By Gerald L. Maatman, Jr. and Matthew J. Gagnon

Seyfarth Synopsis: In a cautionary tale for all employers, the Eleventh Circuit recently upheld a jury verdict of intentional discrimination in an EEOC lawsuit when an employer hired a current employee who was facing an imminent lay-off, rather than the charging party. The employer’s policy was to favor internal candidates who were about to be terminated even if they were not the most qualified or “best” candidate for the open position. The Eleventh Circuit held that a reasonable jury could have found that the application of that policy was merely a pretext for discrimination.

In EEOC v. Exel, Inc., No. 14-11007, 2018 U.S. App. LEXIS 6629 (11th Cir. Mar. 16, 2018) (available here), the Eleventh Circuit considered and rejected an employer’s challenge to a jury verdict of liability in an EEOC lawsuit, but rejected the jury’s imposition of punitive damages. At issue was the employer’s policy of favoring current employees whose positions were being eliminated for other jobs within the Company, so those employees would not have to lose their jobs. The Eleventh Circuit upheld a jury verdict that was based on the finding that a Hiring Manager discriminated on the basis of sex even though he was ostensibly following the Company’s policy when he hired a soon-to-be-terminated male employee instead of the female charging party.

Case Background

In EEOC v. Exel, the charging party/intervenor complained that her supervisor had denied her a promotion because of her sex. At issue was how the Company filled vacancies. When a job became available, the Hiring Manager would submit an online job requisition for the vacancy. The HR department would then post the job and locate interested candidates from within and outside the Company. Internal applicants could apply on the Company’s website, like external candidates, or they could complete an internal application. HR would consider all candidates together and then forward the best candidates to the Hiring Manger.

However, the Company had a different procedure for considering current employees who were facing termination. The Company’s priority transfer practice (“PTP”) was designed to save employees who worked at a site that was about to undergo a workforce reduction from losing their jobs. Employees applying through the PTP process were given priority over other internal and external candidates as long as they met the minimum qualifications for the job, whether or not they were considered the “best” applicant for the position.

The charging party was passed over for promotion to a supervisory position in favor of an employee who was applying through the PTP process. The EEOC argued that the PTP process was merely a pretext for sex discrimination. It alleged that the Hiring Manager had informed the charging party “behind closed doors” that he would never make a woman a manager. It also alleged that he treated women differently than men and was more “stand-offish” with women.

A jury found in favor of the EEOC and awarded the charging party back pay, compensatory damages, and punitive damages. After trial, the employer filed a renewed motion for judgment as a matter of law with respect to liability and the imposition of punitive damages. The district court denied the motion with respect to liability, but vacated the punitive damages award. The EEOC appealed the vacatur to the Eleventh Circuit. The employer also cross-appealed the denial of its motion as to liability.

Eleventh Circuit Issues Split Decision On Question Of Liability

The Eleventh Circuit refused to overturn the jury’s verdict against the employer on the issue of liability. It was persuaded that a reasonable juror could have found against the employer because the jury heard evidence that: (1) the Hiring Manger had the discretion to hire the charging party despite being presented with a PTP candidate; and (2) the evidence showed that the Hiring Manager harbored a bias against women. Based on that evidence, the Eleventh Circuit held that a reasonable jury could have concluded that the Hiring Manager maintained discretion over his own hiring decisions regardless of the PTP process, and that he exercised that discretion in conformity with his discriminatory animus.

In a lengthy dissent, Judge Tjoflat vigorously disagreed with the majority’s conclusion. According to Judge Tjoflat, no reasonable juror could find that sex discrimination motivated the promotion decision at issue because there was insufficient evidence tying the decision-maker’s generalized discriminatory behavior to the specific employment decision at issue.

He agreed with the majority that the EEOC had presented sufficient evidence that would allow a reasonable factfinder to conclude that the Hiring Manager harbored discriminatory animus towards women. However, the dissent opined that there was not sufficient evidence to demonstrate that the Hiring Manager had any chance to put his alleged bias into action because the evidence demonstrated that he was simply following the PTP process when he hired a man for the open supervisory position instead of the charging party.

No Punitive Damages

With respect to punitive damages, the Eleventh Circuit noted that Title VII allows for the recovery of punitive damages only if an employer engaged in a discriminatory practice “with malice or with reckless indifference to the federally protected rights of an aggrieved individual.” Id. at *9 (quoting 42 U.S.C. § 1981a(b)(1)). That standard focuses on the decision-maker’s state of mind; however, the EEOC must also impute liability for the punitive damages to the employer.

Under prior Eleventh Circuit precedent, liability is imputable to an employer by showing either that the discriminating employee was high up in the corporate hierarchy, or that higher management countenanced or approved of the behavior. Id. at *10 (quoting Dudley v. Wal-Mart Stores, Inc., 166 F.3d 1317, 1323 (11th Cir. 1999)). However, the Supreme Court later held that punitive damages are imputable to an employer when the discriminatory actor was acting within the scope of employment and acting in a managerial capacity. See Kolstad v. Am. Dental Ass’n, 527 U.S. 526, 535 (1999). The Eleventh Circuit held that it was bound to apply its prior precedent because its subsequent decisions had continued to apply Dudley’s “higher management” standard even after Kolstad was decided. The Eleventh Circuit found that it was bound to apply that precedent unless and until it is overruled or squarely abrogated by the Supreme Court or the Eleventh Circuit sitting en banc.

Applying that standard, the Eleventh Circuit affirmed the district court’s decision vacating the award of punitive damages because the EEOC had failed to present evidence that the Hiring Manager (who was also a General Manager) was high enough in the corporate hierarchy. He was one of 329 other General Managers, and he oversaw only 25 employees. The EEOC had also failed to present evidence that any employee above the actor’s rank were aware of the discriminatory decision.

Implications For Employers

One point that was significant for the majority’s decision on liability was that the PTP process was not rigorously followed in all of its details when the discriminatory decision was made. Among other things, the Hiring Manager identified the wrong position when he submitted a requisition for the open position to Corporate HR. This opened the door for the EEOC to argue that the PTP process was merely a pretext for the decision, which the Hiring Manager had used as cover for the discriminatory animus that was really motivating his decision. According to the EEOC, the Hiring Manager requisitioned the wrong position as a means of ensuring that the charging party would not apply for the open position.

One lesson for employers to take away from this case is that any policy that favors one candidate over another is potentially problematic, even where the intentions behind the policy are to protect current employees from layoffs. Employers should take care to ensure that such policies are rigorously applied. Any deviations from that policy could later be called into question and even used against the employer as evidence that the application of that policy in that instance was merely a pretext for discrimination.

By Gerald L. Maatman, Jr. and Andrew Scroggins

Seyfarth Synopsis: The chief legal officer of the EEOC is an important post, and one which impacts all employers interacting with the Commission. Nearly 14 months after the start of his Administration, President Trump has finally announced his choice for General Counsel of the EEOC.

On the evening of March 19, 2019, the White House announced it will nominate Sharon Fast Gustafson to fill the position of General Counsel at the EEOC. The announcement was a long-time coming, as James Lee had been serving as Acting General Counsel since 2016, after former EEOC David Lopez resigned.

Ms. Gustafson has been an employment lawyer for more than 25 years, almost all of it as a sole practitioner focused on Virginia, Maryland, and the District of Columbia (from 1995-present).  In her practice, she represents primarily employees, though she does represent employers as well.  As noted on her firm’s website, she is a member of the National Employment Lawyers Association (NELA), an organization that holds itself out as advancing employee rights.

Ms. Gustafson’s most high-profile litigation matter is her representation of the plaintiff in Young v. UPS, a pregnancy discrimination case decided by the U.S. Supreme Court in 2015.  In that case, the plaintiff argued that her employer should have provided an accommodation when her physician limited her to light duty work during her pregnancy.  The Supreme Court declined to follow the EEOC’s Enforcement Guidance for Pregnancy Discrimination and Related Issues. However, the plaintiff obtained an employee-friendly decision that employers should provide the same reasonable accommodations to pregnant employees as are offered to employees with disabilities.

In addition to her employment practice, Ms. Gustafson has devoted a significant portion of her practice to adoption law and has been recognized as a Fellow of the American Academy of Adoption Attorneys since 1997.  Her other affiliations include membership in the Federalist Society, Federal Bar Association, and Metropolitan Washington Employment Lawyers Association.  Ms. Gustafson also is a member of the Board of Trustees for Gordon Conwell Theological Seminary.

Ms. Gustafson is married to David Gustafson, a judge on the United States Tax Court in Washington, D.C. who was appointed by President George W. Bush.  The Gustafsons met as undergraduates at Bob Jones University, before she attended Georgetown University Law Center.

To the extent employers had expected the President to announce the appointment of a management-side defense lawyer as the next General Counsel of the EEOC, this announcement is sure to prompt discussion amongst the employer community.

Ms. Gustafson’s nomination continues the Trump administration’s trend of somewhat non-traditional appointment announcements related to the EEOC.  In June 2017, the administration nominated Janet Dhillon, a lawyer working in-house as Executive Vice President, General Counsel, and Corporate Secretary of Burlington Stores, Inc. to serve as Chair.  (The Senate has taken no action on Ms. Dhillon’s confirmation since October 2017; in the meantime, Vicki Lipnic continues to serve as Acting Chair.)  In December 2017, the President nominated Obama-appointee Chai Feldblum to be reappointed as a Commissioner, for a term expiring in 2023, an announcement subsequently criticized by many conservative Republicans.  (The Senate has taken no action on Ms. Feldblum either.)

Like Ms. Dhillon and Ms. Feldblum, Ms. Gustafson must await confirmation by the Senate.  There currently is no timetable for the Senate to take up these issues.

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

Seyfarth Synopsis: Over the past few weeks, two federal appellate courts have issued major decisions on the scope of workplace discrimination protections covered under Title VII of the Civil Rights Act of 1964 (“Title VII”).  In addition to creating a conflict between various past appellate court precedents, these decisions highlight an ideological divide between two major federal government agencies.  In this video blog, Associate Alex Karasik and Partner Jerry Maatman of Seyfarth Shaw discuss the importance of these decisions, and what employers can expect to see in the evolving debate over Title VII protections.

On February 26, 2018, the U.S. Court of Appeal for the Second Circuit issued an impactful decision in Zarda, et al. v. Altitude Express, d/b/a Skydive Long Island, et al., No. 15-3775 (2d Cir. Feb. 26, 2018), which fueled the debate over protections for sexual orientation under Title VII. The Second Circuit ruled in favor of a (now-deceased) skydiving instructor who claimed to be fired because he was gay, therefore ruling that sexual orientation is a protected category under Title VII.

Then, just last week, the U.S. Equal Employment Opportunity Commission (“EEOC”) notched a major win when the Sixth Circuit sided with the Commission’s position in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., Nos. 16-2424 & 2018 (6th Cir. Mar. 7, 2018).  We previously blogged about this decision here.  This case considered a transgender worker.

These recent appellate court decisions have agreed with the EEOC’s position on the definition of sex discrimination under Title VII.  However, there is also significant opposition to this position – namely by the U.S. Department of Justice (“DOJ”).  In the Zarda case mentioned above, the EEOC and DOJ both submitted amicus briefs, taking completely opposite sides on this issue.  Additionally, the 11th Circuit issued a decision in March of 2017 entitled Evans v. Georgia Reg’l Hosp., No. 15-15234 (11th Cir. Mar. 10, 2017), which sided with the DOJ and a more strict interpretation of the workplace discrimination laws at hand.

In today’s video, Jerry and Alex discuss this controversial topic in detail, and provide their own insights on the matter.  As Jerry states in the video, what this issue looks to be driving towards is, “a showdown in the U.S. Supreme Court, or the halls of Congress, over the scope and parameters over the protections of Title VII.”

By Scott Rabe, Gerald L. Maatman, Jr., and Marlin Duro

Seyfarth Synopsis: In its recent decision in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., No. 16-2424, 2018 U.S. App. LEXIS 5720 (6th Cir. Mar. 7, 2018), the U.S. Court of Appeal for the Sixth Circuit has sent the strong message that the Religious Freedom Restoration Act (“RFRA”) has minimal impact on the Equal Employment Opportunity Commission’s (“EEOC”) authority to enforce the anti-discrimination laws under Title VII of the Civil Rights Act of 1964 (“Title VII”).  The ruling is a big win for the EEOC.

In EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., a Sixth Circuit panel held in a unanimous decision that: (i) Title VII’s proscription of discrimination on the basis of sex encompasses a prohibition on discrimination based on transgender status, and that (ii) in this case the RFRA would not limit the EEOC’s authority to enforce anti-discrimination laws under Title VII.  With this decision, the Sixth Circuit became the first federal Court of Appeals to address the extent to which the RFRA may limit the EEOC’s power to enforce Title VII.[1]

Case Background

By way of background, the EEOC brought suit against a funeral home on behalf of a transgender employee, Aimee Stephens, who was terminated from her employment shortly after informing her employer that she intended to transition from male to female.  The EEOC alleged the funeral home violated Title VII by terminating Stephens’ employment on the basis of her transgender or transitioning status and her refusal to conform to sex-based stereotypes.  The funeral home argued that Title VII did not prohibit discrimination on the basis of transgender status and that the funeral home was protected from enforcement of Title VII by the  RFRA as the government action would constitute an unjustified substantial burden upon the funeral home owner’s exercise of his sincerely held religious beliefs.

Both parties moved for summary judgment and the district court found in favor of the funeral home on both motions  The district court found that Title VII did not protect against discrimination based on transgender status and that, while Stephens had suffered discrimination based on sex stereotyping, the RFRA prevented the EEOC from suing on her behalf.

The Sixth Circuit Appeal

On the EEOC’s appeal, the Sixth Circuit reversed the district court with respect to both motions and  granted summary judgment in favor of the EEOC. First, the Sixth Circuit held that the funeral home’s conduct violated Title VII, reinforcing its prior holdings that discrimination against employees because of their gender identity and transgender status are illegal under Title VII’s prohibition of sex discrimination based on sex stereotyping.  The Sixth Circuit explained that “discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex” and found that firing a person because he or she will no longer represent him or herself as the gender that he or she was born with “falls squarely within the ambit of sex-based discrimination” forbidden under Title VII.  Id. at *18.

Second, the Sixth Circuit held that the EEOC’s enforcement of Title VII against the funeral home did not violate the funeral home’s rights under the RFRA.  A viable defense based on the RFRA requires a demonstration that the government action at issue would substantially burden a sincerely held religious exercise.  Although the Sixth Circuit treated the running of the funeral home as a sincere religious exercise by the owner, it held that the alleged burden caused by the enforcement of Title VII was not “substantial” within the meaning of RFRA.  The Sixth Circuit reasoned that tolerating an employee’s understanding of his or her sex and gender identity was not “tantamount to supporting it” and that mere compliance with Title VII, “without actually assisting or facilitating transition efforts,” did not amount to an endorsement by the employer of the employee’s views.  Id. at *59, *61.  Nor, the Sixth Circuit explained, could the funeral home rely on customers’ “presumed biases” against transgender individuals to meet the substantial burden test. Accordingly, the Sixth Circuit held that the funeral home had not demonstrated a substantial burden on the its religious exercise.

While the Sixth Circuit could have ended its analysis there, it went on to hold that even if tolerating Stephens’ gender identity and transitioning status were a “substantial burden” on the funeral home’s religious exercise, the EEOC did not violate the RFRA because the agency had a compelling interest in eradicating all forms of invidious employment discrimination, and enforcement of Title VII through its enforcement function was the least restrictive means for eradicating discrimination in the workforce.  This analysis, if found not to apply only to the facts of this case, could ostensibly doom any defense to a Title VII action within the Sixth Circuit where an employer raises a defense based on the RFRA.

Implications For Employers

The Sixth Circuit’s opinion is an important one, as it addresses two of the more hot button topics in employment jurisprudence:  the scope of the definition of “sex discrimination” under Title VII and the impact of laws protecting the free exercise of religion in the workplace.  On the former, this opinion joins the recent trend in decisions finding that gender identity is inextricably linked with sex and therefore is protected under Title VII.  And on the latter, the Sixth Circuit has laid down a gauntlet as the first federal circuit addressing the RFRA’s impact on the EEOC’s Title VII enforcement power.  The decision is clearly intended to send a strong message that the RFRA has limited application, if any, in defense of a Title VII action brought by the Commission.  While time will tell whether other federal circuits will adopt a similar interpretation, if the Sixth Circuit’s legal rationale is followed, employers will be hard-pressed to defend Title VII claims brought by the EEOC based on the alleged exercise of religious freedom.

In light of the current uncertainty regarding the ultimate interpretation of Title VII as it applies to gender identity, employers should regularly review their policies to ensure that adequate protections are provided to employees on the basis of their gender identity, and transgender and transitioning status.  As always, we also invite employers to reach out to their Seyfarth contact for solutions and recommendations regarding anti-harassment and EEO policies and addressing compliance with LGBTQ+ issues in the law.

[1]              The RFRA, enacted in 1993, prohibits the government from enforcing a law that is religiously neutral against an individual, if the natural law “substantially burdens” the individual’s religious exercise and is not the least restrictive way to further a compelling government interest.  Importantly, the RFRA applies only in the context of government action, and therefore would not provide a defense for an employer in a civil suit brought by a private plaintiff.

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

Seyfarth Synopsis:  In a showdown between the State of Texas and the EEOC – whereby Texas alleged that the EEOC’s “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII” interfered with its authority to limit the hiring of felons – a federal district court in Texas recently granted the EEOC’s motion for summary judgment, and denied in part Texas’s motion for summary judgment and request for declaratory relief.

This decision signals to employers that the Commission’s position on the unlawful nature of categorical bans on the hiring of felons remains viable.

***

Case Background

In State of Texas v. EEOC, No. 5:13CV-255, 2017 U.S. Dist. LEXIS 30558 (N.D. Tex. Feb. 1, 2018) (which we previously blogged about here), Texas argued that the EEOC’s Guidance directly interfered with its authority to impose categorical bans on hiring felons and to be able to discretionarily reject felons for certain jobs.  Id. at *1.  In its Second Amended Complaint, Texas brought two causes of action.  The first cause of action, brought under the Declaratory Judgment Act, sought a declaration that Texas has a right to maintain and enforce its laws and policies that absolutely bar convicted felons (or certain categories of convicted felons) from serving in any job the State and its Legislature deem appropriate; and (2) an injunction preventing the EEOC and the U.S. Attorney General from enforcing the interpretation of Title VII that appears in the Guidance, and from issuing right-to-sue letters.  Id. at *2.  The second cause of action, brought under the Administrative Procedures Act, asked the Court to hold the Guidance unlawful and to set it aside as (1) a substantive rule issued without notice and opportunity for comment; (2) outside the statutory scope given to the EEOC; and (3) an unreasonable interpretation of Title VII. Id.

The EEOC argued that the Guidance had not yet been enforced against Texas, and therefore, the issue was not ripe for adjudication.  Id.  Further, the EEOC asserted that the only purpose of the Guidance was to update and consolidate all of the EEOC’s prior policy statements about Title VII and the use of criminal records in employment decisions.  The EEOC additionally contended that the Guidance was not an expansion of Title VII’s prohibition against hiring policies that create a disparate impact upon protected classes (in this instance, certain racial classes are alleged to be disproportionately impacted by consideration of felony convictions as a ban for employment opportunities).

The District Court’s Decision

The Court granted the EEOC’s motion for summary judgment, and denied in part Texas’s motion for summary judgment and request for declaratory relief.  First, the Court opined that Texas did not have a right to maintain and enforce its laws and policies that absolutely bar convicted felons (or certain categories of convicted felons) from serving in any job that the State and its Legislature deemed appropriate.  Id. at *3.  The Court explained that although there were many categories of employment for which specific prior criminal history profiles of applicants would be a poor fit and pose far too great a risk to the interests of the State and its citizens, there were also many conceivable scenarios where otherwise qualified applicants with felony convictions would pose no objectively reasonable risk.  Accordingly, the Court held that “a categorical denial of employment opportunities to all job applicants convicted of a prior felony paints with too broad a brush and denies meaningful opportunities of employment to many who could benefit greatly from such employment in certain positions.” Id.

Further, the Court addressed Texas’s request that it enjoin the EEOC from issuing right-to-sue letters in relation to the denial of employment opportunities based on the criminal history of the job applicant.  The Court rejected this request, holding the issuance of a right to sue letter was not a determination by the EEOC that a meritorious claim exists. However, the Court did grant Texas’s motion for summary judgment as to its APA claim, noting the Guidance was a substantive rule issued without notice and the opportunity for comment. The Court thus enjoined the EEOC from enforcing the guidance until the notice and comment requirements were satisfied. Accordingly, the Court granted the EEOC’s motion for summary judgment, and denied in part Texas’s motion for summary judgment and request for declaratory relief. Id. at *3-4.

Implications For Employers

This decision has a heavy dose of procedure, but assuming the District Court’s decision remains in place, it nonetheless puts employers on notice that courts will likely give strong deference to the EEOC’s Guidance when considering categorical bans regarding the hiring of felons.  Further, the EEOC will likely use the momentum it gained from this ruling to continue enforcement of its Guidance in an aggressive fashion and investigate businesses with such sweeping hiring practices.

While employers in certain industries may have legitimate reasons for not hiring particular felons (for instance, a bank refusing to hire a felon convicted of embezzlement), businesses need to be cautious about implementing blanket hiring prohibitions of felons.  Accordingly, the best practice for employers is to focus on the qualifications of applicants, and make hiring decisions based on merit.

 

 

By Gerald L. Maatman, Jr., Christopher J. DeGroff, Matthew J. Gagnon, & Kyla Miller

Seyfarth Synopsis: This month the EEOC released its 2018-2022 strategic plan, which focuses on preventing and combating discrimination and improving the EEOC’s organizational functionality. It also released the agency’s 2019 budget request, which mirrors its $363 million dollar request from last year.

Strategic Plan: FY 2018-2022

On February 12, 2018, the EEOC approved its Strategic Plan for fiscal years 2018-2022 (available here). The EEOC is required to publish a strategic plan, which serves as a framework for the EEOC in implementing its mission to combat employment discrimination. The Strategic Plan is not to be confused with the Strategic Enforcement Plan. We like to think of the Strategic Enforcement Plan as the “what,” and the Strategic Plan as the “how.” The Strategic Enforcement plan, discussed more fully here, explains what priorities the EEOC will focus on. More generally, the Strategic Plan lays out the high level overview of how the agency is going to achieve those objectives. The 2018-2022 strategic plan includes three general objectives:

  1. Combat and prevent employment discrimination through the strategic application of the EEOC’s law enforcement authorities.

The EEOC has outlined two outcome goals of this strategic objective. First, the EEOC aims to stop and remedy discriminatory employment practices and provide meaningful relief to victims. Second, the EEOC would like to exercise its enforcement authority fairly, efficiently, and based on the circumstances of each charge or complaint.

  1. Prevent employment discrimination through education and outreach.

This objective reflects the EEOC’s interest in deterring employment discrimination before it occurs. The primary means to this goal includes investigations, conciliations, and litigation. The EEOC’s two goals for this strategic objective include helping members of the public understand the law and their rights, and for employers, unions, and employment agencies to prevent discrimination and address EEO issues when they occur.

  1. Management objective.

This objective is focused on the EEOC “achieving organizational excellence,” which includes improving management functions with a focus on information technology, infrastructure enhancement, and accountable financial stewardship. The EEOC pledged accountability for improving its operations where needed. The two outcome goals for this objective include having staff that exemplify a culture of excellence, respect and accountability, and allocating resources effectively to ensure they line up with their stated priorities.

FY 2019 Budget Request

With its new strategic plan also comes a new budget request (available here). The EEOC is requesting $363,807,086 for fiscal year 2019, which includes $29,443,921 for state and local fair employment practice agencies (FEPAs) and tribal employment rights organizations (TEROs).

The EEOC urges congressional support, citing its commitment to building a digital workplace to increase their efficiency and provide timely service to the public. The agency also states a need for more staff and resources to deliver high quality service. The EEOC says that it intends to maintain its staffing levels in order to further reduce the charge backlog. The funding is also anticipated to cover “rents and mandatory office relocations.”

This request is  $1.783 million over the fiscal year 2018 Continuing Resolution level, but is the exact same budget request it made for fiscal year 2018. This year’s budget goals include: (1) investing in the “agency of the future”; (2) managing the inventory and reducing backlog; (3) improving and leveraging technology; and (4) outreach, education, and strategic law enforcement. Time will tell if the EEOC’s budget request will be approved, and whether it will use that money wisely.

Implications For Employers

As anyone who is paying attention to the news knows, the future direction of the budget for many federal agencies is a bit uncertain. For example, President Trump’s recently released budget proposes huge cuts for a different federal agency — the Consumer Financial Protection Bureau. This makes the relative stability of the EEOC’s budget request somewhat remarkable. Whether it can continue to fly under the radar of federal budget cutting remains to be seen. In the meantime, employers should keep in mind that the EEOC managed to file an impressive number of lawsuits last year while operating under pretty much the same budgetary constraints that are proposed for fiscal year 2019.

Seyfarth Synopsis:  Our latest blog gave readers a detailed breakdown of a busy year on the litigation front at the U.S. Equal Employment Opportunity Commission (“EEOC”) and Department of Labor (“DOL”).  Notably, our 2018 Workplace Class Action Report highlighted a doubling in EEOC-initiated lawsuits despite the incorporation of a pro-business Trump Administration.  In today’s blog, author Jerry Maatman explains this important trend, and provides his analysis on the direction of government-initiated litigation in 2018.  Watch the video in the link below!

By: Gerald L. Maatman, Jr., Christopher J. DeGroff, Matthew J. Gagnon, and Kyla Miller

Seyfarth Synopsis: We are once again pleased to offer our loyal blog readers a breakdown of the five most intriguing developments in EEOC litigation in 2017, in addition to a pre-publication preview of our annual report on developments and trends in EEOC-initiated litigation. This year’s book, titled EEOC-Initiated Litigation: FY 2017, provides a comprehensive examination of the EEOC’s FY 2017 filings (from October 2016 through September 2017), and the major decisions handed down this year in pending EEOC litigation.

In our view, every employer should be monitoring EEOC activity – it is the surest way to avoid becoming the EEOC’s next target. That is why we conduct a thorough analysis of all EEOC activity every year to keep our readers up to date on current trends and, hopefully, provide a peek inside the EEOC’s decision-making process. Our annual report is targeted towards HR professionals, corporate counsel, and other corporate decision-makers. We hope that it proves useful as they attempt to steer clear of EEOC-initiated litigation in FY 2018.

This year, we have once again categorized our analysis of substantive developments in line with the EEOC’s strategic priorities. This year is the first year of the EEOC’s new Strategic Enforcement Plan, which covers Fiscal Year 2017 through 2021. The new SEP advances the same six strategic priorities as the previous strategic plan. It has been our experience that analyzing developments in EEOC litigation in light of the SEP priorities provides a better understanding of the EEOC’s focus and agenda.

The full publication will be offered for download as an eBook. To order a copy, please click here.

As always, we like to take a moment at the end of one year, and the beginning of the next, to look back at the most intriguing decisions and developments of the year.

Here is our list of the “top five” most intriguing developments of 2017.

A Year Of Transition: Litigation On Track Despite Changes On The Way

FY 2017 was a year of transition for the EEOC. It is still too early to tell how the changed political landscape will impact the future of EEOC litigation given the important positions that remain vacant for high-level agency personnel. But this did not stop the EEOC from charging full speed ahead. Total merits filings were up more than 100% over FY 2016. In fact, the EEOC filed more lawsuits in September than it did in all of FY 2016 combined. Although the 2017-2021 Strategic Enforcement Plan maintains its focus on the same six strategic enforcement priorities, it added two substantive areas as emerging issues, including complex employment relationships and “backlash discrimination” against Muslims, Sikhs, and other persons of Arab, Middle Eastern, or South Asian descent. Those are important issues to watch in FY 2018 and beyond. Our analysis of these issues can be found here.

A New Standard Of Review For EEOC Subpoena Enforcement Actions

In McLane Co. v. EEOC, the U.S. Supreme Court clarified the scope of review for appellate courts reviewing a lower court’s decision to enforce (or not) an EEOC administrative subpoena. In McLane, the Supreme Court held that such decisions are reviewable under the abuse-of-discretion standard, which is more akin to a hands-off type of review. The decision clarified that the District Courts should subject EEOC subpoenas to a searching, fact-intensive review, and that their judgment in this respect should be respected by the appellate courts. Although ostensibly a win for the EEOC, the decision makes it clear that the District Court cannot simply presume the relevance of information or documents the EEOC seeks with its administrative subpoenas. Instead, a District Court must give serious consideration to issues of relevancy and burden when deciding whether or not to enforce an EEOC subpoena. Our analysis of this trend can be found here.

Developments In Religious Discrimination Law: Accommodations May Be Required For Wide Swath Of Beliefs

In EEOC v. Consol Energy, Inc., the Fourth Circuit expanded the scope of religious accommodation requests employers must consider. In Consol, the EEOC alleged that the defendants refused to provide an employee with a religious accommodation by subjecting him to a biometric hand scanner to clock in and out of work. The employee believed a hand scanner was used to identify and collect personal information that would be used by the Christian Anti-Christ to identify followers with the “mark of the beast,” as described in the New Testament Book of Revelation. The Fourth Circuit affirmed the judgment of the District Court against the employer, finding that a religious accommodation was necessary. Our discussion of this development can be found here.

Sexual Harassment In The Workplace: Focus on “Manager”

Given all the recent news about sexual harassment in the workplace, and the fast developing #MeToo movement, we suspect that the EEOC is already preparing for an uptick in sexual harassment complaints in FY 2018. But recent decisions show that not all complaints alleging sexual harassment are a slam dunk for employees. In EEOC v. Autozone, Inc., the Sixth Circuit affirmed a U.S. District Court’s grant of an employer’s motion for summary judgment after finding that the harassing managerial employee was not a “supervisor” under Title VII. The employer was thus not liable for the employee’s actions. The Sixth Circuit held that just because someone is titled a “manager” does not necessarily mean that they are “supervisors” under Title VII. They must have the authority to take an employment action against the complaining employee. A further discussion on this development can be found here. We expect decisions in FY 2018 will dramatically reshape the landscape of harassment law, with the EEOC leading the way.

EEOC’s Penchant For Expanding Pattern Or Practice Cases

In FY 2017, the EEOC continued to try to expand its powers to prosecute large-scale pattern or practice cases. In EEOC v. Bass Pro Outdoor World, LLC, a District Court in Texas was willing to reign it in. In that case, the EEOC attempted to add claims on behalf of individuals who had not yet applied to work for Bass Pro at the time the EEOC tried to conciliate its claims against Bass Pro. Title VII requires the EEOC to attempt to resolve charges of discrimination against an employer through means of conciliation before it seeks redress in the courts. In this case, the District Court was unwilling to allow the EEOC to add claimants on behalf of whom it could not have conciliated prior to bringing its lawsuit. A closer look at this development can be found here.

Although we are almost a full year into the Trump Administration and Republican control of Congress, it is still unclear what those political developments will mean for the future of EEOC litigation. The enforcement priorities are the same as the past four years. But how the EEOC chooses to interpret those priorities will undoubtedly change as high-level positions are filled by the Trump Administration. This makes FY 2018 a year of uncertainty as we await those changes in EEOC leadership. We look forward to keeping our readers apprised of these changes as they occur!

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

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

Seyfarth Synopsis:  In an ADEA action brought by the EEOC alleging that the New Mexico Department of Corrections failed to promote correctional officers over the age of 40, a federal district court in New Mexico denied the employer’s motion to dismiss but ordered the EEOC to file a supplemental pleading identifying previously unnamed aggrieved parties.

For employers facing EEOC age discrimination claims, this ruling provides insight into how to attack allegations relative to unidentified aggrieved individuals and to flush out the true size and scope of an EEOC systemic lawsuit.

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In EEOC v. State of New Mexico, Dep’t of Corrections, No. 15-CV-879, 2017 U.S. Dist. LEXIS 198770 (D.N.Mex. Dec. 4, 2017), the EEOC alleged that from January 2009 to at least December 2014, the New Mexico Department of Corrections (“NMDC”) denied employment opportunities to three specific workers and a group of unidentified aggrieved individuals aged 40 and over on the basis of their age.  The NMDC moved to dismiss with respect to the unidentified aggrieved individuals, arguing those claims were insufficiently plead, and further, that the EEOC failed to provide sufficient notice about any additional aggrieved individuals during the pre-filing conciliation period. 

The EEOC moved to convert the motion to dismiss to a motion for summary judgment after the NMDC attached to its motion exhibits relating to the EEOC’s investigation and conciliation.  Judge Kenneth J. Gonzales of the U.S. District Court for the District of New Mexico denied both motions, but  ordered the EEOC to file a supplemental pleading listing the names of each aggrieved party.

Employers can use this decision in ADEA litigation to argue that the EEOC should identify any unnamed aggrieved individuals at the outset of litigation. In this respect, it is a key ruling for employers.

Case Background

The EEOC alleged that the NMDC failed to promote three correctional officers to various positions at the Central New Mexico Correctional Facility because they were over the age of 40.  The former warden allegedly told the officers that “while [two Claimants] were qualified for the [position], he selected a 31-year-old candidate because he was looking for someone with ‘longevity.’”  Id. at *2.  The EEOC also alleged that the warden: (1) made many of the decisions to deny employment opportunities to older workers; (2) used ageist comments about longevity, preferring younger workers, and not promoting employees near retirement; and (3) instilled a culture of age discrimination that continued to be applied by the NMDC.  As such, the EEOC sought an injunction requiring policy changes and money damages for any individual adversely impacted by the discrimination.

Arguing that the EEOC failed to provide sufficient notice about any additional aggrieved individuals during the pre-filing conciliation period, the NMDC moved to dismiss the amended complaint.  In support of its motion, NMDC sought to offer several exhibits, including: (1) requests for information propounded on the NMDC by the EEOC; (2) the EEOC’s letter to the NMDC’s employees soliciting information or claims; and (3) letters and e-mails between the parties relating to EEOC’s efforts at conference, conciliation, and investigation.  Id. at *5.  The EEOC argued that if the Court was willing to entertain evidence regarding pre-filing communications, then the motion to dismiss should be converted to a motion for summary judgment.  Id. at *3.

The Court’s Decision

The Court denied the NMDC’s motion to dismiss, denied the EEOC’s motion to convert the convert the motion to dismiss to a motion for summary judgment, and ordered the EEOC to file a supplemental pleading listing the names of each aggrieved party involved in this lawsuit.  First, the Court addressed the NMDC’s argument that the exhibits were “implicitly referenced” in the EEOC’s allegations regarding its pre-filing investigation.  Id. at *5.  The Court rejected this argument, opining that “implicit, subtle, or passing references to extraneous evidence” did not justify their inclusion.  Id.  As such, the Court excluded the NMDC’s exhibits, and therefore denied the EEOC’s motion to convert.

Second, the Court addressed the NMDC’s argument that the Court should consider the lack of actual pre-litigation notice as part of the notice pleading inquiry, including its knowledge about the potential number of claimants, facilities, and wrongdoers.  Id. at *6.  According to the NMDC, any potential recovery should be limited to the claimants the EEOC actually knew about when conciliation concluded in September of 2013.  The Court held that it would allow the parties to amend their pending summary judgment motions to supplement any evidence and arguments regarding actual pre-litigation notice and timeliness, but that “a motion to dismiss typically is not the correct vehicle for determining whether a claim is barred based on when it arises.”  Id. at *7.

Third, the Court addressed the NMDC’s argument that the EEOC failed to meet the pleading standards defined in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).  The Court opined that there is no binding case law addressing how much information the EEOC’s complaint must provide about unidentified parties.  Id. at *9.  Further, it instructed that courts are more permissive about the class-type allegations where the complaint is very specific about the charging parties.  Id. at *10 (citations omitted).  Applying these principles, the Court held that the complaint stated a plausible claim for relief on behalf of the unidentified aggrieved individuals since it described the types of discrimination at issue (age); the group of workers (NMDC workers over the age of 40); and the duration of the discriminatory conduct (since 2009 and ongoing).  Id.  Accordingly, the Court denied the NMDC’s motion to dismiss.

Finally, at oral argument, the EEOC offered to file an amended complaint to satisfy the party plaintiff rule, if the Court found it applied.  Id. at *12.  Instructing that the ADEA incorporated the requirements of 29 U.S.C. § 216(c), the Court ordered the EEOC to identify each aggrieved individual in the record by filing a supplemental pleading.  Id. at *11-12.  The Court also permitted the NMDC the option to file a response, but advised that the Court would prefer to address additional substantive arguments through the summary judgment proceedings.  Accordingly, the Court denied the NMDC’s motion to dismiss, denied the EEOC’s motion to convert the convert the motion to dismiss to a motion for summary judgment, and ordered the EEOC to file a supplemental pleading listing the names of each allegedly aggrieved worker on whose behalf the EEOC sought recovery.

Implications For Employers

In its Strategic Enforcement Plan for Fiscal Years 2017-2021, the EEOC identified eliminating barriers in recruitment and hiring as one of its six priorities (as we blogged about here).  One of the prime areas where the EEOC has been targeting employers involves age discrimination.  This litigation should put employers on notice that promotional and hiring decisions will be closely scrutinized by the EEOC.

Further, although the Court did not reach the issue of whether the EEOC fulfilled its conciliation obligations with respect to the unnamed group of allegedly aggrieved individuals, this employer’s attack of the EEOC’s failure to fulfill its pre-suit obligations under Title VII resulted in the Court ordering the Commission to file a supplemental pleading identifying such individuals.  Although the employer’s motion to dismiss was denied, employers can cite to this ruling in ADEA litigation when arguing that the EEOC should “put its cards on the table” and disclose who exactly is part of the lawsuit.

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

 

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

Seyfarth Synopsis:  In an ADA action alleging that a maker of train components discriminated against a group of applicants by regarding them as disabled, a federal district court in Illinois granted the EEOC’s partial motion for summary judgment, holding that the company’s decision to deny them work was based on improper tests concerning prospective injuries.

Employers should keep this ruling on their radar when considering medical testing in the job application process.

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In EEOC v. Amsted Rail Co., No. 3:14-CV-1292, 2017 U.S. Dist. LEXIS 189713 (S.D. Ill. Nov. 16, 2017), Amsted made conditional job offers to thirty-nine applicants (the “Claimants”) for chipper positions, but placed them on medical hold because of abnormal results from a nerve conduction test (“NCT”).  Id. at *2-6.  The EEOC argued that Amsted violated the ADA by not hiring the Claimants on the basis of disability in regards to job application procedures and hiring.  Id. at *7-8.  Amsted justified its refusal to hire the Claimants by asserting there was a higher risk of developing carpal tunnel syndrome (“CTS”) for those with abnormal NCT results.  After both parties cross-moved for summary judgment, Judge J. Phil Gilbert of the U.S. District Court for the Southern District of Illinois granted in part the EEOC’s motion for partial summary judgment, holding that the NCT did not indicate the Claimants’ contemporaneous inability to perform the chipper job, but only a prospective, future threat to their health if they were to perform the job. 

This ruling illustrates that employers must be careful not to make hiring decisions based on the potential of future medical injuries.

Case Background

Amsted employs “chippers” to finish the surfaces of the steel side frames for railcar components.  Id. at *3.  Chippers use pneumatically powered tools, such as 12-pound sledgehammers, to perform their jobs.  The work requires intensive use of the hands and arms, and includes exposure to vibrations.  In 2010 and 2011, during a hiring surge, Amsted offered employment to applicants who had the necessary skills and experience, but the offers were contingent on their passing a medical examination and other tests.  Id.  The medical examination aimed, in part, to determine applicants who were at higher risk of developing CTS, one of the risks of jobs that require intensive use of the hands and exposure to vibrations.  Amsted contracted with an outside medical company to conduct on-site medical exams, which included a medical history questionnaire, measuring vital signs, vision and hearing assessments, a physical examination, and an NCT.

Applicants whose NCT was “abnormal” were put on “medical hold pending further data” regardless of any other information obtained in the examination.  Id. at *4.  This was done because the medical testing company believed abnormal NCT tests indicated that an applicant was “right on the verge of” developing CTS and losing the use of his hand.  Id.  Amsted was aware that applicants were being placed on hold because of an abnormal NCT result and authorized this use of the NCT results.  Applicants who did not return with normal NCT results were not hired.  Amsted did not hire any applicants who did not test normal on an NCT.

The EEOC alleged that Amsted violated the ADA when it denied the Claimants employment on the basis of their disability rather than an individualized assessment.  Id. at *7.  The EEOC argued that an abnormal NCT result was an inappropriate basis for making employment decisions.  It further alleged that Amsted was not concerned with worker safety, but rather with reducing workers’ compensation costs.  Amsted challenged the EEOC’s ability to prove all elements of its ADA case, including that the Claimants were qualified because they did not pose a direct threat.  Id. at *9.  As such, both parties cross-moved for summary judgment. 

The Court’s Decision

The Court granted in part the EEOC’s motion for partial summary judgment.  With the exception of one Claimant, Amsted did not challenge whether the EEOC had sufficient evidence to prove the Claimants were disabled.  Id. at *10.  The Court rejected Amsted’s challenge relative to the lone Claimant, noting that because Amsted conceded it refused to hire the Claimant because it feared he posed a safety risk in light of his prior CTS diagnosis and corrective surgery, no reasonable jury could fail to find that it regarded him as disabled  Id. at *11.  Regarding the element that the Claimants be qualified, the Court opined that the relevant case law established that the qualification question focuses on the individual’s condition at the time of the defendant’s employment decision, regardless of what may happen to the individual in the future.  Id. at *15.

In addition, the Court addressed the adverse employment action element.  Id. at *18.  Amsted argued that the Claimants were not subject to an adverse employment action because they were not rejected for employment but were simply put on medical hold pending receipt of further medical information.  The EEOC argued that Amsted’s placement of Claimants on medical hold was an adverse employment action because it effectively foreclosed future employment as a chipper.  Agreeing with the EEOC, the Court held that “[t]he evidence show[ed] that the Claimants’ placement on medical hold due to an abnormal NCT result was an adverse employment action because it effectively precluded them from being hired.”  Id. at *19. 

Finally, the Court explained that the EEOC must show but-for causation in order to prevail.  Id. at *20.  Amsted argued that the EEOC could not establish a discriminatory intent because the company relied in good faith on medical judgments that the Claimants were unable to safely perform the essential functions of the chipper job or had certain medical restrictions.  The Court rejected this argument, holding that Amsted took the Claimants out of the applicant pool because of its perception that they were disabled.  Accordingly, the Court granted in part the EEOC’s motion for partial summary judgment.

Implications For Employers

In its Strategic Enforcement Plan for Fiscal Years 2017-2021, the EEOC identified eliminating barriers in recruitment and hiring as one of its six enforcement priorities (as we blogged about here).  For employers in industries where an applicant’s medical background may be important, it is crucial for those employers to keep the EEOC’s strategic priorities in mind.  When employers make hiring decisions based on the potential for future injuries, such as the employer here, they significantly increase their likelihood of facing EEOC-initiated ADA litigation.  As such, employers should be exercise caution when implementing medical testing procedures for applicants, and ensure such procedures are lawfully conducted.

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