. at 350, which is precisely what Plaintiffs have done in their proposed common question.”  Id. at *37.  After reviewing Plaintiffs’ evidence, the Court held that Plaintiffs allegedly suffered the same injury (deprivation of promotional opportunities), from the same source (non-enforcement of the residency ordinance), and thus established commonality.  Id. at *42.

Third, the Court held that Plaintiffs satisfied Rule 23(a)(4)’s adequacy factor, which dictates that the proposed class representatives must fairly and adequately protect the interests of the class.  Id. at *44-45.  Plaintiffs argued that they were adequate representatives because they had no conflicts of interest with the proposed members of the class; to the contrary, their interests in ensuring that Defendants are held accountable for their discriminatory promotion practices were perfectly aligned.  Id. at *45.  The Court held that Plaintiffs met the adequacy requirement since there appeared to be no conflicts between Plaintiffs and other current and former minority employees of the Fire Department, who would have the same interest in ensuring enforcement of the residency ordinance and recovering unpaid wages and benefits from Defendants.  Id. at *46.

Finally, the Court held that Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011), barred certification of a Rule 23(b)(2) class, as sought by Plaintiffs.  The Court explained that incidental damages that are permissible under Rule 23(b)(2) are those that would flow to the class as a whole by virtue of its securing the sought after injunctive relief.  Id. at *47 (citations and quotations omitted).  Noting that Plaintiffs’ counsel acknowledged at oral argument that the award of damages would require individualized assessment for each minority firefighter denied a promotional opportunity, the Court held that monetary damages Plaintiff seek do not meet these requirements.  Accordingly, because Plaintiffs failed to meet the requirements Rule 23(a)(1) and Rule 23(b)(2), the Court denied Plaintiffs’ motion for class certification.

Implications For Employers

While Plaintiffs may have had potentially strong arguments for a handful of individuals, this ruling illustrates that courts will carefully examine motions for class certification in accordance with Rule 23, regardless of the strength of the claims of the lead Plaintiffs.  In situations where the putative class size is close to 40 members but short of that baseline, and hence numerosity may be in question, employers would be wise to consider citing the Court’s scrutiny here of Plaintiffs’ declaration testimony.  Finally, from a big picture standpoint in the class action litigation landscape, this ruling confirms that the U.S. Supreme Court’s Wal-Mart Stores, Inc. v. Dukes decision remains a cornerstone case for employers to use when attempting to fracture a putative class action.

By Gerald L. Maatman, Jr., Alex W. Karasik, and Aaron A. Bauer

Seyfarth Synopsis:  In Easom v. US Well Servs., No. 21-20202, 2022 U.S. App. LEXIS 16556 (5th Cir. June 15, 2022), the employer defendant invoked the WARN Act’s “natural disaster” exception when it conducted mass layoffs in its Texas workforce, due to the sudden economic downturn caused by the COVID-19 pandemic in March 2020.  The Fifth Circuit held that the COVID-19 pandemic could not be considered a “natural-disaster” under the WARN Act, and that an employer invoking the “natural-disaster” exception must prove that the event was the proximate cause of the layoffs.  

The Fifth Circuit’s decision demonstrates the importance of careful analysis when deciding whether to invoke an exception to the WARN Act notice requirements and planning such layoffs.

Background

In March 2020, oil producer US Well was forced to conduct mass layoffs in its Texas workforce due to the sudden steep decline in oil demand, precipitated by the COVID-19 pandemic.  Later that summer, the laid off employees filed a class action in a Houston federal district court against the company, alleging that it violated the Federal WARN Act, 29 U.S.C. § 2102(a), et seq, by failing to provide them with at least 60 days-notice before conducting the mass layoffs.  Id. at 5.

The WARN Act provides an exception to this 60-day notice requirement for mass layoffs that are “due to any form of natural-disaster, such as a flood, earthquake, or [] drought…”  29 U.S.C. § 2102(b)(2)(B).  Defendant US Well argued that this statutory exception applied to it because the COVID-19 pandemic was a “natural-disaster” which forced it to conduct mass layoffs.  Id.  The District Court agreed, and also held that US Well would only have to prove that COVID-19 was the ‘but-for’ cause of it having to conduct mass layoffs in order to successfully invoke the WARN Act ‘natural-disaster’ exemption.  The terminated workers appealed the District Court’s decision to the U.S. Court of Appeals for the Fifth Circuit.  Id.

The Fifth Circuit Holdings

A three judge panel on the Fifth Circuit unanimously held that: (1) COVID-19 is not a natural disaster under the WARN Act’s natural-disaster exception; and that (2) the WARN Act’s natural-disaster exception requires that the employer prove proximate, not only ‘but-for,’ causation.  Id. at 2.

To reach its first holding, the Fifth Circuit applied fundamental concepts of statutory interpretation to determine that when Congress passed the WARN Act in 1988, it did not intend to include pandemics and infectious diseases within the meaning of ‘natural-disaster.’  Id. at 12.  For its second holding, the Fifth Circuit determined that a regulation of the U.S. Department of Labor (“DOL”) – interpreting the WARN Act’s provisions regarding the natural-disaster exception – provides that a natural disaster must be the proximate cause of an employer’s mass layoffs, in order for the employer to invoke the exception.  Id. at 16.

The Fifth Circuit applied traditional concepts of statutory interpretation.

The Fifth Circuit first noted that at the time the WARN Act went into effect in 1988, leading dictionaries in publication had not defined the term “natural-disaster.”  Because of this, it could not deduce a ‘plain meaning’ of the term based on a dictionary definition.  Id. at 8-9.  So the Fifth Circuit then looked to the language in the Act surrounding ‘natural-disaster,’ in order to determine what types of ‘natural events’ Congress had intended to include within the term’s meaning.  Employing this contextual reading of the Act, the court found that Congress had chosen to limit the meaning of the term “natural-disaster” to “hydrological, geological, and meteorological events;” not pandemics and infectious diseases.  Id. at 9-10.

The Fifth Circuit further reasoned that Congresses decision to exclude pandemics and infectious diseases from the meaning of ‘natural-disaster’ was a deliberate choice, because “[b]y the late 1980’s, Congress was familiar with pandemics and infectious diseases.”  Id. at 11.  Moreover the court observed that given the broad remedial purpose of the WARN Act to address extensive worker dislocation that occurred in the 1970’s and 1980’s, it should narrowly construe any exceptions to Act’s application.  Therefore, the court held that “COVID-19 does not qualify as a natural disaster under the WARN Act’s natural-disaster exception.”  Id. at 12.

The WARN Act requires ‘proximate’ causation analysis

The Fifth Circuit also discussed how an employer must prove that a “natural-disaster” caused it to conduct mass layoffs.  The defendant employer argued, and the lower court held, that it should only have to prove it would not have conducted mass layoffs ‘but-for’ a natural-disaster; in other words, that the layoffs would not have occurred in the absence of a natural disaster.  Id. at 4.  The plaintiff appellants disagreed, arguing that the employer should have to prove that a natural-disaster was also the ‘proximate cause’ of its layoffs; in other words, that the natural-disaster was sufficiently related to the layoffs.  Id. at 12.

The Fifth Circuit sided with the plaintiff appellants.  It looked to the DOL regulation interpreting the WARN Act, which says that a natural-disaster must be the “direct-cause” of an employer’s layoffs.  It reasoned that, because previous court precedents have interpreted ‘direct’ and ‘proximate’ causation to be synonymous terms, an employer invoking the natural disaster exception must also prove that a natural disaster was the ‘proximate cause’ of its mass layoffs.  Id. at 13-14.  The Fifth Circuit disagreed with the employer’s argument that such a holding would preclude employers from invoking the notice exception for natural-disasters such as hurricanes, where the hurricane might cause man-made levies to break, causing flooding, which would force businesses to shut down.  According to the Fifth Circuit, mass layoffs caused by such a natural disaster would not necessarily “foreclose the natural-disaster exception” under proximate-cause analysis.  Id. at 14-16.

Implications for Employers

At first glance, the Fifth Circuit’s holdings in Easom may appear to have limited application, since pandemics have traditionally been viewed as multi-generational events.  Still, whether we are fully past COVID-19 shutdowns remains to be seen, and the Fifth Circuit’s decision serves as a warning to employers who might otherwise be tempted skirt the WARN Act’s 60-day notice requirement during a COVID-19 shutdown.

More importantly, the Easom decision shows the importance of carefully analyzing the WARN Act requirements before conducting reductions in force.  As the Fifth Circuit noted, exceptions to the WARN Act requirements are to be “narrowly construed.”  This means that employers should conduct careful analysis when considering whether WARN Act exceptions apply to their reductions in force.

 

By Jennifer A. Riley, Andrew Scroggins, and Tyler Zmick

Seyfarth Synopsis: As we previously reported, employers generally have found success when the U.S. Supreme Court takes up questions about the arbitrability of workplace disputes. The unanimous decision in Southwest Airlines Co. v. Saxon bucks that trend, denying employers a clear victory and holding that those who load cargo onto airplanes engaged in interstate travel are exempt from the Federal Arbitration Act (FAA). The Court’s fact-specific decision, however, rejects any bright-line test based on the employer’s industry and allows for a worker-based inquiry.  As such, it leaves room for employers looking to enforce their arbitration agreements under federal law and opens the door to future litigation regarding whether workers are actually “engaged in interstate commerce” when they do not cross borders to perform their work.

Background

Latrice Saxon worked at Midway International Airport in Chicago as a ramp supervisor for Southwest Airlines. She filed suit against the company in federal court, alleging that Southwest Airlines failed to pay overtime wages to Saxon and others. Saxon, however, previously had agreed to submit any disputes over wages to an arbitrator who would decide them in arbitration on an individual basis. Accordingly, the company moved to dismiss the lawsuit and to compel arbitration under the FAA.

Saxon resisted the motion to compel, arguing that her work placed her outside the scope of the FAA. More specifically, she cited Section 1 of the FAA, which provides that the statute does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

The district court sided with Southwest Airlines, reasoning that ramp agents and supervisors are responsible for the handling of goods but not responsible for the transportation of those goods across state lines. The Seventh Circuit reversed that decision, holding that “[t]he act of loading cargo onto a vehicle to be transported interstate is itself commerce” as the term was understood when the FAA was enacted. The Seventh Circuit’s decision put it in conflict with an earlier decision by the Fifth Circuit, and the Supreme Court took the case to resolve the split.

What Did The Supreme Court Hold?

In a unanimous 8-0 decision (Justice Barrett recused), the Supreme Court agreed with the Seventh Circuit’s holding that ramp agents and supervisors who physically loaded cargo onto airplanes traveling across state lines are subject to the FAA’s transportation worker exemption.  Southwest Airlines Co. v. Saxon, 596 U.S. ___ (2022).

The Court reached its conclusion through a two-step analysis.  (Slip. Op. at 3.)  First, the Court defined “the relevant ‘class of workers’ to which Saxon belongs.”  Id.  Next, the Court “determine[d] whether that class of workers is ‘engaged in foreign or interstate commerce.’”  Id.

Defining the Relevant Class of Workers As “Airplane Cargo Loaders”

Saxon urged the Court to take an expansive view of this issue and to decide it based on her employer’s industry – air transportation. The Court expressly rejected this sweeping approach, noting that the FAA refers to “workers,” not “employees” or “servants,” which suggests that the scope of the exemption turns on the performance of work.

The Court held that this inquiry is not directed at the nature of the employer’s business but directed at the actual work that the members of the class typically carry out.  (Id. at 4.)  In other words, “Saxon is … a member of a ‘class of workers’ based on what she does at Southwest, not what Southwest does generally.”

The Court concluded from the record before it that Saxon and other ramp supervisors physically loaded and unloaded cargo on and off airplanes on a frequent basis.

Defining Whether “Airplane Cargo Loaders” Are Engaged in Interstate Commerce

The Court next considered whether the class of airplane cargo loaders to which Saxon belonged was “engaged in foreign or interstate commerce” and found its answer in a decision issued nearly a century ago:

We have said that it is “too plain to require discussion that the loading or unloading of an interstate shipment by the employees of a carrier is so closely related to interstate transportation as to be practically a part of it.” Baltimore & Ohio Southwestern R. Co. v. Burtch, 263 U. S. 540, 544 (1924). We think it equally plain that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods. They form “a class of workers engaged in foreign or interstate commerce.”

(Id. at 5.)  Applying that decision here, the Court concluded that “one who loads cargo on a plane bound for interstate transit is intimately involved with the commerce (e.g., transportation) of that cargo.”  (Id. at 6.)

Having concluded that “Saxon frequently loads and unloads cargo on and off airplanes that travel in interstate commerce,” the Court held that she satisfied the transportation worker exemption in Section 1 of the FAA.

The ruling does not disturb mandatory arbitration of certain types of disputes arising under collective bargaining agreements pursuant to the Railway Labor Act.

What About Other Classes of Workers?

While the Court agreed that “airplane cargo loaders” are engaged in interstate commerce, it acknowledged that the distinction may not always be clear:

We recognize that the answer [whether the class of workers are engaged in foreign or interstate commerce] will not always be so plain when the class of workers carries out duties further removed from the channels of interstate commerce or the actual crossing of borders.

(Id. at 5 n.2.)  While the Court did not offer a bright-line test to help draw such distinctions in the future, it provided a few guideposts.

First, the Court noted that, although the FAA does not define “transportation worker,” any such worker must at least be “actively engaged” in the “free flow of goods across borders” via the “channels of foreign or interstate commerce.”  (Id. at 6.)

Applying these criteria, the Court noted that cargo loaders exhibit these central features of a transportation worker because they “load[] cargo on a plane bound for interstate transit” and, when they engage in such activity, “there [can] be no doubt that [interstate] transportation [is] still in progress.”  (Id.)

Second, the Court offered some examples of work that would not satisfy the exemption. Citing Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186 (1974), it noted that workers who make intrastate sales of asphalt are not engaged in interstate commerce merely because the product is later used to build interstate highways. Similarly, citing United States v. American Building Maintenance Industries, 422 U.S. 271 (1975), the Court explained that workers who supply localized janitorial services to a corporation engaged in interstate commerce do not satisfy the exemption because they do not perform activities “within the flow” of interstate commerce.

In a footnote, the Court acknowledged that two Circuits recently issued divergent decisions involving workers who carried out duties “further removed from the channels of interstate commerce or the actual crossing of borders.”  (Slip Op. at 5 n.2.)  It referred to the Ninth Circuit’s decision finding “last leg” delivery drivers within Section 1’s exemption and the Seventh Circuit’s decision finding food delivery drivers outside Section 1’s exemption. Although its opinion appeared to signal its take on these holdings, the Court stated only that it “need not address those questions to resolve this case.”  Id.

Implications For Employers

Employers avoided the worst case scenario that some had feared — a holding that the transportation worker exemption applies to all employees who work for employers engaged in the transportation industry. Instead, the Court issued a fact-specific decision that focused on application of the transportation worker exemption to a worker directly engaged in loading cargo for transport across borders.

Companies should anticipate that other workers who are less directly involved in the flow of interstate commerce will attempt to invoke the exemption claiming that they, too, are exempt from the FAA. The burden of demonstrating that the “transportation worker” exemption applies falls to the worker, and the decision in Saxon provides employers ammunition for curtailing these arguments based the work “actually performed” as well as the connection of that work to the flow of goods across borders.

Somewhat ironically, the Supreme Court’s decision heightens the importance of state law in enforcing arbitration agreements of workers most connected to interstate transportation.  For those workers, the choice of state law will take on renewed emphasis as many states already have adopted uniform arbitration acts that do not contain transportation worker exemptions and others have a clear runway to legislate the enforceability of these agreements.

By Andrew L. Scroggins and Sarah K. Bauman

 Seyfarth Synopsis: As we previously reported here, last October the EEOC put employers on notice of an initiative to ensure that artificial intelligence (“AI”) and other technology used in hiring and employment decisions comply with federal anti-discrimination laws. Consistent with this recent initiative, on May 12, 2022, the EEOC shared guidance to help employers using AI technology to remain compliant with the Americans With Disabilities Act (“ADA”). The DOJ followed suit by posting similar guidance regarding AI-related disability discrimination on the same day.

These guides are an important read for employers who presently use — or are considering using — AI and other technological tools to increase efficiency in hiring and employment decisions.

The EEOC’s Guidance

Entitled the “Americans With Disabilities Act and the Use of Software, Algorithms, and Artificial Intelligence to Assess Job Applicants and Employees,” available here, the EEOC’s guidance discusses how existing ADA requirements may apply to the use of AI, software applications, and algorithms in employment-related decision-making processes and practices. The guidance also offers useful information and tips to employers in an effort to assist them with ADA compliance when using such tools.

Specifically, the EEOC explains how an employer’s use of AI and other technological tools can discriminate against disabled individuals within the meaning of the ADA, group the potential types of discrimination into three broad categories: (1) failing to reasonably accommodate an employee’s disability; (2) screening out qualified individuals with disabilities; or (3) posing “disability-related inquiries” or seeking information that qualifies as “medical examination,” before giving the candidate a conditional offer of employment. The guidance concludes by providing employers with promising practices to be followed when assessing job applicants and employees with AI tools.

The EEOC provides several examples of how the above three ADA violations could be implicated. For example, if an employer administers a test through computer software, it risks violating the ADA if it fails to offer extended time or an alternative version of a test, such as one that is compatible with accessible technology (like a screen reader) as a reasonable accommodation to those who need it on account of their disability. Similarly, employers may run afoul of the law if AI and other tools result in lower scores or assessment results for individuals with disabilities.

The EEOC recommends several promising practices for employers when using AI tools, such as: training staff to recognize and process requests for reasonable accommodations as quickly as possible; informing job applicants and employees that reasonable accommodations are available for individuals with covered disabilities; ensuring that AI tools only measure abilities or qualifications that are truly necessary for the job; and confirming, before purchase, with AI vendors that the AI tool does not ask individuals questions likely to elicit information about a disability.

The DOJ’s Guidance

Entitled “Algorithms, Artificial, and Disability Discrimination in Hiring,” the DOJ’s guidance, available here, similarly explains how algorithms and AI intelligence can lead to disability discrimination in hiring, particularly with respect to reasonable accommodations and screen-outs.

The DOJ’s guidance provides various examples of the types of technological tools that employers are using and the ways in which such tools can discriminate in failing to reasonable accommodate or screening out disabled applicants. The guidance also provides recommendations to employers on ADA-compliant practices, such as providing and implementing clear procedures for requesting reasonable accommodations.

Implications For Employers

From FY 2020 to FY 2021, ADA cases increased fairly significantly, and they now represent 36% of all charges filed with the EEOC. As these types of claims continue to rise, businesses should be aware of the specific ways in which technological advancements like AI tools can lead to disability discrimination charges and lawsuits. This is especially important for businesses that continue to grow — thereby requiring increased efficiency in the hiring process — in the midst of a global pandemic where remote work (and use of digital platforms) have become the norm.

By Gerald L. Maatman, Jr. and Sarah K. Bauman

Seyfarth Synopsis: In EEOC v. BNSF Railway Co., Case No. 8:21-CV-369 (D. Neb. April 28, 2022), Judge Brian C. Buescher of the U.S. District Court for the District of Nebraska denied the EEOC’s request for a temporary restraining order (“TRO”) to prevent alleged discriminatory conduct.  The EEOC sought an order reinstating an employee, Rena Merker, to work and prohibiting BNSF from engaging in retaliatory action against employees who seek to cooperate with the EEOC in its pending lawsuit against BNSF.  Though the District Court ultimately found that the EEOC failed to demonstrate the requisite factors for obtaining a TRO, this decision is important because of the focal basis for the District Court’s denial of the EEOC’s motion.  The District Court ruled that because the claim in the pending lawsuit was that Merker was subjected to a sexually hostile work environment, but the TRO request was based on alleged retaliation, it was impossible for the EEOC to demonstrate the likelihood of success factor necessary for relief.  Given this inconsistency, the EEOC’s motion failed on its face.  This case is a must-read for employers faced with EEOC-related litigation, as such an arguably basic flaw could serve as a critical defense to these types of motions.

Case Background

In BNSF, Merker, a train conductor, filed a charge of discrimination with the EEOC on January 18, 2018, alleging on behalf of herself and other aggrieved individuals in non-management positions that they had been subjected to a pattern and practice of gender discrimination, sexual harassment, sex discrimination, and retaliation for opposing such alleged discrimination and harassment.  Id. at *1-2.  On November 24, 2020, the EEOC issued a letter of determination stating that the EEOC had reasonable cause to believe that BNSF violated Title VII because Merker and other female employees were subjected to harassment and Merker was disciplined for complaining about the alleged harassment.  Id. at *2.  The EEOC was unable to reach a conciliation agreement with BNSF.  Id.

On September 23, 2021, the EEOC sued BNSF under Title VII on behalf of Merker and other aggrieved individuals adversely affected by similar conduct, but amended its complaint on December 20, 2021, alleging that Merker has been harassed by coworkers’ sexual and demeaning comments and other conduct.  Id.  The amended complaint further alleges that BNSF’s supervisors and human resources personnel turn “blind eye” to harassment, but does not assert  a claim of retaliation on behalf of Merker or other aggrieved individuals.  Id.  On April 15, 2022, the District Court granted in part and denied in part BNSF’s motion to dismiss, finding that the EEOC stated a plausible claim for sexual work environment on behalf of Merker, but failed to do so on behalf of the other aggrieved individuals.  Id. 

While the motion to dismiss was pending, BNSF terminated Merker for alleged attendance issues.  Id.  Before the District Court entered the above-mentioned decision on the motion to dismiss, the EEOC filed a TRO request with the District Court to immediately reinstate Merker’s position and from retaliating against female employees from cooperating with the EEOC in the pending lawsuit.  Id. 

The District Court’s Decision

The District Court denied the EEOC’s motion.  At the outset of its analysis, the District Court held that the EEOC could not prevail on its motion because the amended complaint in the pending lawsuit did not state a claim for retaliation — the very basis for its request for a TRO.  Citing Carson v. Simon, 978 F.3d 1051, 1059 (8th Cir. 2020), the District court explained that while no single factor of the TRO analysis is determinative, the “probability of success factor is the most significant.”  Id. at *15-16.  “This factor requires the movant to demonstrate at least a fair chance of prevailing,” or an “adequate showing of a nexus between the unlawful conduct and the responsible individuals.”  Id. at *16 (citations and quotations omitted).  Critically, the District Court observed that the likelihood of success “is considered in light of the elements of the movant’s claim.”  Id.  In BNSF, the EEOC argued in support of its request for a TRO only that it is likely to succeed in proving BNSF terminated Merker in retaliation for the EEOC’s lawsuit based on her charge of discrimination.  That claim, however, is missing from the amended complaint — which only alleges hostile work environment — and therefore could not substantiate the crucial factor (likelihood of success) of its TRO request.

The District Court nevertheless evaluated the merits of the EEOC’s TRO motion and found that it failed to show irreparable harm because the EEOC failed to demonstrate an emergency, a TRO would be unlikely to preserve the status quo, and the EEOC failed to demonstrate irreparable harm from Merker’s termination.  Specifically, the District Court found the EEOC’s attempted bureaucratic excuse for failing to file the TRO for more than two weeks unavailing: “If the EEOC wishes to file TRO actions, it must comply with the law to do so.  This means it must find a way to timely file a TRO, just as any other party must do . . . .”  Id. at *20.  Further, the District Court held that the EEOC’s request for relief was not proper preliminary injunctive relief, but rather affirmative relief — reinstatement of Merker’s position.  Id. at *21.  Lastly, the District Court found a lack of irreparable harm from Merker’s termination because the EEOC failed to offer sufficient evidence supporting a “but for” connection between the EEOC lawsuit and her termination.  Id. at *22.  Rather, the evidence offered by BNSF demonstrated a rich disciplinary record relative to Merker which BNSF argued was the cause of her termination, and the EEOC failed to offer sufficient evidence to suggest otherwise.

Implications For Employers

Employers faced with TROs should be mindful of BNSF because it highlights a rather basic defense that could be overlooked when scrambling to defend these motions under strict time-constraints.  In BNSF, the District Court rejected the EEOC’s attempt at obtaining immediate relief for something that, though related to the underlying lawsuit, was not specifically alleged in the pending complaint.  When the EEOC or other plaintiff files a TRO, employers and their attorneys should first look to whether the operative complaint specifically alleges the claim that provides the underlying basis for the TRO.  If there is an inconsistency in such respect, employers should rely on BNSF in arguing that the motion should be denied.

By Jennifer A. Riley, Alex W. Karasik and Tyler Z. Zmick

Seyfarth Synopsis:  In Sosa v. Onfido, Inc., No. 20-CV-4247, 2022 U.S. Dist. LEXIS 74672 (N.D. Ill. Apr. 25, 2022), the Court issued the latest plaintiff-friendly decision under the Illinois Biometric Information Privacy Act (“BIPA”), putting businesses and employers on notice that the statute can apply to photographs in addition to the typically-alleged facial and hand scans.  The Court denied the Defendant’s motion to dismiss on the basis that: (1) photographs and information derived from photographs are protected by BIPA; (2) Plaintiff sufficiently plead a claim for liquidated damages; and (3) the BIPA does not violate the First Amendment. 

Case Background

Plaintiff filed suit alleging that the Defendant markets and sells proprietary facial recognition software that is used by online businesses to verify consumers’ identities.  Id. at *2.  To verify a consumer’s identity, the consumer first uploads a copy of his or her identification and a facial photograph.  Id.  The software then scans the identification and photograph to locate the facial images on each document; extracts a unique numerical representation of the shape or geometry of each facial image, which is often called a ‘faceprint,” compares the faceprints from the consumer’s identification and photograph; and generates a score based on the similarity of the faceprints.  Id.  The software also can compare the faceprints obtained from a consumer’s identification or photograph with other biometric data in Defendant’s database, such as the biometric data of known masks or other consumers’ photographs.  Id. at *2-3.  Online businesses can integrate the software into their products and mobile apps in such a way that consumers seeking to verify their identities likely do not know that they are interacting with and providing their sensitive information to Defendant, a third party.  Id. at *3.

Plaintiff was a member of an online marketplace that partnered with Defendant to verify its users’ identities using Defendant’s software.  Id.  Plaintiff claimed that, in April 2020, Plaintiff verified his identity in the online marketplace and that Defendant allegedly used its software to scan Plaintiff’s face, extract his faceprints, compare the two photographs, and then Defendant kept his unique faceprint in a database and accessed it every time another person used Defendant’s verification process.  Defendant purportedly did not inform Plaintiff that it would collect, store, or use his biometric identifiers derived from his face,” and Plaintiff never signed a written release allowing Defendant to do so.  Id. at *3-4.

Plaintiff filed suit against Defendant in the Circuit Court of Cook County, Illinois, alleging that it violated the BIPA, 740 Ill. Comp. Stat. 14/1 et seq., seeking to represent himself and a putative class of Illinois residents “who had their biometric identifiers or biometric information, including faceprints, collected, captured, received, otherwise obtained, or disclosed by Defendant while residing in Illinois.”  Id. at *4.  Defendant removed the lawsuit based on diversity jurisdiction and the Class Action Fairness Act (“CAFA”).  Id. at *5.  After the Court denied Defendant’s motion to compel arbitration (and the Seventh Circuit affirmed), Defendant moved to dismiss on the grounds that: (1) Plaintiff did not state a viable claim under the BIPA because the information Defendant allegedly collected — photographs and information derived from photographs — is not protected by the BIPA; (2) Plaintiff failed to adequately state a claim for liquidated damages; and (3) the BIPA violates the First Amendment.

The Court’s Decision

The Court denied Defendant’s motion to dismiss on all three grounds.

The BIPA’s Application To Data Derived from Photographs

The Court first addressed the argument that Plaintiff failed to state a claim under the BIPA because Defendant’s software captured information from user-submitted photographs, and neither photographs nor information derived from photographs are covered by the BIPA.  The Court’s analysis turned on Section 10 of the BIPA, which defines “biometric information” and “biometric identifier” and also lists items that do not fall under those definitions — specifically, “biometric identifiers do not include photographs, and biometric information ‘does not include information derived from items or procedures excluded under the definition of biometric identifiers.’”  Mem. Op. & Order at 11 (quoting 740 ILCS 14/10).  The Court acknowledged that data derived from photographs is not “biometric information,” but it held that data derived from photographs in the form of “scans of face geometry” can constitute biometric identifiers.  Id. at 11-12 (“As alleged . . ., [defendant’s] software scans identification cards and photographs to locate facial images and extracts a unique numerical representation of the shape or geometry of each facial image, which [plaintiff] refers to as a ‘faceprint.’  The faceprints extracted by [defendant] plausibly constitute scans of face geometry and, therefore, ‘biometric identifiers’ under BIPA.”) (internal citations omitted).

The Court rejected the argument that the data cannot be a “scan of face geometry” because it did not involve the scan of plaintiff’s “actual face, but rather, a scan of a photograph of his face,” holding that “[n]othing in the BIPA’s text . . . supports [defendant’s] contention that a scan of face geometry must be an ‘in person’ scan.”  Id. at 14 (citation omitted).

Request For Liquidated Damages

The Court next turned to Defendant’s argument that Plaintiff’s request for liquidated damages should be dismissed because he failed to allege facts from which it reasonably could be inferred that Defendant negligently, recklessly, or intentionally violated BIPA.  The court held that Plaintiff need not plead Defendant’s state of mind to allege a BIPA claim and that dismissing Plaintiff’s request for liquidated damages was unwarranted because the request sought a particular remedy (which is “distinct from [plaintiff’s] underlying claim for relief based on BIPA”).  Id. at 18.

BIPA authorizes a prevailing party to recover, inter alia, the greater of actual damages or $1,000 in liquidated damages for each negligent BIPA violation and the greater of actual damages or $5,000 in liquidated damages for each intentional or reckless BIPA violation.  740 ILCS 14/20(1), (2).  Importantly, Plaintiff sought not only liquidated damages but also injunctive relief and relief in the form of reasonable attorneys’ fees, costs, and expenses — the latter forms of relief having no associated mental state requirement.  See Mem. Op. & Order at 19-20 (“Nor does [plaintiff] need to allege facts suggesting any level of culpability to plausibly state a BIPA claim in the first place,” as “[Plaintiff] may obtain injunctive relief or attorneys’ fees — as he has requested — regardless of whether [Defendant’s] actions are proven to be negligent, reckless, or intentional.”).

First Amendment

Finally, the Court addressed the argument that BIPA Section 15(b) — which requires a private entity to obtain informed consent before collecting an individual’s biometric data — violates the First Amendment as applied by restricting Defendant’s speech and its collection of “ information voluntarily provided by consumers to identify themselves as marketplace users.”  Id. at 24.  The court held that (1) Section 15(b) does not restrict defendant’s speech (meaning the First Amendment does not apply), and (2) even if Section 15(b) restricted defendant’s speech, it is a content-neutral restriction that survives the applicable level of First Amendment scrutiny (i.e., intermediate scrutiny).

In holding that Section 15(b) does not regulate Defendant’s speech, the Court reasoned that Section 15(b) “does not prohibit or otherwise restrict what a private entity may do with an individual’s biometric data once the data is obtained”; instead, Section 15(b) “regulates [D]efendant’s ability to obtain an individual’s biometric data by requiring [Defendant] to acquire the individual’s informed consent before doing so.”  Mem. Op. & Order at 24.  The Court relied on Dahlstrom v. Sun-Times Media, LLC, 777 F.3d 937 (7th Cir. 2015), where the Seventh Circuit held that the Driver’s Privacy Protection Act’s (the “DPPA”) “prohibition on obtaining information from driving records” did not restrict speech because it limited only “access to information.”  Mem. Op. & Order at 24 (citation omitted).  Sosa reasoned that “[l]ike the DPPA provision at issue in Dahlstrom, Section 15(b) burdens a party’s ability to access certain information.”  Id. at 25.

The Court further held that, even if Section 15(b) restricted Defendant’s speech, it would nonetheless survive intermediate scrutiny under the First Amendment.  The Court applied the four-prong intermediate scrutiny test set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980): [1] First, courts ask whether the commercial speech concerns unlawful activity or is misleading (if so, the speech is not protected by the First Amendment); [2] if the speech concerns lawful activity and is not misleading, courts next ask whether the asserted governmental interest is substantial; [3] if it is, then courts determine whether the regulation directly advances the governmental interest asserted; and [4] finally, courts ask whether the regulation is more extensive than necessary to serve that interest.

Regarding the first step, the Court held that the at-issue commercial speech does not concern unlawful activity and is not misleading because Section 15(b) “regulates both the misleading and non-misleading collection of biometric data.”  Mem. Op. & Order at 31.  But the Court held that Section 15(b) passes muster under steps (2) through (4).  At the second step, the Court determined that Section 15(b) is supported by a substantial governmental interest — namely, the interest in protecting consumers’ rights to privacy in and control over their biometric data.  At the third step, the Court held that Section 15(b) directly advances the government’s interest because the harms identified by the Illinois legislature are real and Section 15(b) alleviates those harms “to a material degree.”  Id. at 33.  Finally, the court held that Section 15(b) is not more extensive than necessary to serve the government’s interest, as: (1) Section 15(b) “does not outright prohibit companies . . . from obtaining biometric data; it merely requires them to obtain informed consent before doing so”; and (2) “it is not too onerous to require a company that wants to collect a consumer’s sensitive and immutable biometric data to obtain the consumer’s consent before doing so.”  Id. at 35.

Conclusion

Sosa is one of several recent plaintiff-friendly BIPA decisions, and it reinforces the unanimous interpretation among courts to date that the BIPA can apply to data derived from photographs.  The Sosa decision also seemingly tends to undermine the defense argument that a BIPA plaintiff must allege facts demonstrating negligence, recklessness, or intent to state a claim and request liquidated damages under the statute.

Significant questions remain, however, regarding the BIPA’s application to companies that collect biometric information.  For one, the Court’s First Amendment analysis regarding Section 15(b) suggested that the same analysis might lead to the conclusion that claims brought under Sections 15(c) and/or 15(d) (which prohibit (i) profiting from biometric data and (ii) disclosing biometric data without consent, respectively) do violate the First Amendment.  See Mem. Op. & Order at 27 (noting that statutory provisions restricting the sale, disclosure, and use of information “undoubtedly restrict[] speech”).  Other important questions will be decided in appeals pending before the Illinois Supreme Court, including the question whether claims asserted under Sections 15(b) and 15(d) accrue only once upon the initial collection or disclosure of biometric information, or each time a private entity collects or discloses biometric information (see here), and the limitations period applicable to BIPA claims.

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By Gerald L. Maatman, Jr., Christopher J. DeGroff, Alex W. Karasik, and Sarah K. Bauman

Seyfarth Synopsis:  On March 28, 2022, the EEOC released its fiscal year 2023 budget justification (see here) and fiscal year 2021 performance report (“APR”) (see here).  The APR is a “report card” analysis of the EEOC’s litigation goals and performance results from FY 2021, while the FY 2023 budget outlines how the Commission intends to allocate funds in order to effectuate those goals, in the context of its proposed FY 2023 budget of $464,650,000.

These publications are exceedingly important to employers, as they contain must-read data points for employers in regards to the EEOC’s future strategic objectives and potential targets of heightened enforcement activity.

FY 2021 APR

 In the APR, the EEOC declared that FY 2021 was a successful year for the Commission in terms of advancing its strategic objectives.  In touting its achievements, the EEOC secured more than $485 million in monetary relief for over 15,000 alleged victims of employment discrimination, resolved 138 merit lawsuits, achieved a “favorable result” in 95.7% of all district court resolutions, and secured a reduction of 9.1% in the aged inventory in federal sector appellate cases.

The EEOC often uses this report to undergird its requests for budget increases and to document its achievement. By comparison, the EEOC recovered $535.5 million in FY 2020, $486 million in FY 2019, and $505 million in FY 2018.

The EEOC also continued its goals in community outreach, education, and technical assistance by – despite the challenges of the pandemic – conducting 460 outreach events and reaching 27,495 small business representatives.  Commissioner Burrows, the Chair of the EEOC, remarked that the success of 2021 was made possible “through efforts to rebuild and strengthen the agency,” as it was “fortunate to hire more than 450 predominately front-line positions to begin replacing staff departures in recent years, thereby strengthening our ability to fulfill the agency’s vital role in preventing and remedying employment discrimination.”

FY 2023 Budget Justification

Moving into 2023, the EEOC justifies its $464,650,000 budget request — a whopping $60.160 million increase from last year — based on advancing the strategic priorities for the fiscal year.  Commissioner Burrows indicated that such priorities correlate with the Biden Administration’s call for a “whole-of-government approach to addressing systemic discrimination and advancing equal opportunity.”  Having a “critical role in achieving that agenda,” the EEOC plans to focus on “three broad areas,” including racial justice and systemic discrimination of all protected bases, pay equity, and the civil rights impact of the COVID-19 pandemic.  Of that $464,650,000, the EEOC requested $31.5 million for state, local, and tribal programs.

Commissioner Burrows further indicated that the proposed budget also will help advance three initiatives launched in 2021, including the Hiring Initiative to Reimagine Equity (HIRE), which aims to expand employment opportunities as the nation recovers from the pandemic; a joint anti-retaliation initiative with the U.S. Department of Labor and the National Labor Relations Board; and an initiative to ensure that employment-related artificial intelligence and algorithmic decision-making tools comply with federal civil rights laws.

Implications For Employers

FY 2021 was a year of change and recovery at the EEOC as a result of the pandemic and new leadership.  Now that the new leadership regime and their structural changes settled in and adapted to a country that remains impacted by the lingering global pandemic, companies find themselves facing continued uncertainty in the employment landscape.  Given that the EEOC will be equipped with a vastly increased proposed budget, it is more crucial than ever for employers to take heed in regards to the EEOC’s strategic priorities and enforcement agendas.

We will continue to monitor these changes closely and keep readers informed of any further developments as we continue into this new year.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Sarah K. Bauman

Seyfarth Synopsis: In Allen et al. v. AT&T Mobility Services, LLC, Case No. 1:18-CV-03730 (N. D. Ga. March 21, 2022), Plaintiffs alleged that AT&T, their former employer, discriminated against them and other pregnant sales associates with how it designed and implemented its attendance policies and related discipline system.  Plaintiffs filed suit seeking damages and an injunction against these practices pursuant to Title VII of the Civil Rights Act of 1964 (“Title VII”), as amended by the Pregnancy Discrimination Act (“PDA”), 42 U.S.C. 2000e et seq.  Plaintiffs brought a motion for class certification, which the Court denied on the basis that individualized inquiries were necessary to determine whether AT&T’s policies caused harm and/or damaged any potential Plaintiff, such that resolution of their claims on a class-basis would be impractical.  This case is a must-read for employers facing class action discrimination claims and another addition to the emerging and developing law of pregnancy discrimination. 

Case Background

In Allen, the named Plaintiffs filed a putative class action alleging that AT&T discriminates against its non-managerial pregnant employees by implementing an absence policy (“SAG”) that disparately impacted such employees.  Id. at 3.  Under the SAG, unexcused absences garnered points, and discipline would follow from the imposition of those points.  After accruing three to four points, retail workers become subject to progressive disciplinary action.  The SAG and associated discipline policies operated without discretion to ensure consistency in attendance and discipline practices in all AT&T retail stores nationwide.  Id.

Not all absences accrue points.  The SAG policy delineates 13 categories of “excused” absences, such as leave under the Family and Medical Leave Act (“FMLA”), military leave, approved short term disability, and approved job accommodations.  Id. at 5.  Employees must request time off through an app at least one hour prior to their scheduled shift.  The app requires employees to select a reason for the absence from various options, none of which include pregnancy.  Id. at 6.

Employees may request excused absences due to their pregnancy or pregnancy-related conditions under the FMLA, and short term disability or approved job accommodations.  While the FMLA includes incapacity due to pregnancy and prenatal care, it also requires employees to have worked at least 1,250 hours of service.  Further, under AT&T’s short term disability policy, employees are required to submit their claims, including medical evidence, to a third-party for consideration and the policy does not cover medical conditions that do not rise to the level of a disability.  The same limitations apply to approved job accommodations leave, which is available only to those with disabling conditions.  Id.  Thus, the essence of Plaintiffs’ claims was that AT&T disproportionately burdens pregnant employees compared to other employees to establish a basis for an excused absence.  Id. at 7.

The Court’s Decision

The Court denied Plaintiffs’ motion for class certification.  In addressing the four requirements of Rule 23(a) — numerosity, commonality, typicality, and adequacy — the Court concluded that each were satisfied.  Id. at 12-19.  The Court held that Plaintiffs established a common policy at issue, reduced to writing and centrally administered — the SAG — and identified common questions that were central to the case, such as whether the SAG has a disparate impact on pregnant workers, in that it disproportionately imposes discipline.  The Court also held that the typicality requirement was satisfied, since Plaintiffs’ claims arose from the same course of conduct underlying the class claims — the SAG — pursuant to which pregnant workers were treated differently.

The Court rejected AT&T’s arguments to the contrary, including that Plaintiffs were not typical because they “knew how to obtain excuses for a pregnancy-related absence under the SAG, but merely ‘failed to act on that knowledge.’”  Id. at 20.  The Court explained “[b]ut Plaintiffs’ claims are that they were unable to successfully obtain excused absences and received discipline,” and “[t]hese asserted experiences with the SAG policy are allegedly typical of the experiences of the pregnant employees they seek to represent.”  Id.  The Court further held that the adequacy requirement was similarly satisfied — Plaintiffs “submitted evidence that support their contention that their unexcused absences were pregnancy-related, and that it is sufficient to meet their burden at the class certification stage.”  Id. at 22.

The Court further analyzed whether the case could be certified under Rule 23(b)(3) or alternatively, Rule 23(c)(4).  The Court held that Plaintiffs failed to demonstrate under the “far more demanding” predominance inquiry that the questions of law or fact common to class members predominated over any questions affecting only individual members.  Id. at 23-24.  The Court found that individualized issues — including whether a class member was absent from work; whether the absence was caused by an inability to come to work; whether that inability was pregnancy-related; and whether the employee informed or attempted to inform AT&T of that inability; and whether the employee sought an excuse for the absence —  predominated in this case.  Further, resolving the issue that the assessment of points even without a termination is an adverse employment action because points may limit the availability of transfers or promotions for a class member would “necessarily require the Court to assess facts and circumstances unique to each individual in the class.”  Id. at 25.

Regarding Rule 23(c)(4), which states that “[w]hen appropriate, an action may be brought or maintained as a class action with respect to particular issues,” the Court agreed with AT&T’s position.  Id. at 28.  Specifically, the Court opined that the certification of a class on the issue of liability for any damages (compensatory or punitive) would not be appropriate due to the individual issues which would predominate whether and to what extent AT&T would be liable to any particular putative class member.  Accordingly, the Court held that Rule 23(a)(4) should not be employed under the circumstances of this particular case.  Id. at 29.

Implications For Employers

The ruling in Allen is noteworthy for employers as the latest in PDA class action litigation — a significant issue of concern for all employers.  Indeed, pregnancy discrimination has been highlighted by the EEOC as an issue of focus in recent years.  When plaintiffs attempt to certify classes with putative class members who were allegedly harmed by a common employment policy or practice, employers can point to Allen to illustrate why class treatment is still not appropriate.  Though Plaintiffs were able to establish all four of the Rule 23(a) prerequisites, the lack of glue amongst all pregnant employees’ experiences relative to the SAG precluded them from certifying a class under the requirements of Rule 23(b).