April 2012

is2.jpgBy Rebecca Pratt Bromet

We often receive the question – “What is the best way to avoid workplace class action litigation?”

That answer is deceptively simple – “Don’t get sued.”

In other words, identify your potential vulnerabilities, remediate those issues, and decrease the potential for ever getting sued.

What Are The Numbers To Examine? 

To that end, when asked “where are the diversity issues in your company,” most employers immediately turn to their workforce demographics, be they EEO-1 reports, human resources information systems, or plain old employee lists. Naturally, comparatively low numbers of particular minorities may signal lurking HR issues and litigation exposures. An expensive statistical analysis may also reveal other problem areas. But is that enough?

One often overlooked but crucial piece of information when assessing the overall “diversity health:” of an employer is considering the nature and number of discrimination complaints. As we have blogged about previously, employers faced an all-time record of charge filings with the EEOC in the agency’s 2011 fiscal year. Those statistics are extremely helpful to track litigation trends across the country, and are closely scrutinized by corporate counsel and external defense lawyers trying to read the tea leaves of how to best prevent future litigation. Indeed, Seyfarth Shaw’s Administrative Charge Team (“ACT”) routinely analyzes and processes this data to keep our clients one step ahead of key litigation trends. In so doing, however, the ACT has also made an important, practical observation: these same statistics examined at the company level can give our clients a unique window into the perception of diversity in their own workforce.

For most companies, a charge filed with the EEOC is a matter for the legal department. The charge is handled by either corporate counsel or external defense counsel, and human resources and operations are often asked to assist with those investigations. An EEOC charge is viewed as a threat, and there is typically a “circle the wagons” mentality when responding to that threat. A frequent goal when responding to the charge is often to compartmentalize the problem and insulate it from spreading. Employers will strive for a swift response that will have the least impact on day-to-day operations.

Once that threat is addressed, and the charge is dismissed or otherwise resolved, most employers want nothing to do with revisiting the issue. Seyfarth’s ACT has concluded that this traditional approach results in lost opportunities. A discrimination charge – regardless of the merits of the allegations – is a barometer of employee perception of fairness in the workplace. Naturally, there will be opportunistic claimants who are only out to squeeze undeserved money from their employer. But most who file a charge have sincere (albeit misguided) feelings that there is a problem. Hence, hiring and promotion claims are particularly important to consider when getting a ground-level view of employee perceptions of diversity.

One challenge is collecting this information. Charges typically “live in legal” or some insulated arm of HR or operations. The nature of the charge, where the charge was filed, and the specifics of the allegations are seldom tracked, or if they are, the data is kept only for legal review. With the proper database tool, however, a company can efficiently compile charge data for current and historical charges. Employers can develop these programs themselves or use pre-existing tools like the EEOC Charge Tracker program we have created here at Seyfarth Shaw to develop a charge database. As each new charge arrives, it should be logged into this database. If the opportunity and resources exist, historical charge data should be added to this tool. The more data that is collected, the more trends that are apt to emerge. In our experience, with some foresight and discipline, an analysis can be developed that will be useful not only for legal, but also for those focused on diversity issues as well.

As mentioned above, once an employer has all of its charge data in one place, there are a number of different analyses it can conduct. The types of analyses are limited only by one’s imagination, but some examples:

·        Benchmarking against national trends – How do the charges stack up against national charge trends? Are there, for example, more race claims than would be expected based on EEOC national data trends? That could represent an employee perception that the workforce is not diverse vis-a-vis a particular protected group.

·        Geographical/operational trends – Are there particular hot spots, either in a given operational division or geographical area? It may be wise to consider more focused diversity attention to those areas, even though the raw EEO-1 numbers would otherwise suggest that all is well in that region/business unit. A geographical analysis may also reveal problem areas before they attract the EEOC’s attention.

·        Year-over-year comparisons – Comparing how particular categories of charges are increasing or decreasing over time is also a key consideration. Significant increases in failure-to-hire cases, for example, would require a qualitatively different response than an increase in workplace harassment claims. Simply examining the total number of charges, however, would not expose these distinctions.

Of course, this sort of analysis approach is only useful if it translates to action. The real challenge is taking these trends and converting them into a plan for addressing diversity issues in the workplace – be they real or perceived. For example, if the data shows that the employer has more than expected gender discrimination claims compared to national benchmarks, this may suggest revisiting hiring and promotion policies to determine if there may be “glass ceiling” or “sticky floor” problems. A spike in failure-to-promote claims for a certain racial or ethnic group would signal that the company’s diversity efforts are potentially ineffective or, at a minimum, not being effectively communicated. A disproportionate number of age charges in a geographic region or operating unit may prompt an employer to focus additional diversity training in that area. The point is, simply relying on employee demographic data is not enough. Discrimination charge data provides unique and critical insight into a workplace – a view that is lost if ignored.

A modified version of this article originally appeared in Diversity Executive Magazine January/February 2012.

CADNUS-District-Court-California.gifBy Timothy F. Haley and Laura Maechtlen

Antitrust claims are not unknown or uncommon anymore for employers.  We have previously blogged about how workplace antitrust claims are coming into vogue for the plaintiffs’ class action bar.

The recent decision in In Re High-Tech Employee Antitrust Litigation, No. 11-CV-02509-LHK, 2012 U.S. Dist. LEXIS 55302 (N.D. Cal., Apr. 18, 2012), illustrates this trend.

Introduction And Summary Of Decision

A group of employees at four high-tech companies filed five class actions against their employers and three other high-tech companies alleging that the Defendants entered into a series of unlawful agreements not to recruit and hire each others’ employees. Plaintiffs alleged that these agreements violated federal and state antitrust laws and two additional California statutes. After the cases were consolidated, Defendants jointly filed a motion to dismiss. While the motion succeeded in getting rid of the claims brought under the two additional California statutes, the Court denied the motion with respect to the Plaintiffs’ federal and state antitrust claims. Id. at *49-50, 53. 

The decision serves as a warning that agreements between or among employers not to hire one another’s employees can violate antitrust laws. Nevertheless, the more challenging question for the Plaintiffs is whether they can obtain certification of their proposed class.  In other similar cases employees have met with mixed results in convincing a court that they can demonstrate antitrust injury with common proof. See, e.g., Weisfeld v. Sun Chemical Corp., 84 Fed. Appx. 257, 263-64 (3d Cir. 2004) (affirming denial of class certification with respect to plaintiff’s antitrust claim based on a “no hire” agreement because plaintiff was unable to show that he could prove that the class members suffered antitrust injury with proof common to the class).

Plaintiffs’ Allegations 

At the heart of the Plaintiffs’ consolidated complaint are five discrete bilateral agreements between the Defendants. In substance each of the so-called “Do Not Cold Call” agreements allegedly provided that the parties to the agreement would not solicit and hire each other’s employees. Id. at *11. Plaintiffs alleged that Apple was a party to three of these agreements with Adobe, Google, and Pixar, respectively. Pixar was also alleged to be a party to a Do Not Cold Call agreement with Lucasfilm, and Google was alleged to be a party to two additional agreements with Intuit and Intel, respectively. Id. at *12-15.  While Plaintiffs did not allege that each of the Defendants was a party to the same agreement, Plaintiffs asserted that these five discrete agreements resulted in “an overarching conspiracy” to decrease competition for skilled labor, reduce employee mobility, and suppress compensation. Plaintiffs also averred that each of the Defendants entered into the conspiracy with knowledge of the other Defendants’ participation. Id. at *15.

The Motion To Dismiss

Aided by evidence uncovered as a result of a prior Department of Justice investigation, the Plaintiffs easily defeated the Defendants’ argument that the complaint contained insufficient allegations of the alleged conspiracy and of the Defendants’ knowledge and intent. Id. at *25-40. The more interesting issue was the Defendants’ argument that the alleged conspiracy was not plausible and that the Plaintiffs failed adequately to allege antitrust injury. The five bilateral agreements did not cover all possible pairings between the Defendants. For example, although Adobe could not cold call Apple employees or vice versa, there were no allegations that Adobe was prohibited from cold calling the employees of Intuit, Google, Lucasfilm, and Pixar. According to the Defendants, of the 21 possible pairings between the seven Defendants, only six pairings had bilateral Do Not Call agreements, thereby leaving competition open among the remaining 15 pairings. The Defendants argued that, for an agreement to be effective in suppressing compensation, the other pairings would also have to be eliminated and thus, the alleged conspiracy was irrational and implausible. Id. at **40-41.

The Court rejected this argument. The Complaint alleged that the any failure to cold call any employee impacted not only the compensation of that employee, but also the compensation of all other employees. Plaintiffs supported this allegation with hypothetical examples. For example, Plaintiffs alleged that when a current employee of Company A receives a cold call from rival Company B, that information is likely to spread through informal employee communication channels, empowering other employees of Company A to use that information in their own compensation negotiations. The Court found that while the Plaintiffs’ economic effects argument needed to be proven, the Plaintiffs had pled sufficient facts alleging the economic plausibility of the conspiracy to withstand a motion to dismiss. Id. at *41-44. 

Given the procedural posture of the litigation, the Plaintiffs’ economic theory will be subjected to greater scrutiny at the class certification stage. Although in a somewhat different context, it is noteworthy that a similar economic theory was found to be inadequate to demonstrate class-wide injury in an antitrust wage suppression case involving registered nurses.  The Court in Fleischman v. Albany Medical Center, 2008 U.S. Dist LEXIS 57108, at *16-17 (N.D. N.Y. July 28, 2008), found that the theory presumed an “unrealistic degree of interchangeability in the nursing profession,” and rejected it.  

Lessons For Employers 

Not all agreements between or among employers not to hire each other’s employees violate the antitrust laws.  See e.g., Eichorn v. AT&T Corp., 248 F.3d 131 (3d Cir. 2007) (8 month agreement not to hire employees of an affiliate of the defendant that was sold to a purchaser did not violate the antitrust laws because the agreement was reasonable in scope and its primary purpose was to ensure the workforce continuity of the purchased entity). However, a no-hire agreement that is not ancillary to another business arrangement and is not limited in time and scope and designed to protect a legitimate business interest can create serious antitrust risks.

As class action lawyers assert claims on behalf of employees continue to branch into new vistas in the brave new world of class actions after Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), we expect to see more activity in this area and resort to antitrust claims.

seal.pngBy Pamela Devata and Frederick Smith

Today, by a 4 to 1 vote of its Commissioners, the EEOC published its long-awaited and much-anticipated Enforcement Guidance on Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964. After the Commissioners’ vote, the EEOC issued a press release about the Guidance along with a Q & A sheet on its new interpretation of Title VII.

If you are an employer, this is required reading for your hiring officers.

Overview Of The EEOC’s Guidance

The EEOC’s Guidance is aimed at employers (best practices for employers are included), as well as for use by the EEOC’s staff. Undoubtedly, the concepts within it will also impact litigation issues in cases brought by the EEOC over use of criminal background checks in the hiring process, especially the EEOC’s high profile litigation alleging systemic violations under Title VII against African-American and Hispanic applicants.

While not binding on employers, because the EEOC will be enforcing Title VII with this Guidance in mind, employers are well advised to consider adjusting their use of criminal history in accordance with it. This is especially true given that Commissioner Ishimaru stated in his remarks at the public meeting this morning that the EEOC was currently investigating hundreds of cases where employers illegally (allegedly, according to the EEOC) used criminal history in employment decisions. This comes on the heels of the EEOC’s high profile $3.13 million settlement with Pepsi earlier this year in a  hiring discrimination case over the use of criminal background checks.

The Guidance starts from the premise that “national data support a finding that criminal record exclusions have a disparate impact” and  has roots in EEOC’s E-RACE (Eradicating Racism and Colorism in Employment) Initiative. The Guidance also cites studies finding that criminal records are often incomplete and inaccurate. Today’s release follows two previous releases by the EEOC on the subject in 1987 and 1990 and two public meetings. See November 20, 2008 Meeting on Employment Discrimination Faced by Individuals with Arrest and Conviction Records. Most recently, on July 26, 2011, the EEOC had a meeting again revisiting the use of arrest and conviction records in employment. 

What an Employer Can Ask

Taking a cue from state “ban the box” laws, the EEOC’s Guidance recommends that employers not ask about convictions on applications. If and when they are made, inquiries about convictions should be limited to those which are job-related.   

Many employers currently ask about convictions in a blanket fashion or with minimal exclusions required by state laws. Per the Guidance, employers should review job applications and pre-employment inquiries based.

Arrest Records

The Guidance makes clear that use of arrest records is not job related and consistent with business necessity. The Guidance, however, states that an employer may make a decision on the underlying conduct if the conduct makes the individual unfit for a position. The Guidance does not specifically discuss how, if at all, pending records are different from arrests, except to state that a person can be placed on an unpaid administrative leave while an employer investigates the underlying facts. 

Factors To Consider When Evaluating Criminal History

It is no surprise that the EEOC reinforced its earlier position that bright line policies relating to the use of criminal history will be unlawful. The good news is that the Guidance does not contain any rule specifically limiting an employer’s ability to consider recent criminal records, or only a specified list of offenses – which many thought would be contained in the Guidance. Rather, the Guidance gives more insight into the factors that were originally set forth in the February 4, 1987 EEOC Policy Statement on the Issue of Conviction Records under Title VII, as well as adding some additional factors to be considered, specifically an individualized assessment. 

Based on the new Guidance, employers should consider the following factors when evaluating criminal history:

(i) the nature and gravity of the offense or offenses (which the EEOC explains may be evaluating the harm caused, the legal elements of the of a crime, and the classification, i.e, misdemeanor or felony);

(ii) the time that has passed since the conviction and/or completion of the sentence (which the EEOC explains as looking at particular facts and circumstances and evaluating studies of recidivism); and

(iii) the nature of the job held or sought (which the EEOC explains requires more than examining just the job title, but also specific duties, essential functions, and environment).

Individualized Assessment

The biggest area of change in the Guidance is the EEOC’s recommendation that an “individualized assessment” can help employers avoid Title VII liability. Reading between the lines, although the Guidance states that “Title VII does not necessarily require individualized assessment in all circumstances,” employers may be challenged by the EEOC or private litigants if they do not do so. According to Commissioner Lipnic’s opening statement at the public meeting this morning, there may be instances “when particular criminal history will be so manifestly relevant to the position in question that an employer can lawfully screen out an applicant without further inquiry. A day care center need not ask an applicant to ‘explain’ a conviction of violence against a child, nor does a pharmacy have to bend over backward to justify why it excludes convicted drug deals from working in the pharmacy lab.”  

The EEOC sets forth a number of individual pieces of evidence that an employer should review when making an individualized determination including:

  • The facts or circumstances surrounding the offense or conduct;
  • The number of offenses for which the individual was convicted;
  • Older age at the time of conviction, or release from prison;
  • Evidence that the individual performed the same type of work, post conviction with the same or a different employer, with no known incidents of criminal conduct;
  • The length and consistency of employment history before and after the offense or conduct;
  • Rehabilitation efforts, e.g., education/training;
  • Employment or character references and any other information regarding fitness for the particular position; and
  • Whether the individual is bonded under a federal, state, or local bonding program.

This is perhaps the most concerning areas of the Guidance. Clearly, this list is extremely burdensome and will cause employers to spend time and resources in evaluating criminal history.  One saving grace is the Guidance does indicate if the applicant does not respond to the employer’s attempt to gather data, the employer can make the determination without the additional information.

Compliance With Other Laws

The EEOC’s new Guidance acknowledges that compliance with “federal laws and regulations” disqualifying convicted individuals from certain occupations is a defense to charges of discrimination (e.g., convictions of theft and fraud that disqualify in the financial services industry).

In addition, the Guidance recognizes that denying employment based on failure to obtain a federal security clearance is not unlawful if the clearance is required for the job. However, the EEOC opines that compliance with state and local laws and regulations will not shield employers from Title VII liability due to Title VII pre-emption of state and local laws.

Best Practices.  Finally, the Guidance sets forth a few employer “best practices.” They include:

  • Eliminate policies or practices that exclude people from employment based on any criminal record;
  • Train managers, hiring officials, and decision-makers about Title VII and its prohibition on employment discrimination;
  • Develop a narrowly tailored written policy and procedures for screening for criminal records;
  • Identify essential job requirements and the actual circumstances under which the jobs are performed;
  • Determine the specific offenses that may demonstrate unfitness for performing such jobs;
  • Identify the criminal offenses based on all available evidence;
  • Determine the duration of exclusions for criminal conduct based on all available evidence;
  • Record the justification for the policy and procedures;
  • Note and keep a record of consultations and research considered in crafting the policy and procedures;
  • Train managers, hiring officials, and decision-makers on how to implement the policy and procedures consistent with Title VII;
  • When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity; and
  • Keep information about the criminal records of applicants and employees confidential (only use it for the purposes for which it was intended).

Seyfarth Webinar

Due to the importance of the EEOC’s new Guidance, we are holding a webinar on the EEOC’s action on April 26, 2012 at 2:30 p.m. to 3:30 p.m. Eastern; 1:30 p.m to 2:30 p.m. Central; 12:30 p.m. to 1:30 p.m. Mountain; 11:30 a.m. to 12:30 p.m. Pacific.

We invite you to participate in our webinar tomorrow by registering through the following link: http://www.seyfarth.com/events/webinar0426.

560481-sm_seal.jpg  By Gerald L. Maatman, Jr., Jennifer Riley, and David Ross

On April 18, 2012, U.S. District Judge F. Dennis Saylor IV issued a decision in Karp v. Cigna Healthcare Inc., No. 11-CV-10361 (D. Mass. Apr. 18, 2012), granting a defense motion to compel bilateral arbitration of the Plaintiff’s claims in a proposed $100 million gender discrimination class action against Cigna. The ruling applies the two recent Supreme Court arbitration opinions – AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), and Stolt-Nielsen v. Animalfeeds International Corp., 130 S.Ct. 1758 (2010) – to eviscerate plaintiffs’ class action.

In Karp, Plaintiff brought suit on behalf of herself and other similarly situated employees contending that her employer, CIGNA Healthcare, Inc. (“Cigna”) engaged in systematic gender discrimination in violation of Title VII and Massachusetts General Laws. Finding no evidence of an agreement to arbitrate on a class basis, Judge Saylor enforced the parties’ arbitration agreement and compelled bilateral arbitration. In a significant win for employers, Judge Saylor refused to defer the decision about whether the arbitration agreement allowed class claims to the arbitrator and rejected Plaintiff’s attempts to block enforcement of the arbitration agreement by asserting a patternor practice workplace bias claim. 

Factual Background 

Plaintiff, a provider contract manager, joined Cigna in 1997. In November 2005, Cigna updated its Employee Handbook.  Plaintiff checked “yes” on an electronic receipt for the Handbook, which provided that Plaintiff “agreed” to resolve any dispute with Cigna under Cigna’s Employment Dispute Arbitration Program. Id. at 3. The receipt also stated that “I understand that any such Arbitration will be conducted pursuant to the CIGNA Employee Dispute Arbitration Rules and Procedures in effect at the time such arbitration is commenced.”Id. Neither the Handbook nor the receipt mentioned class claims. 

Cigna set forth additional detail as to the scope of arbitration – that it did not include in the Handbook – in its Arbitration Policy and Arbitration Rules and Procedures. In the Arbitration Policy, Cigna provided that no class-wide arbitrations were allowed, and in the Arbitration Rules and Procedures, Cigna provided that each party seeking resolution of its claims “must proceed individually” and “[t]here shall be no class or representative actions permitted.” Id. at 4-5. 

On March 3, 2011, Plaintiff brought an action on behalf of herself and other similarly situated individuals alleging that Cigna engaged in systematic gender discrimination by paying women less, denying promotions, giving women less preferable work assignments, and subjecting women to gender-based hostility. Defendant moved to compel arbitration and dismiss or, in the alternative, stay the litigation. 

The Court’s Opinion

Plaintiff did not dispute that she knowingly agreed to arbitrate her claims. Plaintiff, however, contended that she was entitled to assert a class-based pattern-or-practice claim, either through class arbitration or litigation, because she did not agree to waive class claims and because bilateral arbitration would not adequately vindicate her statutory rights under Title VII. 

At the outset, Judge Saylor noted that, because the arbitration agreement was not ambiguous, the determination of whether it barred or allowed class arbitration was a question for the Court to decide. Id. at 7 n.6. Relying on Supreme Court precedent, Judge Saylor found that, because “the ‘changes brought about by the shift from bilateral arbitration to class-action arbitration’ are ‘fundamental,’” a party cannot be compelled to arbitrate class claims unless something in the contract indicates, at least implicitly, that it agreed to permit class arbitration. Id. at 7-8 (quoting AT&T Mobility LLC v. Concepcion, 131 S. Ct. at 1750).

The Court reasoned that although there was “certainly some question” about whether Cigna’s policies and procedures could be enforced against plaintiff, “there is no doubt that defendant did not agree to permit class arbitration.” Id. at 9. Accordingly, Judge Saylor concluded that he could not compel Cigna to submit to class arbitration. 

The Court next considered whether Plaintiff should be entitled to litigate her claims on a class basis in a judicial forum. Judge Saylor found that, in order to maintain a class action, a plaintiff must have an individual claim, and by agreeing to arbitrate her individual claim, Plaintiff waived her ability to serve as a class representative in a litigated action. Id. at 9-10. 

The Court rejected Plaintiff’s argument that arbitration would preclude her from vindicating her statutory rights under Title VII. Plaintiff contended that she would not be able to assert her pattern or practice discrimination claim in a bilateral proceeding because it is unavailable outside of the class action context. Id. at 11. The Court disagreed. Judge Saylor ruled that “a pattern or practice claim is clearly not a separate cause of action.” Id. at 16. Rather, a pattern or practice claim is “merely a method of proof – that is, a method of proving a Title VII claim.” Id. at 17. If a plaintiff can prove that she was the victim of an isolated incident of discrimination, “surely she should be allowed to prove that she was the victim of a more egregious form of discrimination.” Id. at 18. The “minor procedural difference” in burden-shifting that would accompany a bilateral assertion of a pattern or practice “is not sufficient to render the arbitration agreement unenforceable.” Id. at 19. 

For these reasons, the Court enforced the arbitration clause and compelled bilateral arbitration of Plaintiff’s discrimination claims. In so doing, Judge Saylor rejected the reasoning of Chen-Oster v. Goldman, Sachs & Co., 785 F. Supp. 2d 394, 409-10 (S.D.N.Y. 2011), where a magistrate judge reached the opposite result in a similar pattern-or-practice case.  Id. at 20 n.19.  

The “Vindication Of Statutory Rights” Gambit

While the result in Karp is a home run for the employer, defendants should be mindful that the plaintiffs’ class action bar is litigating a myriad of theories to “work-around” AT&T Mobility LLC v. Concepcion and Stolt-Nielsen v. Animalfeeds International Corp. This new phenomenon is the subject of recent media attention of several of our previous blog postings, such as the Advisen Front Page News article by Susanne Sclafane.

In this context, plaintiffs’ counsel have advanced the notion that a workplace arbitration agreement precluding a class action is void on account of its frustration of a worker’s ability to vindicate their statutory rights. Thus far, that argument has gained traction in the U.S. District Court for the Southern District of New York in Chen-Oster, which is the subject of an appeal to the Second Circuit. Signaling the importance of this issue, the U.S. Chamber of Commerce submitted an amicus brief for the defense on April 3, arguing that the vindication of statutory rights argument is incorrect, and that assertion of class claims or a pattern or practice theory does not gut an otherwise enforceable workplace arbitration agreement.

Implications For Employers  

The result in Karp is the polar opposite to Chen-Oster where the “effectuation of public policy” argument defeated the employer’s efforts to force a workplace class action into a single plaintiff bilateral arbitration. The Court’s opinion in Karp is a useful precedent for employers seeking to assert an arbitration defense under the Federal Arbitration Act in an employment discrimination class action. The Court rejected Plaintiff’s attempt to end-run an arbitration agreement by asserting a claim that, according to Plaintiff, could be litigated only on a class-wide basis. In so doing, the Court confirmed that a class action or pattern or practice claim are procedural devices – or “method of proof” – that do not allow plaintiffs to avoid bilateral arbitration.   

iowa-flag.jpgBy David Kadue, Gerald L. Maatman, Jr., Jennifer Riley, and David Ross

When one thinks of the judicial venues responsible for leading class action rulings, the District Court of Polk County, Iowa, does not immediately come to mind. Judge Robert Blink’s opinion of April 17, 2012, however, has put Polk County on the class action map. His ruling, coming after a three-week class action trial in Pippen v. Iowa, No. LACL107038 (Dist. Ct. Polk County Apr. 17, 2012), is a stunner.

Judge Blink entered judgment for Defendants and against a class of African-American employees who claimed class-wide bias in hiring and promotion within 37 departments of the executive branch of the State of Iowa. Judge Blink found that Plaintiffs failed to show that the departments’ subjective, discretionary decision-making caused disparate impact or adverse impact discrimination. Although Judge Blink’s decision is not binding on other courts, we predict that employers will cite it repeatedly, for its thorough and thoughtful analysis and rejection of class action discrimination theories that have been — and continue to be — raised by plaintiffs’ attorneys across the country.

Factual Background In The Pippen Litigation

Plaintiffs, a group of African-Americans who sought employment or promotion in positions with the State of Iowa, sued all 37 executive branch departments, claiming disparate impact and disparate treatment discrimination. Plaintiffs claimed in particular that the State permitted subjective, discretionary decision-making that had a disparate impact on class members in violation of Title VII and the Iowa Civil Rights Act.

The 37 departments of the State of Iowa’s executive branch vary in size, mission, and funding source. The State’s equal-opportunity merit system requires that all appointments and promotions to positions be made solely on the basis of merit and fitness, to be ascertained by examinations or other appropriate screening methods. The Department of Administrative Services (DAS) is responsible for ensuring that the departments make hiring decisions in accordance with the merit system. After each job posting closes, DAS reviews the applications and identifies those who meet the minimum qualifications of the job classification and sends the list to the hiring department. The departments use different practices to further screen applicants and decide which candidates to interview and hire.

In earlier proceedings, the Court had granted certification of the claims of African-American applicants and employees for purposes of adjudicating Plaintiffs’ disparate impact class claim. Judge Blink severed all non-class claims, as well as the disparate treatment claims, from the trial on the class claims. Judge Blink denied the State’s motions for summary judgment, and the disparate impact class claims proceeded to trial on September 12, 2011.

Judge Blink’s Opinion Of April 17

Relying on the Supreme Court’s decision in Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011), Judge Blink noted that, to establish a disparate impact claim, Plaintiffs had to identify a specific employment practice. Judge Blink reasoned that merely identifying a generalized policy allowing broad discretion at lower levels “does not suffice even at the lower threshold of the class certification stage.” Id. at 15 (citing Wal-Mart, 131 S. Ct. at 2555-56.) Judge Blink concluded that Plaintiffs failed to meet their burden. First, Plaintiffs failed to provide legal authority for concluding that “abdication of statutory or regulatory responsibilities and obligations and/or failure to follow its own policies” is a particular employment practice. Id. at 41. Second, Plaintiffs failed to show that the “entire hiring process” consisted of components so indistinguishable or “not capable of separation for analysis” that the process itself could be considered an employment practice. Id. at 46.

Although Judge Blink found “no question” that the components of the State’s merit employment system were “interconnected,” this finding did not mean that the process could not be examined part by part. On the contrary, Plaintiffs’ experts were capable of separating data for the referral stage, the interview stage, and the hiring stage for African-Americans as compared to whites. Id. at 43-44. Further, the evidence showed that DAS had recommended curtailment of particular practices such as a second resume screen and a “spelling and grammar” screen utilized by some departments. Id. at 45 n.26. On this record, Judge Blink reached what he termed the “inescapable conclusion” that one could focus on any number of discrete employment decisions made as individual, separable, identifiable employment practices. Id. at 45-46.

Furthermore, Judge Blink found that even if Plaintiffs had proven an actionable employment practice, they had failed to show causation. Judge Blink noted that Plaintiffs’ burden “goes beyond” merely showing statistical disparities in the employer’s workforce; rather, Plaintiffs had to show that a specific employment practice caused the exclusion of applicants for jobs or promotions because of their membership in a protected group. Id. at 47-48. Judge Blink determined that Plaintiffs’ experts failed to support this conclusion. Dr. Killingsworth, Plaintiffs’ statistical expert, for instance, admitted that his statistical analysis could not identify “causes” of discrimination and that the numerical disparities he found did not link any particular employment practice to different outcomes in the hiring or promotion of African-Americans. Id. at 48-50. Indeed, the evidence showed that, among the different departments, African-Americans had less opportunity for interviews in some, about the same in some, and higher probabilities in others. Judge Blink concluded, “Plaintiffs did not identify why certain agencies had differing outcomes. The causes could be anything as egregious as explicit bias or as benign as extremely specific job requirements.” Id. at 51.

The Implicit Bias Theory

Judge Blink also rejected the centerpiece of Plaintiffs’ class claim — their “implicit bias” theory. Plaintiffs presented testimony from Dr. Anthony Greenwald in support of this theory. Implicit bias, according to Dr. Greenwald, is a person’s “automatic preference for one race over another” that leads the person to unintentionally discriminate. Id. at 28.

Dr. Greenwald is a psychology professor who claims to have invented the famous (some would say infamous) Implicit Association Test (IAT). The IAT is a computerized test that requires a subject to associate a verbal or visual stimulus viewed on a monitor with either “pleasant” or “unpleasant” words and then measures the relative response time to complete the associations. By combining together the results of several disparate IAT tests taken under different conditions with different groups (in a so-called “meta-analysis), Dr. Greenwald has concluded, based on his use of IAT, that 70% of white persons have an automatic preference for whites over blacks. Under his theory, the inherent racial preference demonstrated by the IAT must affect employment decision-making, absent strict bureaucratic supervision and the use of wholly objective standards. Other plaintiffs’ class action lawyers have advanced this theory in nationwide workplace bias class actions, and the media has publicized it widely [here and here].

Judge Blink did not buy this argument. He noted that subjective discretion in decision-making is “not a bad thing”; rather, it is a “presumptively reasonable way of doing business” that “should itself raise no inference of discriminatory conduct.” Id. at 53 (quoting Wal-Mart, 131 S. Ct. at 2554).

Judge Blink also identified significant problems with Dr. Greenwald’s theory. First, as Dr. Greenwald admitted, an IAT-measured racial preference would not necessarily result in prejudicial behavior. Id. at 29. In this case, Dr. Greenwald did not opine that implicit racial bias caused the alleged statistical disparities, and could did not explain how many of the discretionary employment decisions were the result of “stereotyped thinking.” Id. at 53-54. Further, Dr. Greenwald did not administer the IAT to anyone in the State of Iowa. He did not present data for employees working in Iowa or managers for the executive branch and merely assumed that the IAT percentages would be the same for the State. Id. at 54. Finally, Judge Blink observed that, under Dr. Greenwald’s theory, even in the best-case scenario with a screening manual, unconscious bias could still infect the decision-making process. Id. at 30. On this basis, Judge Blink dismissed Dr. Greenwald’s testimony as “worlds away from ‘significant proof.’” Id. at 54.

Implications for Employers

The ruling in Pippen v. Iowa contains a treasure trove of legal analysis and conclusions for employers. This opinion is well worth two cups of coffee during the time you review and analyze its holdings.

Judge Blink engaged in a critical analysis of Plaintiffs’ class theories that should provide a helpful roadmap for employers defending disparate impact claims of the type asserted by the Plaintiffs’ class action bar. Of particular import, Judge Blink saw through the so-called evidence of unconscious bias – a tool frequently used by plaintiffs’ counsel to bolster claims of discrimination and provide the Wal-Mart “glue” to demonstrate commonality in a class action context. Building on Supreme Court precedent from Wal-Mart, Judge Blink’s opinion provides a useful template to attack the use of social science theory as proof of discrimination.

That being said, the last chapter in this litigation has yet to be written. Plaintiffs’ counsel has already announced their intention to appeal Judge Blinks ruling. Stay tuned!


Apr12_360x216.jpgBy Laura J. Maechtlen

We were honored to present today on workplace class action issues at the Annual Conference of the Risk and Insurance Management Society (RIMS) in Philadelphia with Thomas P. Hams, EPLI Practice Leader at Aon Risk Solutions, and Nicole Franzese, Senior Risk Manager at Best Buy Co., Inc. RIMS is the largest insurance-based educational meeting in the world, and its annual meeting is attended by thousands of insurance executives and corporate representatives from around the world.

Our presentation was entitled “Are Employment Class Actions Dead After Walmart & AT&T?”  A copy of our PowerPoint is here. The mobile app can be downloaded here.

The panelists discussed trends in workplace class action litigation in 2011 and 2012, and the aftermath and evolution of the headline-grabbing U.S. Supreme Court decisions Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), and AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). As highlighted in the presentation, class actions are not “dead” – although many employers and attendees at the conference today might wish they were. [We were also featured on this topic over the weekend in the Chicago Tribune’s focus on workplace class actions].

As highlighted by the panelists today, Wal-Mart Stores, Inc. v. 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 Wal-Mart to attack a variety of class theories (not just those rejected by the Supreme Court), and reverberated in case law rulings on a myriad of Rule 23-related issues in a variety of cases in all substantive areas, not just workplace discrimination cases. In addition, the panelists discussed how Wal-Mart has led the plaintiffs’ bat to reboot their class theories by focusing on smaller claims, regional claims, or a retooling the architecture of putative class claims in an effort to side-step Wal-Mart.

The panelists also discussed the viability of workplace arbitration agreements, and whether and why some employers have implemented, expanded, and altered their arbitration agreements as a result of the AT&T decision and its progeny. The panel discussed how AT&T has 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. As recognized in our discussion today, the AT&T decision has also spawned significant “second generation” analysis when employers and employers alike have restructured and reformed their strategies related to arbitration in preventing, alleging, and defending class action lawsuits at the federal and state level. Because there is a myriad of potential issues arising in the arbitration context, the panelists advised that employers should have a “toolkit” of considerations – both “pros” and “cons” of arbitration from a practical and legal perspective – when considering whether to change or implement a workplace arbitration program. A non-comprehensive list of those factors can be found in the presentation materials linked to this post (see Slides 13-18).

Finally, Tom Hams from Aon provided some interesting analysis from a broker’s perspective on employment liability practices trends, which included increased activity by the EEOC and the OFCCP, addition of new protected status categories under statutory law, and a surge of disability claims in administrative and judicial proceedings. Tom also shared statistics and trends in several categories including EPLI large loss trends, EEOC charge patterns, workforce trend issues, and class action filings in the last year (see Slides 23-33). 

Based on the trends identified at the RIMS presentation, class actions are alive and well, as are governmental enforcement actions.

We hope you find the power point useful, and hope to see some of you this week at the RIMS conference!


120px-US_DC_NorCal_svg.pngBy Laura Maechtlen and Brian Wong

This past week the U.S. District Court for the Northern District of California issued a decision denying class certification in Herrera et. al. v. Service Employees International Union Local 87, No. 3:10-CV-01888-RS (N.D. Cal. April 10, 2012), in which Plaintiffs alleged that their union violated Title VII and the California Fair Employment and Housing Act by discriminating on the basis of national origin. Both statutes make it an unlawful practice for a labor organization to discriminate based on national origin in membership and referral to employment, or to cause an employer to discriminate on the basis of national origin in the terms or conditions of employment. 

Local 87’s members consist mainly of janitorial employees working under contracts between the union and building maintenance companies, which contract with buildings in which the union members work. The Union is the duly certified collective bargaining representative for its members and operates a “hiring hall” that is the exclusive means of hiring for positions that the members fill.

In denying class certification, the Court’s decision in Herrera provides a virtual “road map” for how Plaintiffs could have certified their class claims. In that respect, the ruling contains an interesting analysis of Rule 23 issues in the wake of Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011).

Plaintiffs’ Class Certification Theories And Evidence

Plaintiffs did not allege a formal policy of discrimination by Local 87; instead, they alleged nine distinct theories of discrimination formed a perceived “pattern” of discriminatory conduct by the Union’s leadership against current and former Hispanic union members by: (1) denying employment and/or referring inferior positions; (2) advancing members of certain other ethnicities and national origins in contravention of the Union’s seniority rules; (3) failing to pursue grievances against employers on behalf of Hispanic members; (4) failing to hire representatives who would defend the interests of Hispanic members; (5) denying Hispanic members certain rights of union membership, such as the right to attend meetings and to hold union positions; (6) harassing and disparaging Hispanic members in the union hall; (7) providing fewer opportunities for training and support to Hispanic members than those given to non-Hispanic members; (8) requiring Hispanic members to take positions in less preferred locations as a condition of promotion or hiring; and (9) retaliating against those Hispanic members who complained of rules violations.

To demonstrate the alleged “pattern” of discrimination, the complaint alleged a number of discriminatory comments by two union leaders, and certain illustrative acts of discrimination against the twelve individually named class representatives. In support of their motion for class certification, Plaintiffs also submitted sworn statements by some of the named Plaintiffs relating their own experiences and those of fellow union members (containing inadmissible hearsay); however, Plaintiffs did not submit additional evidence to support their motion. For example, the Court recognized that Plaintiffs’ counsel did not appear to have interviewed scores of potential class members, and did not present any statistical evidence.    

Plaintiffs moved to certify a class defined as “all members of Local 87 in the period 2003 to the present who were of Hispanic national origin, also sometimes colloquially known as ‘Latinos.’” Id. at 4. The Court denied the motion for class certification without prejudice while laying out a roadmap for Plaintiffs to succeed in their next attempt.   

The Court’s Conclusion As To The Rule 23(a) Elements

The Court addressed each element of Rule 23 in turn.  In evaluating whether Plaintiffs established numerosity under 23(a), the Court recognized that Plaintiffs’ proposed class of over 1,600 Hispanic union members could meet numerosity. However, Plaintiffs’ class definition that consisted simply of “all Hispanic members” was overbroad. The Court concluded that Plaintiffs made no effort to assess the number of Hispanic members actually exposed to or impacted by the alleged discrimination which took “many different forms.” Id. at 6. While “exact numbers” are not required, Plaintiffs mainly offered anecdotal evidence from a few named Plaintiffs who suffered discrimination under varying circumstances, which the Court found insufficient to satisfy the “rigorous analysis” necessary to establish numerosity. Id. The Court opined Plaintiffs could have shown numerosity by defining a narrower sub-class, but did not propose any, and while the Court had authority to create a sub-class, the approach was “largely foreclosed” because there was no indication in the record of how many individuals might fall within any such sub-class. Id.

In evaluating whether Plaintiffs established commonality, the Court recognized that Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), requires “significant proof that an employer operated under a general policy of discrimination,” but that the proposed class in Herrera was “far less expansive” than Wal-Mart. Id. at 9. For example, Plaintiffs alleged many different theories of discrimination with some support in the record, and the source of the discrimination was the same – Local 87’s officers. Nevertheless, despite the fact that the class was less expansive than in other cases, Plaintiffs offered “far less substantial than the proof offered in other cases” by relying on a few declarations in a class of thousands of members. Id. at 10. While “there is no bright line requiring a particular number or ratio of anecdotes” proving discrimination, and “the inquiry is qualitative, rather than qualitative,” the Court found that the evidence did not “match the scope of the proposed class” and plaintiffs could not establish commonality. Id. (citing Wal-Mart).

The Court determined that Plaintiffs could not establish typicality for similar reasons. Plaintiffs alleged that “all members of the Class have an basically identical interest in nondiscriminatory treatment,” but Plaintiffs’ argument was “telling insofar as it drastically oversimplifies the nature of Plaintiffs’ many claims, the interests of hundreds of putative class members, and the potential injuries at issue,” and “[c]lass certification does not proceed at such a high level of generality.” Id. at 13. 

Finally, the Court held that Plaintiffs failed to establish adequacy of representation because they did not provide evidence that the claims they advanced were common and typical to the entire proposed class. At the same time, the Court found that Plaintiffs could be adequate representatives of the proposed class, or “more likely, a narrower one,” but the record reveals “so little” that Plaintiffs failed to carry their burden to demonstrate adequacy. Id. at 15.       

Roadmap To Meet Rule 23(b)

Plaintiffs relied on Rule 23(b)(2) because the Union had allegedly discriminated on grounds that applied generally to the class such that class-wide relief was appropriate, and Rule 23(b)(3) because common questions of law or fact predominated over issues and class adjudication would resolve their claims more fairly and efficiently than would separate actions.

The Court, however, found that the Plaintiffs failed to carry their burden to plead facts supporting a Rule 23(b)(3) class under any theory because the evidence was insufficient. Nevertheless, the Court laid out a roadmap for the Plaintiffs, and detailed how they should fix the allegations in any future motion for class certification. First, the Court recognized that it is possible that some of the kinds of claims they raise could support certification under Rule 23(b)(2) because they requested declaratory relief and injunctive relief , and the case could be certified as a “hybrid” action (a Rule 23(b)(2) class for equitable relief with a parallel and separate Rule 23(b)(3) class for damages). Id. at 16-17. Second, the Court recognized that individual damages calculations in post-liability proceedings were not fatal to class certification under the requirement to establish predominance under Rule 23(b)(3), and that Plaintiffs could rely on such a theory in any future motion provided they addressed why individualized damages assessments should not bar certification with much greater specificity

Implications Of Herrera

Herrera provides helpful insight for how to attack weak or insufficient allegations of class claims in opposition to a motion for class certification. It also demonstrates how claims of a “pattern” of discrimination can differ from allegations of a general policy of discrimination, and the type or extent of evidence required to establish the elements of Rule 23 when attacking class claims arising from multiple factual and legal theories. 

One issue that was not addressed in the latest order in Herrera is why Plaintiffs’ motion was denied without prejudice. Certainly, in litigation of any class action, defendants are well advised to avoid multiple rounds of certification briefing under any circumstances. This can be done by developing a record early so there is no argument that plaintiffs should be given additional discovery and/or additional opportunities to file motions for class certification. It can also be done by filing a motion to deny class certification based on a well developed record pursuant to Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935 (9th Cir. 2009).  

v%20station%20mic.jpgBy Gerald L. Maatman, Jr., Chris Palamountain, and David Ross

As quiz shows go, we believe that NPR has created the most honest one. The pauses designed to give the home player a chance to answer before the reveal are not engineered with lights and buttons and coy invitations from the host. Instead, the home audience is treated to hearing the players hilariously think aloud in answering questions that are practically beside the point. In keeping with the tenor, all the points are just made up as the game goes along, with blithe acknowledgements that the host just divvies them up as he likes because…well…he’s the host. Of course, the format works because there is nothing at stake in the game:  no money, no prizes, just plain old entertainment. However, even in such a low-stakes format, the show still provides the actual answer to the question presented. They get that any refusal to do so would just be maddening.

To that end, employers might be surprised to read the recent decision from the U. S. District Court for the District of New Jersey in a case entitled Barghout v. Bayer Healthcare Pharmaceuticals, et al., Case No. 11-CV-1576, 2012 WL 1113973 (D.N.J. Mar. 30, 2012), in which Judge Cavanaugh took the opposite approach in responding to the far more serious question of whether class claims that on their face appear to be unviable should be permitted to continue on to the distinctly high stakes forum of class discovery. 

Barghout involved Title VII and state law claims of gender discrimination brought by eight plaintiffs who are current and former employees of Bayer. Plaintiffs alleged hostile work environment claims based upon both sexual harassment and pregnancy discrimination, as well as disparate impact claims involving pay and promotion practices. Three plaintiffs additionally raised FMLA claims, and two of those plaintiffs also raised retaliation claims. Plaintiffs sought injunctive and declaratory relief, as well as compensatory and punitive damages, and back pay. They purported to bring their claims as a class action. 

Following the filing of plaintiffs’ Second Amended Complaint, Bayer moved to dismiss and/or strike the class allegations. Bayer argued that plaintiffs complaint was deficient under Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), for two reasons. First, the Second Amended Complaint “failed to explain the ‘supposed commonality’ of ‘highly individualized and fact specific claims.” Id. at *9. Second, Bayer argued that plaintiffs’ claims were facially deficient because their claims for individualized monetary relief could not be harmonized with Wal-Mart

The Court’s Ruling

The Court’s opinion is structured in a way that seems to highlight the point of Bayer’s motion. The Court used nearly two-thirds of its 22 page order outlines the individual factual allegations of each of the eight Plaintiffs. For example, the Court points out specific awards bestowed upon each of the plaintiffs, particular conversations each of the plaintiffs had with their supervisors, and discipline to which each of the plaintiffs was subjected. The Court also enumerates specific injuries some of the plaintiffs allegedly suffered, and it refers to statement made in their individual performance reviews. Notably absent from the discussion of the facts is any identification of any company-wide policy that potentially supports class certification.  In other words, neither plaintiffs nor the Court identified “the specific employment practice that is challenged.” Wal-Mart, 131 S.Ct. at 2555. Not surprisingly, given the absence of an allegation identifying a single company-wide practice at issue, neither plaintiffs nor the Court identify how the Court could provide relief in the form of “a single injunction or declaratory judgment would provide relief to each member of the class.” Id. at 2557. 

Perhaps the most surprising aspect of the opinion was the Court’s refusal to address the questions Bayer presented in its motion: Did the allegations of the Second Amended Complaint state any viable class claim for relief and, if so, what were those allegations? Indeed, to the extent that the Court expressed an opinion on the issue, it only indicates that Bayer’s substantive concerns were valid, stating “[i]ndeed Defendants ably present strong legal analysis regarding Plaintiffs’ potential deficiencies in so far as class certification is sought.” Id. at 18. Apparently, the plaintiffs did not provide a substantive response to those concerns, as the Court asserts only that plaintiffs demonstrate “at the very least, an understanding of what certification under 23(b)(2), 23(b)(3), or 23(c)(4) would require….” Id. at *11. 

Implications Of The Ruling

Most would agree that the “very least” any plaintiff should do is articulate the legal standards that govern their claims, especially if they launch a high stakes class action. Hence, the mere recitation of legal standards is not sufficient to meet pleading requirements under Twombly and Iqbal. Employers have sometimes achieved success – especially after Wal-Mart – in attacking defective class certification theories and securing dismissal of those allegations under Rule 23(d)(1)(D). A prime example is Scott v. Family Dollar Stores, Inc., 2012 U.S. Dist. LEXIS 4669 (W.D.N.C. Jan. 13, 2012), the subject of one of our previous posts.

Rather than explain how plaintiffs’ allegations overcame Bayer’s concerns – and virtually ignoring the standards articulated in Wal-Mart – the Court in Barghout made the conclusory statement that Bayer’s arguments “are not appropriate at this stage of the litigation.” Id. At this point in the order, one can almost see the Judge covering his ears and saying “WAIT! DON’T TELL ME!”

The ruling in Barghout also flies in the face of the Sixth Circuit’s decision late last year in Pilgrim v. Universal Health Care, LLC, 660 F.3d 943 (6th Cir. 2011), where it held that when plaintiffs’ class claims are defective on their face, discovery is not required, and Rule 23 class claims can be adjudicated on the pleadings.

Of course, as readers of this Blog know all too well, class action litigation is not a low-stakes game show. Enormous amounts of time and money are spent simply getting to the point where plaintiffs file a motion for class certification. Under these circumstances, it is not particularly satisfying if the best answer the adjudicator can offer is the coy response:  “Stay Tuned.” 

Thumbnail image for seal.jpgBy Mark Casciari and Alexis Hawley

In Northwest Airlines, Inc. v. Phillips, Case No. 11-1730, 2012 U.S. App. LEXIS 7072 (8th Cir. Apr. 9, 2012), the U.S. Court of Appeals for the Eighth Circuit recently issued an important decision for employers on the application of the Age Discrimination in Employment Act (ADEA) to employee pension benefit plans. In the current economic climate and on-going corporate belt-tightening, the issues in Phillips are apt to play out in workplace litigation in an increasing fashion.

Facts Of The Case

Prior to declaring bankruptcy in 2005, Northwest Airlines provided pension benefits through a defined benefit plan, under which pilots could receive up to 60% of their final average earnings.  After declaring bankruptcy, Northwest froze the plan and established a new target benefit plan and made contributions to a retirement savings account for each pilot based on a defined percentage of pilot earnings, with the goal that benefits under the frozen plan and the new plan would approximate 50% of final average earnings.  Benefits under the frozen plan served as off-sets to the target plan benefits. To arrive at the 50% goal, Northwest projected a pilot’s final average earnings, using age and years of service as considered factors. This caused older pilots with only a few years of service to have their contributions to the target plan significantly reduced.  As older pilots with long service records had already accumulated significant benefits under the frozen plan, they sued (among other theories) for alleged ADEA violations. The U.S. District Court for the District of Minnesota granted summary judgment against the ADEA claims in 2009.

The Eighth Circuit’s Ruling

On appeal, the pilots argued that use of a pilot’s projected final average earnings to determine contribution levels is “inextricably linked to age,” and therefore a violation of the ADEA. Id. at 8. The Eighth Circuit rejected this argument. Relying on the Supreme Court decisions in Kentucky Retirement Systems v. EEOC, 554 U.S. 135 (2008), and Hazen Paper Co. v. Biggins, 507 U.S. 604 (1993), the Eighth Circuit determined that pension plans often include age as a factor that determines benefits, and that plaintiffs must show that age, as opposed to pension status, motivated that use in order to assert a valid ADEA claim. The Eight Circuit concluded that any reduction in target plan benefits was not because of age. In affirming summary judgment, it noted that Congress did not legislate against the fact that younger workers have more time left before retirement, and thus a greater opportunity to earn benefits than do older workers. 

Implications For Employers

This is a pro-employer ruling. As a result of the Phillips case, it will be even tougher for employees to show that a pension plan’s consideration of age violates the ADEA, as long as other factors such as years of service also are considered.

ndil seal.gifBy Gerald L. Maatman, Jr. and Jennifer Riley

The plaintiffs’ class action bar continues in its search for “re-booting theories” to workaround Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). Our blog has commented on this phenomenon and the courthouse scorecard to date as judges confront and rule upon these attempts (read more here, here, here and here).

In one of the first rulings applying the Seventh Circuit’s recent decision in McReynolds v. Merrill, Lynch, Pierce, Fenner & Smith, 2012 WL 592745 (7th Cir. Feb. 24, 2012), a recent opinion by Judge Joan Lefkow of the U.S. District Court for the Northern District of Illinois demonstrates its potential broad-reaching impact. 

In Bolden v. Walsh Group, No. 06-CV-4104 (N.D. Ill. March 30, 2012), twelve construction workers filed a putative class action against Walsh alleging race discrimination. Plaintiffs alleged that Walsh discriminated against African-American  employees through its hiring, firing, job assignment, and compensation practices. Plaintiffs asserted both disparate treatment and disparate impact theories of liability and also alleged that the working conditions at Walsh amounted to a hostile work environment.

Judge Lefkow certified classes under Rule 23(b)(3) for both Plaintiffs’ disparate impact discrimination and hostile work environment claims, even though the evidence showed that Walsh delegated discretionary decision-making to its superintendents and foremen on each of hundreds of construction sites.   

For employers facing workplace class action litigation, the ruling in Bolden v. Walsh Group is noteworthy in its recognition of workarounds to Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011).

Factual Background To Judge Lefkow’s Ruling

From 2000 to 2009, Walsh employed approximately 2,610 journeymen and 175 foremen on 262 construction projects in the Chicago area. Walsh typically allowed independent management of its construction projects with little oversight from its corporate office. Usually, a project manager or business group leader selected a superintendent, the superintendent supervised foremen, and either the superintendent or the foremen hired journeymen and assigned tasks. Walsh did not have a policy for hiring journeymen, and it left decisions regarding hiring and assigning overtime work to the discretion of superintendents and foremen.   

Plaintiffs filed a motion seeking to certify four classes, including a hire and promotion class, a work hours and compensation class, a lay-off and termination class, and a hostile work environment class. The Court granted plaintiffs’ motion in part and denied it in part.

The Court’s Opinion On Rule 23 Commonality Factors

Walsh asserted that plaintiffs could not satisfy the commonality requirement of Rule 23(a)(2) because their claims involved a myriad employment decisions made by numerous managers at hundreds of construction sites and thus turned on individual as opposed to class-wide issues of fact and law. In essence, the defense argued that Plaintiffs’ class theories failed to surmount the Wal-Mart bar.

At the outset, Judge Lefkow recognized that the commonality requirement should be measured against Wal-Mart and McReynolds, 2012 WL 592745, at *5. In Wal-Mart, plaintiffs brought disparate treatment and disparate impact claims on behalf of 1.5 million putative class members alleging that local managers exercised discretion over pay and promotions disproportionately in favor of men, leading to an unlawful disparate impact on female employees. In McReynolds, plaintiffs alleged that two company-wide policies – including a “teaming policy” under which the company delegated the formation of teams to local brokers – had a disparate impact on African-American brokers. Unlike Wal-Mart, the Seventh Circuit concluded that the plaintiffs in McReynolds met the commonality requirement. Id. at 9 (citing McReynolds, 2012 WL 592745, at *8.) Seeking to navigate the waters between Wal-Mart and McReynolds, Plaintiffs in Bolden asserted that Walsh had a company-wide policy of setting up each project as its own business, with no material oversight. 

Judge Lefkow noted that the most obvious distinction between the two cases – the absence in Wal-Mart and the presence in McReynolds of a company-wide policy more definite than that of granting all hiring and promotion decisions to local managers – was “razor thin.” Id. She reasoned that both “cases concern a company-wide policy of delegation of discretionary authority to a low-enough level that employment decisions are based on the decider’s personal comfort level, resulting in a statistical disparity disfavoring a protected class.” Id. at 10. In so doing, Judge Lefkow discounted McReynold’s explanation for parting ways with Wal-Mart (i.e., that, unlike the effect of delegating decision-making authority to local managers, the incremental causal effect of permitting brokers to form teams was susceptible to class-wide determination). Id. at 10 n.9. 

Instead, in effect, Judge Lefkow cabined the Supreme Court’s decision in Wal-Mart. Judge Lefkow seized on the Seventh Circuit’s characterization of Wal-Mart’s holding as partially based on “manageability” concerns: “‘Wal-Mart holds . . . a class action by more than a million . . . is unmanageable [and] the incidents of discrimination complained of do not present a common issue that could be resolved efficiently in a single proceeding.’. . . This language implies that the Seventh Circuit reads Wal-Mart as a case where the difficulties of manageability and lack of efficiency overwhelmed any potential common issue based on delegation of authority.” Id. at 11. Judge Lefkow concluded, therefore, that whether Walsh’s company-wide policy of delegating discretionary authority to job site superintendents discriminates against black employees was a common question that could be certified so long as Plaintiffs could demonstrate an evidentiary basis for their class definition. Id. at 12. 

Rule 23 Certification Conclusions

The Court concluded that, with respect to their disparate treatment claims, Plaintiffs fell short of the required evidentiary threshold. The Court found Plaintiffs’ limited statistical evidence and their anecdotal evidence (which was limited to seven out of 262 construction sites) “too weak to support the conclusion that there will be a common question of whether supervisors at all of Walsh’s construction sites engaged in ‘stereotyped thinking’ that adversely affected black journeymen.” Id. at 15. 

The Court reached the opposite conclusion with respect to Plaintiffs’ disparate impact claims. Plaintiffs alleged that Walsh’s superintendents and foremen tended to offer overtime and work hours to non-African-American employees in the first instance and supported their allegation with the same statistical evidence showing that African-American journeymen, on average, received fewer hours than non-African-American journeymen. Id. at 17. 

The Court also found common issues with respect to Plaintiffs’ hostile environment claims. Plaintiff submitted “voluminous testimony, affidavits, and the EEOC Investigative Memorandum” showing that supervisors at two job sites made offensive comments, and Plaintiffs claimed that they saw offensive graffiti in portable toilets and saw “hangman’s nooses” at three other sites. The Court concluded that “Plaintiffs’ evidence demonstrates that there is a common issue of fact as to whether Walsh management knew of its supervisors’ harassing conduct . . . and yet allowed supervisors to act with unfettered discretion on the job.” Id. at 20.

Impact Of The Bolden Decision

Bolden is one of the first opinions applying McReynolds. After McReynolds, we predicted that employers could expect to see plaintiffs’ lawyers attempting to repackage claims that attack discretionary decision-making as claims that attack a company-wide policy that allows managers to exercise discretion in a certain, allegedly discriminatory, manner. After Bolden, employers can continue to expect the plaintiffs’ class action bar to use McReynolds in this and perhaps even broader ways.   

Although Judge Lefkow’s decision is not binding on other district courts, if other judges take a similarly broad view of McReynolds, it could represent a game-changing limitation on Wal-Mart. Judge Lefkow relied on McReynolds to marginalize the Supreme Court’s decision in Wal-Mart – limiting much of its impact to situations involving super-sized or otherwise unmanageable classes. Judge Lefkow proceeded to find commonality in a situation that Wal-Mart seemed to place off-limits – a situation where the alleged common policy involved delegating virtually unfettered discretion to local managers. She also certified a workplace harassment claim, which most had thought post-Wal-Mart would never survive a commonality analysis.