EEOC Litigation

Subscribe to EEOC Litigation

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

Seyfarth Synopsis: A federal district court in Maryland recently denied in part an employer’s motion to dismiss a race discrimination action brought on behalf of African-born security guards by the EEOC, and instead granted the EEOC’s motion to stay so that the Commission could amend its deficient pre-suit letters of determination that were the subject of the employer’s motion to dismiss.

This is an important ruling for employers facing systemic EEOC actions, particularly regarding the strategy to challenge whether the EEOC has satisfied its Title VII pre-suit obligations.

***

Case Background

In EEOC v. MVM, Inc., No. 17-CV-2864, 2018 U.S. Dist. LEXIS 81268 (D. Md. May 14, 2018), the EEOC alleged that MVM subjected a group of African-born employees to national origin discrimination, consisting of disparate treatment, a hostile work environment, and unlawful retaliation. Id. at *1. In October 2013, MVM hired a new project manager to oversee 400 security personnel, approximately half of whom were “African or foreign-born blacks.” Id. at *2. Within weeks of his hire, the project manager allegedly began complaining that there were “too many Africans” on the contract, that he was not comfortable working with foreigners, that he “couldn’t understand their accents.” Id.

During the project manager’s tenure, MVM also allegedly engaged in a variety of negative actions against African and foreign-born black security personnel, including denying them leave, forcing them to work on their scheduled days off, forcing them to work extra hours beyond their scheduled shifts, assigning them to undesirable posts, subjecting them to heightened scrutiny, disciplining them more harshly than called for by its discipline policy, intimidating and threatening them with termination, and denying them union representation so as to facilitate the imposition of discipline, suspensions, and termination without cause. Id. at *2-3.

Nine terminated employees filed charges with the EEOC. After the EEOC investigated the Charging Parties’ complaints, it issued Letters of Determination (“LODs”) on November 3, 2016, finding that there was reasonable cause to believe MVM had violated Title VII by discriminating against the Charging Parties through “unequal, terms, conditions, and privileges of … employment because of … national origin,” and/or had retaliated against the Charging Parties for engaging in protected activity. Id.

Following unsuccessful conciliation, on September 27, 2017, the EEOC brought suit on behalf of the Charging Parties and a group of allegedly aggrieved individuals. As amended, the complaint alleged five counts of violations of Title VII, consisting of: (I) a pattern or practice of discriminatory treatment based on national origin; (II) disparate terms and conditions of employment based on national origin; (III) a hostile work environment based on national origin; (IV) discharge and constructive discharge based on national origin; and (V) unlawful retaliation.

In its motion to dismiss, MVM primarily argued that the amended complaint contained claims of disparate treatment on behalf of a group of aggrieved individuals, including claims of discriminatory termination and constructive discharge, which went beyond the scope of the underlying LODs. MVM also argued: (i) discrimination based on “perceived” national origin was not cognizable; (ii) that certain allegations in the amended complaint were based on incidents that do not rise to the level of “adverse employment actions”; (iii) that the EEOC failed to state a plausible claim for constructive discharge; and (iv) that the EEOC failed to state a plausible claim of retaliation arising from the termination of one employee. Id. at *10. In its motion to stay, the EEOC requested that the Court stay the proceedings for 45 days to afford it an opportunity to amend its LODs and engage in conciliation efforts based on the amended LODs.

The Court’s Decision

The Court granted the EEOC’s motion to stay, and denied most of MVM’s motion to dismiss. First, in addressing the EEOC’s motion to stay, the Court noted that in the absence of a stay, either the Court would have to engage in detailed, fact-based analysis of the adequacy of the LODs, or the EEOC would dismiss and re-file the case. Id. at *14. In support of staying the case, the Court noted that its conclusion was supported by Mach Mining v. EEOC, 135 S. Ct. 645 (2015). Specifically, the Court held that “MVM’s rigid position that the EEOC may have only one opportunity to provide notice of charges through its LOD is inconsistent with … Mach Mining … to allow additional opportunities to provide notice of charges and engage in conciliation, precisely the steps that the EEOC seeks to accomplish through its proposed stay.” Id. at *13. Accordingly, the Court granted the EEOC’s motion to stay.

Next, having granted the motion to stay in order to permit the EEOC to amend the LODs, the Court held that MVM’s request for dismissal of claims that were not specifically identified in the LODs, such as discriminatory termination, was now moot. Id. at *16. Turning to MVM’s motion to dismiss claims alleging discrimination on the basis of “perceived” national origin, the Court likewise denied MVM’s motion, holding that “[t]o conclude otherwise would be to allow discrimination to go unchecked where the perpetrator is too ignorant to understand the difference between individuals from different countries or regions, and to provide causes of action against only those knowledgeable enough to target only those from the specific country against which they harbor discriminatory animus.” Id. at *17, 21. 

The Court next addressed MVM’s motion to dismiss any disparate treatment claims based on allegedly discriminatory actions other than suspension or termination. MVM asserted that any freestanding claims of disparate treatment in other specific matters, such as denying leave to African employees, forcing them to work on their scheduled days off, or assigning them to undesirable posts, necessarily failed because those actions did not constitute adverse employment actions for purposes of Title VII. The EEOC argued that it was making no such discrete claims, but rather, that the various discriminatory acts short of suspension and termination that were referenced in the amended complaint were offered collectively to establish a hostile work environment. Id. at *25. The Court rejected the EEOC’s argument and granted MVM’s motion to dismiss the nation origin disparate treatment claim, noting that hostile work environment, discriminatory termination, and retaliation claims were separately plead in other counts. The Court also denied MVM’s motion to dismiss constructive discharge and retaliation claims, holding that the EEOC plausibly stated claims for both. Accordingly, the Court denied in part and granted in part MVM’s motion to dismiss, and granted the EEOC’s motion to stay.

Implications For Employers

Since the U.S. Supreme Court issued its decision in the Mach Mining case in 2015, whether the EEOC has fulfilled its pre-suit obligations under Title VII has become a major area of focus for employers EEOC lawsuits. Here, although the Court generally acknowledged that the LODs were deficient, it avoided closely scrutinizing these pre-suit letters and allowed the EEOC to amend any deficiencies. Accordingly, while employers should not let one district court’s opinion deter them from challenging whether the EEOC fulfilled its pre-suit obligations, they should be cognizant that some courts will be more forgiving in allowing the EEOC to revisit failures to meet these obligations, as opposed to outright dismissing EEOC lawsuits.

 

By: Gerald L. Maatman, Jr. and Mark W. Wallin

Seyfarth Synopsis:  A Maryland federal district court recently found that a successor employer could be liable in an EEOC lawsuit for its predecessor’s alleged employment discrimination.  For employers, this decision is a cautionary tale — the lesson being that liability for claims of employment discrimination can extend beyond the entity alleged to have been responsible for the conduct to reach a successor entity that played no role in the alleged bad acts.  In light of this decision, due diligence in corporate acquisitions is more important than ever.  An entity acquiring not only assets but also employees must understand the risks of liability regarding the workforce it is inheriting.  As the Court decided here, no matter how explicit the disclaimer of liability, a successor may still be liable in an EEOC lawsuit for the discriminatory acts of its predecessor.

***

In EEOC v. Phase 2 Invs. Inc., Case No. 17-CV-2463, 2018 U.S. Dist. LEXIS 65719 (D. Md. April 17, 2018), a Maryland district court denied motions to dismiss and for summary judgment brought by a successor employer and the predecessor employer, finding that the Court not only had jurisdiction over the claims against the successor employer, but also that the successor employer could be held liable for the discrimination allegations levied against its predecessor.  What’s more, the Court found that although the charging parties were undocumented workers, such status did not prevent the EEOC from pursuing Title VII claims on their behalf, contrary to the argument advanced by the predecessor employer. However, the Court recognized the precarious nature of the relief it could grant under such circumstances, as back pay and injunctive relief (i.e., re-hiring) are unavailable.  Nevertheless, the Court stated that the Defendants would not get off “scot-free” if the allegations were proven true.

Case Background

In EEOC v. Phase 2, Invs., Inc., the employee charging parties worked for Maritime Autowash, Inc. (“Maritime,” and later became Phase 2 Investments).  Maritime operated a car wash in Edgewater, Maryland.  The charging parties alleged that they and other Hispanic employees were subject to harassment and discrimination while working for Maritime, and that they were fired after they complained to management about the alleged mistreatment.  Notably, several months prior to their termination, an audit by U.S. Immigration and Customs Enforcement revealed that thirty-nine Maritime employees, including the charging parties, were not authorized to work in the United States.  According to the charging parties, Maritime management gave each of these employees money “so that they could obtain new papers and be re-hired . . . under new names.”  Upon their termination, in July 2013, the charging parties contacted the EEOC and eventually signed formal charges of discrimination against Maritime in February 2014.

In January 2015, after many months of negotiation, Maritime sold its assets including the Edgewater car wash to CWP West Corp. t/a Mister Car Wash (“Mister”).  According to Mister, the deal was structured as an asset purchase agreement, in order to avoid assuming Maritime’s existing liabilities other than those expressly stated in the agreement — which did not include employment discrimination liability.  However, as part of the purchase, Maritime did disclose to Mister its responses to the charges of discrimination filed by the charging parties with the EEOC.

In August 2017, after more than three years of investigation, litigation regarding EEOC subpoenas, and failed conciliation (including Mister), the EEOC filed suit against Maritime and Mister.  In its lawsuit, the EEOC alleged, pursuant to Title VII, race discrimination in the form of harassment, intimidation, unequal terms and conditions of employment, lower wages, denial of promotional opportunities, disparate discipline and discharge because of their race and in retaliation for engaging in protected activity.  Moreover, although the charging parties never worked for Mister, the EEOC alleged that Mister could be liable as a successor in interest.

On this record, Maritime and Mister moved for dismissal and summary judgment.  After considering Maritime and Mister’s arguments, the Court issued a thorough opinion rejecting them in total.

Jurisdiction

Mister first challenged the Court’s jurisdiction over it as a successor entity.  Although neither the charging parties nor the EEOC brought administrative charges against Mister — which is a jurisdictional requirement under Title VII — the Court found that it had jurisdiction over the claims.  Id. at *21.  To reach this conclusion, the Court drew a distinction between successor jurisdiction, and the more substantive inquiry regarding successor liability.  Id. at *26.  The former, it found, could be satisfied as long as the jurisdictional requirements were satisfied for the predecessor company, and the successor had notice of the charge and an opportunity to voluntarily comply.  Id. at *26.  Specifically, “[a] federal court has jurisdiction over a Title VII claim against a defendant-employer who was not named in an administrative charge of discrimination when the theory of liability rests on the actions of a different employer who was named in the charge of discrimination, and the defendant-employer had notice of the charge and an opportunity to voluntarily comply prior to the plaintiff bringing the claim in court.” Id. at *26 (emphasis in original).

Because Mister had notice of the charges prior to filing of the lawsuit, and even had the opportunity to conciliate with the EEOC, the Court found that Mister need not actually be named in a charge.  Id. at *27.  The Court rejected a formalistic approach that would require the refiling of the exact same charges against Mister.  Id.

Successor Liability And The Applicability Of Title VII To Undocumented Workers

Satisfied that it had jurisdiction over the claims, the Court moved on to address Mister and Maritime’s substantive arguments.  Maritime argued that because it never employed the charging parties, it should not be treated as successor for liability purposes under Title VII.  Further, Maritime argued that the charging parties’ status as undocumented workers required the lawsuit to be dismissed.

The Court held that as Maritime’s successor, Mister could be found liable under Title VII, despite the charging parties having never worked for Mister.  The Court stated that successor liability under Title VII was equitable in nature, and that the Court should thus “balance the needs of discriminatees and the national policy against discrimination . . . against the unfairness of holding an innocent purchaser liable for another’s misdeed . . .”  Id. at *39.  Specifically, the Court looked to three primary factors: “whether a successor had notice, whether a predecessor had the ability to provide relief, and the continuity of the business.”  Id. at *40-41.

As to notice, the Court distinguished successor liability notice from successor jurisdiction, stating that for liability purposes, Mister needed to have actual or constructive notice of the charges prior to purchasing Maritime’s assets.  Id. at *41.  While Mister’s knowledge as to the full extent of the charges was unclear, the Court found that Mister had at least constructive knowledge that Maritime faced some potential employment discrimination liability prior to purchase.  Id. at *41-42.  Indeed, the Court found it persuasive that Mister was a relatively sophisticated consumer that could have acted upon the red flags it uncovered during its due diligence.  Id. at *42.  Moreover, the Court noted that in the event the EEOC prevails and Mister suffers economic liability as a result, then Mister may look to the asset purchase agreement for recourse against Maritime, but that potential recourse against Maritime did not absolve Mister from liability “vis a vis the EEOC.”  Id. at *42-43.

The Court next found that as the former employer, Maritime would not be able to provide relief, because the EEOC sought injunctive relief that Maritime could no longer provide at this juncture.  Id. at *44.  As to the continuity factor, the Court held that because Mister continued to run essentially the same business, a car wash, this factor also weighed in favor of finding that Mister may be liable as a successor.  Id. at *45.  Accordingly, under these three factors, the Court determined that it would be equitable to hold Mister jointly and severally liability for any liability that Maritime incurred.  Id. at *46.

Finally, the Court addressed the thorny issue of whether discrimination against an undocumented worker was an unlawful employment action under Title VII.  Id. at *54.  After analyzing Title VII itself, along with Supreme Court and Fourth Circuit precedent, the Court found that “discrimination against an employee on the basis of his race, national origin, or participation in EEOC investigations is an unlawful employment practice under Title VII even if that employee is an undocumented alien, and the EEOC may therefore pursue its claim here.”  Id. at *65.  Among other things, the Court noted that finding otherwise would essentially give Maritime and other employers the ability to both hire undocumented workers and then unlawfully discriminate against those it unlawfully hired.  Id. at *64.  It further reasoned that “[e]ven if Maritime was unaware of the Charging Parties’ immigration status when it hired them, if the Court were to ‘sanction the formation of [that] statutorily declared illegal relationship’ by shielding Maritime (and its successors) from Title VII scrutiny, other employers may well find an incentive to look the other way when potential employees are unable to provide proper documentation.”  Id.

Nevertheless, the Court noted that as a result of the charging parties’ undocumented status, the nature of relief that could be sought was limited.  For instance, the Court found that it could not require Mister to re-hire the charging parties or award back pay.  Id. at *66.  Instead, the Court found that if the EEOC proves that Maritime discriminated against the charging parties, Title VII grants the Court broad discretion in fashioning relief and that the public interest would be best served through some monetary penalty.  Id.

Implications For Employers

This opinion should be required reading for any employer contemplating an acquisition of another company.  Indeed, the Court provided a detailed road map for when employment discrimination claims may be maintained against successor employers, even if such employees never worked for the successor and never named it in the charging documents.  Based on this decision, merely disclaiming the liability of a predecessor entity through an asset purchase agreement is not enough to shield a successor employer from the EEOC’s pursuit of employment discrimination liability — although such disclaimers are still useful for recouping any monetary loss against the predecessor entity.  Accordingly, through due diligence, employers must be sure to seek information regarding this potential employment liability, and understand the risks acquiring a company that has received charges of discrimination against it before deciding to proceed.  Willful ignorance is unlikely to be a fruitful defense to such claims.

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. 5:13–CV-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.