January 2012

Front Coverpdf.jpgBy Christopher J. DeGroff and Gerald L. Maatman, Jr.

The EEOC promised to file bigger, higher-profile cases in 2011. The EEOC did just that, with a second straight year of a record number of systemic investigations and class-like federal court filings. Indeed, for the last five years, the EEOC’s public strategy has been to further its agenda through prosecution of large-scale cases that will attract media attention, with the hope that this brand of high-stakes litigation will channel employers’ behavior. To that end, 2011 saw a mixture of judicial rulings in EEOC cases that range from refreshingly employer-friendly decisions to those that sent chills through the employer community. 

An annual staple of our blog that our readers tell us they enjoy is what we offer here with this post – our picks for the five of the most intriguing EEOC-related decisions handed down this past year.

We also prepared a special EEOC Litigation Report – entitled EEOC-Initiated Litigation: Case Law Developments In 2011 And Trends To Watch For In 2012 – analyzing these EEOC rulings. The Report is 95 pages in length, discusses the key trends in EEOC litigation for 2011 and what to expect in 2012, and analyzes the 79 major decisions of the past year.

The Report can be downloaded here.

So what are the 5 most intriguing decisions? Here are our picks:

1. EEOC. v. Bloomberg L.P.,
778 F. Supp. 2d 458 (S.D.N.Y. 2011).
 We start in the U.S. District Court of the Southern District of New York, where Judge Loretta Preska put a resounding end to nearly four years of contentious litigation, holding that the EEOC’s case was so riddled with problems that the employer should not face a trial on the alleged pattern or practice of discrimination. First and most importantly, the Court found that the EEOC did not have the numbers to back up its claims of a widespread pattern of disadvantaging Bloomberg’s pregnant or recently pregnant employees. Despite the instructions in the EEOC’s own compliance manual that statistical evidence is “extremely important” in a pattern or practice claim, the EEOC argued that statistical evidence was not legally required and therefore having none should not hurt its case. In rejecting the EEOC’s position, the Court reasoned that a lack of statistics may not be fatal, but that in its absence was “severely damaging” and required the EEOC to provide significant anecdotal evidence. Id. at 479. But the EEOC did not have the anecdotal goods either. The Court held that the EEOC’s anecdotal evidence came from just a fraction of the women it claimed were victims, and even that evidence was, at best, a mixed bag and “insufficient to demonstrate a pattern or practice.” Id. at 470. Ultimately, the Court held that the EEOC’s non-existent statistical case – coupled with nebulous and downright unpersuasive anecdotal evidence – was not enough to move the case to an expensive and time consuming trial.

A grant of summary judgment is rare in such a case. EEOC v. Bloomberg is a case study where a massive claim brought by the government was found so wanting to be booted out of the courthouse for lack of proof, earning it a spot on our Top 5 List.

2. EEOC v. JBS USA, LLC, 2011 U.S. Dist. LEXIS 87127 (D. Colo. August 8, 2011). Next we turn to the somewhat complicated EEOC v. JBS case from the U.S. District Court for the District of Colorado. EEOC v. JBS offers a mixed opinion on the applicability of the bifurcation model first articulated in the U.S. Supreme Court case of International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977). The Court in EEOC v. JBS applied a version of the familiar Teamsters model to some of the EEOC’s discrimination claims, but questioned its utility for pattern or practice harassment claims. Under the Teamsters model, a prima facie showing of a pattern or practice of discrimination creates an early presumption that the employer violated the law for a broad class of alleged victims. It is potentially difficult to un-ring that bell at Phase II during individual damages/remedies stage. The Court held that it would apply the Teamsters model to the EEOC’s religious accommodation, retaliation, and disparate treatment claims. Id. at *16-19. On the other hand, the Court held that the bifurcation model simply broke down for a pattern or practice harassment claim, concluding that hostile work environment claims were too individualized to decide on a class-wide basis. Id. Importantly, the Court held that the EEOC could not seek punitive or compensatory damages for individuals pursuant to its pattern or practice claims, noting that the statute’s plan language did not authorize those damages in a Section 707 claim. Id. at *16. Claims for those damages must come, if at all, in the more individualized Phase II damages proceedings. Id. at *18.

The impact of a successful pattern or practice finding is enormous, but the standard for demonstrating a pattern or practice in Phase I is high, and cases like EEOC v. JBS show that judges can and do narrow the bifurcated Teamsters framework to only those claims truly susceptible to class treatment. By virtue of the novel bifurcation issues examined in this decision, EEOC v. JBS also garners a spot on the Top 5 List.

3. EEOC v. Freeman, 2011 U.S. Dist. LEXIS 8718 (D. Md. Jan. 31, 2011). Since the inception of its Systemic Litigation Program in 2006, the EEOC has maintained that it is unencumbered by the 300-day statute of limitations in Section 706 of Title VII that applies to private litigants (and which frames any Title VII lawsuit as limited to events occurring within 300 days preceding the filing on an EEOC charge with the Commission). Typically, the EEOC argues that it can sue an employer back to the start of the allegedly illegal pattern or practice (e.g., a discriminatory practice of denying promotions to female employees) irrespective of when a charging party filed an administrative charge. In EEOC v. Freeman, the employer moved for partial summary judgment contending that, for claims that were not part of the original charge, the 300 days should run – not from the date of the original charge – but from the date that the EEOC notified the company that it was expanding its investigation to encompass new claims. The Court agreed, holding that the “relevant date” for purposes of the 300-day time bar is the “date of notice” of the new charges.  Id. at *14-17.

The EEOC’s view of the 300-day rule inevitably expands the parameters of its typical case and sweeps in large numbers of claimants for whom the Commission seeks damages, raising the stakes for employers in this type of litigation. The EEOC has a mixed track record of success in convincing federal courts to adopt its view of the statute of limitations issue. EEOC v. Freeman flatly rejects the Commission’s position, and gives employers additional ammunition when confronted by broad class periods in pattern or practice litigation brought by the EEOC. Due to its importance to employers, EEOC v. Freeman would make the Top 5 List in almost any year.

4. EEOC v. AutoZone, Inc., 2011 U.S. Dist. LEXIS 128927 (C.D. Ill. Nov. 8, 2011). The EEOC v. AutoZone case shows the unique risk factors in EEOC litigation, whereby a trial loss inevitably translates into injunctive relief on top of a jury’s verdict of monetary damages. In EEOC v. AutoZone, the EEOC claimed the employer violated the Americans With Disabilities Act (“ADA”) by failing to accommodate an employee’s disability at its Macomb, Illinois facility. The EEOC asserted that the AutoZone forced one of its sales managers to perform jobs that violated his medical restrictions and that he ultimately experienced additional back and neck impairments. A jury found against the employer, and awarded lost wages, compensatory damages, and punitive damages. The EEOC then sought a post-trial injunction against the company designed to keep the employer from engaging in similar conduct in the future. The Court agreed with the EEOC’s injunctive relief requests in part, and in its order found that “the conduct of the defendant’s managerial employees at the highest level was clearly an intentional violation of the ADA” and was concerned with the “possibility of future infractions.” Id. at *40-42. The Court entered an injunction covering all of AutoZone’s stores in Central Illinois, requiring the company to report all requests for accommodations by employees to the EEOC for three years, and to maintain certain company records for four years, including how AutoZone responded to each request for a reasonable accommodation. Finally, the order granted access to the EEOC to view any such records on 48 hours notice. Id. at *41-42. 

The Court’s post-trial order in EEOC v. AutoZone is a cautionary tale for employers. Given the breadth of the injunctive relief order, the ruling also garners a spot on the Top 5 List.

5. EEOC o/b/o Serrano, et al. v. Cintas Corp., 2010 U.S. Dist. LEXIS 86228 (E.D. Mich. Aug. 4, 2011). We close with a sanctions case that was welcomed by all employers facing the EEOC’s sometimes overzealous tactics. One of our “Top 5” cases in 2010, the EEOC o/b/o Serrano, et al. v. Cintas litigation heated up again in 2011 with a decision by Judge Sean Cox from the U.S. District Court for the Eastern District of Michigan to award Cintas over $2,638,443 in attorneys’ fees and costs. The ruling is a resounding defeat for the EEOC’s systemic litigation program, and is yet another in a recent series of set-backs for the EEOC in the courthouse. Employers facing systemic EEOC cases that ultimately go nowhere will obviously applaud this fee and cost award, even if it was only half of what the company sought in fees.

As the top sanction award of 2011, it was pretty easy to put EEOC o/b/o Serrano, et al. v. Cintas Corp. back on the Top 5 List. EEOC-initiated pattern or practice cases are incredibly time consuming and expensive, and even more problematic when grafted to private-plaintiff class actions like those faced by Cintas. The good news is, based on cases like this, employers have ammunition to make the government think twice about bringing and/or continuing to prosecute facially meritless claims.

Save The Date – Our annual webinar on EEOC litigation developments is now set for March 6, 2012 at 1pm EST. Registration materials will be posted on the blog in the next week.

seal.pngBy Christopher DeGroff and Annette Tyman

The U.S. Equal Employment Opportunity Commission recently published its Draft Strategic Plan For Fiscal Years 2012 – 2016. In it, the EEOC outlines its four-year strategy for accomplishing its mission “to stop and remedy unlawful employment discrimination” and for achieving its vision of “justice and equality in the workplace.” The Plan focuses on three Strategic Objectives accompanied by targeted Outcome Goals and Performance Measures. The Plan is a must-read for employers and practitioners alike, as it provides a forecast of where the EEOC intends to focus its efforts over the next four years.

The EEOC’s first Strategic Objective is to combat employment discrimination through strategic law enforcement. Most of the agency’s financial and human resources will be focused on this Objective. The key strategies include:

  • “Use administrative and litigation mechanisms to identify and attack discriminatory policies and other instances of systemic discrimination.” To this end, the EEOC’s Systemic Initiative remains a “top priority” for the EEOC.  As we have reported in the past, the Initiative is focused on identifying, investigating, and litigating pattern or practice, policy, and/or class cases. The EEOC’s strategy around this initiative includes a more rigorous and strategic pursuit of systemic discrimination case. Employers should take note – the EEOC intends to establish target percentages that will increase year over year to ensure that a “TBD% of the agency’s litigation docket are systemic cases” by the end of FY 2016. We expect to see those preliminary target percentages by the end of FY 2012 (on September 30, 2012).  
  • Developing and implementing a Strategic Enforcement Plan. By September 2012, the EEOC intends to develop a Strategic Enforcement Plan that will replace the current National Enforcement Program prepared in 2006. In addition to articulating the EEOC’s high priority cases, the Enforcement Plan will outline the Commission’s plan to “integrate” the EEOC’s investigation, conciliation, and litigation responsibilities for private employers and state and local government sectors. Although the EEOC’s stated position as a “neutral” at the investigation stage has long been questioned, the EEOC’s new Draft Plan makes it official – the EEOC is, in essence,  entitled to free discovery though its investigative powers to support its long-term litigation strategy. The lines that purportedly once existed between the EEOC’s investigative arm on the one hand and its litigation arm on the other will now be erased for all practical purposes.
  • Ensure that remedies end discriminatory practices and deter future discrimination. The EEOC promises to seek “targeted equitable relief” for alleged victims of discrimination. Exactly what “targeted equitable relief” will mean for employers will be defined in the Strategic Enforcement Plan. It seems clear that such relief will go well beyond standard requests for compensatory damages or punitive damages that are common in current cases. The equitable relief sought will target all employees and job seekers as opposed to just the original charging parties and will be used by the EEOC to deter employers other than the Respondent from engaging in alleged unlawful discriminatory practices. Employers should expect to receive increased demands for ongoing management training and external monitoring, for example, among other “creative” remedies.       

The EEOC’s second Strategic Objective is to prevent employment discrimination through education and outreach. The EEOC’s two outcome goals are:

  • Ensure that members of the public understand and know how to exercise their right to employment free discrimination; and
  • Encourage employers, unions, and employment agencies to prevent discrimination and better resolve equal employment opportunity issues, thereby creating more inclusive workplaces.

Traditionally, the EEOC’s outreach programs were implemented through free education activities and training and, to a lesser extent, fee-based training through the EEOC’s Training Institute. The EEOC now intends to focus its outreach efforts on particular target groups that the EEOC believes have not been “equitably served by the Commission.” While the target groups are not yet defined, the EEOC suggests that “persons of color under 30, low-skilled workers, and new immigrants who may be unfamiliar with the nation’s employment laws” as well as small and new businesses will be part of the EEOC’s target audience. Not surprisingly, the protected-category workers at issues are the very groups on whose behalf the EEOC filed several large-scale actions in 2011.

To reach these groups, the EEOC indicates that it plans to shore up its internet and social media presence to conduct education and outreach activities. The EEOC will implement a “social media plan” by the end of FY 2014 and promises to make its website more “accessible and user-friendly.” In addition, the EEOC states that it will review and update “all current sub-regulatory guidance” with plain language materials. Such guidance includes an update to the EEOC Compliance Manual. 

The EEOC’s third Strategic Objective is to deliver excellent service through effective systems, updated technology, and a skilled and diverse workforce. This objective is largely operational in nature and will be further detailed in other publications. Nonetheless, at least one key initiative will be directed toward reducing the time it takes for the EEOC to investigate charges before issuing a determination. The EEOC anticipates that this strategy will result in the ability to focus the majority of its attention on meritorious discrimination charges.

Implications For Employers

The EEOC’s Strategic Plan continues to evidence the Commission is an agency with a laser-focus on pursuing systemic discrimination claims with more robust tools and strategies. In the face of Congressional action that reduced the Commission’s annual budget by $6.6 million in late 2011, the EEOC’s four-year plan makes clear that it will focus on getting the word out to currently underserved populations while at the same time harnessing its collective resources and investigative powers to identify, investigate, and litigate large discrimination claims to deliver the most “bang for its buck.”

2012CAR_small.jpgBy Lorie Almon, Gerald L. Maatman, Jr., and Ian Morrison

Back by popular demand, our Annual Workplace Class Action Report Webinar is scheduled for February 16, 2012 – click here to register and attend.

By all accounts, 2011 was a transformative year for employment-related class actions, and the aftershocks will be felt through 2012 and beyond. Our webinar will focus on these developments and analyze the likely twists and turns of complex workplace litigation in 2012.

Our readers have given us enormous feedback over the last three weeks since the launch of the 8th Annual Report in the first week of January. Over 5,500 copies were requested by – and mailed out to – clients and the readers of our blog, and over 450 media mentions have cited to the Report on workplace class action trends (a few are included here and here).

Based on the trends identified in our 8th Annual Workplace Class Action Report, partners Gerald L. Maatman, Jr., the Report’s author, and Lorie Almon and Ian Morrison, the chairs of our wage & hour and ERISA practice groups, we will lead attendees through a changed national landscape of “bet the company” employment disputes fueled by an aggressive plaintiffs’ bar and invigorated federal and state enforcement regimes. We will also provide insights on the new parameters for Rule 23 standards and workplace class arbitration defenses created by Dukes and Concepcion, and how employers can continue to prepare themselves for litigation in light of those decisions. Other significant developments to be addressed include: 

  • The trend toward bigger and more complex cases, the higher settlement figures they are driving, and judicial acceptance of defense tactics to allow early case assessments of the validity of class theories.
  • The EEOC’s shifting focus from one-off cases toward the initiation and litigation of nationwide pattern or practice cases.
  • Expanding and intensified level of DOL enforcement, as well as likely impact of the upcoming Supreme Court decision in Christopher, et al v. SmithKlineBeecham.
  • The evolving class certification theories being pursued by the plaintiffs’ class action bar, and how corporations can assess their vulnerability and mitigate those potential exposures.

The date and time of the webinar is – – Thursday, February 16, 2012

1:00 p.m. to 2:30 p.m. Eastern Time
12:00 p.m. to 1:30 p.m. Central Time
11:00 a.m. to 12:30 p.m. Mountain Time
10:00 a.m. to 11:30 p.m. Pacific Time

Speakers: Lorie Almon, Gerald L. Maatman, Jr., and Ian Morrison

We hope to see you there!

seal.pngBy Gerald L. Maatman, Jr.

Today I had the honor of speaking on workplace class action litigation developments at the American Conference Institute’s 17th Annual EPLI Program in New York City. It was a great conference. Corporate counsel, plaintiffs’ lawyers, and defense counsel from around the country shared insights on a broad spectrum of workplace litigation issues.

The best part of the program reminded me of the old E.F. Hutton TV commercial with the tag line “When E.F. Hutton speaks, people listen…” For those who do not recall it, it’s on YouTube here.

In this instance, Constance Barker, one of the EEOC’s Commissioners, gave the key note address on “EEOC Initiatives for 2012 and Beyond.” Like that old TV commercial, when the EEOC talks, it behooves employers and business professionals to listen. Ms. Barker’s presentation was no exception.

Commissioner Barker has been a member of the EEOC since 2008. She was nominated by President Bush on March 31, 2008, and unanimously confirmed by the Senate to serve the remainder of a five-year term expiring on July 1, 2011. On May 19, 2011, Commissioner Barker was nominated by President Obama to serve a second term to expire on July 1, 2016. The nomination to the second term was unanimously confirmed by the Senate on September 26, 2011.

As a former employment litigator representing primarily small businesses in Alabama, Commissioner Barker is known to be sensitive to the challenges and frustrations of businesses in the current economy. She summed up her personal philosophy in her opening remarks at the ACI Program – that vigorous enforcement of employment discrimination laws is an imperative, but it is unfair and inappropriate for any governmental agency to use the vast powers at its disposal to leverage a settlement from a business through threats and litigation tactics that force a business to settle due to the costs – measured both in litigation expenses as well as a loss of market share – of defending itself.

It reminded me of the chorus of criticisms from some quarters leveled against New York Attorney General Eliot Spitzer in the late 1990’s for alleged abuses of prosecutorial discretion in pursuing civil and criminal litigation against Wall Street companies. While somewhat “apples to oranges” to the current state of workplace litigation, the refrain is not entirely irrelevant. More than one employer has shared stories of how the EEOC “just doesn’t fight fair” in terms of the way it unfairly expands single worker charges into wide-ranging systemic investigations, negotiates via “take-it-or-leave-it” settlement demands while threatening to file a “big case,” or sometimes litigates with a “shoot first and aim later” philosophy that more than one federal judge has deemed inappropriate (and then sanctioned the government for its litigation tactics). That topic has been popular theme from readers of our prior blog postings – especially on EEOC o/b/o Serrano, et al v. Cintas Corp., where Judge Sean Cox from the U.S. District Court for the Eastern District of Michigan awarded an employer $2,638,443 in fees and costs this past year for having to defend the EEOC’s lawsuit.

Ms. Barker cited the EEOC’s latest litigation statistics released yesterday by the Commission. Those statistics underscore the reality employers face – more charges than ever before in the Commission’s history, more systemic investigations, and more – and bigger – EEOC lawsuits. The EEOC’s most recent new release on its statistics further confirms the findings of its FY 2011 report from last Fall.

Ms. Barker suggested that the key to successful compliance strategies for businesses and their legal counsel is to keep a focus on what is “coming down the road” in the future. Here are some of those take-aways from the Commissioner in terms of the EEOC’s future focus –

1. An agency emphasis on hiring or “gateway access” issue to jobs

Despite the lack of any explicit legislative grounding for such claims, EEOC investigators and attorneys have their “radar on” for issues involving employers’ use of criminal background checks and credit checks in the hiring process. The recent settlement with Pepsi for over $3.13 million bears witness to that focus. What’s more, some EEOC personnel see a legitimate basis for examining employer conduct in “refusing to hire the unemployed” or using “high school diploma” hiring requirements. Ms. Barker opined that more often than not, these investigations and lawsuits are based on alleged race and national origin discrimination. At the same time, critics of the EEOC paint this as “legislating through the backdoor” by aggressive stretching of the envelope of workplace bias laws when Congress has never explicitly made such practices unlawful.

2. Numbers matter

Critics of the EEOC sometimes bemoan agency reports of measuring “success” by numbers of lawsuits filed (and settlement numbers and amounts). Commission Barker said that “quotas” do not exist and have no place in law enforcement, but that “target” numbers have seeped into the conversation from time to time. There is no doubt that this often fuels the critics who complain that decision-making on institution of lawsuits is not an ideal process in light of the law’s aims. One only needs to check the right-hand side of the EEOC’s website – in its news release section – to see the daily listing of “who got sued” or “what the latest settlement entailed in terms of the dollars paid.”

3. Conciliation often entails frustration

Ms. Barker also addressed another employer headache in terms of the sometimes distasteful experience of “good faith” conciliation at the end of an investigation – the “take-it-or-leave-it settlement demand for full relief,” and the stance of “if-you-don’t-like-it-and-don’t-agree-to-our-terms,” we are going to bring “a substantial lawsuit against your company that will be even bigger.” She ascribed this problem to the fact that such decision-making is often more local than headquarters-driven, and that perceived abusive tactics are sometimes the by-product of that process. She urged employers to document any such problems, and insist on compliance with the “good faith” duty that is part and parcel of the conciliation concept.

4. The future is disparate impact

The most intriguing comments in her address were Ms. Barker’s prediction that statistical issues with workforce data – patterns in hiring, pay, promotions, and terminations – will become the most important focus of analysis and investigations in the EEOC’s future. Given the EEOC’s focus on systemic investigations, this prediction is already coming home to roost for many employers. In turn, an employer’s efforts to capture, understand, and strategize about its workforce data will become an increasingly more important attribute of compliance efforts. Identification of vulnerabilities and remediation of problem areas often will spell the difference between success or failure in facing EEOC investigations or lawsuits.

* * * * *
Today was a great learning experience. When the EEOC speaks, it behooves us all to listen and understand how it views the world of workplace bias laws.

seal.gifBy Gerald L. Maatman, Jr. and David Ross

Dukes issues – stemming from the U.S. Supreme Court’s seminal ruling this past spring in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011)  – are twisting, turning, and morphing into all types of class actions. We anticipate that 2012 will be the year that litigants and courts alike increasing confront “second generation” issues left open by Dukes.

The Dukes litigation is undoubtedly well-known to our readers, as its meaning and implications have been the focus of intense scrutiny. In the SCOTUS case, the district court certified a class in 2004, which was seeking both injunctive relief and back pay, under Rule 23(b)(2). After a series of rulings in the Ninth Circuit, the Supreme Court accepted certiorari, and subsequently held – in a unanimous ruling – that individualized monetary relief claims such as back pay cannot be certified under Rule 23(b)(2). In the 5-4 portion of the opinion, the Supreme Court held that plaintiffs failed to satisfy the Rule 23(a) commonality requirement, which requires that plaintiffs present significant proof that an employer operated under a general policy of discrimination. The Supreme Court’s majority reasoned that plaintiffs’ statistical evidence was insufficient to establish that plaintiffs’ theory could be proved on a class-wide basis. Plaintiffs had provided regional and national data showing pay disparities, but the majority determined that the regional disparities might be attributable to only a small set of stores, and could not by itself establish the uniform, store-by-store disparity upon which plaintiffs’ theory of commonality depended.

Additional chapters in the class action playbook stemming from the Dukes litigation are now being written. One of the prime areas of development is the use of Dukes to attack the architecture of the class theories in a complaint. After all, class action litigation is expensive and participation in class litigation often entails a significant investment of management time. The sooner an employer can exit from a class action the better if the architecture of the complaint is legally defective.

In a ruling on January 13, 2012 – in Scott, et al. v. Family Dollar Stores, Inc., Case No. 08-CV-540 (W.D.N.C. Jan. 13, 2012) – Judge Max Cogburn of the U.S. District Court for the Western District of North Carolina issued a decision of significant importance in employment discrimination class action litigation. On a defense motion per Rule 12(b)(6), Judge Cogburn dismissed plaintiffs’ class claims under Title VII of the Civil Rights Act of 1964 for pay discrimination, their collective action claims for unequal pay under the Equal Pay Act, and denied plaintiffs leave to amend their class theories to assert new pay discrimination class claims. In essence, the Court held that the architecture of plaintiffs’ proposed class complaint was inherently defective.

Key Facts At Issue In Scott

Plaintiffs in Scott asserted nearly identical class claims as in the Dukes litigation. Plaintiffs in Scott followed the standard blueprint that the plaintiffs’ class action bar has pursued over the past decade in litigating large scale, nationwide employment discrimination cases.

In Scott, 51 named plaintiffs brought suit in 2008 alleging that the company paid female store managers less than male store managers. According to plaintiffs, this discrimination was caused by subjective decision-making, which manifested itself in salary disparities between male and female store managers. Plaintiffs brought class claims under Rule 23 for equitable relief, back pay, and punitive damages under Title VII, as well as collective action claims under the Equal Pay Act (“EPA”) per 29 U.S.C. § 216(b). In seeking punitive damages, plaintiffs sought class certification under either Rule 23(b)(2) as part of the relief available at Stage 1 of a bifurcated trial of their pattern or practice claim for injunctive relief, or via hybrid certification under both Rule 23(b)(2) or Rule 23(b)(3). The Court denied previous motions to dismiss and for summary judgment, and the parties subsequently engaged in substantial discovery.

Defense Motion Post-Dukes

After the SCOTUS ruling in Dukes, the defense brought a motion to dismiss and/or strike under Rule 12(b)(6). The motion attacked the architecture of plaintiffs’ class theories under both Title VII and the Equal Pay Act. The defense argued that plaintiffs’ class theory – that the employer’s use of subjective decision-making created salary disparities between male and female store managers – should be dismissed or stricken from the complaint based on the SCOTUS decision in Dukes. Plaintiffs countered that Dukes concerned the issue of class certification based on an evidentiary record at an adversarial hearing under Rule 23, and not the dismissal of a complaint under Rule 12(b)(6).

The Court sided with the defense, granted the employer’s motion, and dismissed all of the class claims under Rule 23 and all of the collective action claims under § 216(b).

Key Components Of The Court’s Ruling

The Court reasoned that plaintiffs class architecture theories in Scott were identical to those in Dukes. This had four consequences, including:

(1). Plaintiffs claims for relief – seeking back pay, punitive damages (under Title VII), and liquidated damages (under the EPA) under any combination of the procedural mechanisms available under Rule 23(b)(2) – were barred due to the SCOTUS opinion in Dukes.

(2). Plaintiffs’ class claims under Title VII – on their face – could never meet the commonality requirement of Rule 23(a)(4).

(3). Plaintiffs’ collective action claims under the EPA – on their face – could never meet the “similarly-situated” requirement of 29 U.S.C. § 216(b).

(4). Plaintiffs’ class claims could not satisfy the predominance requirement of Rule 23(b)(3).

Id. at 7-8. In so ruling, the Court allowed the individual plaintiffs to continue litigating their individual claims. Id. at 9.

Disposition Of Plaintiffs’ Motion For Leave To Amend

During the briefing on the defense motion, plaintiffs also asked for leave to “re-boot” their class theories by seeking leave to file an amended complaint. Plaintiffs claimed to have discovered “new facts” about the employer’s compensation system and the setting of store manager pay. They asserted that the system was both “more centralized” and “non-subjective” than may have been alleged in their original complaint, and hence not foreclosed by Dukes. Plaintiffs also asserted that the proposed amendment was not late, since it was made before the completion of class certification discovery and the deadline for filing a motion for class certification.

The Court rejected plaintiffs’ 11th hour request on the grounds that it was futile “because plaintiffs’ theory for class certification is simply foreclosed by Dukes.” Id. at 8. The Court reasoned that the supposed “new facts” were long since known to plaintiffs’ counsel, the proposed amendment was simply a recasting of the class theories to avoid dismissal under Dukes, and the core of plaintiffs’ class theories remained “subjective, individualized decisions” as opposed to “any uniform company-wide policy that discriminates” against class members. Id. at 11. The Court also concluded that allowance of the proposed amendment would prejudice defendant due to the additional discovery it would impose. Id. at 12.

The Court’s Rationale On The Insufficiency Of The “Re-Booted” Dukes Theory

The Court reasoned that the proposed amended complaint advanced class theories that feel into three distinct buckets. The Court found each insufficient. The three theories included:

(A). The new proposed allegations described how the employer’s retail policies and store manager duties were similar for all class members. The Court explained that this showed nothing, for all employers impose budgetary restraints and uniform business controls, and such “have no bearing on gender discrimination.” Id. at 12.

(B). The new proposed allegations recited statistical disparities in pay between female and male store managers. The Court also rejected this pleading strategy, as “alleged statistical disparities between men and women . . . is, standing alone, insufficient to support a Title VII claim.” Id.

(C). The new proposed allegations also advanced a theory that the employer used “corporate-imposed policies and practices” as a work-around Dukes. The Court also determined this was insufficient, since the policies merely confirmed gender neutrality in making pay decisions (such as uniform parameters for pay ranges) plus use of discretion by regional managers and division vice presidents in placing store managers within the established pay ranges or by granting out-of-range exceptions, and “that this exercise of discretion results in disparities in pay based on gender.” Id. at 13. (emphasis in original).

In sum, the Court opined that plaintiffs’ proposed amended complaint did not assert facts that could establish that the employer had a “policy that discriminated on the basis of gender in a common manner across the proposed class.” Id. at 12.

Implication For Employers

The ruling is Scott is the first in the post-Dukes era to determine that dismissal is appropriate when the architecture of the class claims cannot pass muster under the standards established in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). The Scott opinion based its analysis on the notion that “[a]ctive judicial supervision may be required to achieve the most effective balance that expedites an informed certification determination without forcing an artificial and ultimately wasteful division between ‘certification discovery’ and ‘merits discovery.'” Id. at 9. As such, it takes Dukes to the next level. It allows an employer to attack the architecture of plaintiffs’ class theories immediately out of the box via a Rule 12(b)(6) motion. It avoids months – and perhaps years – of wasteful class discovery and focuses the spotlight on an up front examination of the class claims to determine if they can pass muster under Rule 23.

seal.pngBy Jennifer Riley and Howard Wexler

The Seventh Circuit recently issued an opinion in EEOC v. Management Hospitality of Racine, Inc. d/b/a International House of Pancakes, et al., No. 10-3247 (7th Cir. Jan. 9, 2012) – substantially upholding a jury’s verdict that an employer allowed two teenage employees to be sexually harassed in violation of Title VII. In its ruling, the Seventh Circuit decided several key issues common in sexual harassment cases, setting precedent for future litigation and lessons for employers going forward. 

In EEOC v. Management Hospitality of Racine, Inc. d/b/a International House of Pancakes, et al., the EEOC brought suit against Management Hospitality, an International House of Pancakes (“IHOP”) franchisee, as well as its owner and its third-party management company, Flipmeastack, on behalf of two teenage servers, Katrina Shisler and Michelle Powell, who worked at an IHOP in Racine, Wisconsin. The EEOC alleged that the servers were harassed by an older, low-level manager, and that the company failed to respond to their complaints. A jury found in favor of the EEOC and awarded the servers compensatory and punitive damages. The Seventh Circuit largely upheld the jury’s verdict. 

Factual Background
Shisler began working at the Racine IHOP on March 3, 2005. According to Shisler, whenever she worked with the night manager, Gutierrez, he made sexually charged comments. She claimed that Gutierrez propositioned her for sex, stared at her body, pressed up against her, and “slap groped” her buttocks. Id. at 7. On March 18, 2005, she and two other servers reported Gutierrez’s behavior to an assistant manager, and the assistant manager “blew [them] off” and called them “silly girls.” Id. On March 27, 2005, Shisler reported the behavior to the general manager, who also responded with “deaf ears.” Id. The district manager eventually conducted his own investigation, determined that Shisler and Powell had complained to the general manager, and terminated the general manager for violating the sexual harassment policy. 

The jury found in favor of the EEOC on the sexual harassment and retaliation claims. The district court upheld the verdict, entered judgment in favor of the EEOC, and imposed an injunction on Flipmeastack. 

The Seventh Circuit’s Opinion 
The Seventh Circuit reversed in part and affirmed in part. The Seventh Circuit found that a rational jury could have found that Shisler was subjected to harassment that was both severe and pervasive. The Seventh Circuit found the 10-year age difference between Shisler and Gutierrez relevant, as well as Gutierrez’s position of authority over her. Although Shisler could only identify three specific instances of sexually harassing comments and conduct by Gutierrez over the four-week period of her employment, the Seventh Circuit determined that the three instances she identified – saying she was “kinky and liked it “rough,” propositioning her for sex, and “slap groping” her buttocks – were sufficiently severe to support a jury verdict. Id. at 16.

The Faragher/Ellerth Defense 
The Seventh Circuit also upheld the jury’s rejection of the Faragher/Ellerth affirmative defense. The Seventh Circuit held that a rational jury could have concluded that the Defendants exercised reasonable care by instituting a sexual harassment policy with a reasonable complaint mechanism, and by engaging in prompt and corrective action by investigating the complaints. However, it found that the evidence also was sufficient for the jury to reach the opposite conclusion. 

First, the Seventh Circuit noted that the “mere creation” of a sexual harassment policy will not shield a company from its responsibility to actively prevent sexual harassment in the workplace. Id. at 20. A rational jury could have found that the policy and complaint mechanism were not reasonably effective in practice. For example, Gutierrez violated the policy by engaging in sexual harassment, and the assistant manager and general manager failed to report the harassment after receiving complaints. 

Second, although management was required to take sexual harassment training, the evidence suggested that the training was inadequate. The assistant manager testified that she did not receive training herself, even though she was responsible for training new employees. Further, the assistant manager did not report Powell’s complaint because, in her opinion, Powell did not seem to be “afraid” of Gutierrez. Id. at 21.

Third, a rational jury could have concluded that the district manager’s investigation of Gutierrez’s sexual harassment was not prompt. Shisler complained twice in March, and Powell complained three times in April, and yet the company did not commence its investigation until late May. The Seventh Circuit opined that this “is not the type of response ‘reasonably likely to prevent the harassment from recurring.” Id. at 22.

Further, the Seventh Circuit found that a rational jury could have concluded that the policy was not reasonably effective on paper. It observed that an employer’s complaint mechanism must provide a clear path for reporting harassment, particularly where a number of the workers are teenagers. Flipmeastack’s sexual harassment policy did not provide a point person for complaints; in fact, neither the policy nor the Defendants’ posters identified any names or contact numbers to call in the event of sexual harassment. 

The Seventh Circuit also rejected Defendants’ argument that Shisler and Powell unreasonably failed to take advantage or preventative or corrective measures because they did not complain to the district manager. The Seventh Circuit concluded that this argument ignored the terms of Defendants’ own sexual harassment policy, which provided that an employee was required to report improper behavior to “[the employee’s] manager or company representative.” Id. at 23. Shisler and Powell first asked Gutierrez to stop his harassing behavior, then reported to the harassment to the assistant manager and general manager. 

Punitive Damages 
In these circumstances, the Seventh Circuit upheld the punitive damages award. It noted that, while Defendants’ sexual harassment policy is relevant to evaluating whether an employer engaged in good faith efforts to company with Title VII, “it is not sufficient in and of itself to insulate an employer from a punitive damages award.” Id. at 27. In fact, the Seventh Circuit noted that a rational jury could have concluded that certain policy language – i.e., noting the “severity of knowingly making a false accusation of discrimination or harassment” – was inserted to discourage complaints of sexual harassment.  Id. at 28.

Implications For Employers 
In the course of its opinion, the Seventh Circuit identified several deficiencies in Flipmeastack’s sexual harassment program from which employers can learn. For instance, in its policy, Defendants directed employees to report concerns to their managers or company representatives, yet did not ensure that such persons knew how to respond. Defendants likewise implemented a training program, but did not ensure that all managers participated. Defendants also required employees to sign an acknowledgement of the policy, while failing to make copies accessible to workers. As the Seventh Circuit reaffirmed, mere adoption of a policy is not enough – particularly where the protections offered by them can be viewed as illusory. 

seal.pngBy Pam Devata and Kendra Paul

The EEOC started its year with a bang. On January 11, 2012, the EEOC announced publically that it had entered into a conciliation agreement with Pepsi Beverages for $3.13 million based on allegations that Pepsi allegedly discriminated against African-American applicants based on use of their criminal histories in the hiring process.

It is the first such settlement by the EEOC ever in this context. What is equally significant is the fact that the settlement stems from a private conciliation agreement ending an EEOC administrative investigation, which is normally confidential (as opposed to a public consent decree approved by a federal district court upon the settlement of an EEOC lawsuit).

According to its press release, the EEOC’s investigation revealed that Pepsi had a policy of not hiring applicants with pending criminal charges that had not resulted in convictions, and failed to hire applicants with arrests or minor conviction records. Specifically, more than 300 African-American applicants were adversely affected when they were disproportionately denied permanent employment for failing Pepsi’s criminal background check. The EEOC’s argument is that people of certain races and colors are arrested and convicted more frequently than others outside of those groups; thus, employers using such information in hiring decisions may cause a disparate impact on those protected groups.

The conciliation agreement requires Pepsi to pay $3.13 million, provide job offers to qualified applicants who were negatively affected by the criminal history policy, and provide training on Title VII obligations for its hiring personnel and all of its managers. With rough math, that equates to approximately $10,333 per applicant, a tidy sum for an alleged failure-to-hire claim.

In its media statement, the EEOC commended Pepsi for reexamining and revising its criminal history policy. Presumably, the EEOC negotiated to make the conciliation agreement public in order to “send a message” relative to its enforcement focus in this area; one can surmise that part of the price of doing so was the “positive” statement about the settling employer.

The EEOC’s Perspective On Employer Use Of Criminal History Information

The EEOC has been focused on employer use of criminal history information for over twenty years. In 1987, the EEOC issued written policy guidance regarding the use of arrest and conviction records in employment whereby it presumed that any policy or practice that caused an adverse employment action to be taken solely because of an African-American or Hispanic person’s conviction record had a disparate impact on members of those protected classes because those groups were convicted at a rate disproportionately higher than the rest of the general population. The EEOC’s guidance provides that employers’ selection criteria regarding criminal history information must take into consideration the following factors to demonstrate business necessity:

    1. the nature and gravity of the offense or offenses;
    2.  the time that has passed since the conviction and/or completion of the sentence; and,
    3. the nature of the job held or sought as related to the conviction.

The EEOC also issued a 1990 policy statement on employers’ use of arrest records stating that employers must consider the: (i) the likelihood that the individual engaged in the conduct arrested for; and (ii) job relatedness, before making a hiring decision. According to the EEOC, a blanket exclusion of individuals with arrest records (without convictions) would almost never withstand scrutiny.

The EEOC held public meetings in 2008 and most recently, on July 26, 2011, revisiting the use of arrest and conviction records in employment. Based on this meeting, we anticipate that the EEOC will likely be updating its policy guidance regarding the use of criminal records in employment in the very near future.

There has also been increased focus by the EEOC on employers’ use of criminal records as evidenced by recent litigation in EEOC v. PeopleMark, Case No. 08-CV-907 (W.D. Mich. 2008), and EEOC v. Freeman Companies, Case No. 09-CV-2573 (D. Md. 2009), as well as numerous Commissioner Charges and nationwide pattern and practice investigations into employers’ practices.

Implications For Employers

The EEOC has been and will continue to scrutinize employers’ use of criminal history in hiring decisions. Employers should review and revise their background screening/criminal history policies to ensure compliance with federal and state law as well as the factors set forth by the EEOC. Criminal history, when used, should be considered as related to a specific position and not an entire workforce. Finally, bright line rules relating to arrests or convictions will likely be deemed to have a disparate impact on certain minority groups and should be eliminated. Suffice it to say, this is a “white hot” area for the EEOC, and administrative enforcement is focused on these types of policies and practices.

We also expect the EEOC to cite this settlement in its other administrative investigations as a signal of what it is prepared to do in pursuing other employers. This is clearly an area of intense focus by the Commission.

We anticipate new guidance from the EEOC in the next few months, but for the time being it behooves employers to make sure their policies and procedures comport with the EEOC’s interpretation or risk being the next million dollar target.

2012CAR_small.jpgBy Gerald L. Maatman, Jr.

Today we are launching Seyfarth Shaw’s 8th Annual Workplace Class Action Litigation Report to the loyal readers of our blog.

The 2012 Report is our biggest ever. It contains analyses of 976 class action rulings on a circuit-by-circuit and state-by-state basis. The Report is divided into chapters on leading class action settlements (both from a monetary and injunctive relief standpoint), federal law rulings, and state law rulings. The substantive areas examined include Title VII, EEOC pattern or practice cases, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, state law rulings in employment law, wage & hour, and breach of contract cases, key CAFA rulings, and other class action rulings with significance to employers on Rule 23 and/or workplace litigation issues.

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation. Called “the definitive source on employment class action litigation” (EPLiC Magazine, Spring 2011), it has become the “go to” research and resource guide for businesses and corporate counsel facing complex litigation. The Report is fully searchable, and is a great tool for corporate law departments in dealing with complex litigation issues in all sorts of substantive legal areas.

The 2012 Report is 790 pages. To obtain your copy, a convenient order form is attached here.

The Introduction Chapter on significant workplace class action trends over the past year can be downloaded here.

2011 Was A Landmark Year In Workplace Class Actions

As events of the past year in the workplace class action world have demonstrated, the array of bet-the-company litigation issues that businesses face continued to evolve on a landscape that is undergoing significant change. In turn, governmental enforcement litigation and regulatory oversight of workplace issues heated up to new levels, thereby challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures.

supreme-court-seal.pngBy almost any measure, 2011 was a transformative year for workplace class actions. The U.S. Supreme Court issued three class action rulings – in Wal-Mart Stores, Inc. v. Dukes, et al., AT&T Mobility v. Concepcion, et al., and Smith, et al. v. Bayer – that impact all varieties of complex litigation in a profound manner. The Supreme Court’s decisions are also apt to have far-reaching implications for litigants for years to come.

More than any other development in 2011, Dukes had an immediate and substantial ripple effect on virtually all types of class actions pending in both federal and state courts throughout the county. It fostered a cascading waive of decisions in the second half of 2011, as litigants and courts grappled with the ruling’s implications in a wide variety of class action litigation contexts. As of the close of the year, Dukes had been cited a total of 260 times in subsequent case rulings, a remarkable figure for a decision rendered in June of 2011.

Against this backdrop, the plaintiffs’ class action employment bar filed and prosecuted significant class action and collective action lawsuits against employers in 2011. In turn, employers litigated an increasing number of novel defenses to these class action theories, fueled in part by the new standards enunciated in Dukes and Concepcion. As the Report reflects, federal and state courts addressed a myriad of new theories and defenses in ruling on class action and collective action litigation issues. The impact and meaning of “Dukes issues” and “Concepcion issues” were at the forefront of these case law developments.

The Key Trends Of 2011 

An overview of workplace class action developments in 2011 reveals six key trends. 

First, the Supreme Court’s opinions in Dukes and Concepcion had a profound influence in shaping the course of class action litigation rulings throughout 2011. Dukes caused both federal and state courts to conduct a wholesale review of the propriety of previous class certification orders in pending cases, prompted defendants to file new rounds of motions based on Dukes to attack all sorts of class theories (and not just those modeled after the nationwide class claims rejected in Dukes), and reverberated in case law rulings on a myriad of Rule 23-related issues. Concepcion likewise fueled significant litigation over the impact of workplace arbitration agreements and the impediments such agreements may impose on employment discrimination class actions and wage & hour collective actions. The result was a year of decisions on class action issues the likes of which have never been seen before. This wave of new case law is still in its infancy. As many class action issues are in a state of flux post-Dukes and post-Concepcion, these evolving precedents are expected to continue developing in the coming year.

seal.pngSecond, government enforcement litigation reached “white hot” levels in 2011. This was especially evident in terms of the enforcement litigation program of the U.S. Equal Employment Opportunity Commission. As an inevitable by-product of our nation’s economic woes, more discrimination charges were filed with the EEOC in 2011 than in any previous year since the founding of the Commission in 1964 – a new record high of 99,947 discrimination charges against private sector employers (by comparison, the EEOC last year reported receiving a then record high of 99,922 discrimination charges). The Obama Administration’s emphasis on administrative enforcement also spawned more government-initiated litigation over workplace issues. The EEOC’s systemic program – in which the Commission emphasizes the identification, investigation, and litigation of discrimination claims affecting large groups of “alleged victims” – grew to its largest level ever. This development is of significant importance to employers, for it evidences an agency with a laser-focus on high-impact litigation.

Third, the continued dislocations in the economy during 2011 fueled more class action and collective action litigation. In particular, the plaintiffs’ bar continued the pace of filings of FLSA collective actions and ERISA class actions seeking recovery for unpaid wages and 401(k) losses. Furthermore, these conditions spawned more employment-related case filings, both by laid-off workers and government enforcement attorneys. As of the close of the year, filings held steady in these distinct categories and increased across the board in employment discrimination, wage & hour, and ERISA cases. In turn, this resulted in more judicial rulings (especially in FLSA collective action cases), as well as higher settlement numbers (especially in government-initiated enforcement lawsuits and ERISA class action litigation). Even more workplace litigation is expected in 2012, as businesses re-tool their operations and the dust continues to settle.

scalesofjustice-thumb-150x143-6140.jpgFourth, wage & hour litigation continued to out-pace all other types of workplace class actions. This trend was manifested by the fact that in terms of case filings, collective actions pursued in federal court under the FLSA outnumbered all other types of private class actions in employment-related cases. In addition, Rule 23 and § 216(b) decisions by federal and state court judges on wage & hour issues were greater than in any other area of workplace litigation – more than triple that for employment discrimination or ERISA class actions combined. Significant growth in wage & hour litigation also was centered at the state court level, and especially in California, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania, and Washington. The crest of the wave of wage & hour litigation is not yet in sight, and this trend is likely to continue in 2012.

Fifth, the plaintiffs’ class action bar is a tight-knit community, and developments in Rule 23 and § 216(b) case law in 2011 saw rapid strategic changes based on evolving decisions and developments. This fostered quick evolution in case theories, which in turn impacted defense litigation strategies. With the Supreme Court’s rulings in Dukes and Concepcion, the plaintiffs’ class action bar has begun a process of “re-booting” class-wide theories of liability and certification. As a result, new certification approaches and cutting-edge strategies are spreading rapidly throughout the substantive areas encompassed by workplace class action law. More than any other trend, the on-going changes to strategy considerations in crafting class claims and litigating Rule 23 certification motions in the wake of Dukes drove case law developments in the second half of 2011. As a result, workplace class action case law is in flux, and more change is inevitable in 2012.

Map-thumb-150x96-6141.jpgSixth and finally, the financial stakes in workplace class action litigation increased in 2011, but in a manner far different than past years. The plaintiffs’ bar continued to push the envelope in crafting damages theories to expand the size of classes and the scope of recoveries. These strategies resulted in a series of massive settlements in nationwide ERISA class actions, as well as in government enforcement prosecutions at levels above the aggregate settlement totals in 2010. At the same time, settlements of employment discrimination class actions were less frequent and decidedly smaller than in past years. This reflected the impact of Dukes, and the notion that difficulties in certifying nationwide, massive class actions place restrictions on the ability of the plaintiffs’ bar to convert their case filings into settlements; it also manifests the ability of defendants to dismantle large class cases, or to devalue them for settlement purposes. As the “shake-out” period of litigating in the post-Dukes world continues to play out in 2012, the plaintiffs’ bar undoubtedly will continue in their search for a successful blueprint for certifying large employment discrimination class actions that enhance their ability to convert the class filings into substantial settlements.

More To Come 

Some of our subsequent postings will cover our picks for the “top ten” 2011 rulings and the “most intriguing decisions” of the year. We also will announce our annual class action webinar date soon.

We hope you enjoy the Report!