By David J. Rowland, Jennifer A. Riley, Uma Chandrasekaran, and Michael D. Jacobsen

Seyfarth Synopsis: Google’s recent travails with simultaneous traditional and “reverse” discrimination claims signal a new era of dynamic employment discrimination risk.  Employers will be wise to consider the push and pull legal effect of diversity and inclusion programs, pay equity reviews, and other well-intended efforts.   

Although employment discrimination claims are a familiar risk to most employers, a growing wave of lawsuits alleging “reverse discrimination” is adding a layer of complexity in this area.  The potential exposure arising from these lawsuits makes them just as much “bet-the-company” endeavors as many traditional discrimination claims.  Moreover, they represent a way that well-intentioned efforts by employers to combat more traditional notions of discrimination can backfire.  Meanwhile, traditional claims of discrimination are not going away.  As a result, many of the most prudent and egalitarian employers may feel trapped in “no-win” situations.

To illustrate, we examine the issues that household-name and tech industry giant Google has faced in recent years. As Google’s story shows, it is crucial that businesses monitor and understand how to manage this swiftly emerging “dynamic discrimination risk,” which has already seen many companies get blindsided with innovative and eyebrow-raising lawsuits.

Understanding The Issue

“Reverse discrimination” refers to discrimination in the terms, conditions, and privileges of employment against members of “historically advantaged” groups on the basis of race, color, national origin, sex, religion, or other status protected under Title VII of the Civil Rights Act of 1964.  Thus, while the commonly-used term “reverse discrimination” may suggest something else, the Equal Employment Opportunity Commission, takes the position, endorsed by most courts, that reverse discrimination is discrimination, plain and simple, and prosecutes claims for reverse discrimination under the same standards it uses to pursue discrimination claims brought on behalf of members of minority or historically disadvantaged groups.  This is not a new phenomenon in the U.S. workplace.  Private litigation alleging reverse discrimination claims has been expanding, however, over the past decade, garnering substantial damages awards against employers.

Google’s Gauntlet

On One Side…
In January 2017, the Office of Federal Contract Compliance Programs (“OFCCP”) filed a lawsuit against Google to compel the company to produce historical employee-compensation data as part of an affirmative action compliance audit.  In justifying its need for the information, OFCCP disclosed that it had identified evidence of systematic pay disparities against Google’s female employees when examining salary information from 2015 and needed to dig further back in time to assess the claims.  During the proceedings, OFCCP officials claimed that the apparent “discrimination against women in Google is quite extreme, even in this industry,” and stretched “pretty much across the entire workforce.”  Google responded by pointing to its annual pay analysis, which it claimed revealed no gender pay gap.

But the knives were out.  As Seyfarth’s Pay Equity Group previously reported, later that year, Google was hit with a class action lawsuit claiming discrimination under the California Equal Pay Act.  Citing to the OFCCP’s analysis, the complaint alleged that Google discriminated against its female employees by systematically paying them less than their male peers for performing substantially similar work under similar working conditions.  The plaintiffs further alleged that Google assigned and kept women in job ladders and levels with lower compensation ceilings and advancement opportunities than those to which men with similar skills, experience, and duties were assigned, and that Google promoted fewer women – and promoted them more slowly – than similarly-qualified men.  Currently, the case is approaching class certification briefing, with a putative class of approximately 8,300 women who have worked for Google in California since 2013.

Not long after, in early 2018, Google was hit with another gender discrimination suit in California Superior Court.  This time, the plaintiff alleged that Google delayed in hiring her so that it could hire a white male for the position instead.  Google was able to dispose of the lawsuit quickly, with the court granting a joint stipulation to dismiss the case just a couple of months after it was filed so that the parties could proceed to arbitration.  However, the Company did not have any time to catch its breath, as it already was facing a new obstacle.

…And On The Other
In January 2018, while Google was dealing with these conventional legal woes, a pair of reverse discrimination lawsuits struck.

As Seyfarth reported in the first case, two former employees alleged that Google engaged in discrimination, except this time, the claim was that white, conservative males were impacted.  Specifically, the plaintiffs alleged that employees who deviated from the “majority view” at Google regarding issues such as “‘diversity’ hiring policies, ‘bias sensitivity,’ or ‘social justice,’” were singled out, mistreated, and systematically punished and terminated from the Company.  The plaintiffs further alleged that “open hostility” to conservative viewpoints  resulted in race and gender-based discrimination in hiring, promotion, and termination decisions because of the “extreme” lengths to which Google went in considering race and/or gender as determinative hiring factors, all to the detriment of white males.  The case was brought on behalf of proposed classes of all employees of Google who had been discriminated against due to their “male gender” and/or “Caucasian race,” as well as their “perceived conservative political views” in California at any time going as far back as 2014.

Perhaps most striking about the lawsuit was that the plaintiffs highlighted several of Google’s efforts to promote diversity within its workforce as evidence of alleged bias.  For instance, the complaint recounted a “Diversity and Inclusion Summit” during  which Google allegedly presented on some of its diversity policies and practices that included affording female and minority job applicants “extra interviews” and a “more welcoming environment based on their race or gender” followed by placing these job candidates into “high priority queues” to increase the likelihood and speed with which they would be hired.  Additionally, the plaintiffs supported their allegations by pointing to an online and in-person “diversity training class” that addressed biases against women and “white male privilege” in the workplace.

In the second reverse discrimination action, filed just a few weeks after the first, the plaintiff had worked as a recruiter for Google’s YouTube “tech staffing” management team.  The plaintiff alleged that for several years Google had “implemented clear and irrefutable policies . . . of systematically discriminating in favor of job applicants who are Hispanic, African American, or female, and against Caucasian and Asian men.”  Notably, the plaintiff also claimed that these policies were designed “to manage public relations problems arising from the underrepresentation of women and certain minority groups in the Google workforce.”  The plaintiff further alleged that Google’s policy documents declared that “only individuals who were ‘diverse’” would be hired for certain positions, and that Google not only “carefully track[ed] the race and gender of each applicant” and based its hiring decisions on those criteria but even went so far as to instruct its employees “to purge entirely any applications by non-diverse employees from the hiring pipeline.”

Currently, both of these lawsuits are stayed in whole or in part pending arbitration.  However, on June 7, 2019,  the court denied Google’s demurrer seeking to dismiss supplemental claims (that were not stayed) alleging that Google systematically discriminates against conservatives in its hiring practices.  These back-to-back reverse discrimination actions – hitting at a time when Google was reporting that almost 70% of its workforce was male and 91% was Caucasian or Asian and already had two lawsuits and a OFCCP investigation alleging discrimination against women on its hands  – are attention-grabbing to say the least.

Odd Numbers/New Problem

Google’s 2018 annual pay review also demonstrates the issues that can arise when evaluating complex pay practices.  In January 2019, Google disclosed to its employees the findings of its pay study for 2018.  In part, the analysis showed that Google had underpaid men for doing similar work as women in certain positions.  The Company noted in its explanation that managers apparently had used discretionary funds to increase employee incomes more often for certain women employees, resulting in a pay differential for men in the same lower-level software engineering job category.  To address these and other identified pay differences,  Google publically announced that it had implemented a $9.7 million payout across 10,677 employees.

So far, there does not appear to have been any legal blowback against Google related to this revelation.  However, $9.7 million is an expensive fix and, coming off of the recent reverse discrimination lawsuits, the timing is uncanny.  Meanwhile, Google remains committed to  evaluating its pay impacting practices , as Google also announced that it was undertaking a comprehensive review of its leveling, performance rating and promotion processes.  To the extent Google continues its practice of publishing the results of its reviews, any announcements will undoubtedly will generate headlines, and may spur complaints, including reverse discrimination class actions, depending upon which group(s) appears disfavored.

Implications For Employers

In sum, these very real workplace challenges do not appear to be going away anytime soon. This account of a high-profile company fighting discrimination claims on both fronts and, most recently, its unexpected discovery of a potential pay disparity impacting its male workforce, plus the costly course-correction that followed, serves as a warning shot to employers of any size that now is the time to evaluate hiring and compensation policies and procedures.  As the example of Google shows, an era of rising reverse discrimination claims poses a growing risk and area of uncertainty for employers, underscoring the balancing act that employers face in implementing initiatives to promote fairness and opportunity among their existing employees and potential applicants.

Seyfarth Shaw attorneys in the Firm’s Complex Discrimination Litigation, Organizational Strategy & Analytics, and Workplace Counseling Solutions practice groups are at the forefront of successfully helping employers navigate, block, and tackle these complex, emerging risks. As the preeminent source of thought leadership in this space, over the next several months, our esteemed attorneys will publish blog posts on a number of critical related topics, including:

  • The balancing act of resourcing talent domestically and internationally;
  • Avoiding preferential recruiting and hiring traps;
  • Recognizing and investigating harassment and discrimination in the 21st Century workforce;
  • The dollars and sense of creating competitive and equitable compensation and promotions programs; and
  • Navigating identity issues in corporate social media.

The era of dynamic discrimination risk is upon us.  Stay tuned to our blog for the latest updates.

Seyfarth Synopsis: As we approach the latter portion of the fiscal year, employers are beginning to see a significant spike in EEOC case filings over the last month or so, bringing the EEOC more in line with its relative aggressiveness during the previous couple of fiscal years. This increase in case filings comes on the heels of the May 8th Senate confirmation of the new EEOC Chair, Janet Dhillon. In today’s video, Partner Jerry Maatman gives an update on the EEOC’s recent activity, as well as what employers can expect from the Agency going forward through the end of the Fiscal Year in September.

While the first half of the 2019 Fiscal Year may have signaled a scaling back with respect to EEOC case filings, the months of May and June have brought with them a significant increase in EEOC-initiated litigation. During the 7 months leading up to the Senate confirmation of EEOC Chair Janet Dhillon on May 8, the EEOC filed just 27 lawsuits. Between May 8 and June 8, the month following Dhillon’s confirmation, the EEOC filed a staggering 17 lawsuits within the span of a single month. As we noted in our blog post from May 8, Dhillon suggested in her hearing with the Senate Committee on Health, Education, Labor and Pensions that litigation should be a matter of “last resort”. While it is a small sample size, Dhillon’s business-friendly sentiment seems to be disconnected from the way in which the agency has conducted itself in the month following her confirmation at the helm of the Commission.

The rise in litigation from the EEOC brings its total number of lawsuits filed for the year to 44 through June 8. This number brings the agency more in line with its aggressive trends during recent years. Of the 17 lawsuits the Agency filed in the month following the confirmation of its new Commissioner, 5 of them arise from sexual harassment allegations, and 3 from disability discrimination allegations. Based on years past, we can expect the EEOC to continue to focus on these two areas of interest as it has begun to file more lawsuits in these two domains than ever before. The EEOC still has its typically busy September month ahead, thus we can anticipate the Commission’s overall case filing numbers to continue to steadily rise through the end of the 2019 Fiscal Year.

 

By Gerald L. Maatman, Jr. and Matthew Gagnon

Seyfarth Synopsis: On June 11, 2019, in an age discrimination lawsuit, the U.S. District Court for the Eastern District of Tennessee once again demonstrated how the lenient standard that is so often applied at the conditional certification stage of a collective action brought under the procedural rules of the Fair Labor Standards Act. In Manlove v. Volkswagen Aktiengesellschaft, No. 18-CV-145 (E.D. Tenn. June 11, 2019), the Court granted conditional certification on the basis of just four declarations, even though those declarations identified four different methods of alleged age discrimination that were perpetrated by different decision-makers.

Background

In Manlove, an assistant manager in the Chattanooga, Tennessee Volkswagen assembly plant sought conditional certification of his claim under the Age Discrimination in Employment Act of 1967 (“ADEA”) on behalf of a putative collective action of all Volkswagen employees in the United States aged fifty and over – which, if certified in full, would have included thirty-five different locations in more than fourteen states.

Plaintiff alleged that employees over the age of 50 were unfairly targeted and discriminated against as part of a corporate initiative that was allegedly designed to make the company “slimmer, leaner and younger.” That initiative – called the “Pact” – was announced on November 18, 2016 and involved the elimination of 30,000 jobs in Germany and around the world. On June 26, 2017, the Company issued a press release stating, among other things, that the Pact would provide “new motivation” and a new selection procedure for junior managers. Two senior executives with authority over human-resources decisions were transferred to Chattanooga, Tennessee.

Plaintiff alleged that the Company began to take discriminatory action against older employees shortly after the Pact was announced. Plaintiff alleged that he was passed over for promotion by younger managers, and that he and another older employee were demoted after the Company restructured his department to eliminate two out of five manager positions.

Plaintiff also submitted declarations from three other over-50 employees at the Chattanooga plant. One alleged that she was abruptly terminated for violating a company policy and was immediately replaced by a much younger employee. Another alleged that he was selected for promotion to a manager position, but then told that he was too old to be included in the Company’s management training program and that he was subsequently terminated. A third declarant alleged that he was continually passed over for promotion in favor of younger employees with less relevant experience. He was then terminated after he failed a random drug test.

The Court’s Decision

The employer argued that these four declarations were not enough to support conditional certification because they failed to establish that the members of the putative collective action were similarly situated. According to the employer, the declarations involved four discrete employment circumstances, which demonstrated no common unifying nexus of alleged discrimination.

The Court disagreed, holding that conditional certification is appropriate upon a modest factual showing of a unified employment policy that ties together the claims of all putative members of the collective action. The Court held that plaintiff had adequately alleged such a policy by identifying and describing the basic parameters of the Pact, as well as some related statements by the company’s CEO that “arguably indicate a preference for younger employees.” Id. at 13. The Court also pointed to the fact that the Company had transferred two high-level executives to Chattanooga and had given them authority over human resources decisions, including termination decisions.

With respect to the declarations, the Court held that they constituted sufficient evidence to show that adverse employment actions were taken on the basis of age against employees in Chattanooga, even though “the exact methods of discrimination, as well as the decision-makers involved, may well vary among the putative collective action members.” Id. at 14. The Court held that the employer would have an opportunity to demonstrate differences among members of the collective action and argue for decertification at the more rigorous second stage of the certification process.

In one positive note for the defense, the Court refused to expand the conditionally certified collective action beyond the Chattanooga location, holding that plaintiff had presented no evidence of any adverse actions taken at other locations.

Implications For Employers

This ruling demonstrates once again – as if more proof were needed – how easy it can be for employees to obtain conditional certification of a collective action under the two-stage certification scheme commonly applied to claims that arise under the procedures of the Fair Labor Standards Act (including ADEA and Equal Pay Act claims). Even more telling, the Court certified the collective action while candidly acknowledging the impact the decision would have on the defense. The employer had requested oral argument, pointing to the impact that conditional certification could have on the scope of discovery and the resources required to defend the lawsuit. The Court dismissed those concerns, stating that it was “no different than any other decision the Court will ever make about whether to conditionally certify a collective action.”

By  Gerald L. Maatman, Jr., Esther Slater McDonald, and Michael L. DeMarino

Seyfarth Synopsis: Satisfying Rule 23(b)(3)’s predominance requirement is undoubtedly a challenge when it comes to a nationwide class. Among the many issues that arise is the extent to which varying state laws can impact whether questions of law or fact common to class members predominate over any questions affecting only individual members.  In In Re Hyundai & Kia Fuel Econ. Litig., No. 15-56014, 2019 WL 2376831 (9th Cir. June 6, 2019), after an en banc rehearing, the Ninth Circuit ruled that a district court did not abuse its discretion by failing to address varying state laws when granting class certification for settlement purposes. Drawing a distinction between class certification for litigation purposes and class certification for settlement purposes, the Ninth Circuit held that the variations in state law across the nationwide class did not defeat predominance.

In many respects, this decision – which rescinds the panel’s previous and controversial ruling that courts must address varying state consumer laws when certifying a settlement class – restores the standard for approval of class action settlements to what it has historically been in federal courts. Employers facing nationwide class claims in the Ninth Circuit now have an easier path to settlement, as it is less likely that varying state law will be an obstacle to satisfying predominance.

Background

In Re Hyundai arises out of an EPA investigation into Hyundai and Kia’s representations regarding the fuel efficiency of certain car models. After the EPA began its investigation, a number of plaintiffs filed a class action in California state court, seeking to represent a nationwide class of car purchasers who were allegedly misled by defendants’ fuel efficiency marketing.

Follow-on class action lawsuits were filed across the country and the MDL panel consolidated the cases in the Central District of California. Eventually, the parties informed the district court that they had reached a class settlement on a nationwide basis.

After winding through the approval process, the district court granted final approval of the nationwide class settlement, but did so over objections to the settlement. The objectors appealed, and a divided Ninth Circuit panel reversed, holding that by failing to analyze the variations in state law, the district court abused its discretion in certifying the settlement class. The Ninth Circuit voted to rehear the case en banc.

The Decision

The key issue on appeal was the extent to which a district court must address varying state laws when certifying a nationwide class for settlement purposes and, to what extent those varying laws impact the predominance analysis under Rule 23(b)(3). The predominance inquiry tests whether proposed classes are sufficiently cohesive and focuses on whether common questions present a significant aspect of the case that can be resolved for all members of the class in a single adjudication.

Quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997), the Ninth Circuit noted that the predominance inquiry is different depending on whether certification is for litigation or settlement purposes. “[I]n deciding whether to certify a settlement-only class,” the Ninth Circuit explained, ‘“a district court need not inquire whether the case, if tried, would present intractable management problems.’” Id. (citation omitted).

Against this backdrop, the Ninth Circuit rejected the objectors’ argument that the district court was required to address variations in state law. The Ninth Circuit began by explaining that “[s]ubject to constitutional limitations and the forum state’s choice-of-law rules, a court adjudicating a multistate class action is free to apply the substantive law of a single state to the entire class.” Id. at *9. Because no party argued that California’s’ choice-of-law rule should not apply or that differences in consumer protection laws precluded certification, the Ninth Circuit concluded that the district court was not required to address these issues.

In further support of this conclusion, the Ninth Circuit cited its decision Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). There, in rejecting the objectors’ argument that “the idiosyncratic differences between state consumer protection laws” defeated predominance, the Ninth Circuit reasoned that the claims revolved around a “common nucleus of facts” and applied the longstanding rule that “differing remedies” do not preclude class certification. Id. at 1022–23.

Based on this reasoning, the Ninth Circuit ultimately concluded that the district court did not abuse its discretion in finding that common issues predominated, notwithstanding varying state consumer protection laws.

Implications for Employers

In Re Hyundai highlights the potential challenges posed by nationwide classes given the Rule 23(b)(3) predominance requirement for certification, even in the context of a settlement class. By ruling that the district court is not required to analyze varying state laws when certifying a settlement class, the Ninth Circuit created an easier path to settlements involving nationwide classes. But employers should keep in mind this result was driven by, in part, the objectors’ failure to demonstrate that California law should not apply.  In other words, the issue of varying state laws is not wholly irrelevant to the predominance inquiry and employers should nevertheless be prepared to address such arguments if objectors adequately raise them.

By Seth Fortin, Esther Slater McDonald, and Jennifer A. Riley

Seyfarth Synopsis: On May 30, 2019, the Fourth Circuit issued an opinion in Krakauer v. Dish Network, L.L.C., No. 18-1518 (4th Cir. May 30, 2019), that paved the way for TCPA plaintiffs to collect historic awards from unsuspecting defendants. The Fourth Circuit held that TCPA plaintiffs need not show any threshold level of injury to have standing, so long as they prove the statutory elements of a TCPA claim; the TCPA creates a simple cause of action that is “conducive to class-wide disposition” without reference to individualized inquiries; and Dish Network could be held responsible for the actions of its third-party marketer even if it repeatedly admonished the third party against violating the law and its contracts disclaimed any agency relationship.  As a result, companies should be wary of using third parties to conduct telemarketing without appropriate oversight.

Case Background

Plaintiff Thomas Krakauer placed his number on the national Do-Not-Call registry. Nonetheless, he received multiple calls from a company called Satellite Systems Network (“SSN”) trying to sell him the services of defendant Dish Network, L.L.C. Krakauer sued Dish under the Telephone Consumer Protection Act (“TCPA”) on behalf of a class of persons whose numbers had been listed on the registry for at least 30 days and who had received two or more calls on behalf of Dish in the course of a year.

The district court certified the class in 2015. A year later, Dish moved to dismiss for lack of Article III standing, arguing that many or most class members did not experience an injury that would have risen to the level of a cause of action at common law. The district court denied the motion, and the case proceeded to trial.

The district court charged the jury with determining: (1) whether SSN was acting as Dish’s agent when it called consumers; (2) whether SSN made multiple calls to the class members’ numbers within the relevant period; and (3) the appropriate damages award for such calls. The jury returned a verdict for plaintiff on the first two points and assigned damages of $400 per call. The district court then determined, as a matter of law, that Dish acted willfully and knowingly, allowing an award of treble damages “to deter Dish from future violations and . . . give appropriate weight to the scope of the violations.”  Krakauer, No. 18-1518 at *29.

Dish appealed the judgment.

The Fourth Circuit’s Opinion

In an opinion by Judge Wilkinson, the Fourth Circuit considered three issues: (1) whether the class as certified had Article III standing to bring claims; (2) whether the district court correctly applied the factors for class certification, especially commonality and predominance, and whether the class was overbroad; and (3) whether Dish was responsible for SSN’s calls, including whether it had acted willfully and knowingly in not remedying SSN’s alleged misconduct. Id. at *10.

Dish argued that many, if not most, class members lacked standing because their injury did not rise to “a level that would support a common law cause of action.” Id. at *13. The Fourth Circuit rejected this argument, relying on the Supreme Court’s guidance in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). Spokeo held that traditional standing requirements, including a concrete and particular injury, applied to statutory causes of action, and that Congress could not create a cause of action without an underlying injury that would have been cognizable under the common law. The Fourth Circuit found that receipt of repeated, unwanted telephone marketing by someone who had taken steps to avoid such marketing was a type of injury cognizable at common law – an intrusion on privacy. Id. at *13-14 (citing Spokeo, 136 S.Ct. at 1549).

Next the Fourth Circuit addressed the district court’s certification of a class under Rule 23(b)(3), finding that the simple scheme created by Congress avoided the kinds of individualized determinations that “so often plague class actions.” Id. at *16-18. Dish argued that many class members did not have a claim because they were not “subscribers” to telephone service, and only a “subscriber” could place a number on the Do-Not-Call registry. But the Fourth Circuit rejected this argument, noting that the plain text of the statute allowed a private right of action by any “person” who received unwanted calls, not just subscribers, and a non-subscriber living in the house where the call was received could suffer the same privacy intrusion as the subscriber. Id. at *19.

The Fourth Circuit also determined that the class was properly ascertainable because the data on potential class members was found in the call data of the defendant companies and the Do-Not-Call registries. Id. at 22-23.

Left unspoken in the Fourth Circuit’s analysis, however, was how to determine who received the phone call at a given number and thus who experienced the injury. Although the SSN/Dish call data revealed numbers called, it did not necessarily reveal the identity of the persons who received unwanted calls. The Fourth Circuit gave the example of a subscriber wife whose husband received a call and noted that the husband could experience an injury to his right to privacy. Id. at 21. But the Fourth Circuit did not explain how it possibly could identify the husband from the company records and, as a result, how it could provide compensation to the real injured party (the recipient) without an individualized investigation.

This slippage between subscribers and call recipients also muddies the standing inquiry. The Fourth Circuit justifies reading a phone call as an intrusion on privacy because the recipient “took steps to avoid” such calls by placing his number on the Do-Not-Call registry. Id. at 12. But if the recipient is not the subscriber, did he actually take such steps?

Finally, the Fourth Circuit addressed whether Dish could be held liable for SSN’s unwanted calls, a question that turned on whether SSN was acting as Dish’s agent when it made the calls. Dish argued that it was not, pointing to contracts that characterized the relationship as independent and not an agency relationship. Id. at * 27-28. But the Fourth Circuit held that a party’s contractual characterization of the relationship is irrelevant; it is the nature of the relationship that matters. The Fourth Circuit held that it was it was reasonable for the jury to conclude that SSN was Dish’s agent because their contract “afford[ed] Dish broad authority over SSN’s business, including what technology it used and what records it retained” and because Dish claimed to have the right to monitor SSN to ensure compliance with the TCPA. Id. at *27. The Fourth Circuit also held that Dish had knowledge of SSN’s violations of the TCPA, and its failure to act to stop such violations was evidence that SSN was acting within the scope of its authority. Id.

Although Dish argued that it had repeatedly instructed SSN to follow the law in acting on Dish’s behalf, the Fourth Circuit held that these verbal instructions were outweighed by Dish’s “failure to respond to” statutory violations “in any serious way” while it was “profiting handsomely from SSN’s sales tactics. Id. at *28-29.

The Fourth Circuit also approved the district court’s finding that Dish had acted willfully and knowingly. The Fourth Circuit relied heavily on the fact that Dish had notice of alleged violations via “lawsuits and enforcement actions” as well as “consumer complaints” but “did nothing to monitor, much less enforce, SSN’s compliance with the telemarketing laws.” Id. at *31.

Implications

The Fourth Circuit provided ample reason for companies to be cautious in drafting contracts with third-party marketers and overseeing their activities. The Fourth Circuit confirmed that a company can be held liable for the behavior of a contractor making calls on its behalf, even if it “includes certain language in a contract or issues the occasional perfunctory warning.” Id. at *32. A court will “look past the formalities and examine the actual control exercised.” Id. Indeed, contractual language requiring one party to comply with the law and giving the other party the right to monitor compliance may even be viewed as a sign of “control” and agency. Id. at 27. And, if a company has the right to control and to monitor compliance, the failure to do so may be viewed as a willful decision to ignore potential violations of the law. Thus, companies should carefully consider the structure of their contractual relationships.

The Fourth Circuit also relaxed the standard for certification of such claims by suggesting that Congress has a great deal of latitude to intentionally structure consumer protection statutes to be class-friendly and to avoid individualized inquiries. Id. at *18. In the Fourth Circuit’s view, so long as the statutory violation causes some concrete and particular injury, even if it would be viewed as minor or de minimis under the common law, Congress may impose statutory damages for it, and those damages need not be tightly targeted to the magnitude of the injury. As the Fourth Circuit’s seeming conflation of subscribers and call recipients shows, in the case of privacy interests, a strong nexus between the claim and a class member’s own efforts to protect his privacy also may not be necessary. Thus, companies subject to consumer protection statutes like the TCPA should take less comfort in arguments regarding standing or the need for individualized consideration of class members’ injuries.

By: Gerald L. Maatman, Jr. and Michael L. DeMarino

Seyfarth Synopsis: Defendants can remove lawsuits filed in state courts to federal courts if they meet the statutory requirements for removal under either 28 U.S.C. § 1441(a) or the Class Action Fairness Act. In Home Depot U. S. A., Inc. v. Jackson, No. 17-1471, 2019 WL 2257158, at *2 (U.S. May 28, 2019), the U.S. Supreme Court ruled that Home Depot was not entitled to removal under either provision because it was brought into the lawsuit by a counterclaim filed by the original defendant. According to the Supreme Court, the term “defendant” in the removal statutes refers only to the party sued by the original plaintiff.

Although counterclaim class actions are not the norm, this decision nonetheless restricts removal strategies for certain companies facing class actions in unfavorable state jurisdictions. Companies with multiple business segments, or in the franchise and staffing industries, or companies that regularly initiate lawsuits are more likely to be named as third-party defendants, and inevitably impacted by this decision.

Background

In 2016, Citibank N.A. filed a debt-collection action in North Carolina state court against George W. Jackson, for charges incurred on a Home Depot credit card. In responding to Citibank’s complaint, Jackson asserted a counterclaim against Citibank and third-party class-action claims against Home Depot and Carolina Water Systems (“CWS”).

In these third-party claims, Jackson alleged that Home Depot and CWS had engaged in unfair and deceptive trade practices with respect to the sale of water treatment systems. Citibank subsequently dismissed its claims against Jackson and one month later, Home Depot filed a notice of removal to federal court, citing federal jurisdiction under the Class Action Fairness Act (“CAFA”).

Jackson moved to remand the case to state court and amended his third-party complaint to remove any reference to Citibank. The district court granted Jackson’s motion to remand because Home Depot was not a “defendant” eligible to remove under the CAFA. The U.S. Court of Appeals for the Fourth Circuit affirmed, finding that allowing Home Depot to remove would be inconsistent with its prior interpretations of the CAFA’s removal statute.

Subsequently, the U.S. Supreme Court granted Home Depot’s writ of certiorari.

The Supreme Court Decision

Justice Thomas wrote the majority opinion for the Supreme court, joined by Justices Ginsburg, Breyer, Sotomayor and Kagan. On review, the Supreme Court concluded that the term “defendant’ used in 28 U.S.C. § 1441(a) and the CAFA does not include a third-party counterclaim defendant, such as Home Depot. First, the Supreme Court explained that while Home Depot was a defendant to a claim (i.e., Jackson’s counterclaim), the removal statute refers to ‘“civil action[s],’ not ‘claims.’” Id. at 6. Hence, under “Section 1441(a),” the Supreme Court reasoned, “a counterclaim is irrelevant to whether the district court has ‘original jurisdiction over the civil action.’” Id. The Supreme Court opined that its conclusion was bolstered by language in other removal statutes that either differentiated between a defendant and a third-party defendant, or expressly extended the reach of the statute to include parties other than the original defendant. Id. at 7.

The Supreme Court similarly concluded that “any defendant,” as used in the CAFA was not intended to expand the class of parties who can remove under Section 1441(a). Id. at 9. Instead, the CAFA merely limits certain restrictions on removal that might otherwise apply. In other words, the Supreme Court held that nothing in the CAFA alters Section 1441(a)’s limitations on who can remove.

Based on this reasoning, the Supreme Court ultimately ruled that neither § 1441(a) nor the CAFA permits removal by a third-party counterclaim defendant.

Implications for Employers

Removal should be in the arsenal for any company facing a class action in an unfavorable state jurisdiction. While the Supreme Court’s decision in Jackson undoubtedly restricts this strategy, it does so only in the narrow circumstances where the company faces a counterclaim as a third-party defendant. Fortunately, counterclaim class actions do not come up that often. In the class action context, the decision is likely to have the most impact on companies that regularly bring suits against individuals that may, in turn, result in a class action counterclaim. Hence, companies with multiple divisions or in the franchise and staffing industries face a potential situation in which a related company could initiate a lawsuit, thus giving rise to a third-party counterclaim.

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: In its recent review of Seyfarth’s 2019 Annual Workplace Class Action Litigation Report, EPLiC called it the “bible” for class action legal practitioners, corporate counsel, employment practices liability insurers, and anyone who works in related areas.

We are humbled and honored by the recent review of our 2019 Annual Workplace Class Action Litigation Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here.

EPLiC said: “The Report is a must-have resource for legal research and in-depth analysis of employment-related class action litigation. Anyone who practices in this area, whether as a corporate counsel, a private attorney, a business execu­tive, a risk manager, an underwriter, a consul­tant, or a broker, cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States. It is the sole compendium that analyzes workplace class ac­tions from ‘A to Z.’ In short, it is ‘the bible’ for class action legal practitioners, corporate coun­sel, employment practices liability insurers, and anyone who works in related areas.”

Thanks EPLiC. We sincerely appreciate the kudos. 

We are often asked – “How does it happen – how do you produce your Annual Workplace Class Action Litigation Report”?

The answer is pretty simple – we live, eat, and breathe workplace class action law 24/7.

Each and every morning we check the previous day’s filings of EEOC lawsuits and workplace class actions relative to employment discrimination, ERISA, and wage & hour claims. We do so on a national basis, both in federal courts and all 50 states. Then we check, log, and analyze every ruling on Rule 23 certification motions and subsidiary issues throughout federal and state trial and appellate courts. This is also done on a national basis. We put this information in our customized database; we analyze and compare the rulings on class action issues and Rule 23 topics, and then we prepare an analysis of each and every decision.

Our class action practitioners – a group of over 175 Seyfarth lawyers – contribute to the process of building the database and analyzing decisional law on a daily basis.

We have been doing this on a 24/7 basis for over 15 years, and publishing the Annual Workplace Class Action Litigation Report in the first week of January of each calendar year.

The result is a compendium of workplace class action law that is unique in its analysis, scope, and comprehensiveness. 

Now, even less than half way through the year, we have tracked and analyzed more class action decisions to this point in 2019 than at the halfway point in past years. On this pace, our 2020 Report will cover more decisions than ever before.

By Gerald L. Maatman, Jr., Christopher DeGroff, and Michael Jacobsen

Seyfarth Synopsis: Who sits as Chair of the EEOC unquestionably has a significant impact for all employers interacting with the Commission. At long last, the U.S. Senate has voted to confirm Janet Dhillon for the post, nearly two years after President Trump’s administration nominated her. How the new leadership at the Commission will impact broader EEOC policy positions remains to be seen.

On May 8, 2019, the Senate voted 50 to 43 to confirm Janet Dhillon as Chair of the U.S. Equal Employment Opportunity Commission. The vote was a long time coming, as Dhillon was first nominated by the Trump White House back in June 2017, and cleared the Senate Committee on Health, Education, Labor and Pensions (the “HELP Committee”) in October 2017, only to be approved by the HELP Committee again in February 2019 after her nomination had been returned to the President due to the government shutdown.        

Dhillon comes to the EEOC with over 25 years of experience in the private sector. When she was nominated for the position of Chair, she had served for two years as Executive Vice President, General Counsel, and Corporate Secretary of national retailer Burlington Stores, Inc. Before joining Burlington, Dhillon led the legal departments of two other large corporations, US Airways and JC Penney. She also practiced as an attorney with Skadden, Arps, Slate, Meagher & Flom LLP for 13 years before going in-house. In addition to her legal career, Dhillon is one of the Founding Board Members of the Law Women LEAD Board at UCLA, where she earned her J.D. in 1991 and was ranked first in her class.

Given her background, many employers hope that Dhillon will take a “business friendly” approach as EEOC Chair. Indeed, last month, the U.S. Chamber of Commerce and numerous other business organizations sent a letter to Senate Majority Leader Mitch McConnell pressing for Dhillon’s confirmation. On the other hand, groups and organizations such as the NAACP had opposed Dhillon’s nomination in light of the business friendly approach she might take.

We can gather some insight into how Dhillon may proceed from her public statements. Dhillon has suggested in her testimony to the HELP Committee that she views litigation as a “last resort” for the EEOC, “believe[s] that most employers want to be law-abiding,” and that the EEOC should continue “providing tools to employers” to assist with compliance. These comments could telegraph that Dhillon intends to take a practical approach to enforcement decisions that takes into account what impact they will have on workers, companies and industries, even in the wake of the agency’s aggressive pursuit of its strategic priorities under the current administration thus far.

Additionally, Dhillon’s confirmation as Chair could usher in some change with respect to policy. During her confirmation hearing in September 2017, Dhillon stated that she was personally opposed to employment discrimination against members of the LGBTQ community, but she did not commit to upholding the EEOC’s interpretation of Title VII’s prohibition of sex discrimination as forbidding any employment discrimination based on gender identity or sexual orientation; instead, she stated that was a question for the courts.

The Trump administration’s “outside-the-beltway” selection of Dhillon was consistent with its other somewhat non-traditional appointment announcements related to the EEOC. Shortly after Dhillon was nominated, Daniel Gade, a non-attorney and veteran of the Iraq War, also was tapped to serve on the Commission, although he withdrew his name in December 2018 after his nomination stalled. In December 2017, President Trump nominated Obama-appointee Chai Feldblum to be reappointed as a Commissioner. That announcement was subsequently criticized by conservatives, and Senate Republicans ultimately blocked Feldblum’s nomination. And last year, the White House nominated Sharon Fast Gustafson – a longtime solo practitioner who has represented primarily employees – to fill the position of General Counsel at the EEOC. Gustafson still awaits confirmation.

As Chair, Dhillon will be taking over from Victoria Lipnic, who was named Acting Chair of the EEOC by President Trump in January 2017 following the departure of Jenny Yang, the Chair during the Obama Administration.

Implications For Employers

As detailed in our other reports, the EEOC’s enforcement efforts have remained robust under the current administration, and the agency has continued to post significant results. Employers certainly should not expect the EEOC’s overall direction and enforcement efforts to shift dramatically with Dhillon as Chair, but, as noted above, we may see some changes in the agency’s approach to both policy and litigation enforcement under her leadership. As our readers know, we will diligently monitor and report on these developments as they unfold over the course of Dhillon’s tenure, both in terms of key events and emerging trends.

By James M. Hlawek, Shireen Wetmore, Gena Usenheimer, and Richard L. Alfred

Seyfarth Synopsis: Today the Supreme Court issued a 5-4 decision in the Lamps Plus, Inc. v. Varela class action arbitration case.  The holding and rationale are important to employers because the Court decisively ruled that class arbitration “fundamentally” changes the nature of the “traditional individualized arbitration” envisioned by the Federal Arbitration Act and, for that reason, requires an express agreement of the parties to be compelled. In so ruling, the Court rejected the basis of the Ninth Circuit’s contrary ruling, which had found the arbitration agreement at issue to be ambiguous and, applying California state contract law that contractual ambiguities should be construed against the drafter, held that the agreement allowed for class arbitration. Relying on its prior class action arbitration decisions, the Court found that such an approach is “flatly inconsistent with the ‘foundational FAA principle that arbitration is a matter of consent.’” How this part of today’s decision will impact Plaintiffs’ efforts to use state laws to invalidate arbitration agreements will undoubtedly be the subject of future litigation, but it is now clear that courts can no longer order class arbitration unless there is an arbitration agreement expressly authorizing it. 

What Did The Supreme Court Hold?

The Supreme Court held today that courts cannot order an arbitration to be conducted on a class-wide basis unless there is an arbitration agreement that expressly authorizes class arbitration. The Supreme Court previously held in its Stolt-Nielsen decision that a court may not compel class arbitration when an agreement is “silent” on the availability of such arbitration. Now the Supreme Court has gone a step further. Courts cannot compel arbitration when an arbitration agreement is ambiguous about the availability of class arbitration.

The parties — Lamps Plus and Varela, an employee of Lamps Plus — had an arbitration agreement that was ambiguous about the availability of class arbitration. Certain phrases, particularly the use of “I” and “my” throughout the agreement, seemed to contemplate purely individual arbitration. Other phrases, such as one stating that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment,” the employee argued, were broad enough to suggest class arbitration. The employee sued Lamps Plus on behalf of a class of employees whose personal information had allegedly been compromised.

The Ninth Circuit affirmed the district court’s order compelling not individual arbitration, as the company had sought, but class arbitration. In deciding whether to compel class arbitration, the Ninth Circuit relied on California state law principles in applying a doctrine know as contra proferentem, which means that ambiguous terms in a contract should be construed against the drafter. In applying this doctrine, the Ninth Circuit found that the ambiguous terms of the parties’ agreement should be interpreted against Lamps Plus — the drafter of the agreement — and in favor of the employee, who argued for class arbitration.

The Supreme Court reversed the Ninth Circuit’s decision with five justices joining in the opinion. Relying on its past decisions in Stolt-Nielsen, Concepcion, and Epic Systems, the Court made clear that class arbitration “fundamentally changes” the nature of “traditional individualized arbitration” envisioned by the Federal Arbitration Act in several ways, including making the process slower, more costly, and “more likely to generate procedural morass than final judgment.” Because arbitration under the Federal Arbitration Act is strictly a matter of the parties’ consent, the Court found that applying contra proferentem to allow class arbitration under an ambiguous agreement is “flatly inconsistent with the ‘foundational FAA principle that arbitration is a matter of consent.’”  The Court, therefore, found that the Ninth Circuit decision ordering class arbitration was improper and reversed.

No Decision On Who Should Decide Whether An Agreement Allows For Class Arbitration  

In a footnote, the Court stated that it was not deciding whether the availability of class arbitration is a “question of arbitrability” that is presumptively for courts (rather than arbitrators) to decide. The Court pointed out that the parties had agreed that a court should decide the issue, and therefore concluded that the question was not at issue. Thus, while every circuit court that has addressed the issue has found that the availability of class arbitration is a “question of arbitrability” for courts to decide in the absence of an express agreement to the contrary, the Supreme Court still has not decided the issue.

What Does The Lamps Plus Decision Mean For Employers?

The decision is an important victory for employers. Courts can no longer order class arbitration under the Federal Arbitration Act unless the employers’ arbitration agreement unambiguously authorizes class arbitration. Under the Lamps Plus decision, employers no longer face the risk that ambiguous phrases in their agreements will lead to class arbitration. Only express agreements can lead to class arbitration. While many employers have revised existing arbitration agreements or adopted new ones since Epic Systems that include express class arbitration waivers, those employers with older clauses using generic language to the effect that all employment disputes are subject to arbitration benefit from today’s opinion.

The decision did not, however, close the door on future litigation as far as the availability of class arbitration. Plaintiffs will likely continue attempts to use principles of state contract laws to invalidate arbitration agreements. Lamps Plus, however, should significantly narrow the successful use of such laws to the extent they “target arbitration either by name or by more subtle methods…” In this light, even general contract principles such as unconscionability cannot stand in the way of arbitration enforcement if they over-ride the “foundational FAA principle that arbitration is a matter of consent.”

Additionally, Justice Ginsburg argued in her dissenting opinion that Congress should act to “correct” the elevation of the FAA over “the rights of employees and consumers” to bring class actions. Congress could, therefore, someday pass legislation that would make class arbitration more widely available.

Thus, despite the fact that the Lamps Plus decision makes it less likely that employers will face class arbitration, we continue to urge employers to have their employment agreements reviewed by experienced counsel and revised consistently with this and prior Supreme Court opinions.

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

Seyfarth Synopsis:  A federal district court in Arkansas recently denied an employer’s motion for summary judgment on two EEOC-initiated ADA claims – in EEOC v. Crain Automotive Holdings LLC, No. 4:17-CV-627, 2019 U.S. Dist. LEXIS 62513 (E.D. Ark. Apr. 11, 2019) –  for failure to provide a reasonable accommodation and discharge based on disability, following a supervisor’s comments to an employee that “it was not working out” and to take care of herself after the employee’s hospitalization.  Id. at *1. For employers and management personnel, this ruling illustrates how courts might find seemingly innocuous comments to be direct evidence of discrimination, thus raising the stakes in ADA litigation initiated by the EEOC.

Case Background

In EEOC v. Crain Automotive Holdings LLC, an employee of Crain who suffered from anxiety, depression, and panic attacks began experiencing chest pains and went to the emergency room, fearing she was having a heart attack.  Id.  After two days of treatment, she ultimately reported back to work.  Upon her return, she began experiencing a panic attack and left work, after she emailed her supervisor.  When she returned to work a few days later, she met with two supervisors and was terminated.  According to the employee, the supervisors told her that “it was not working out” due to her health problems and that she needed to take care of herself.  Id.

The EEOC brought a lawsuit on behalf of the employee alleging that Crain violated the Americans With Disabilities Act, as amended by the Americans with Disabilities Act Amendments Act of 2008 (“ADA”) because it (1) failed to provide a reasonable accommodation for the employee, and (2) that it discharged her because of her disabilities.

Crain moved for summary judgment on both of the EEOC’s claims, arguing that: (i) the employee was not disabled under the ADA; (ii) even if the employee was disabled, she could not have been fired because of her disability since Crain did not know about it; and (iii) the EEOC had no direct evidence of discrimination, and under the McDonnell-Douglas framework, the disability claim could not survive.

The Court’s Decision

The Court denied Crain’s motion for summary judgment on both of the EEOC’s claims. First, the Court rejected Crain’s argument that the employee was not disabled within meaning of the ADA, noting that she had been diagnosed with anxiety, depression, and panic attacks. Id. at *4-5. Crain supported its position by arguing that she had been able to perform other demanding activities, such as handling her parents’ estates, and further noted that she did not have constant panic attacks. The Court rejected Crain’s position, holding that a reasonable jury could find that the employee was disabled within the meaning of the ADA based on her testimony regarding the difficulty caused by her impairments. Id. at *6.

Crain further argued that even if the employee was disabled, she could not have been fired because of her disability since Crain did not know about it. Id. at *6-7. In response, the EEOC presented the following evidence: on Tuesday, the employee told her supervisor she had experienced chest pains the day before; on Wednesday, the employee told her supervisor she had anxiety, depression, and had suffered a panic attack; on Friday, the employee emailed her supervisor before leaving work, saying “I can’t do this” because she was “still hurting too bad,” and further, she emailed another supervisor explaining that she had had a heart catheterization, which was supported by a doctor’s note attached to that email. Id. at *7. The Court held that taking all these facts as true, a reasonable jury could infer that at the time the employee was fired the following week, Crain knew about her anxiety, depression, and panic attacks.

Finally, Crain argued that the EEOC had no direct evidence of discrimination, and under the McDonnell-Douglas framework, the disability claim could not survive. The Court noted that when the employee met with two supervisors in order to discuss why she had left work early the previous Friday, she was terminated. The employee testified that at this meeting, a supervisor told her that “due to [her] health, it wasn’t going to work out and [she] should take time for [her]self.” Id. at *8. The Court held that this comment was direct evidence of discrimination, as opposed to falling within the categories of “stray remarks in the workplace, statements by non-decision-makers, and statements by decisionmakers unrelated to the decisional process,” which would have precluded the comments from being considered direct evidence of discrimination. Id. at *9 (citation omitted). The Court further held there was no reason to suspect that the suggestion that the employee should take care of her health or take time for herself was made “with the intent of attempting to preserve and promote” her, as she was fired in the same conversation. Id. Accordingly, the Court denied Crain’s motion for summary judgment as to the discriminatory discharge claim.

Turning the EEOC’s failure to accommodate claim, the Court noted that the employee emailed a doctor’s note to a supervisor, and that the doctor’s note stated that she needed three weeks off work. The Court held that because Crain did not follow up whatsoever on the recommendation contained in the doctor’s letter before firing the employee, the EEOC generated a genuine dispute of fact on whether the employee requested an accommodation  Accordingly, the Court denied Crain’s motion for summary judgment as to the failure to accommodate claim.

Implications For Employers

This ruling serves as cautionary tale for employers regarding both the handling of employee health issues and comments made by supervisory personnel during terminations. In instances where employees present doctors’ notes, as was the case here, employers must be diligent to review those and properly provide any necessary accommodations.

Further, although the comments made during this employee’s termination – “it wasn’t going to work out” and “[she] should take time for [her]self” may seem innocent in nature – the Court here analyzed those comments in the context of the employee’s condition and recent attendance history, and found that such remarks constituted direct evidence of discrimination. Id. at *8-9.  Employers should thus be prudent to educate supervisors and other relevant personnel about carefully selecting their words during termination and disciplinary situations, especially in instances involving health issues.

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