By: Gerald L. Maatman, Jr., Timothy F. Haley and Ashley K. Laken

Seyfarth Synopsis: On January 22, 2019, in Maderazo v. VHS San Antonio Partners, L.P., C.A. No. 06-CV-535 (available here), a case alleging that hospitals in San Antonio conspired to suppress nurses’ wages that had been pending for nearly 13 years, the U.S. District Court for the Western District of Texas issued a decision denying Plaintiffs’ motion for class certification  In doing so, the Court expressly disagreed with a class certification decision issued in a nearly identical case by the U.S. District Court for the Eastern District of Michigan in Cason-Merenda, et al. v. Detroit Medical Center, 2013 U.S. Dist. LEXIS 131006 (E.D. Mich. Sept. 6, 2013).

Background

In 2006, five nearly identical antitrust class actions were filed in different cities around the country alleging that hospitals in each of those cities unlawfully conspired to fix nurse wages below free market levels and agreed to unlawfully exchange nurse wage information in a way that had the effect of suppressing nurse wages. Class certification was defeated in the cases in Memphis and Chicago. In cases in Detroit and Albany, the courts certified or partially certified the classes, and those cases thereafter reportedly settled for millions of dollars.

Now the court in the San Antonio case has denied class certification also.

The Court’s Class Certification Ruling

Like the other cases, the complaint in Maderazo asserted two claims, including: (1) that the defendants agreed to suppress nurse wages, allegedly a per se violation of §1 of the Sherman Act; and (2) that the defendants agreed to, and did, exchange nurse wage information in violation of §1 of the Sherman Act under the rule of reason.  The class certification decision turned on the question of the whether Plaintiffs could demonstrate, with proof common to the class, that common issues predominated over individual issues, consistent with the requirements of Rule 23(b)(3).

One of the issues in an antitrust case is whether the harm allegedly suffered was caused by the alleged conspiracy, often referred to as “antitrust impact.” Plaintiffs in Maderazo attempted to satisfy this element through the testimony of their expert, Henry Farber. In analyzing Farber’s expert report and deposition testimony, the Court concluded that Farber provided “no factual explanation of how Plaintiffs could show a causal link between the conspiracy and the wages of staff registered nurses.” In fact, the Court quoted the following testimony from Farber: “I don’t know anything about the precise effect of the – of any conspiracy or information exchange on the wages of different nurses.” As a result, the Court excluded Farber’s testimony under Daubert and denied Plaintiffs’ motion for class certification.

The Court in Maderazo further noted that the court in the Detroit nurse wage fixing/exchange case had found a similar problem with the testimony of the expert in that case. Nonetheless, the judge in the case in Detroit certified the class while stating that the defendant was free to attempt to persuade the trier of fact that the case lacked a sufficient causal connection between the plaintiffs’ theory of liability and the alleged injury. By contrast, the Court in Maderazo disagreed and ruled that this was an issue that had to be resolved at the class certification stage. (We previously blogged about the Detroit class certification decision here.)

Implications For Employers

This is obviously a helpful decision for employers because it requires plaintiffs to demonstrate at the class certification stage that they can show, with evidence common to the class, that there is a causal connection between the alleged conspiracy and the alleged harm suffered by the class. Sending the issue to the jury when plaintiffs are unable to demonstrate that they can make this showing at the class certification stage unnecessarily adds to the parties’ costs and wastes judicial resources.  Often, if the stakes are high, employers may be unwilling to risk having a jury decide what is potentially a complicated question based on evidence provided by an economic expert.  This in turn puts undue pressure on employers to settle cases that are baseless. The ruling in Maderazo levels the playing field in this respect.

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: In last week’s blog posting, we explained to our readers how the #MeToo Movement impacted the class action litigation space in 2018, and accordingly became the fifth trend of this year’s Workplace Class Action Report (“WCAR”).  Specifically, due to the emergence of this movement via social media, victims of sexual misconduct began coming forward and bringing allegations against numerous well-known figures and companies.  In today’s finale of the WCAR video series, author Jerry Maatman analyzes this movement in terms of its impact on complex workplace litigation, and discusses how employers should expect this trend to develop in 2019.  Watch the video in the link below!

By Gerald L. Maatman, Jr., Thomas E. Ahlering, and Alex W. Karasik

Seyfarth Synopsis: The Illinois Supreme Court held in its first ever ruling concerning the state’s Biometric Information Privacy Act (“BIPA”) that a person need not have sustained actual damage beyond technical violations of BIPA in order to pursue claims for damages.  The Illinois Supreme Court’s ruling will likely greatly increase the potential exposure for companies in actions alleging violations of the Act, and makes strict compliance with the Act significantly important.

For businesses in Illinois (and potentially in states with similar statues), the ruling in Rosenbach v. Six Flags Entertainment Corp., No. 123186, 2019 Ill. Lexis 7 (Ill. Jan. 25, 2019), serves as a loud warning shot that they must immediately take steps to strictly comply with BIPA’s requirements, or risk facing costly class action litigation.  As determined by the Illinois Supreme Court, “[w]hatever expenses a business might incur to meet the law’s requirements are likely to be insignificant,” in light of the potential for “liability for failure to comply with [BIPA’s] requirements.”  Id. at *21.

***

BIPA Background

Despite being barely over a decade old, BIPA litigation was rather stagnant for its first ten years, until a flurry of lawsuits were filed under this law in 2018.  The BIPA prohibits an entity from collecting, capturing, purchasing or otherwise obtaining a person’s “biometric identifier” or “biometric information,” unless it satisfies certain notice, consent, and data retention requirements.  At the time BIPA was passed into law, the thought of an entity utilizing fingerprint or facial recognition for employee identification was typically reserved for high-net-worth entities or those with dire need for added levels of security.  In today’s workplace, businesses small and large across nearly every industry are using fingerprint or facial recognition for both employee and customer identification.

The BIPA outlines several requirements for the collection and use of biometric information by private entities. Private entities collecting a person’s biometric information musty (1) inform the person in writing that his or her biometric information is being collected; (2) explain the purpose and length of time for which the information will be used; and (3) receive written consent.

The BIPA also creates a limited right of action for “person[s] aggrieved by a violation” of its terms. A “person aggrieved” by a negligent violation of the BIPA may recover “liquidated damages of $1,000 or actual damages, whichever is greater.”  A “person aggrieved” by an intentional or reckless violation of the BIPA may recover “liquidated damages of $5,000 or actual damages, whichever is greater.”

Case Background

Since 2014, Defendants, operators of an amusement park in Illinois, have used a fingerprinting process when issuing repeat-entry passes to the park.  Id. at *2.  Plaintiff alleged that this system scans pass holders’ fingerprints; collects, records and stores biometric identifiers and information gleaned from the fingerprints; and then stores that data in order to quickly verify customer identities upon subsequent visits by having customers scan their fingerprints to enter the theme park.  She further alleged that in 2014, while the fingerprinting system was in operation, her 14-year-old son visited the amusement park on a school field trip, where his thumbprint was used to gain access as a season pass holder.

Plaintiff filed a three count complaint alleging Defendants violated the BIPA by: (1) collecting, capturing, storing, or obtaining biometric identifiers and biometric information from Plaintiff’s son and other members of the proposed class without informing them or their legally authorized representatives in writing that the information was being collected or stored; (2) not informing them in writing of the specific purposes for which Defendants were collecting the information or for how long they would keep and use it; and (3) not obtaining a written release executed by Plaintiff, her son, or members of the class before collecting the information.  Id. at *6.

Defendants moved to dismiss the complaint, arguing among many things, that plaintiff had suffered no actual or threatened injury and therefore lacked standing to sue.  Id. at *6-7.  The Circuit Court granted Defendants’ motion to dismiss Count III, but denied its motion as to Counts I and II.  Defendants thereafter sought interlocutory review of the Circuit Court’s ruling, which the Illinois Appellate Court granted.

On December 21, 2017, the Illinois Appellate Court for the Second District became the first to address the issue of whether a plaintiff can recover for technical violations of the BIPA, even if the complaint does not allege that the plaintiff suffered any harm, loss or injury.  It held that a plaintiff is not “aggrieved” within the meaning of the Act and may not pursue either damages or injunctive relief under the Act based solely on a defendant’s violation of the statute.  Additional injury or adverse effect must be alleged.  The injury or adverse effect need not be pecuniary, the Appellate Court held, but it must be more than a technical violation of the Act.  Plaintiff thereafter petitioned the Illinois Supreme Court for leave to appeal, which was granted.

The Illinois Supreme Court’s Decision

On January 25, 2019, in a highly anticipated ruling, the Illinois Supreme Court reversed the Illinois Appellate Court and remanded the case back to the Circuit Court for further proceedings.  After summarizing the BIPA, the Illinois Supreme Court began its analysis by zeroing in its statutory construction, noting that Defendants had read the Act as evincing an intention by the legislature to limit a plaintiff’s right to bring a cause of action to circumstances where he or she has sustained some actual damage, beyond violation of the rights conferred by the statute, as the result of the defendant’s conduct.  Id. at *13-14.  The Illinois Supreme Court rejected this argument as untenable, noting that when the General Assembly has wanted to impose such a requirement in other situations, it has made that intention clear.  Id.

Next, the Illinois Supreme Court held that a person who suffers actual damages as the result of the violation of his or her rights would meet this definition of course, but sustaining such damages is not necessary to qualify as “aggrieved.”  Id. at *16.  Rather, “[a] person is prejudiced or aggrieved, in the legal sense, when a legal right is invaded by the act complained of or his pecuniary interest is directly affected by the decree or judgment.”  Id.  Accordingly, based on this construction, the Illinois Supreme Court held that a when a private entity fails to comply with one of the BIPA’s Section 15’s requirements, that violation constitutes an invasion, impairment, or denial of the statutory rights of any person or customer whose biometric identifier or biometric information is subject to the breach.  Id. at *17-18.  Further, it opined that “[n]o additional consequences need be pleaded or proved. The violation, in itself, is sufficient to support the individual’s or customer’s statutory cause of action.”  Id. at *18.

Finally, the Illinois Supreme Court explained that the BIPA vests in individuals and customers the right to control their biometric information by requiring notice before collection and giving them the power to say no by withholding consent.  Id.  It explained that these procedural protections are particularly crucial in our digital world because technology now permits the wholesale collection and storage of an individual’s unique biometric identifiers — identifiers that cannot be changed if compromised or misused.  Id. at *18-19 (citations and quotation marks omitted).  The Illinois Supreme Court further opined that “[w]hen a private entity fails to adhere to the statutory procedures, as [D]efendants are alleged to have done here, the right of the individual to maintain [his or] her biometric privacy vanishes into thin air. The precise harm the Illinois legislature sought to prevent is then realized.  This is no mere ‘technicality.’  The injury is real and significant.”  Id. at *19 (citations and quotation marks omitted).

The Illinois Supreme Court concluded its opinion by holding that contrary to the Appellate Court’s view, an individual need not allege some actual injury or adverse effect beyond violation of his or her rights under the Act in order to qualify as an “aggrieved” person and be entitled to seek liquidated damages and injunctive relief pursuant to BIPA.  Id. at *22.  Therefore, it reversed the judgment of the Appellate Court and remanded to the Circuit Court for further proceedings.

What This Means For Businesses

The decision will make it significantly easier for individuals to assert causes of action and seek damages for mere non-compliance with the BIPA’s requirements – absent any allegations of harm or injury.  In that regard, the decision makes it of the utmost importance that companies take strict measures to comply with the BIPA’s requirements.  As stated by the Illinois Supreme Court, “[w]hatever expenses a business might incur to meet the law’s requirements are likely to be insignificant,” in light of the potential for the significant “liability for failure to comply with [the BIPA’s] requirements.”  Id. at *21.

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: Seemingly overnight, the #MeToo movement emerged as a worldwide social phenomenon with significant implications for the workplace and class action litigation. In this age of connectivity, societal movements have unprecedented speed and reach. Traditional means of spreading information and generating social change have been supplemented — if not outright replaced — by the near-instantaneous ability of an idea or cause to go viral on social media. Nowhere over the past year was this more evident than with the #MeToo movement, as the chorus of victims’ voices and the media spotlight exposed sexual misconduct in the workplace.

Against this backdrop, many predicted that allegations of on-the-job sexual harassment would increase. The EEOC’s release of data on workplace harassment data in October of 2018 confirmed that reality and the widespread impact of the #MeToo movement throughout the country.

At the same time, many states reviewed their laws in the past year in response to the #MeToo movement. Washington and California changed their laws in 2018 to bar employers from use of mandatory non-disclosure agreements for employees asserting sexual harassment and abuse claims. Several states also explored extending or ending statutes of limitations, spurred on by revelations of sexual abuse in the Catholic Church and in #MeToo reports. More than any other state, California has been in the forefront of introducing “#MeToo bills,” including banning mandatory arbitration clauses in contracts, which require workers to waive the right to take an employer to court in the event of a dispute.

The increasing number of sexual harassment claims in the corporate world as part of the #MeToo movement also has led to a number of high-profile employment-related claims. These types of settlements gained momentum in 2018, as plaintiffs’ lawyers secured a $215 million class action settlement for victims of sexual abuse from the University of Southern California, and a $500 million settlement for victims of sexual assaults from Michigan State University.

On the heels of those claims are a growing number of shareholder derivative and securities class actions. In 2017, 21st Century Fox reached a $90 million settlement with shareholders over losses related to two harassment scandals. Additional class actions were filed against other organizations in 2018. The derivative lawsuits are brought by plaintiff-shareholders purportedly acting on behalf of the company asserting claims for breaches of fiduciary duty and waste of corporate assets against board members and corporate executives. These complaints generally allege that these executives or board members had actual knowledge of or declined to act on sexual misconduct incidents and that, once aware of the incidents, they failed to take appropriate action or concealed the misconduct from shareholders and other stakeholders in the company. Derivative plaintiffs may also allege the misuse of corporate assets and legal resources for settlements and other payments to alleged harassers.

Implications For Employers:

These derivative actions raise significant issues concerning the legal duties of corporations and their boards to monitor potential sexual misconduct by senior executives and other employees. While a corporate board generally has no duty to monitor a corporate officer’s personal behavior, sexual misconduct by an executive in the workplace may trigger liability if the directors consciously allowed the unlawful conduct to occur or failed to establish a compliance system to facilitate employee reporting of sexual harassment and to ensure that the company appropriately investigates and addresses any such allegations. These types of claims are expected to increase in 2019, as the #MeToo movement continues to expand.

By: Gerald L. Maatman, Jr. 

Seyfarth Synopsis: Yesterday’s blog posting gave our readers an in-depth look at class action settlement developments in 2018, the fourth trend of this year’s Workplace Class Action Report (“WCAR”).  In terms of the top ten largest settlement among substantive areas of class action litigation, the monetary value of major case resolutions plummeted in 2018.  In fact, as compared to 2017, top settlement numbers declined by more than a billion dollars.  Today, author Jerry Maatman explains the factors influencing this dramatic change, as well as what employers can expect regarding class action settlements in 2019.  Watch Jerry’s analysis in the video below!

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: As measured by the top ten largest case resolutions in various workplace class action categories, overall settlement numbers decreased significantly in 2018 as compared to 2017. After settlement numbers were at an all-time high in 2017, those numbers fell dramatically over the past year. In sum, the ability of the plaintiffs’ bar to monetize their class action filings hit a significant wall.

This trend harkened back to the U.S. Supreme Court’s decision in Wal-Mart, Inc. v. Dukes in 2011. By tightening Rule 23 standards and raising the bar for class certification, Wal-Mart made it more difficult for plaintiffs to certify class actions, and to convert their class action filings into substantial settlements. These barriers became more formidable in 2018 with the Supreme Court’s ruling in Epic Systems v. Lewis, which upheld the validity of class action waivers in mandatory workplace arbitration agreements.

The “Wal-Mart/Epic Systems” phenomenon is still being played out, as well as manifesting itself in settlement dynamics. It is expected that the force of this barrier will be felt more profoundly in 2019.

Considering all types of workplace class actions, settlement numbers in 2018 totaled $1.32 billion, which decreased significantly from 2017 when such settlements totaled $2.72 billion and in 2016 when such settlements totaled $1.75 billion.

The following graphic shows this trend:

In terms of the story behind the numbers, the breakouts by types of workplace class action settlements are instructive.

In 2018, there was a significant downward trend for the value of settlement of ERISA and wage & hour class action settlements, as well as for government enforcement lawsuits. In addition, there were significant decreases across-the-board for resolutions of class actions involving employment discrimination claims and statutory workplace laws. By any measure, class action recoveries were down.

This phenomenon is shown by the following chart for 2018 settlement numbers:

By type of case, settlements values in ERISA class actions, wage & hour class actions, and government enforcement cases experienced the most significant decreases.

The top ten settlements in the private plaintiff statutory class action category (e.g., cases brought for breach of contract for employee benefits, and workplace anti-trust laws and statutes such as the Fair Credit Reporting Act or the Worker Adjustment and Retraining Notification Act) totaled $411.15 million, which represented a slight decrease from $487.28 million in 2017 (but an increase from $114.7 million in 2016.)

The following chart tracks these figures:

The pattern for employment discrimination class action settlements likewise followed a slight downward trend in 2018. The top ten settlements totaled $216.09 million as compared to $293.5 million in 2017. The comparison of the settlement figures with previous settlement activity over the last decade is illustrated in the following chart:

In 2018, the value of the top ten largest employment discrimination class action settlements of $216.09 million was the fourth lowest figure since 2010, and largely aligned with the trend that started in 2011 (after Wal-Mart was decided) that showed decreases in settlement amounts over three years of that four-year period.

This trend also held for wage & hour class action settlements. In 2018, the value of the top ten wage & hour settlements was $253.18 million. This was a significant decrease from 2017, when the value of the top ten settlements spiked at $574.49 million, which was the second highest annual total in wage & hour class actions ever. When coupled together, the two-year period of 2016 and 2017 saw over $1.2 billion in the top wage & hour settlements. Further, this is most telling in examining the last four years, for 2016 represented almost a quadrupling (after two years of declining numbers in 2013 and 2014) in the value of the top wage & hour settlements as compared to 2014. Given the ruling in Epic Systems this past year, settlement numbers are apt to remain on a downward trajectory in 2019.

This trend is illustrated by the following chart:

Relatedly, the top ten settlements in government enforcement litigation experienced a downward arc, as they decreased nearly four-fold to $126.7 million. This compared to the figure of $485.2 million in 2017. That being said, these numbers were slightly above the three year trend from 2014 to 2016 when governmental enforcement litigation settlements trended under $100 million for three years running. This trend is illustrated by the following chart of settlements from 2010 to 2018:

ERISA class action settlements fell precipitously in 2018. The top ten settlements fell nearly three-fold to $313.4 million, which were down from $927 million in 2017 and $807.4 million in 2016. Further, given that ERISA class action settlements for the two-year period of 2016 and 2018 were a combined $1.73 billion, the figure for 2018 represents a clear reversal for the plaintiffs’ bar. This trend is illustrated by the following chart of settlements from 2010 to 2018:

Implications For Employers:

Settlement trends in workplace class action litigation are impacted by many factors. In the coming year, settlement activity is apt to be influenced by developing case law interpreting U.S. Supreme Court rulings such as Epic Systems, the Trump Administration’s labor and employment enforcement policies, case filing trends of the plaintiffs’ class action bar, and class certification rulings.

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: Last week, our blog posting analyzed another busy year on the governmental enforcement front, with a key focus on the U.S. Equal Employment Opportunity Commission (“EEOC”).  Though many expected the EEOC’s litigation activity to decline in its first full year under the Trump Administration, the Commission’s filing numbers actually went up in 2018, whereas the top 10 settlements dropped in comparison to 2017.  Today, the Workplace Class Action Report (WCAR) video series continues with author Jerry Maatman’s explanation of the third trend of 2018, governmental enforcement litigation.  Watch in the link below!

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: On the governmental enforcement front, the change-over from the Obama Administration to the Trump Administration had little to no impact on reducing the pace of litigation filings and settlements in 2018 at least insofar as EEOC litigation was concerned. At the same time, while the number of lawsuits filed went up, the aggregate recoveries – measured by the top 10 settlements in government enforcement litigation – went down.

To the extent the Trump Administration aims to change those dynamics, its agency appointees at the DOL either were not nominated in time to influence their respective agencies or were not put into place until mid to late 2018. Insofar as the EEOC is concerned, the Trump nominees for the Chair, two Commissioners, and the general counsel were never voted upon by the Senate in 2018. The result was a delay in changes to agency policies and priorities. In this respect, fundamental changes to patterns in government enforcement litigation are more akin to changing the direction of a large sea-going cargo tanker than a small motor boat. Change is inevitable, but it takes time. Thus, the impact of change on governmental litigation enforcement trends is not likely to be felt until well into 2019.

As a result, the EEOC’s lawsuit count increased again in 2018. It filed 199 merits lawsuits, and 20 subpoena enforcement actions. By continuing to follow through on the systemic enforcement and litigation strategy plan it announced in April of 2006 (that centers on the government bringing more systemic discrimination cases affecting large numbers of workers), the EEOC filed more cases as well as more systemic lawsuits. As 2018 demonstrated, the EEOC’s prosecution of pattern or practice lawsuits remained an agency-wide priority backed up by the numbers. Many of the high-level investigations started in the last three years mushroomed into the institution of EEOC pattern or practice lawsuits in 2018.

By comparison to previous years, 2018 was a big one for the EEOC in terms of the number of lawsuits filed. Total merits filings were up more than 100% as compared to 2016. In fact, the EEOC filed more lawsuits in the month of September of 2018 than it did in all of the months of 2016 combined.

This past year also marked the second year of the EEOC’s new Strategic Enforcement Plan (“SEP”), which is intended to guide enforcement activity for 2017 to 2021. Although the new SEP outlines the same six enforcement priorities as in prior years, few people familiar with how the agency pursues its objectives expect that the EEOC will continue to enforce those priorities in the same way under the Trump Administration. The six enforcement priorities include: (1) the elimination of systemic barriers in recruitment and hiring; (2) protection of immigrant, migrant, and other vulnerable workers; (3) addressing emerging and developing issues; (4) enforcing equal pay laws; (5) preserving access to the legal system; and (6) preventing harassment through systemic enforcement and targeted outreach.

Each of these priorities can be interpreted in multiple ways. For example, the EEOC has consistently focused on the protection of lesbians, gay men, bisexuals, and transgender people as one of the most important emerging and developing issues in the workplace. The EEOC’s efforts in this area have resulted in a body of case law in many jurisdictions over the past several years that now holds that discrimination against transgender individuals, or on the basis of sexual orientation, is a form of sex discrimination prohibited by Title VII. However, the Department of Justice under President Trump has recently disagreed with that interpretation. This may signal that this is one area that will shift in 2019 as high-level personnel changes are made within the EEOC.

The EEOC also focused in the past year on employers’ utilization of social media and the use of algorithms and information available on the internet to screen job applicants. Recent comments by the EEOC’s staff indicate that this may be one of the “barriers to recruitment and hiring” that the agency will focus on in 2019 and beyond. Along the same lines, the EEOC has shown an increased willingness to bring ADEA lawsuits against employers – especially in the hospitality industry – that it believes are discriminating against hiring applicants aged 40 and over.

The EEOC also recently issued new guidance impacting two of its enforcement priorities, including preserving access to the legal system (i.e., through increased enforcement of the anti-retaliation provisions of Title VII, the ADA, and the ADEA) and preventing harassment in the workplace. Among other things, the retaliation guidance expands the definition of “adverse action” to include one-off incidents and warnings, as well as anything that reasonably could be likely to deter protected activity. With respect to preventing harassment, the new guidance clarifies the EEOC’s thinking about what constitutes a hostile work environment and the defenses available to employers when that hostile work environment is the result of supervisors’ misconduct. Although important developments in their own right, the real impact of these new guidelines may not be clear until employers see how they are interpreted by the EEOC in active litigation situations. Like the priorities themselves, that will be impacted by whatever new policies and directives are put in place by the new Trump appointees.

Furthermore, the EEOC has focused on #MeToo issues with more intensity than ever before. The most striking trend of all is the substantial increase in sex-based discrimination filings, as 74% of the EEOC’s Title VII filings this past year targeted sex-based discrimination. By comparison, in 2017, sex-based discrimination accounted for 65% of Title VII filings. Of the 2018 sex discrimination filings, 41 filings included claims of sexual harassment. The total number of sexual harassment filings was notably more than 2017, where sexual harassment claims accounted for 33 filings.

It also appears that the EEOC is finally executing on its oft-stated intention to increase enforcement under the Equal Pay Act (“EPA”). The EEOC filed 11 EPA lawsuits in 2018. This is a significant increase over prior years (six EPA lawsuits were filed in 2016, five in 2015, and two in 2014). However, its enforcement efforts in this area may have suffered a setback when the changes the EEOC planned to make to the EEO-1 reporting requirements were put on hold in 2018. It was widely speculated that the new reporting requirements would have assisted the EEOC in bringing more claims under the EPA. Under the leadership of the new Administration, the Office of Management and Budget, pursuant to its authority under the Paperwork Reduction Act, stayed implementation of the EEOC’s new EEO-1 regulations this past year.

The Commission’s 2018 Performance Accountability Report announced that its systemic litigation program continues to be a focus for the EEOC. The EEOC labels a case “systemic” if it “has a broad impact on an industry, company, or geographic area.” The EEOC’s FY 2018 report outlined the EEOC’s activity from October 1, 2017 to September 30, 2018. It showed the following:

The EEOC’s field offices resolved 409 systemic investigations and collected $30 million in remedies (compared to 329 systemic investigations and $38.4 million in 2017). The figures for 2018 constitute a significant increase in the number of investigations over the previous year, but a marked decrease in the amounts for monetary relief for systemic cases.

The EEOC also issued cause determinations finding discrimination in 204 systemic investigations (compared to 167 in 2017 and 113 in 2016). Hence, the EEOC resolve more systemic investigations compared to 2017, and made considerably more cause determinations that may well result in an increase in systemic lawsuits filed in the coming year.

The EEOC secured approximately $505 million in total relief in 2018 in litigation, mediations, and pre-litigation investigations. This tracks closely the total relief figure of $484 million for 2017. It also includes $354 million obtained through mediation, conciliation, and settlement for victims of discrimination in private, state and local government, and federal workplaces. That number was marginally down from 2017, which saw $355.6 million in such recoveries.

Litigation recoveries, on the other hand, were relatively flat as compared to the past few years, hitting only $53.5 million in 2018. This was slightly higher than in 2017 and 2016, which saw the EEOC obtain $42.4 million and $52.2 million respectively, and lower than in 2015 when the EEOC obtained $65.3 million in litigation recoveries.

The EEOC filed 199 merits lawsuits in 2018. This is up from 184 lawsuits in 2017, and more than double the 86 merits lawsuits that were filed in 2016. Of the lawsuits, 117 were on behalf of individuals, 45 were non-systemic suits with multiple victims, and the other 37 were systemic claims. The EEOC also filed 20 subpoena enforcement actions in 2018. Hence, the EEOC in the first and second years of the Trump Administration was far more active in filing lawsuits than in the final year of the Obama Administration.

In FY 2018, the EEOC received 76,418 charges, as compared to 99,109 charges in 2017. Furthermore, the EEOC decreased its charge inventory by 19.5%, to 49,607 charges. This is the lowest level of charge inventory in 10 years and represents a significant reduction compared to FY 2017, when the EEOC reduced its outstanding charges by 16.2%.

In contrast to the EEOC, the DOL’s agenda in 2018 reflected that its new Republican-appointed decision-makers had been in place for the better part of the past year. That being said, however, the DOL’s Wage & Hour Division (“WHD”) still did not have a Senate-confirmed Administrator nominated by the Trump Administration. Despite the lack of a confirmed leader (or perhaps because of it), the WHD continued its aggressive enforcement activities, setting a new record of $304 million in back wages recovered during 2018, which represents an increase of more than $30 million over the previous year.

At the same time, however, the DOL increased its focus on compliance assistance, holding more than 3,600 outreach events, which also represented a record high for the agency. The DOL also returned to its historical practice (abandoned during the Obama Administration) of issuing opinion letters, which allows employers and employees alike to seek formal guidance from the WHD on some of the most challenging wage & hour issues. In 2018, the WHD issued nearly 30 such letters, which addressed tipped employees, the salary basis test, volunteer status, travel time obligation, and pay required by the FMLA, among a number of other topics.

This past year also brought the return of another program – the WHD’s supervision of wage & hour back pay awards following an employer’s self-audit or similar practice. Early in the year, the DOL announced the Payroll Audit Independent Determination (“PAID”) program. The PAID program allows employers to identify potential violations, the affected employees, the relevant time frame, and the amounts due, and then present that information to the WHD, in addition to some additional certifications regarding compliance. Upon review by the DOL, the back wages are paid, and, if the employee accepts the back wages, the employee waives his or her right to a private right of action. That waiver, however, is limited to the scope of the issues and timeframe. Initially launched as a six-month pilot program, the PAID program was extended for an additional six months, thereby keeping this option open for employers well into 2019.

Not to be outdone, the National Labor Relations Board (“NLRB”) also undertook an ambitious agenda in 2018. It reconsidered well-settled NLRB principles on joint employer rules and representative elections, entertained the possibility of extending the protections of the National Labor Relations Act (“NLRA”) to college athletes, and litigated novel claims seeking to hold franchisors liable for the personnel decisions of franchisees. By the end of the year, however, the Trump Administration’s appointees began to roll-back NLRB precedents and positions that had been espoused during the Obama Administration, such as a reversal of the expansive view of joint employer liability, allowing more deference to employer workplace rules, and eliminating protections for obscene, vulgar, and inappropriate activity under the NLRA.

Implications For Employers

Despite predictions to the contrary, the EEOC has continued its “business as usual” aggressive litigation despite two years under the Trump administration. Changes are, however, afoot. The Senate has still not confirmed two Trump-nominated Republican Commissioners, including one who is set to become Chair of the Commission, or Trump’s pick to be the EEOC’s General Counsel. (One of those nominated to be a Commissioner, Daniel Gade, recently withdrew from consideration on December 21, 2018, citing the delays in the nomination process as the reason.) Eventually, the impact of the injection of new decision makers will be felt, perhaps dramatically. That makes it especially important for employers to monitor these developments in 2019. Of course, we will have our ear to the ground, and look forward to sharing our thoughts and prognostications with our readers throughout the new year!

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: Our latest blog gave readers a detailed breakdown of the second trend of our 15th Annual Workplace Class Action Report (WCAR), which was class certification rulings in 2018.  While Plaintiffs attained noticeably high rates of success in the areas of ERISA and wage & hour litigation this year, employers also fared well in the employment discrimination space.  In today’s video, author Jerry Maatman explains the reasoning behind these developments, and provides his perspective on potential outcomes in 2019 with regards to class certification.  Check out Jerry’s in-depth analysis in the link below!

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: As our 2019 Workplace Class Action Report describes, 2018 was quite an interesting year for employers in terms of class certification rulings. Plaintiffs achieved robust numbers of initial conditional certification rulings of wage & hour collective actions in 2018, while employers secured less defeats of conditional certification motions and decertification of § 216(b) collective actions. Check out the extensive analysis below!

Anecdotally, surveys of corporate counsel confirm that complex workplace litigation – and especially class actions and multi-plaintiff lawsuits – remains one of the chief exposures driving corporate legal budgetary expenditures, as well as the type of legal dispute that causes the most concern for companies. The prime component in that array of risks is indisputably complex wage & hour litigation.

The circuit-by-circuit analysis of 301 class certification decisions in all varieties of workplace class action litigation is detailed in the following map:

Wage & Hour Certification Trends

Plaintiffs achieved robust numbers of initial conditional certification rulings of wage & hour collective actions in 2018, while employers secured less defeats of conditional certification motions and decertification of § 216(b) collective actions. The percentage of successful motions for decertification brought by employers saw a significant dip in 2018 to 52%. This was fully 11% less than the figure of 63% in 2017.

Most significantly, for only the second time in over a decade, and for the second year in a row, wage & hour lawsuit filings in federal courts decreased. That being said, the volume of FLSA lawsuit filings for the preceding four years – during 2014, 2015, 2016, and 2017 – were at the highest levels in the last several decades.

As a result, an increase in FLSA filings over the past several years had caused the issuance of more FLSA certification rulings than in any other substantive area of complex employment litigation – 273 certification rulings in 2018, as compared to 257 certification rulings in 2017, 224 certification rulings in 2016, and 175 certification rulings in 2015.

The analysis of these rulings – discussed in Chapter V of this Report – shows that a high predominance of cases are brought against employers in “plaintiff-friendly” jurisdictions such as the judicial districts within the Second and Ninth Circuits. For the first time in a decade, however, rulings were equally voluminous out of the Fifth Circuit, which also tended to favor workers over employers in conditional certification rulings. This trend is shown in the following map:

The statistical underpinnings of this circuit-by-circuit analysis of FLSA certification rulings is telling in several respects.

First, it substantiates that the district courts within the Second, Fifth, and Ninth Circuits are the epi-centers of wage & hour class actions and collective actions. More cases were prosecuted and conditionally certified – 50 certification orders in the Ninth Circuit, 42 certification orders in the Fifth Circuit, and 32 certification orders in the Second Circuit – in the district courts in those circuits than in any other areas of the country. That being said, the district courts in the Third, Fourth, and Sixth Circuits were not far behind, with 22, 23, and 29 certification orders respectively in those jurisdictions.

Second, as the burdens of proof reflect under 29 U.S.C. § 216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (196 of 248 rulings, or approximately 79%). However, in terms of “second stage” decertification motions, employers prevailed in just over half of those cases (13 of 25 rulings, or approximately 52% of the time).

The “first stage” conditional certification statistics for plaintiffs at 79% for 2018 were even more favorable to workers than in 2017, when plaintiffs won 73% of “first stage” conditional certification motions. However, employers fared much worse in 2018 on “second stage” decertification motions. Employers won decertification motions at a rate of 52%, which was down from 63% in 2017 (but up slightly from 45% in 2016).

The following chart illustrates this trend for 2018:

Third, this reflects that there has been an on-going migration of skilled plaintiffs’ class action lawyers into the wage & hour litigation space for close to a decade. Experienced and able plaintiffs’ class action counsel typically secure better results. Further, securing initial “first stage” conditional certification – and foisting settlement pressure on an employer – can be done quickly (almost right after the case is filed), with a minimal monetary investment in the case (e.g., no expert is needed, unlike the situation when certification is sought in an employment discrimination class action or an ERISA class action), and without having to conduct significant discovery (per the case law that has developed under 29 U.S.C. § 216(b)).

As a result, to the extent litigation of class actions and collective actions by plaintiffs’ lawyers is viewed as an investment of time and money, prosecution of wage & hour lawsuits is a relatively low cost investment, without significant barriers to entry, and with the prospect of immediate returns as compared to other types of workplace class action litigation.

Hence, as compared to ERISA and employment discrimination class actions, FLSA litigation is less difficult or protracted for the plaintiffs’ bar, and more cost-effective and predictable. In terms of their “rate of return,” the plaintiffs’ bar can convert their case filings more readily into certification orders, and create the conditions for opportunistic settlements over shorter periods of time.

The certification statistics for 2018 confirm these factors.

The great unknown for workplace class action litigation is the impact of the Epic Systems ruling, and whether it reduces class action activity in the judicial system and depresses settlement values of workplace lawsuits.

At the same time, a future Congress may effectuate a legislative response to abrogate or limit the impact of workplace arbitration agreements with class action waivers, but that will be dependent upon ideological and political dynamics based on future elections.

As a result, Epic Systems may well impact case filing numbers in the near term, and as a result, class action settlement numbers are likely to decrease.

Employment Discrimination & ERISA Certification Trends

Against the backdrop of wage & hour litigation, the ruling in Wal-Mart also fueled more critical thinking and crafting of case theories in employment discrimination and ERISA class action filings in 2018.

The Supreme Court’s Rule 23 decisions have had the effect of forcing the plaintiffs’ bar to “re-boot” the architecture of their class action theories. At least one result was the decision two years ago in Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036 (2016), in which the Supreme Court accepted the plaintiffs’ arguments that, in effect, appeared to soften the requirements previously imposed in Wal-Mart for maintaining and proving class claims, at least in wage & hour litigation.

Hence, it is clear that the playbook on Rule 23 strategies is undergoing a continuous process of evolution.

Filings of “smaller” employment discrimination class actions have increased due to a strategy whereby state or regional-type classes are asserted more often than the type of nationwide mega-cases that Wal-Mart discouraged.

In essence, at least in the employment discrimination area, the plaintiffs’ litigation playbook is more akin to a strategy of “aim small to secure certification, and if unsuccessful, then miss small.”

In turn, whereas employment-related class certification motions were a mixed bag or tantamount to a “jump ball” in 2017 – when 7 of 11 motions were granted and 4 of 11 were denied – employers were far more successful in 2018, where only 3 of 11 motions were granted for plaintiffs and 8 of 11 were denied.

The certification rate of 27% was the lowest on record over the last decade.

The following map demonstrates this array of certification rulings in Title VII and ADEA discrimination cases:

In terms of the ERISA class action litigation scene in 2018, the focus continued to rest on precedents of the U.S. Supreme Court as it shaped and refined the scope of potential liability and defenses in ERISA class actions.

The Wal-Mart decision also has changed the ERISA certification playing field by giving employers more grounds to oppose class certification.

The decisions in 2018 show that class certification motions have the best chance of denial in the context of ERISA welfare plans, and ERISA defined contribution pension plans, where individualized notions of liability and damages are prevalent.

While plaintiffs were more successful than employers in litigating certification motions in ERISA class actions, their success rate was less than in previous years. In 2018, plaintiffs won 11 of 17 certification rulings or 65%. By comparison, in 2017, plaintiffs won 17 of 22 certification motions, with a success rate of 77%.

A map illustrating these trends is shown below:

Overall Trends

So what conclusions overall can be drawn on class certification trends in 2018?

In the areas of wage & hour and ERISA claims, the plaintiffs’ bar is converting their case filings into certification of classes at a high rate. To the extent class certification aids the plaintiffs’ bar in monetizing their lawsuit filings and converting them into class action settlements, the conversion rate is robust. Conversely, plaintiffs’ success rate in the context of employment discrimination class actions is modest, as employers have a high success rate in blocking such certification motions.

Whereas class certification for employment discrimination cases (3 motions granted and 8 motions denied in 2018) was far less possible, class certification is relatively easier in ERISA cases 11 motions granted and 6 motions denied in 2018), but most prevalent in wage & hour litigation (with 196 conditional certification motions granted and 52 motions denied, as well as 13 decertification motions granted and 12 motions denied).

The following bar graph details the win/loss percentages in each of these substantive areas:

–          a 27% success rate for certification of employment discrimination class actions (both Title VII and age discrimination cases);

–          a 65% success rate for certification of ERISA class actions; and,

–          a 79% success rate for conditional certification of wage & hour collective actions.

Obviously, the most certification activity in workplace class action litigation is in the wage & hour space.

The trend over the last three years in the wage & hour space reflects a steady success rate that ranged from a low of 70% to a high of 79% (with 2018 representing the highest success rate ever) for the plaintiffs’ bar, which is tilted toward plaintiff-friendly “magnet” jurisdictions were the case law favors workers and presents challenges to employers seeking to block certification.

Yet, the key statistic in 2018 for employers was a significant decrease in the odds of successful decertification of wage & hour cases to 52%, as compared to 63% in 2017, a decrease of 11%.

Comparatively, the trend over the past five years for certification orders is illustrated in the following chart:

While each case is different and no two class actions or collective actions are identical, these statistics paint the all-too familiar picture that employers have experienced over the last several years. The new wrinkle to influence these factors in 2018 was the Supreme Court’s ruling in 2018 in Epic Systems and in 2016 in Tyson Foods. To the extent it assists plaintiffs in their certification theories, future certification decisions may well trend further upward for workers.

Lessons From 2018

There are multiple lessons to be drawn from these trends in 2018.

First, while the Wal-Mart ruling undoubtedly heightened commonality standards under Rule 23(a)(2) starting in 2011, and the Comcast decision tightened the predominance factors at least for damages under Rule 23(b) in 2013, the plaintiffs’ bar has crafted theories and “work arounds” to maintain or increase their chances of successfully securing certification orders in ERISA and wage & hour cases. This did not hold true in the context of employment discrimination lawsuits. In 2018, their certification numbers were up for ERISA and wage & hour case, and down for employment discrimination litigation.

Second, the defense-minded decisions in Wal-Mart and Comcast have not taken hold in any significant respect in the context of FLSA certification decisions for wage & hour cases. Efforts by the defense bar to use the commonality standards from Wal-Mart and the predominance analysis from Comcast have not impacted the ability of the plaintiffs’ bar to secure first-stage conditional certification orders under 29 U.S.C. § 216(b). If anything, the ruling two years ago in Tyson Foods has made certification prospects even easier for plaintiffs in the wage & hour space, insofar as conditional certification motions are concerned. The conversion rate of successful certification motions hit an all-time high of 79% in 2018.

Third, while monetary relief in a Rule 23(b)(2) context is severely limited, certification is the “holy grail” in class action litigation, and certification of any type of class – even a non-monetary injunctive relief class claim – often drives settlement decisions. This is especially true for employment discrimination and ERISA class actions, as plaintiffs’ lawyers can recover awards of attorneys’ fees under fee-shifting statutes in an employment litigation context. In this respect, the plaintiffs’ bar is nothing if not ingenuous, and targeted certification theories (e.g., issue certification on a limited discrete aspect of a case) are the new norm in federal and state courthouses.

Fourth, during the certification stage, courts are more willing than ever before to assess facts that overlap with both certification and merits issues, and to apply a more practical assessment of the Rule 23(b) requirement of predominance, which focuses on the utility and superiority of a preclusive class-wide trial of common issues. Courts are also more willing to apply a heightened degree of scrutiny to expert opinions offered to establish proof of the Rule 23 requirements.

Finally, employers now have a weapon to short-circuit the decision points for class action exposure through use of mandatory workplace arbitration agreements. Based on the Epic Systems ruling, a class waiver in an arbitration agreement is now an effective first-line defense to class-based litigation.

In sum, notwithstanding these shifts in proof standards and the contours of judicial decision-making, the likelihood of class certification rulings favoring plaintiffs are not only “alive and well” in the post-Wal-Mart and post-Comcast era, but also thriving. The battle ground may shift, however, as employers may create a bulwark against such class-based claims based on the Epic Systems ruling.