By Christopher DeGroff, Matthew Gagnon, and Gerald L. Maatman, Jr.

Every year at this time we like to offer our loyal readers a pre-publication preview of our annual report on developments and trends in EEOC-initiated litigation. That book, entitled EEOC-Initiated Litigation: Case Law Developments In 2014 And Trends To Watch For In 2015 is set for distribution in early January 2015. This publication focuses on EEOC-related litigation and explores the key drivers of the EEOC’s enforcement and litigation activity in FY 2014, as well as our examination of what to expect in terms of enforcement litigation in 2015 and beyond. This publication will be offered for download as an eBook. To order a copy, please click here. 

As we look back at the last year, certain EEOC-initiated cases catch our eye as intriguing; intriguing either for their impact on the legal landscape, or for the fact that they offer a glimpse at the often puzzling and, at times, downright frustrating agency agenda.

With that, let’s take a look at the 5 most intriguing cases from 2014:

1.    EEOC v. BMW Manufacturing Co., LLC, Case No. 13-CV-1583, 2014 U.S. Dist. LEXIS 169849 (D.S.C. Dec. 2, 2014).   

BMW scored yet another win for employers in the EEOC’s long-running challenge to employers’ use of criminal and credit background checks in hiring and other employment decisions. As with other cases pursued by the agency under similar theories, the EEOC filed suit against BMW claiming the company’s criminal conviction background check policy had a disparate impact on black employees and applicants and was not job-related or consistent with business necessity. The EEOC has suffered some significant defeats pursuing this theory, including a stinging loss in the Sixth Circuit in the case, EEOC v. Kaplan Higher Education Corp., in which the Sixth Circuit harshly criticized the EEOC for using a “homemade” methodology for determining race to compile its statistical evidence. As we previously noted, the Sixth Circuit threw out the EEOC’s case after concluding that the agency’s methodology for determining race was “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.” It was a stunning rebuke of the EEOC’s method for proving disparate impact in these types of cases.

Aside from the expert evidence, another concern for the Court in the Kaplan case and other similar cases has been the fact that the EEOC also uses criminal and credit history background checks in its own hiring practices. Naturally, it is difficult for the EEOC to argue that the use of those checks is not job-related and consistent with business necessity when it engages in the same practices itself. That was the issue that was decided against the agency yet again in EEOC v. BMW Manufacturing Co. BMW sought discovery into the EEOC’s personnel policies relating to the use of background checks. The Magistrate Judge originally ruled in favor of the agency, holding that BMW failed to explain how that information would prove that its own criminal conviction policy was job-related or consistent with business necessity. But District Court Judge Herlong disagreed, finding that the EEOC had failed to establish why its discovery objections were proper. Unless and until the EEOC changes its own personnel policies, the fact that the agency also uses credit and criminal history checks in its hiring decisions will continue to be a stumbling block as it tries to pursue other employers under this theory.

2.    State of Texas v. EEOC, Case No. 5:13-CV-255 (N.D. Tex. Aug. 20, 2014).

The EEOC’s focus on the use of credit and criminal history has also come under political scrutiny and criticism, including a case brought by the State of Texas to enjoin the enforcement of the EEOC’s guidance on this issue. As we previously blogged about here, on April 25, 2012, the EEOC issued its Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964. Texas brought suit in the U.S. District Court for the Northern District of Texas in November 2013 seeking to enjoin the enforcement of that guidance, arguing that it interfered with Texas statutes that prohibit the hiring of felons in certain job categories.

As we recently discussed here, the Court dismissed the suit, holding that Texas lacked standing to challenge the guidance because the state had not alleged that there had been any enforcement action taken against it by the Department of Justice in relation to the EEOC’s guidance. This rendered the state’s attempts to establish standing mere speculation because it could not show that there was a “substantial likelihood” that Texas would face Title VII enforcement proceedings. Texas has appealed that decision to the Fifth Circuit and the briefing in that case is underway. The core of the state’s argument is that because the EEOC’s guidance is in direct conflict with state regulations and statutes, and because the EEOC’s guidance was expressly intended to preempt state law hiring policies, that should confer Article III standing on the state to defend its laws. This will be an interesting case to watch as the EEOC continues to struggle to gain traction in its push to restrict the use of criminal and credit history in employment decisions. Regardless, it certainly earns a spot on our list of the top 5 intriguing cases of 2014.

3.     EEOC v. Honeywell International, Inc., Case No. 14-CV-4517, 2014 U.S. Dist. LEXIS 157945 (D. Minn. Nov. 6, 2014).

On November 6, 2014, the EEOC lost its bid for a preliminary injunction against Honeywell International, Inc. that would enjoin the company from imposing penalties against employees who refuse to participate in the biometric screening component of the company’s corporate wellness program. The U.S. District Court for the District of Minnesota denied the EEOC’s request for a preliminary injunction because, among other things, the agency had failed to establish that irreparable harm would result if the injunction were not issued.

This case is “intriguing” because it reveals what may become a new focus for the EEOC on these types of wellness programs. Honeywell’s program allowed employees and their families the option of participating in a wellness program that was designed to inform participants about their health status and encourage improvements in some specific health goals. Employees who chose to participate would be subjected to biometric testing, and would receive certain financial incentives, including contributions to their Health Savings Accounts. Those who chose not to participate were subject to financial surcharges. The EEOC alleged that this program violated the Americans with Disabilities Act and the Genetic Information Non-discrimination Act because it discriminated on the basis of disability and the manifestation of disease or disorder in family members. This case will be one to watch as it develops because, as the District Court noted in its decision denying the injunction, there is considerable uncertainty about how the EEOC’s theory will interact with the ADA’s safe harbor provisions and the Affordable Care Act, which encourages employers to adopt these types of programs. You can read more about this interesting new development here.

4.    EEOC v. Sterling Jewelers Inc., 3 F. Supp. 3d 57 (W.D.N.Y. 2014).

On March 10, 2014, Judge Richard J. Arcara of the U.S. District Court for the Western District Of New York adopted Magistrate Judge McCarthy’s January 2, 2014 Report, Recommendation, And Order in EEOC v. Sterling Jewelers dismiss the largest pattern or practice case in the country with prejudice. As we previously discussed here, the Court’s decision was based on the EEOC’s failure to investigate the expansive, nationwide pattern or practice case that it eventually brought. In that case, 19 female employees had filed charges with the EEOC. Those charges were assigned to a single investigator in New York. The EEOC brought suit in September 2008 alleging that Sterling “engaged in unlawful employment practices throughout its stores nationwide.” Sterling challenged, among other things, that the EEOC never investigated the expansive allegations that it put in its complaint.

The Court agreed with Sterling, rejecting the EEOC’s argument that it could not scrutinize the scope of the EEOC’s pre-lawsuit investigation. According to the Court, while courts should not review the sufficiency of the investigation, they could and should make a determination concerning whether an actual investigation occurred, and the scope of that investigation. Because the Court found no evidence that the EEOC investigated its claims on a nationwide basis, it held that the agency had not satisfied its pre-suit obligations. This case is now up for appeal before the Second Circuit.

5.    Tie: EEOC v. CVS Pharmacy, Inc., Case No. 14-CV-863, 2014 U.S. Dist. LEXIS 142937 (N.D. Ill. Oct. 7, 2014) and EEOC v. CollegeAmerica Denver, Inc., Case No. 14-CV-1232, 2014 U.S. Dist. LEXIS 167333 (D. Colo. Dec. 2, 2014).

Our case #5 is actually a duet of related cases filed a country apart. This year, the EEOC asserted a new theory of liability based on language in employers’ separation agreements that the agency believes stands as an impediment to an employee’s right to file charges with the EEOC and participate in its investigations. In EEOC v. CVS Pharmacy, Inc. and EEOC v. CollegeAmerica Denver, Inc., the EEOC brought claims alleging similar theories of discrimination arising out of terminated employees’ separation agreements. You can read more about those decisions here and here. In essence, the EEOC claims that, among other things, the confidentiality and non-disparagement provisions found in those agreements deters the filing of charges and interferes with employees’ ability to communicate voluntarily with the EEOC and other federal and state agencies. This is an entirely new attack on employers’ use of those agreements.

Both of these cases were ultimately decided on issues relating to the EEOC’s failure to conciliate the claims prior to bringing suit, rather than the merits of the allegations regarding separation agreements. So that issue remains a live concern for the EEOC about which there has yet to be a judicial determination. That makes these decisions two of the most interesting of the year. Not so much for what they held, but for what they may portend concerning the future of the EEOC’s focus in 2015 and beyond.

Interesting cases one and all. Once again, it was an exciting year of developments for EEOC-initiated litigation. We expect that 2015 will bring its own share of surprises and intriguing decisions. For additional reading, see our picks for the last few years in our previous blog postings here and here. We look forward to keeping our readers on top of all of these twists and turns in government-initiated litigation. Happy New Year to all of our followers!

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