Search results for: arbitration

Co-authored by Alex S. Drummond and Brandon L. Spurlock

While the U.S. Supreme Court’s ruling last year in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), constituted a “game-changer” in the field of class arbitration, the scope and breadth of this ruling continues to be a hotly debated topic in class action litigation. 

In 2009, the Second Circuit considered the enforceability of a mandatory class action waiver clause in American Express’ Card Acceptance Agreements. See In Re American Express Merchants’ Litigation, 554 F.3d 300 (2d Cir. 2009) (“Amex I”). In Amex I, the Second Circuit found the class action waiver unenforceable, “because enforcement of the clause would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiffs.” Id. at 304. The U.S. Supreme Court granted certiorari and vacated the opinion, remanding it to the Second Circuit for reconsideration in light of Stolt-Nielsen.

In a ruling on March 8 in In Re AMEX Merchants’ Litigation, No. 06-1871 (2d Cir. Mar. 8, 2011), the Second Circuit held that Stolt-Nielsen did not mandate a change in its original ruling [link to ruling] (“Amex II”). In reaching this conclusion, the Second Circuit expressly rejected American Express’ argument that Stolt-Nielsen and the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the “FAA”), required federal courts to enforce the parties’ arbitration agreement, even if it contained a class action waiver. Rather, the Second Circuit held:

Stolt-Nielsen states that parties cannot be forced to engage in a class arbitration absent a contractual agreement to do so. It does not follow, as Amex urges, that a contractual clause barring class arbitration is per se enforceable. Indeed, our prior holding focused not on whether the plaintiffs’ contract provides for class arbitration, but one whether the class action waiver is enforceable when it would effectively strip plaintiffs of their ability to prosecute alleged antitrust violations.

Amex II, at 11. The Second Circuit also found that the construction of Stolt-Nielsen advocated by American Express would have limited prior Supreme Court decisions concerning whether a party could effectively vindicate its federal rights through arbitration. Id. at 21. Ultimately, the Second Circuit focused on the same factors as Amex I and held that the class action waiver was unenforceable as against public policy.

Notwithstanding its holding, Amex II may be helpful to employers seeking to stave off class arbitration when their underlying arbitration agreements do not provide for this type of arbitration. In Amex II, the Second Circuit recognized Stolt-Nielsen stood for the principle that “parties cannot be forced to engage in class arbitration absence a contractual agreement to do so.” Id. at 11. Moreover, the Second Circuit found “Stolt-Nielsen plainly rejects using public policy as a means of divining the parties’ intent,” a practice that had been widely used by arbitration before Stolt-Nielsen. Id. at 21. Further, the Second Circuit noted “Stolt-Nielsen plainly precludes [the court] from ordering class-wide arbitration.” Id. at 22.

Likewise, in discussing the availability of class relief as a mean to vindicate federal statutory rights, the Second Circuit engaged in an extensive review and analysis of the Supreme Courts’ decision in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). Gilmer held, among other things, that an arbitration agreement was not unconscionable because it denied an ADEA plaintiff the right to pursue claims on a class basis. Id. at 32. The references to Gilmer strongly suggest that Amex II should be construed narrowly and may not invalidate class waivers in employment disputes. 

In summary, Amex II illustrates the complexity of issues that have followed since Stolt-Nielsen. While Amex II is likely to be seen as a pro-plaintiff decision, its negative impact on employment cases may be limited. Indeed, Amex II contains some helpful language concerning the application of Stolt-Nielsen to arbitration agreements that are silent on the issue of class arbitration.

It remains to be seen if this decision remains viable when the Supreme Court rules later this year in AT&T Mobility LLC v. Concepcion, which concerns the issue of whether class action waivers in a consumer contract of adhesion are enforceable. AT&T Mobility was argued before the Supreme Court on November 9, 2010, and a ruling is expected at any time.

Co-authored by Brandon L. Spurlock and Alex S. Drummond

Since the U.S. Supreme Court’s ruling last year in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), the battle lines are being drawn in federal courts over the extent to which employers can use workplace arbitration agreements to stay out of court proceedings and/or class actions.

Sutherland v. Ernst & Young LLP, No. 10-CV-3332 (S.D.N.Y. Mar. 3, 2011), a recent decision out of the U.S. District Court for the Southern District of New York [link to ruling], is the latest example of the impact of class waiver provisions in employment agreements. In Sutherland, Plaintiff was a former accountant who alleged that Ernst & Young (“E&Y”) misclassified her and other similarly-situated individuals as exempt from overtime under the Fair Labor Standards Act (“FLSA”). She brought a putative collective action under the Section 216 (b) of the FLSA and a Rule 23 class action under New York state law claiming that she and putative class members were unlawfully denied overtime compensation. Plaintiff had signed a dispute resolution agreement with E&Y, which called for binding arbitration on an individual, rather than class-wide, basis. E&Y moved to dismiss Plaintiff’s complaint and compel arbitration of Plaintiff’s claim on an individual basis. 

Relying upon In Re American Express Merchant’s Litigation, 554 F.3d 300 (2d Cir. 2009) (“Amex”), the District Court found E&Y’s class waiver provision unenforceable on the grounds that enforcing the provision would preclude Plaintiff from vindicating her statutory rights. Even though she retained the right to pursue her individual claims in arbitration, the District Court determined that she would have to find legal counsel – at an estimated cost of $160,000 – to pursue a claim worth $1,800. The District Court concluded that no attorney would sign on to do so, and that this precluded Plaintiff from vindicating her rights. The District Court determined that Amex retained persuasive force notwithstanding the Supreme Court’s summary order vacating the judgment in that case and remanding to the Second Circuit in light of the Supreme Court’s April 2010 decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), which held that class arbitration is not allowed unless the parties agree to it. 

The District Court reasoned that because it would be prohibitively expensive for Plaintiff to pursue her overtime claims on an individual basis, and because the arbitration provision barred any claim other than an individual claim, the class waiver provision was unenforceable because it would prevent Plaintiff from vindicating her statutory rights. At the same time, the District Court stated that it could not compel class-wide arbitration based on Stolt-Nielsen. In effect, this meant that Plaintiff could pursue her claims in a judicial forum.

Sutherland illustrates how Plaintiffs are apt to argue for an end-run around Stolt-Nielsen. The District Court determined the class waiver in the arbitration agreement was unenforceable because it prevented the vindication of the employment claim at issue, thus allowing workers to pursue class and/or collective actions in federal court notwithstanding agreements requiring individual arbitrations. While this argument is easier for plaintiffs’ counsel to make in an FLSA case, the force of the argument is attenuated when employment discrimination claims – which allow for up to $300,000 in combined compensatory and punitive damages – are at issue.

It remains to be seen if this decision remains viable when the Supreme Court rules later this year in AT&T Mobility LLC v. Concepcion, which concerns the issue of whether class action waivers in a consumer contract of adhesion are enforceable. AT&T Mobility was argued before the Supreme Court on November 9, 2010.

The Sutherland ruling is a plaintiff-friendly decision. It should make employers cognizant of the possibility that class arbitration waivers in employment or dispute resolution agreements may not provide protection from class proceedings. Employers should continue to monitor decisions addressing this issue, as these cases will have a significant impact on how employment-related class actions are litigated and defended in the future.

 

By: Andy Scroggins, Matt Gagnon, Sarah Bauman, James Nasiri, Christopher DeGroff

Seyfarth Synopsis: On Tuesday, January 10, the EEOC released for public comment its draft 2023-2027 Strategic Enforcement Plan, or “SEP” (available here)—a document that will guide the Commission’s enforcement priorities for the next five years. The EEOC’s previously announced Strategic Plan described “how” it would pursue its enforcement goals. (See our prior blog on the Strategic Plan here.) The Strategic Enforcement Plan, on the other hand, describes “what” the EEOC’s enforcement priorities will be, making it a must-read for employers and their attorneys who want to be prepared if their industry or employment practices have them poised for increased government scrutiny.

History of the SEP

The EEOC’s first SEP, which was in effect for its Fiscal Years 2013-2016, identified six broad subject matter priorities:

  1.          Eliminating Barriers in Recruitment and Hiring.
  2.          Protecting Immigrant, Migrant and Other Vulnerable Workers.
  3.          Addressing Emerging and Developing Issues.
  4.          Enforcing Equal Pay Laws.
  5.          Preserving Access to the Legal System.
  6.          Preventing Harassment Through Systemic Enforcement and Targeted Outreach.

The EEOC’s second SEP, which covered Fiscal Years 2017-2022, kept the same six broad priorities but announced additional “areas of focus” within those areas. Consistent with the EEOC’s announcement, employers saw increased enforcement activities in these areas, which included a focus on protecting the rights of the LGBT community; addressing issues related to pregnancy; scrutinizing “complex” employment relationships, such as contingent work arrangements and gig economy roles; and “backlash discrimination,” particularly as it relates to those who are Muslim or Sikh.

The EEOC’s proposed third SEP continues with the same six priorities but with notable additional details that put the employer community on notice of the Commission’s intentions. In particular, the proposal includes robust interest in how employers use technology to recruit, hire, and manage workers; highlights protections for pregnancy-related issues, LGBTQI+ individuals, and those unaware of or unable to exercise their rights; and calls out the construction and technology industries for closer scrutiny.

Subject Matter Priority 1: Eliminating Barriers in Recruitment and Hiring

Prior versions of the SEP announced the EEOC’s focus on recruitment and hiring practices and policies that might give rise to discrimination against members of racial, ethnic, and religious groups, as well as women, older workers, and those with disabilities. The proposed SEP continues to include those groups while adding specific call outs for pregnant workers and those with pregnancy-related medical conditions, and LGBTQI+ individuals.

The EEOC also added far more detail about the types of hiring practices and policies that it intends to scrutinize. For example, prior SEPs described the EEOC’s intention to prevent steering members of protected groups into specific jobs. The proposed SEP goes further to explain that the EEOC also will be examining whether employers are segregating workers in jobs, or by job duties, based on membership in a protected group.

Building further on this, the proposed SEP includes several new but related areas of focus. These include looking at practices that may limit access to work opportunities, such as advertising jobs in a manner that excludes or discourages some protected groups from applying, or denying training, internships, or apprenticeships. The EEOC also intends to scrutinize whether businesses are denying opportunities to move from temporary to permanent roles, including when permanent positions are available.

Likewise, the EEOC modified its earlier focus on screening tools that might disproportionately impact workers based on their protected status, noting explicitly that it is interested in employers’ use of artificial intelligence and automated systems in that regard.

This aligns with the EEOC’s increased interest in how employers use technology to recruit and hire workers. Here, the Commission has emphasized its intent to investigate whether protected groups might be harmed—whether intentionally or not—by automated systems used to target job advertisements to particular populations, recruit workers, or aid in hiring decisions. The proliferation in recent years of electronic tools available to assist employers to find talent in challenging labor markets may provide fertile ground for the EEOC on this issue.

The EEOC also in this section called out a “lack of diversity” in certain industries, naming construction and high tech in particular, and stated its intent to monitor those benefitting from substantial federal investment.

Subject Matter Priority 2: Protecting Vulnerable Workers and Persons from Underserved Communities from Employment Discrimination

For purposes of the SEP, “vulnerable workers” are those who may be unaware of their rights under equal employment opportunity laws, or reluctant or unable to exercise those rights. The EEOC’s proposal adds substantially to this priority as well. In a change from prior versions of the SEP, the EEOC has called out nine different categories of vulnerable workers that it aims to safeguard:

  • immigrant and migrant workers;
  • people with developmental or intellectual disabilities;
  • individuals with arrest or conviction records;
  • LGBTQI+ individuals;
  • temporary workers;
  • older workers;
  • individuals employed in low wage jobs, particularly teen-aged workers employed in such jobs;
  • Native Americans/Alaska Natives; and
  • persons with limited literacy or English proficiency.

Employers in sectors that engage many members of these communities, or who have operations in areas of the country with large populations of such workers, may face increased inquiry.

Subject Matter Priority 3: Addressing Selected Emerging and Developing Issues

Priority 3 has long been a catch-all for the EEOC to address topical issues or push for expansions of the laws that it enforces.

One priority remains largely unchanged from the prior SEP: qualification standards and inflexible policies or practices that discriminate against individuals with disabilities will remain an area of focus.

The EEOC has dropped two priorities that appeared in this section of the prior SEP. These include protecting LGBT people from discrimination, and clarifying the application of workplace civil rights protections in complex employment relationships and structures. However, those priorities have not fallen completely by the wayside and do appear in other areas of the proposed SEP.  This is likely just an acknowledgement that these issues are no longer “emerging” areas, but rather have been fully embraced in the EEO universe.

The proposed SEP elaborates on statements from the earlier document related to pregnancy discrimination to include protection for those affected by pregnancy, childbirth, and related medical conditions and disabilities, as well as requests for reasonable accommodations related to same.

Prior versions of the SEP have discussed “backlash” discrimination, but the new proposed SEP goes further. The EEOC has noted that discrimination against some groups can arise as a backlash in response to local, national, or global events. The EEOC identifies some groups facing such discrimination now, including African Americans; individuals of Arab, Middle Eastern, or Asian decent; Jews; Muslims; and Sikhs, but also notes that the groups at issue, and the practices they are subjected to, can be expected to change over time and in response to current events.

The proposed SEP also calls out discrimination and stereotyping related to COVID-19, noting in particular that persons of Asian descent, older workers, and persons with disabilities have been targeted. This enforcement priority also extends to requests for accommodation by those with disabilities or sincerely held religious beliefs; unlawful medical inquiries and direct threat determinations; and mistreatment based on actual or perceived disabilities, including those associated with long COVID.

The final topic under this priority is “technology-related employment discrimination.” Here, the EEOC is interested in particular in employment decisions based on algorithmic decision-making; as well as automated recruitment, selection, production, and performance management tools. (The EEOC’s recent interest in this area has been the subject of several prior blog posts, including here and here.)

Subject Matter Priority 4: Advancing Equal Pay for All Workers

The proposed SEP revises this priority to make more clear that it intends to focus on pay discrimination based on any protected category. (This prior version was more focused on sex-based differences in pay.)

The proposal departs from prior versions in two other notable ways. First, it includes a statement that the EEOC will not depend on charges from members of the public, but will use its authority to initiate directed investigations and Commissioner’s charges in order to investigate pay differences. Second, the EEOC states its intent to challenge practices that it perceives to contribute to pay disparities, including employer policies and practices that encourage secrecy around pay, reliance on past salary history to set pay, and requiring applicants to disclose expected pay rates during the application stage.

Subject Matter Priority 5: Preserving Access to the Legal System

The EEOC’s fifth priority aims to keep an eye on policies and practices that the Commission believes may limit or discourage individuals from exercising their rights under employment statutes, or hinder the EEOC’s ability to conduct investigations. The proposed SEP is largely unchanged from the prior version and focuses on overly broad agreements, including waivers, releases, non-disclosure agreements, non-disparagement agreements, and arbitration agreements; failure to maintain applicant and employee records; and practices seen as retaliatory against those who engage in protected activity.

Subject Matter Priority 6: Preventing and Remedying Systemic Harassment

Past SEPs have offered robust statements in support of the EEOC’s interest in combatting harassment, and that continues in the new proposal. Of note, the EEOC’s proposal now expressly calls out harassment based on pregnancy, gender identity, and sexual orientation. The EEOC has also articulated more detailed support for employer training, including providing education, technical assistance, and policy guidance.

Continued Focus on Systemic Investigations and Litigation

In the proposed SEP, the “Commission once again reaffirms its commitment to the agency’s systemic program.” The EEOC looks to its SEP priorities to decide what types of systemic investigations and cases to pursue. Indeed, the SEP priority areas are “given precedence over other cases to maximize the EEOC’s strategic impact.”

Implications For Employers

The SEP is still a draft, and the EEOC is accepting comments through February 9, 2023. We will report on the final version once it is available.

However, the proposed SEP is revealing of the EEOC’s intentions. Charges related to pregnancy or issues related to LGBTQI+ individuals are high on the agency’s enforcement radar. So too are employment practices that rely on automated systems, including using technology to find and screen candidates.

On an industry basis, companies in construction, technology, and staffing should be particularly alert to EEOC enforcement activities. The same is true of companies that use contingent workers, or that employ significant numbers of workers from vulnerable communities.

With the EEOC soon to be comprised of a majority of Commissioners appointed by the Biden administration, we anticipate a pronounced uptick in enforcement activity. Employers should expect that the Commission will continue to make good on its promise to litigate large-scale, high-impact, and high-profile investigations and cases that address the issues identified as its enforcement priorities and areas of focus.

By Jennifer A. Riley, Alex W. Karasik and Tyler Z. Zmick

Seyfarth Synopsis:  In Sosa v. Onfido, Inc., No. 20-CV-4247, 2022 U.S. Dist. LEXIS 74672 (N.D. Ill. Apr. 25, 2022), the Court issued the latest plaintiff-friendly decision under the Illinois Biometric Information Privacy Act (“BIPA”), putting businesses and employers on notice that the statute can apply to photographs in addition to the typically-alleged facial and hand scans.  The Court denied the Defendant’s motion to dismiss on the basis that: (1) photographs and information derived from photographs are protected by BIPA; (2) Plaintiff sufficiently plead a claim for liquidated damages; and (3) the BIPA does not violate the First Amendment. 

Case Background

Plaintiff filed suit alleging that the Defendant markets and sells proprietary facial recognition software that is used by online businesses to verify consumers’ identities.  Id. at *2.  To verify a consumer’s identity, the consumer first uploads a copy of his or her identification and a facial photograph.  Id.  The software then scans the identification and photograph to locate the facial images on each document; extracts a unique numerical representation of the shape or geometry of each facial image, which is often called a ‘faceprint,” compares the faceprints from the consumer’s identification and photograph; and generates a score based on the similarity of the faceprints.  Id.  The software also can compare the faceprints obtained from a consumer’s identification or photograph with other biometric data in Defendant’s database, such as the biometric data of known masks or other consumers’ photographs.  Id. at *2-3.  Online businesses can integrate the software into their products and mobile apps in such a way that consumers seeking to verify their identities likely do not know that they are interacting with and providing their sensitive information to Defendant, a third party.  Id. at *3.

Plaintiff was a member of an online marketplace that partnered with Defendant to verify its users’ identities using Defendant’s software.  Id.  Plaintiff claimed that, in April 2020, Plaintiff verified his identity in the online marketplace and that Defendant allegedly used its software to scan Plaintiff’s face, extract his faceprints, compare the two photographs, and then Defendant kept his unique faceprint in a database and accessed it every time another person used Defendant’s verification process.  Defendant purportedly did not inform Plaintiff that it would collect, store, or use his biometric identifiers derived from his face,” and Plaintiff never signed a written release allowing Defendant to do so.  Id. at *3-4.

Plaintiff filed suit against Defendant in the Circuit Court of Cook County, Illinois, alleging that it violated the BIPA, 740 Ill. Comp. Stat. 14/1 et seq., seeking to represent himself and a putative class of Illinois residents “who had their biometric identifiers or biometric information, including faceprints, collected, captured, received, otherwise obtained, or disclosed by Defendant while residing in Illinois.”  Id. at *4.  Defendant removed the lawsuit based on diversity jurisdiction and the Class Action Fairness Act (“CAFA”).  Id. at *5.  After the Court denied Defendant’s motion to compel arbitration (and the Seventh Circuit affirmed), Defendant moved to dismiss on the grounds that: (1) Plaintiff did not state a viable claim under the BIPA because the information Defendant allegedly collected — photographs and information derived from photographs — is not protected by the BIPA; (2) Plaintiff failed to adequately state a claim for liquidated damages; and (3) the BIPA violates the First Amendment.

The Court’s Decision

The Court denied Defendant’s motion to dismiss on all three grounds.

The BIPA’s Application To Data Derived from Photographs

The Court first addressed the argument that Plaintiff failed to state a claim under the BIPA because Defendant’s software captured information from user-submitted photographs, and neither photographs nor information derived from photographs are covered by the BIPA.  The Court’s analysis turned on Section 10 of the BIPA, which defines “biometric information” and “biometric identifier” and also lists items that do not fall under those definitions — specifically, “biometric identifiers do not include photographs, and biometric information ‘does not include information derived from items or procedures excluded under the definition of biometric identifiers.’”  Mem. Op. & Order at 11 (quoting 740 ILCS 14/10).  The Court acknowledged that data derived from photographs is not “biometric information,” but it held that data derived from photographs in the form of “scans of face geometry” can constitute biometric identifiers.  Id. at 11-12 (“As alleged . . ., [defendant’s] software scans identification cards and photographs to locate facial images and extracts a unique numerical representation of the shape or geometry of each facial image, which [plaintiff] refers to as a ‘faceprint.’  The faceprints extracted by [defendant] plausibly constitute scans of face geometry and, therefore, ‘biometric identifiers’ under BIPA.”) (internal citations omitted).

The Court rejected the argument that the data cannot be a “scan of face geometry” because it did not involve the scan of plaintiff’s “actual face, but rather, a scan of a photograph of his face,” holding that “[n]othing in the BIPA’s text . . . supports [defendant’s] contention that a scan of face geometry must be an ‘in person’ scan.”  Id. at 14 (citation omitted).

Request For Liquidated Damages

The Court next turned to Defendant’s argument that Plaintiff’s request for liquidated damages should be dismissed because he failed to allege facts from which it reasonably could be inferred that Defendant negligently, recklessly, or intentionally violated BIPA.  The court held that Plaintiff need not plead Defendant’s state of mind to allege a BIPA claim and that dismissing Plaintiff’s request for liquidated damages was unwarranted because the request sought a particular remedy (which is “distinct from [plaintiff’s] underlying claim for relief based on BIPA”).  Id. at 18.

BIPA authorizes a prevailing party to recover, inter alia, the greater of actual damages or $1,000 in liquidated damages for each negligent BIPA violation and the greater of actual damages or $5,000 in liquidated damages for each intentional or reckless BIPA violation.  740 ILCS 14/20(1), (2).  Importantly, Plaintiff sought not only liquidated damages but also injunctive relief and relief in the form of reasonable attorneys’ fees, costs, and expenses — the latter forms of relief having no associated mental state requirement.  See Mem. Op. & Order at 19-20 (“Nor does [plaintiff] need to allege facts suggesting any level of culpability to plausibly state a BIPA claim in the first place,” as “[Plaintiff] may obtain injunctive relief or attorneys’ fees — as he has requested — regardless of whether [Defendant’s] actions are proven to be negligent, reckless, or intentional.”).

First Amendment

Finally, the Court addressed the argument that BIPA Section 15(b) — which requires a private entity to obtain informed consent before collecting an individual’s biometric data — violates the First Amendment as applied by restricting Defendant’s speech and its collection of “ information voluntarily provided by consumers to identify themselves as marketplace users.”  Id. at 24.  The court held that (1) Section 15(b) does not restrict defendant’s speech (meaning the First Amendment does not apply), and (2) even if Section 15(b) restricted defendant’s speech, it is a content-neutral restriction that survives the applicable level of First Amendment scrutiny (i.e., intermediate scrutiny).

In holding that Section 15(b) does not regulate Defendant’s speech, the Court reasoned that Section 15(b) “does not prohibit or otherwise restrict what a private entity may do with an individual’s biometric data once the data is obtained”; instead, Section 15(b) “regulates [D]efendant’s ability to obtain an individual’s biometric data by requiring [Defendant] to acquire the individual’s informed consent before doing so.”  Mem. Op. & Order at 24.  The Court relied on Dahlstrom v. Sun-Times Media, LLC, 777 F.3d 937 (7th Cir. 2015), where the Seventh Circuit held that the Driver’s Privacy Protection Act’s (the “DPPA”) “prohibition on obtaining information from driving records” did not restrict speech because it limited only “access to information.”  Mem. Op. & Order at 24 (citation omitted).  Sosa reasoned that “[l]ike the DPPA provision at issue in Dahlstrom, Section 15(b) burdens a party’s ability to access certain information.”  Id. at 25.

The Court further held that, even if Section 15(b) restricted Defendant’s speech, it would nonetheless survive intermediate scrutiny under the First Amendment.  The Court applied the four-prong intermediate scrutiny test set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980): [1] First, courts ask whether the commercial speech concerns unlawful activity or is misleading (if so, the speech is not protected by the First Amendment); [2] if the speech concerns lawful activity and is not misleading, courts next ask whether the asserted governmental interest is substantial; [3] if it is, then courts determine whether the regulation directly advances the governmental interest asserted; and [4] finally, courts ask whether the regulation is more extensive than necessary to serve that interest.

Regarding the first step, the Court held that the at-issue commercial speech does not concern unlawful activity and is not misleading because Section 15(b) “regulates both the misleading and non-misleading collection of biometric data.”  Mem. Op. & Order at 31.  But the Court held that Section 15(b) passes muster under steps (2) through (4).  At the second step, the Court determined that Section 15(b) is supported by a substantial governmental interest — namely, the interest in protecting consumers’ rights to privacy in and control over their biometric data.  At the third step, the Court held that Section 15(b) directly advances the government’s interest because the harms identified by the Illinois legislature are real and Section 15(b) alleviates those harms “to a material degree.”  Id. at 33.  Finally, the court held that Section 15(b) is not more extensive than necessary to serve the government’s interest, as: (1) Section 15(b) “does not outright prohibit companies . . . from obtaining biometric data; it merely requires them to obtain informed consent before doing so”; and (2) “it is not too onerous to require a company that wants to collect a consumer’s sensitive and immutable biometric data to obtain the consumer’s consent before doing so.”  Id. at 35.

Conclusion

Sosa is one of several recent plaintiff-friendly BIPA decisions, and it reinforces the unanimous interpretation among courts to date that the BIPA can apply to data derived from photographs.  The Sosa decision also seemingly tends to undermine the defense argument that a BIPA plaintiff must allege facts demonstrating negligence, recklessness, or intent to state a claim and request liquidated damages under the statute.

Significant questions remain, however, regarding the BIPA’s application to companies that collect biometric information.  For one, the Court’s First Amendment analysis regarding Section 15(b) suggested that the same analysis might lead to the conclusion that claims brought under Sections 15(c) and/or 15(d) (which prohibit (i) profiting from biometric data and (ii) disclosing biometric data without consent, respectively) do violate the First Amendment.  See Mem. Op. & Order at 27 (noting that statutory provisions restricting the sale, disclosure, and use of information “undoubtedly restrict[] speech”).  Other important questions will be decided in appeals pending before the Illinois Supreme Court, including the question whether claims asserted under Sections 15(b) and 15(d) accrue only once upon the initial collection or disclosure of biometric information, or each time a private entity collects or discloses biometric information (see here), and the limitations period applicable to BIPA claims.

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: During 2021, COVID-19 class action litigation became more pervasive in reaching across new industries and spawning new challenges on the workplace class action front. The COVID-19 pandemic had a significant impact on all aspects of life in 2021 and a profound impact on the workplace, in particular. In 2020, as state and local governments responded to the COVID-19 threat, many employers moved their employees to tele-work or work-from-home arrangements, or laid off or furloughed workers, and many businesses and courts shut down or postponed critical operations. In 2021, as state and local governments continued to manage the COVID-19 threat, vaccines became widely available, and many employers attempted to move their employees to “return to work” or “hybrid” work arrangements.

Such developments prompted federal regulators to enact vaccine-or-test mandates and fueled employers to adopt or expand health screenings, temperature check protocols, and mandatory vaccination policies. These steps, in turn, led to waves of controversy as workplace class actions brought by states, employee advocates, unions, and employer groups erupted over regulatory actions and employer policies.

Challenges to federal actions, to date, have produced mixed results. On September 9, 2021, President Biden signed Executive Order 14042. Through its terms, the EO required entities that contract with the federal government to agree to require vaccinations for their employees. The EO proclaimed that it “promoted economy and efficiency in Federal procurement by ensuring that the parties that contract with the Federal Government provide adequate COVID-19 safeguards to their workers performing on or in connection with a Federal Government contract or contract-like instrument.“ On November 30, 2021, in State of Louisiana v. Becerra, No. 3:21-CV-03970 (W.D. La. Nov. 30, 2021), however, the district court entered a preliminary injunction enjoining enforcement of the rule.

On a similar front, on November 4, 2021, the U.S. Occupational Safety and Health Administration (OSHA) announced its long-awaited Emergency Temporary Standard (ETS) that required employers with 100 or more employees, among other things, to develop, implement, and enforce policies requiring most employees to get vaccinated or to undergo weekly testing for COVID-19. The ETS became effective upon publication in the Federal Register on November 5, 2021, and set January 4, 2022, as the deadline for employees to receive their final vaccine dose or to begin testing. The ETS covered all employees of covered employers, whether full-time, part-time or temporary, except for employees (a) working alone (in a location where other individuals are not present); (b) working from home; or (c) working exclusively outdoors.

Litigants filed at least 27 lawsuits in 12 different federal circuit courts of appeals challenging such agency rule-making on the grounds that, among other things, it exceeded executive authority to regulate employment conditions. On November 12, 2021, in BST Holdings, LLC v. OSHA, No. 21-60845 (5th Cir. Nov. 12, 2021), the Fifth Circuit stayed the ETS and ordered OSHA to refrain from taking steps to implement or enforce the mandate until further court order, reasoning that the petitioners’ challenges to the mandate were likely to succeed on the merits because, even if the mandate passed constitutional muster, it was the “rare government pronouncement” that was both under-inclusive and over-inclusive. Despite such pronouncement, on December 17, 2021, a Sixth Circuit panel designated to rule on the consolidated challenges lifted the stay, reasoning that the harm caused by keeping the emergency temporary standard frozen outweighed any damage that would stem from letting it go into effect.

The Sixth Circuit’s ruling was quickly appealed on an emergency basis to the U.S. Supreme Court. On December 22, 2021, the U.S. Supreme Court agreed to hear arguments on an expedited basis at a special session on January 7, 2022, and to consider whether it should allow the ETS and another rule, issued by the Centers for Medicare & Medicaid Services requiring vaccinations for employees at facilities that participate in the Medicare and Medicaid healthcare programs, to go into effect. Both cases challenge the authority of administrative agencies and the federal government to issue such sweeping mandates in the context of the pandemic. A ruling is anticipated in the first quarter of 2022.

Challenges to state government actions have proven less successful. For instance, healthcare workers sued to block COVID-19 vaccine mandates in both Maine and New York and sought preliminary injunctions contending that such mandates violated their constitutional rights because they did not include religious exemptions. In both cases, the reviewing courts, respectively, refused to grant injunctive relief, and the U.S. Supreme Court declined requests to intervene in both actions. In total, of the 41 motions for preliminary injunctive relief filed in 2021 to prevent enforcement of vaccination rules, only 15, or 41% were granted.

This trend is illustrated by the following graphic.

Challenges to policies adopted by private employers faced worse odds in 2021. In 2021, litigants challenged employer policies on various grounds, including on the grounds that they supposedly discriminated against employees because they failed to provide disability or religious accommodations or retaliated against workers who expressed COVID-related concerns or sought such accommodations.

In Sambrano v. United Airlines, Inc., No. 21-CV-1074 (N.D. Tex. Nov. 8, 2021), for instance, a group of employees filed a putative class action alleging that United violated Title VII by refusing to engage in an interactive process, by failing to provide reasonable religious accommodations, and by retaliating against them for engaging in protected activity. After granting in part defendant’s motion to dismiss in part on personal jurisdiction grounds, the court denied plaintiffs’ motion for preliminary injunction on the basis that plaintiffs failed to meet their burden to show that, without such an order, they would suffer imminent, irreparable harm.

On December 13, 2021, the Fifth Circuit denied an emergency motion for an injunction pending appeal of the order in Sambrano v. United Airline, Inc., No. 21-11159 (5th Cir. Dec. 13, 2021).

By contrast, in Fraternal Order Of Police Chicago Lodge No. 7 v. City of Chicago, No. 2021 CH 5376 (Ill. Cir. Ct. Nov. 1, 2021), a group of police officers filed an action seeking a temporary restraining order to enjoin the implementation of defendant’s COVID-19 vaccination policy until the parties could arbitrate their grievances pursuant to their collective bargaining agreements. The court granted the motion in part. The court reasoned that, if all employees complied with the vaccine requirements, as of the end of the year, there would be no grievances to adjudicate and no remedy that an arbitrator could award. The court, therefore, ruled that plaintiffs demonstrated irreparable injury, stayed compliance with the vaccination requirement until the parties completed their arbitrations, and granted in part plaintiffs’ motion for a preliminary injunction.

In total, courts have issued 65 opinions on motions to dismiss class action claims related to COVID-19 in 2021, and have granted 82% of those motions in whole or in part. The following graphic shows this trend:

In sum, the pandemic has continued to spike class actions (of all varieties) and litigation over all types of workplace issues. To date, however, defendants have achieved high rates of success in defeating these claims by overcoming motions for preliminary injunction and by prevailing on motions to dismiss in whole or part. Employers are apt to see these workplace class actions continue to expand and morph in 2022 as the pandemic endures.

Seyfarth Synopsis: In our continuing coverage of the top trends found in Seyfarth’s 2022 Workplace Class Action Litigation Report, wage & hour litigation remained the sweet spot for the plaintiffs’ class action bar over the past year. Based on sheer volume and statistical numbers, workers certified more class and collective actions in the wage & hour space in 2021 as compared to any other area of workplace. Complex workplace litigation remains one of the chief exposures driving corporate legal budgetary expenditures. Class actions and multi-plaintiff lawsuits, in particular, continue to provide a source of concern for companies. A prime component in that array of risks indisputably continues to include complex wage & hour litigation.

The following map sets forth a circuit-by-circuit analysis of this year’s 332 class certification decisions in all varieties of workplace class action litigation, including wage & hour, employment discrimination, and ERISA.

As the map reflects, in 2021, complex wage & hour litigation under the FLSA drove more certification briefings and a greater number of certification decisions than other areas combined.

Wage & Hour Certification Trends

The ease with which plaintiffs have achieved first-stage certification in the FLSA wage & hour context surely has contributed to the number of filings in that area, and plaintiffs achieved a higher rate of success on initial certification motions in 2021 than in any other year of the past decade, indicating that wage & hour remains a sweet spot for the plaintiffs’ bar.

In 2021, wage & hour lawsuit filings in federal courts decreased for the sixth year in a row. That said, more FLSA lawsuits were filed during each of the preceding nine years – during 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, and 2020 – than were filed in any year of the preceding several decades. Many of these cases remain in the pipeline within federal courts, and the result is a burgeoning case load of wage & hour issues.

To be sure, the significant volume of FLSA filings over the past several years has caused the issuance of more certification rulings in the FLSA area than in any other substantive area of complex employment litigation. Despite the pandemic’s continued impact on court operations and personnel, courts issued more rulings on wage & hour certification issues in 2021 than they issued in each of the past five years. In particular, federal courts issued 298 decisions on FLSA certification and decertification issues in 2021, an increase from the 286 certification rulings issued in 2020, the 267 certification rulings issued in 2019, the 273 certification rulings in 2018, and the 257 certification rulings in 2017.

Of these rulings, 279 addressed first-stage motions for conditional certification of wage & hour collective actions under 29 U.S.C. § 216(b), whereas 19 addressed second-stage motions for decertification. Plaintiffs historically have secured a higher rate of success on the former, while employers have secured a higher rate of success on the latter. In 2021, as noted above, plaintiffs achieved an exceptionally high rate of success on first stage conditional certification motions, equal to or higher than the rate they achieved in any year of the past decade aside from 2020. In 2021, Plaintiffs saw their rate of success at 81%, down slightly from their 2020 success rate of 84%, and the same as their 2019 success rate of 81%. Employers, on the other hand, saw their rate of success on decertification motions rise to 53% in 2021, up from 50% in 2020 and 58% in 2019.

The analysis of these rulings – discussed in Chapter V of this Report – shows that plaintiffs filed a high predominance of cases against employers in “plaintiff-friendly” jurisdictions such as the judicial districts within the Second and Ninth Circuits. For the second time in a decade, however, rulings were equally or more voluminous out of the Sixth Circuit, which also tended to favor workers over employers in conditional certification rulings.

The following map illustrates this trend:

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, Sixth, and Ninth Circuits are the epi-centers of wage & hour class actions and collective actions. More cases were prosecuted and conditionally certified – 47 certification orders in the Second Circuit, 31 certification orders in the Ninth Circuit, and 50 certification orders in the Sixth Circuit – in the district courts in those circuits than in any other areas of the country. For the second time in two years, the Sixth Circuit – which encompass the states of Michigan, Ohio, Kentucky, and Tennessee – had more rulings and certifications than either the Second or Ninth Circuits.

Second, as the burdens of proof under 29 U.S.C. § 216(b) suggest, plaintiffs won the overwhelming majority of “first stage” conditional certification motions (226 of 279 rulings or approximately 81%) in 2021, which was similar to the 2020 numbers (231 of 274 rulings or approximately 84%), the 2019 numbers (198 of 243 or approximately 81%), and the 2018 numbers (196 of 248 rulings or approximately 79%), which were themselves the highest percentages of plaintiff-side wins recorded in the last decade. Further, in terms of “second stage” decertification motions, employers won 53% (10 of 19 rulings) in 2021, which represented a slight rise from the 2020 numbers (6 of 12 rulings or approximately 50%) and the 2019 numbers (14 of 24 rulings or approximately 58%).

Overall, these statistics show robust numbers for the plaintiffs’ bar, as plaintiffs prevailed on “first stage” conditional certification motions at a high rate in 2021 and lost “second stage” decertification motions at a lower rate. The “first stage” conditional certification statistics for plaintiffs at 81% were nearly as favorable as the rate of success that workers obtained in 2020 (84%), as favorable as the rate of success that workers obtained in 2019, when plaintiffs won 81% of “first stage” conditional certification motions, and more favorable as the rate of success that workers obtained in 2018, when plaintiffs won 79% of “first stage” conditional certification motions.

The “second stage” decertification statistics for employers at 53% in 2021 was more favorable to employers than the decertification statistics in 2020, when employers prevailed on 50% of such motions, in 2019, when employers prevailed on 58% of “second stage” decertification motions, in 2018, when employers won 52% of decertification rulings, and in 2017, when employers won 63% of decertification rulings.

The following chart illustrates this trend for 2021:

Third, these numbers reflect the ongoing migration of skilled plaintiffs’ class action lawyers into the wage & hour litigation space. Experienced and able plaintiffs’ class action counsel are apt to secure better results, and the case law that has developed under 29 U.S.C. § 216(b) serves to attract such individuals. In light of the “lenient” standard that many courts apply at the initial conditional certification phase of a case, plaintiffs often can secure “first stage” conditional certification – and foist settlement pressure on an employer – fairly quickly (shortly after filing a case), with minimal monetary investment (e.g., without support from an expert), as compared to class certification in an employment discrimination class action or an ERISA class action, for instance, which typically requires additional discovery, evidentiary submissions, and expert testimony.

As a result, to the extent that litigation of collective actions and class 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 employment discrimination and ERISA 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 the short term.

The certification statistics for 2021 confirm these factors. Despite the continued impact of the COVID-19 pandemic and the lower rate of case filings, courts issued more certification rulings in 2021 and the plaintiffs’ bar secured more certification victories in 2021 than in any other year of the past decade.

The extent to which Epic Systems will continue to impact wage & hour certification trends remains uncertain. As 2021 reflected, the number of FLSA lawsuits filed in 2021 continued to fall as compared to prior years. Coupled with the settlements and the number of rulings discussed above, these statistics suggest that the plaintiffs’ class action bar is not losing interest in these suits. To the contrary, the number of rulings issued by federal courts, despite the COVID-19 pandemic, suggests that plaintiffs’ counsel are succeeding in obtaining rulings on motions for conditional certification at a higher rate than ever. These factors also indicate that arbitration agreements are not getting in the way of these motions and that, instead, plaintiffs are being more selective in filing their cases or in narrowing the groups of employees that they seek to represent.

As discussed below, given the pro-worker policies of the Biden Administration, employers are seeing legislative efforts to overturn Epic Systems gain traction. Particularly if Democrats are able to retain control of the House and Senate during the remainder of President Biden’s term, employers may see these legislative efforts to overturn Epic Systems succeed. As a result, employers could see substantial expansion of case filing numbers in the next few years.

Employment Discrimination & ERISA Certification Trends

Against the backdrop of wage & hour litigation, the rulings in Wal-Mart and Epic Systems continued to fuel more critical thinking and crafting of case theories in employment discrimination and ERISA class action filings in 2021. The Supreme Court’s Rule 23 decisions forced the plaintiffs’ bar to “re-boot” the architecture of their class action theories.[1] Hence, the playbook on Rule 23 strategies is undergoing a continuous process of evolution, and the plaintiffs’ class action bar is continually testing ways to navigate around and to wear away the force of these precedents.

As to Wal-Mart, one work-around has been the filing of “smaller” employment discrimination class actions. In the past 10 years, employers have seen more statewide or regional-type classes asserted than the type of nationwide mega-case that Wal-Mart discouraged. Plaintiffs’ counsel have been more selective, strategic, and savvy relative to calibrating the focus of their cases and aligning the size of their proposed classes to the limits of Rule 23 certification theories.

As to Epic Systems, at least in the employment discrimination area, Plaintiffs have seemed apt to file scaled-down class actions to test the prevalence of arbitration agreements among putative class members and, depending on the result, to move forward with one or more limited classes of non-signers or to use the threat of undermining the enforceability of the arbitration program to attempt to leverage a settlement prior to obtaining a ruling on the propriety or scope of certification.

In 2021, the number of rulings on motions for class certification expanded as compared to 2020. In 2021, courts issued 18 rulings on motions for class certification in employment discrimination actions, compared with 12 rulings in 2020 and 15 rulings in 2019. Plaintiffs, however, prevailed on these motions at a higher rate. Plaintiffs prevailed in 13 of the 18 rulings, or 72%, in 2021, with four of those rulings emanating from the Ninth Circuit, compared to 5 of the 12 rulings, or 42%, in 2020, again with four of those rulings emanating from the Ninth Circuit.

The rate of success of the plaintiffs’ bar in 2021 on such motions was materially higher than its rate of success in recent years. In 2019, plaintiffs won 7 of the 11 rulings, or 63%, on motions for initial certification of class actions in employment discrimination cases, but plaintiffs lost 4 of 4 motions for decertification, for an overall success rate of 46.7%. By comparison, in 2018, plaintiffs won 3 of the 11 rulings on motions for class certification, or 27%, and, in 2017, plaintiffs won 7 of 11 rulings on such motions, or 64%.

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

In terms of the ERISA class action litigation in 2021, the decisions show that employers had the best chance of defeating class certification in the context of ERISA class actions. Courts issued 16 rulings on class certification in 2021, with plaintiffs prevailing in 8 of 14 decisions, or 57%. As a result, 2021 marks plaintiffs’ lowest rate of success in terms on certifying ERISA class action in recent years by a fair margin. In 2020, plaintiffs won 11 of 16 certification rulings, a success rate of 69%. In 2019, plaintiffs won 11 of 17 certification rulings, a success rate of 65%. By comparison, in 2018 plaintiffs won 11 of 17 certification rulings for a similar success rate of 65%, and, in 2017, plaintiffs prevailed in 17 of 22 certification rulings, for 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 2021?

In the areas of wage & hour and employment discrimination claims, in particular, 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.

While class certification rates in ERISA class actions took a nose dive in 2021 compared to prior years (8 motions granted and 6 motions denied in 2021, for a success rate of 57%), class certification for employment discrimination cases (13 motions granted and 5 motions denied in 2021) and conditional certification in wage & hour cases (226 motions granted and 53 motions denied in 2021) remained pronounced, with a success rate ranging from 71% to 81%.

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

–          a success rate of 57% for certification of ERISA class actions;

–          a success rate of 72% for certification of employment discrimination class actions (both Title VII and age discrimination cases); and

–          a success rate of 81% for conditional certification of wage & hour collective and class actions.

The most certification activity in workplace class action litigation took place in the wage & hour space. The trend over the past five years in the wage & hour space reflects a steady success rate that ranged from a low of 73% to a high of 84% for the plaintiffs’ bar. The positive results are more concentrated in plaintiff-friendly “magnet” jurisdictions where the case law favors workers and presents challenges to employers seeking to block certification.

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 past several years. Although case law precedents and defense approaches continue to evolve and generate many good outcomes for employers, courts continue to grant conditional certification motions at high rates.

Whereas overall case filing numbers were down, the numbers of rulings issued in 2021 and the rate of success of the plaintiffs’ bar in gaining conditional certification suggest that the plaintiffs’ bar is exercising more selectivity and restraint when it comes to filing and seeking certification of narrower or more defined groups, thereby contributing to a higher success rate.

The key bright spots in 2021 for employers were an increase in the odds of defeating certification in ERISA class actions, where employers succeeded in defeating class certification in nearly 43% of the rulings issued during 2021, and in the odds of prevailing on decertification of FLSA collective actions, where employers succeeded in obtaining decertification in 53% of the rulings issued during 2021.

By Gerlad L. Maatman, Jr.

Seyfarth Synopsis: As measured by the top 10 largest case resolutions in various workplace class action categories, overall settlement numbers skyrocketed in 2021 to an all-time high. The plaintiffs’ bar and government enforcement attorneys obtained significant settlements in a wide range of areas in 2021, and the overall “top ten” settlement values in 2021 in workplace class actions increased from those in 2020 in every area except for employment discrimination and government-initiated enforcement actions. For the first time ever, aggregate class action settlement recoveries in all categories exceeded the $3.19 billion threshold.

Although many employers and commentators alike expected the continuing impact of the pandemic to depress the size and slow the pace of settlements, workplace class action settlements defied expectations, and the plaintiffs’ bar was successful in converting case filings into significant settlement numbers at higher levels during the two years of the pandemic than during the two preceding years. After settlement numbers reached a high point in 2017, those numbers fell dramatically in 2018, and then leveled off in 2019. In 2020, the plaintiffs’ bar was successful in monetizing their class action filings at a higher level, signaling the beginning of an upward climb.

The momentum continued in 2021, as class action settlement recoveries reached a new high.

This past year, the plaintiffs’ bar drove the settlement of high-value class actions in multiple areas. Considering all types of workplace class actions, settlement numbers in 2021 totaled more than $3.19 billion, an increase compared to 2020, which totaled $1.58 billion, and from 2019, which totaled 1.34 billion. The 2021 totals exceeded the previous high-water mark reached in 2017, when such settlements topped $2.72 billion, setting a new benchmark. The following graphic shows this trend:

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

In 2021, employers saw a monumental upward swing in the settlement values of wage & hour claims, ERISA class actions, and private statutory claims. In contrast, corporate America saw significant decreases across-the-board for resolutions of class actions involving employment discrimination claims and government enforcement litigation.

The following chart illustrates the overall results in these categories for 2021 settlement numbers:

By type of case, settlement values in wage & hour claims, ERISA class actions, and private statutory cases experienced the most significant increases.

On the wage & hour front, the value of the top 10 wage & hour class action settlements ballooned in 2021 to $641.3 million. In 2020, the value of those settlements fell off significantly from the previous year. In 2020, the value of the top 10 wage & hour settlements was $294.60 million, compared with $449.05 million in 2019.

In 2021, the value of the top 10 wage & hours class action settlements made a resurgence to a number higher than the number in any year of the past decade aside from 2016. The 2021 value of $641.3 million held slightly lower than the high water mark reached in 2016 ($695.5 million) but otherwise exceeded every other year of the past decade, including 2020 ($294.6 million), 2019 ($449.05 million), 2018 ($253.5 million), 2017 ($525 million), 2015 ($463.6 million), 2014 ($215.3 million), 2013 ($248.45 million), and 2012 ($292 million).

Considering the trend starting in 2015, aside from dips in 2018 and 2020, the value of the top 10 wage & hour settlements exceeded $400 million in every year, for an adjusted five-year average of $537.43 million, or an overall seven-year average of $462.18 million. Adding the numbers, corporate America saw over $3.235 billion devoted to settling the top 10 wage & hour settlements over that seven-year period.

As the plaintiffs’ class action bar continues to find avenues to avoid the impact of the 2018 ruling in Epic Systems on businesses inclined to adopt mandatory workplace arbitration programs with class action waivers, and as cases subject to that precedent continue to work their way out of the pipeline, we anticipate that settlement numbers will continue to climb in 2022.

The settlement value of the top 10 ERISA class actions also climbed in 2021. The top 10 settlements totaled $411.05 million, an increase over the 2020 total of $380.10 million as well as the 2019 total of $376.35 million and the 2018 total of $313.40 million. ERISA settlements in 2021 climbed back closer to the levels employers saw from 2014 to 2017, during which period settlements totaled $1.31 billion (2014), $926.5 million (2015), $807.4 million (2016), and $927.8 million (2017), for an average over the four-year period from 2014 through 2017 of $992.93 million.

This trend is illustrated by the following chart of settlements from 2013 to 2021:

The top 10 settlements in the private plaintiff statutory class action category (e.g., cases brought for breach of contract for employee benefits, workplace antitrust laws, or statutes such as the Fair Credit Reporting Act or the Worker Adjustment and Retraining Notification Act) skyrocketed in 2021 to a new high. The settlements totaled $1.671 billion, which represents a significant increase over every year from 2016 forward and a reversal of a downward year-over-year trend that began in 2018. The previous high water mark, set in 2017, was $487.28 million. In 2018, settlements tapered to $411.15 million, followed by $319.65 million in 2019, and $244.55 in 2020.

The following chart tracks these figures:

Employment discrimination class action settlements, on the other hand, showed a decrease in 2021, as compared to 2020. In 2021, the top 10 settlements totaled $323.45 million, as compared to $422.68 million in 2020. In 2020, the value of the top 10 largest employment discrimination class action settlements of $422.68 million was the highest figure reached since we began tracking numbers, and $76.28 million higher than the next highest year recorded (2010).

While lower than the levels employers saw in 2020, the 2021 settlement numbers were significantly higher than previous years, including 2015 ($295.57 million) and 2017 ($293.5 million), and greatly exceeded those in 2012 ($48.65 million), 2013 ($234.1 million), 2014 ($227.93 million), 2016 ($79.81 million), 2018 ($216.09 million), and 2019 ($139.2 million). In fact, the top 10 settlements in 2021 of $323.45 million were higher than the average year-over-year value of the top 10 settlements from 2012 to 2020 of $217.5 million.

The comparison of the settlement figures with previous settlement activity over the last decade is illustrated in the following chart:

Relatedly, the top 10 settlements in government enforcement litigation experienced a downward turn in 2021, as they decreased to a total of $146.38 million.

In 2020, those settlements totaled $241.0 million, a significant jump from the $57.52 million employers saw in 2019 and from the $126.7 million recorded in 2018. Thus, although the numbers decreased in 2021, they outpaced the numbers lodged in 2014, 2015, 2016, and 2019 and fell closer to the average year-over-year value of the top 10 settlements from 2012 to 2020 of $168.82 million.

This trend is illustrated by the following chart of settlements from 2013 to 2021:

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, case filing trends of the plaintiffs’ class action bar, the Biden Administration’s labor and employment enforcement policies, and class certification rulings.

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: Seyfarth’s 18th Annual Workplace Class Action Litigation Report analyzes 1,607 rulings and is our most comprehensive Report ever at over 840 pages.

Click here to access the microsite featuring all the Report highlights. You can read about the five major trends of the past year, order your copy of the eBook, and download Chapters 1 and 2 on the 2022 Executive Summary and key class action settlements.

The Report has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We are humbled and honored by the recent review of our 2021 Annual Workplace Class Action Litigation Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said: “The Report is a must-have resource for legal research and in-depth analysis of employment-related class action litigation.” Further, the article noted that “No practitioner who deals with employment claims, whether as an underwriter, broker, risk manager, consultant, or attorney should be without it.”

EPLic stated: “The encyclopedic . . . Seyfarth Shaw Annual Workplace Class Action Litigation Report insightfully examines and analyzes an array of class action decisions. In addition, the federal cases examined in the Report are indexed by federal circuit – an invaluable feature that further enhances the Report’s utility. The Report is also available in e-Book format and is fully searchable.”

The 2022 Report analyzes rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2021 for employment discrimination, wage & hour, ERISA class actions, and statutory workplace laws, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

We hope our loyal blog readers will enjoy it!

Executive Summary

Over the past decade, workplace class action litigation has exploded relative to its prevalence and complexity. The class action mechanism provides skilled plaintiffs’ lawyers a tool to attempt to inflate the size and risk of litigation exponentially. The plaintiffs’ class action bar has seized on and expanded its use of this tool to grow its practice and has adopted an array of tactics to command and build increasing pressure and leverage.

Today, workplace class actions remain at the top of the list of challenges that business leaders face. An adverse judgment in a class action has the potential to bankrupt a company. Adverse publicity from a threatened or ongoing class action has the potential to eviscerate good will and market share. At the same time, negotiated resolutions have the potential to spawn copy-cat class actions and follow-on claims from multiple groups of plaintiffs’ lawyers who challenge corporate policies and practices in numerous jurisdictions at the same time or in succession. Compounding these risks, federal and state legislatures and administrative agencies continually add to a patchwork quilt of compliance challenges that shift and change with each administration, thereby bringing increased unpredictability.

Ever-attuned to the challenges facing business leaders, the plaintiffs’ class action bar has leveraged these risks into increasingly large pay-outs. Skilled plaintiffs’ class action lawyers and governmental enforcement litigators have continued to develop new theories and approaches to the successful prosecution of complex workplace litigation and enforcement lawsuits and have continued to convert the size and uncertainty of such litigation into settlements at increasing rates. This phenomenon was manifest in 2021 as the aggregate value of workplace class action settlements ballooned to an all-time high.

As a result, managing and combating workplace class action threats commands an evolving and strategic approach. The events of the past year demonstrate that the array of problems facing businesses are continuing to change and to become more complex. During 2021, the COVID-19 pandemic continued to inspire new laws and regulations, which led to new types of workplace issues and new class theories that are likely to influence the fabric of complex workplace litigation for years to come. The COVID-19 “return to work” effort, remote and hybrid work arrangements, and vaccination mandates spawned new challenges and new class action risks.

The impact of the pro-worker policies of the Biden Administration also took hold over the past year as the agencies under its charge effectively reversed many of the pro-business rules adopted by the Trump Administration. The Biden Administration rolled out policy changes that are continuing to take shape through executive orders, legislative efforts, agency rulemaking, and enforcement litigation. Contrary to the pro-business approach of the Trump Administration, many of these efforts expanded the rights, remedies, and procedural avenues available to workers and government enforcement agencies, and created an array of litigation and compliance challenges for businesses.

As we move into 2022 and beyond, employers should expect that the changing workplace, coupled with these stark reversals in policy, will expand enforcement efforts and have a cascading impact on private class action litigation. The combination of these factors presents increasing challenges for businesses to integrate their risk mitigation and litigation strategies to navigate these exposures.

While predictions about the future of workplace class action litigation may cover a wide array of potential outcomes, one sure bet is that the plaintiffs’ class action bar will continue to evolve and adapt to changes in legislation, agency rulemaking, and case law precedents. As a result, class action litigation will remain fluid and dynamic, and corporate America will continue to face new litigation challenges in the year to come.

An overview of workplace class action litigation developments in 2021 reveals five key trends.

Blockbuster Settlement Numbers

First, the aggregate monetary value of workplace class action settlements exploded in 2021 to an all-time high, as plaintiffs’ lawyers and government enforcement agencies monetarized their claims at the highest values we have ever tracked. Many employers and commentators alike expected the pandemic to depress the size and pace of settlements. Instead, the numbers show that the plaintiffs’ bar was successful in converting case filings into significant settlement numbers at higher levels during the pandemic than in any of the preceding years. After settlement numbers reached a high point in 2017, they plummeted to their lowest level ever in 2018 before experiencing a mild recovery in 2019. In 2020, settlement numbers continued their upward trend in several areas, signaling a return to prominence of these bet-the-company cases. This momentum continued in 2021, as class action settlement recoveries reached a new threshold. The top 10 settlements in various employment-related class action categories exceeded $3.19 billion in 2021, compared to $1.58 billion in 2020, $1.34 billion in 2019, and $1.32 billion in 2018. For wage & hour class actions, the monetary value of the top 10 private plaintiff settlements entered into or paid in 2021 reached $641.3 million. This amount represents a monumental increase from the 2020 total of $294.6 million, as well as the 2019 total of $449.05 million. For ERISA class actions, the monetary value of the top 10 private plaintiff settlements entered into or paid in 2021 totaled $411.05 million, more than the 2020 total of $380.10 million and the 2019 total of $376.35 million. The only areas of decline were private-plaintiff employment discrimination and government enforcement action settlements. The top 10 employment discrimination settlements garnered $323.45 million in 2021, as compared to settlement figures of $422.68 in 2020 and $137.35 million in 2019, and the top 10 government enforcement action settlements garnered $146.38 million, a sharp decline from the 2020 total of $241 million, but a significant jump from the 2019 total of $57.52 million.

Deluge Of Wage & Hour Litigation

Second, wage & hour litigation remained a sweet spot for the plaintiffs’ class action bar as it achieved high rates of success at both the certification and decertification stages. Based on sheer volume and statistical numbers, workers certified more class and collective actions in the wage & hour space in 2021 as compared to any other area of workplace law. While evolving case law precedents and new defense approaches resulted in many good outcomes for employers opposing class and collective action certification requests in 2021, the plaintiffs’ bar sustained its high rate of success on first-stage conditional certification motions in 2021 and markedly improved its rate of success on second-stage decertification motions. Perhaps due to the backlog resulting from pandemic-related court closures, the overall number of rulings increased in 2021, and plaintiffs prevailed on those first-stage motions at a rate exceeded only by the rate at which they prevailed in 2020. Of the 298 FLSA wage & hour certification decisions in 2021, plaintiffs won 226 of 279 conditional certification rulings (approximately 81%). As to second-stage decertification motions, plaintiffs prevailed at a similar rate in 2021 than in other years of the past decade. Plaintiffs lost 10 of 19 decertification motions (approximately 53%). By comparison, employers saw 286 wage & hour certification decisions in 2020, and plaintiffs won 231 of 274 conditional certification motions (approximately 84%) and lost six out of 12 decertification rulings (approximately 50%). By further comparison, of the 267 wage & hour certification decisions in 2019, plaintiffs won 198 of 243 conditional certification rulings (approximately 81%), and lost 14 of 24 decertification rulings (approximately 42%). By further comparison, there were 273 wage & hour certification decisions in 2018, where plaintiffs won 196 of 248 conditional certification rulings (approximately 79%) and lost 13 of 25 decertification rulings (approximately 48%). In sum, the plaintiffs’ bar successfully secured certification of wage & hour actions at an astounding rate in 2021, while their odds of clearing the decertification hurdle decreased slightly to 47%. We expect these numbers to rise ever further in 2022 with a more employee-friendly U.S. Department of Labor actively working to eliminate pro-business rules and shifting its regulatory focus toward a plaintiff-friendly agenda.

More Aggressive Government Enforcement Litigation

Third, the change of leadership in the White House translated directly to reversals in administrative agendas, as the Biden Administration’s enforcement authorities took steps to eliminate pro-business rules of the Trump Administration, thereby fueling skepticism regarding the continued weight of agency determinations. Voters elected to turn the White House from red to blue in November 2020 and, as a result, changes in numerous areas rolled out over 2021 that reversed Trump-era pro-business policies and sought to expand worker rights. The Department of Labor (“DOL”), in particular, withdrew or rescinded Trump-era rules, including the tip credit, joint employer, and independent contractor rules promulgated by the DOL during the Trump Administration. For example, after amending the DOL’s Field Operations Handbook in February 2019, the Trump DOL undertook formal rulemaking and, in late 2020, issued a final rule that would have allowed employers to take the tip credit for duties performed “for a reasonable time immediately before or after” a tipped duty. Before that final rule took effect, the Biden Administration delayed its effective date and then rescinded and replaced it with a more complicated, worker-friendly final rule that limited use of the tip credit effective December 28, 2021. Similarly, effective on March 16, 2020, the Trump DOL established a rule that set forth a four-factor balancing test for determining when a business would be considered the “employer” of a worker who simultaneously performs work for another business. The Biden DOL rescinded the Trump DOL rule, effective September 28, 2021, in favor of the more expansive and less predictable “economic reality” test applied by some courts. While the DOL acted swiftly to reverse course on many fronts with the change of administrations, other agencies continue to operate under Trump-appointed majorities and, as a result, have been slower to pivot. Likewise, the chair of the EEOC shifted with President Biden’s inauguration, and major rule shifts came through other avenues. On June 30, 2021, for example, President Biden signed a joint resolution narrowly passed by Congress to repeal a Trump-era rule that would have increased the EEOC’s information-sharing requirements during the statutorily mandated conciliation process. The agency’s filings over the past year reflect this state of affairs. For instance, after more than doubling its inventory of systemic filings between FY 2016 and FY 2018 (with 18 in FY 2016, 30 in FY 2017, and 37 in FY 2018), the EEOC’s systemic filings dropped to 17 in FY 2019, 13 in FY 2020, and 13 in FY 2021. Total filings followed a similar trajectory, with 136 in FY 2016, 202 in FY 2017, 217 in FY 2018, but only 149 in FY 2019, 101 in FY 2020, and 114 in FY in 2021. When the EEOC’s current leadership shifts away from a majority of Trump-appointed Commissioners in mid-2022, employers should anticipate a stark shift in the EEOC’s litigation enforcement program.

Continuing Impact Of COVID-19 On Class Actions

Fourth, COVID-19 class action litigation became more pervasive in reaching across new industries and spawning new challenges on the workplace class action front. The COVID-19 pandemic had a significant, continuing impact on all aspects of life in 2021. Its impact extended to the legal system in general and workplace class actions in particular. As we reported last year, in 2020, as state and local governments responded to the COVID-19 threat, many employers moved their employees to tele-work or work-from-home arrangements, many companies laid off or furloughed workers, and many businesses shut down or postponed critical operations. In 2021, as vaccines became widely available and state and local governments continued to manage the COVID-19 threat, many employers attempted to move their employees to “return to work” or “hybrid” work arrangements. Such developments prompted federal regulators to enact vaccine-or-test mandates and fueled employers to adopt or expand health screenings, temperature check protocols, and mandatory vaccination policies. These steps, in turn, led to waves of controversy as workplace class actions brought by states, employee advocates, unions, and employer groups erupted over regulatory actions and employer policies. Litigants challenged agency rule-making contending that it exceeded executive authority to regulate conditions of employment. These challenges have met mixed results, as courts have granted approximately 41% of requests for temporary restraining orders or preliminary injunctions to date. Other litigants have challenged employer policies on various grounds, including on the bases that they allegedly discriminated against employees by failing to provide disability or religious accommodations, or retaliated against workers who expressed COVID-related concerns or sought such accommodations. Such challenges have met a lower rate of success, as courts have granted approximately 82% of motions to dismiss such class claims in whole or part. In sum, the pandemic has continued to spike class actions (of all varieties) and litigation over all types of workplace issues. Employers are apt to see these workplace class actions continue to expand and morph in 2022 as the pandemic endures.

Assault On Arbitration Defenses

Fifth, workplace arbitration programs continued to influence the nature of class action litigation and shift the types of claims filed in 2021 as the plaintiffs’ bar continued to find ways to work around such obstacles. As employers clawed for cover from the increasing weight of workplace class action litigation in recent years, workplace arbitration continued to gain steam, aided by the U.S. Supreme Court’s transformative ruling in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). Epic Systems reaffirmed that the Federal Arbitration Act requires courts to enforce agreements to arbitrate according to their terms, including mandatory agreements that provide for individual proceedings and include class action waivers. Bolstered by such precedents, more than half of non-union, private-sector employers and more than two-thirds of large employers have adopted mandatory arbitration agreements. Such programs have continued to shift class action litigation dynamics in critical ways as they have led to more front-end attacks on proposed class and collective actions and, as the result of such attacks, to the defense bar dismantling more workplace class and collective actions by fracturing those proceedings and diverting them into individual arbitrations. Over the past year, plaintiffs’ class action lawyers continued to attempt to find ways to attempt to end-run such agreements. These efforts took shape on multiple fronts. In 2021, the plaintiffs’ bar continued to shift its efforts toward claims more apt to be immune from such programs or toward populations less likely to have entered into agreements with defendants. This trend is illustrated by the spike in filings based on state laws that are not currently subject to arbitration, like the California Private Attorneys’ General Act (“PAGA”), which filings have quadrupled over the past decade and continued their upward trajectory during 2021. On a different front, advocates for workers and labor redoubled their efforts to shift this landscape by backing new legislation that would amend federal laws to ban mandatory arbitration agreements, depending on the bill, for employment, consumer, antitrust, civil rights, or sexual harassment disputes. In light of current administrative priorities, the future remains anything but clear as to whether arbitration programs will remain viable tools to counter proposed workplace class actions in the face of these continued attacks on Epic Systems.

Implications For Employers

In the ever-changing economy and patchwork quilt of laws and regulations, corporations face new, unique, and challenging litigation risks and legal compliance problems.

Adding to this challenge, the one constant in workplace class action litigation is change. Continuing a trend from 2020, 2021 was a year of great change, inside and outside of the workplace. As these issues play out in 2022, additional chapters in the class action playbook will be written.

The private plaintiffs’ bar are apt to be equally, if not more, aggressive in 2022 in bringing class action and collective action litigation against employers. They are likely to be aided by new worker-friendly rulemaking emanating from agencies within the executive branch.

These novel challenges demand a shift of thinking in the way companies formulate their strategies. As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel. Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel’s priorities list for 2022.

By: Matthew J. Gagnon and Tyler Z. Zmick

Seyfarth Synopsis: Following the March 8, 2021 Executive Order establishing the White House Gender Policy Council, on October 22, 2021 the White House released the first-ever U.S. Government National Strategy on Gender Equity and Equality. The EEOC contributed to the Strategy and supports its full implementation, suggesting that gender-related issues – including the gender wage gap – may be among the Commission’s top priorities in its FY 2022 enforcement agenda.

As part of President Biden’s March 8, 2021 Executive Order 14020 establishing the White House Gender Policy Council (see here), on October 22, 2021 the White House released the first-ever U.S. Government National Strategy on Gender Equity and Equality (available here).

The Strategy has three main sections. Section One establishes guiding principles undergirding the strategy to advance gender equity and equality. Section Two outlines the following ten interconnected priorities: (1) economic security; (2) gender-based violence; (3) health; (4) education; (5) justice and immigration; (6) human rights and equality under the law; (7) security and humanitarian relief; (8) climate change; (9) science and technology; and (10) democracy, participation, and leadership. Section Three elaborates on the whole-of-government effort that is required for implementation, ensuring that a focus on gender is mainstreamed across the work of the federal government.

Strategy On Improving Economic Security And Accelerating Economic Growth

The Strategy Paper’s “economic security” priority includes subsections on “Promoting Economic Competitiveness by Advancing Women’s Employment in Well-Paying Jobs” and “Addressing Persistent Gender Discrimination and Systemic Barriers to Full Workforce Participation.” Under the Strategy Paper, the White House will “ensure that women have the support they need to enter, stay, and advance in the labor force, and encourage their access to well-paying, good quality jobs,” “ensure that women have a free and fair choice to join a union and that domestic workers receive the legal benefits and protections they deserve,” and “seek increased pay for jobs that are disproportionately held by women by pursuing an increase in the minimum wage and the elimination of the tipped minimum wage and the subminimum wage for all workers, including those with disabilities.”

Furthermore, to close the gender wage gap in the U.S., the White House will “work to strengthen laws prohibiting wage discrimination on the basis of gender, race, and other characteristics, and . . . increase resources for enforcement,” “promote pay transparency, taking steps to increase analysis of pay gaps on the basis of gender, race, and other factors, and outline plans to eliminate these disparities,” “pursue policies to eliminate reliance on prior salary history in compensation decisions, which can perpetuate and compound the effects of prior discrimination,” and “support policies to prohibit discrimination against pregnant and parenting workers.” To eliminate harassment and other forms of workplace discrimination, the White House will support “increasing transparency and accountability by ending forced arbitration and mandatory nondisclosure agreements that prevent workers from pursuing their day in court and by strengthening prevention efforts to create a work environment where all workers can thrive.”

Section III (“Implementation”) requires each federal agency to establish at least three goals to advance the Strategy’s objectives, and detail the plans and resources needed to achieve their goals. Specifically, “agencies should identify, under the auspices of their three priority goals: (i) the gender gaps they aim to close; (ii) outcome measures; and (iii) budgetary, staff, and other needs to achieve targeted objectives.” To ensure effective implementation of the Strategy Paper, the White House will also “embark on a government-wide effort to strengthen data collection and analysis and close gender data gaps.”

EEOC “Supports Full Implementation” Of White House Strategy

The EEOC issued a press release (see here) the same day the Strategy Paper was released, noting the Commission’s contribution to the White House’s Strategy Paper and supporting its full implementation. EEOC Chair Charlotte A. Burrows stated:

The COVID-19 pandemic’s disparate impact on women generally and women of color in particular makes it more urgent than ever to ensure that gender is not a barrier to economic security and opportunities in the workplace. This strategy’s goals to promote pay equity, eliminate harassment and other forms of employment discrimination, and support the nation’s caregivers are all important EEOC priorities.

As previously noted (here), the EEOC’s litigation enforcement activity showed signs of recovering in fiscal year 2021 following the Commission’s down year in FY 2020 – forecasting a busy year in FY 2021 for the EEOC and employers. The EEOC’s public support for full implementation of the White House’s National Strategy on Gender Equity and Equality indicates that issues relating to gender equity may be priorities for the Commission in FY 2022.

By Gerald L. Maatman, Jr., Thomas Ahlering, Alex Karasik, and Sarah Bauman

Seyfarth Synopsis: On September 20, 2021, the Seventh Circuit ruled in Fernandez v. Kerry, Inc., No. 21-1067 (7th Cir. Sept. 20, 2021), that a cause of action filed under the Illinois Biometric Information Privacy Act (“BIPA”) by employees of Kerry, Inc., was preempted by Section 301 of the Labor Management and Relations Act because the claims were premised on an alleged failure by the employer to obtain consent before requiring their employees to scan their fingerprints, and the issue of consent was covered by a collective bargaining agreement. As a result, the Seventh Circuit held that the class action claims could not be pursued by the employees against Kerry, Inc. in federal court.

The Fernandez ruling exemplifies that certain employee disputes implicating the BIPA will be dismissed if the parties intended such disputes to be resolved by the employer and the employees’ collective bargaining representative.

Case Background

Five former employees of Kerry, Inc. (“Plaintiffs”) filed a class action under the BIPA, alleging that Kerry, Inc. failed to obtain their consent before requiring Plaintiffs to scan their fingerprints for timekeeping purposes.  Id. at 1-2.  Defendant moved to dismiss on the grounds that the suit was preempted by Section 301 of the Labor Management Relations Act, 29 U.S.C. §185 (“LMRA”), because the resolution of the claims depended on interpretation of collective bargaining agreements between Defendant and the union that represented Plaintiffs while employed with Kerry.  Id. at 2.  Pursuant to preemption principles, federal law prevents states from interfering in relations between private employers and unions.  Id.  The district court agreed with Defendant and dismissed the lawsuit. Plaintiffs thereafter filed an appeal with the Seventh Circuit.

The Seventh Circuit’s Decision

In reviewing the district court’s ruling, the Seventh Circuit relied primarily on its decision in Miller v. Southwest Airlines Co., 926 F.3d 898, 903-05 (7th Cir. 2019).  There, it held that provisions in the Railway Labor Act that parallel Section 301 prohibit employees from “bypassing their employers about how to clock in and out.”  Id. at 2.  The Miller decision further “doubted that Illinois has attempted to give unionized workers a privilege to bargain directly with employers — after all, the [BIPA] permits an employee’s ‘legally authorized representative’ to consent to the collection and use of biometric information.”  Id. (citing 740 ILCS 14/15(b)).  Relying on Miller, the Seventh Circuit held that where an employer asserts that a union has consented, any dispute regarding the accuracy of such consent must be resolved between the employer and the union.  Id. at 2.  And if any employer “plausibly contends that the union[] has consented,” that “is enough to prevent suits by individual workers.”  Id. at 3.

The Seventh Circuit rejected Plaintiffs’ argument that the Railway Labor Act is “more preemptive” than the LMRA, recognizing that the U.S. Supreme Court “has equated the two” in Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246, 260 (1994).  Id. at 3.  The Seventh Circuit similarly rejected Plaintiffs’ suggestion that a permissive topic (i.e., with respect to the LMRA, clocking in and out) of bargaining need not be subject to the union’s representation.  Id.  Rather, it held that “a certified union is each worker’s exclusive representation on collective issues,” and thus covers disputes regarding timekeeping.  Id.

In conclusion, the Seventh Circuit held that as in Miller, Defendant “invoke[d] a management rights clause,” and whether “‘unions did consent to the collection and use of biometric data, or perhaps grant authority through a management-rights clause, is a question for [decision under the agreement].  Similarly, the retention and destruction schedules for biometric data, and whether [employers] may use third parties to implement timekeeping . . . are topics bargaining between unions and management.’”  Id. at 4 (quoting Miller, 926 F.3d at 903).  Accordingly, the Seventh Circuit explained it would be impossible to litigate a dispute about how an employer uses biometric information without asking whether the union has consented on the employees’ behalf — as such, states “cannot by-pass the mechanisms” of federal law and allow direct negotiation or litigation between workers and their employers.  Id. 

Finally, the Seventh Circuit rejected Plaintiffs’ request to send the dispute to arbitration to the extent that the collective bargaining agreements at issue did not allow workers to demand arbitration if the union forgoes the procedure, and the union had not requested arbitration.  Id.  For these reasons, the Seventh Circuit upheld the district court’s decision and dismissed the case.  Id.

Takeaways For Employers

The ruling in Fernandez v. Kerry doubles down on the Seventh Circuit’s refusal to litigate employee-initiated BIPA class actions where the issue of consent is covered by a collective bargaining agreement.  Accordingly, if sued under the BIPA, employers should consider this ruling to assess whether their employees’ claims are premised on a dispute that is covered by an applicable collective bargaining agreement.  Doing so could significantly limit an employer’s liability for damages, and provide another mechanism for seeking dismissal on the pleadings.