Seyfarth Synopsis: The impact of the #MeToo Movement was the fifth major class action development of 2018, as well as the newest trend in our 15th Annual Workplace Class Action Litigation Report (“WCAR”).  By way of its groundbreaking emergence on social media, the #MeToo Movement profoundly impacted the workplace and made its way into the class action arena.  Today, we conclude our exclusive video series by posting WCAR author Jerry Maatman’s analysis of this trend from Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event held on January 30, 2019.  Click the link below to see and hear Jerry discuss the #MeToo Movement’s effect on complex litigation in 2018!

By: Gerald L. Maatman, Jr.

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

By: Gerald L. Maatman, Jr.

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

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

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

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

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

Implications For Employers:

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

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: At 852 pages, Seyfarth’s 15th Annual Workplace Class Action Litigation Report analyzes 1,453 rulings and is our most comprehensive Report ever.

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 2019 Executive Summary and key class action settlements.

The Report was featured today in an exclusive article in MarketWatch. Click here to read the coverage!

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We were again honored this year with a review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”). Here is what EPLiC said: “The Report is a must-have resource for legal research and in-depth analysis of employment-related class action litigation. Anyone who practices in this area, whether as a corporate counsel, a private attorney, a business execu­tive, a risk manager, an underwriter, a consul­tant, or a broker, cannot afford to be without it. Importantly, the Report is the only publica­tion of its kind in the United States. It is the sole compendium that analyzes workplace class actions from ‘A to Z.’” Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation.

The 2019 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 2018 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

The prosecution of workplace class action litigation by the plaintiffs’ bar has continued to escalate over the past decade. Class actions often pose unique “bet-the-company” risks for employers. As has become readily apparent in the #MeToo era, an adverse judgment in a class action has the potential to bankrupt a business and adverse publicity can eviscerate its market share. Likewise, the on-going defense of a class action can drain corporate resources long before the case even reaches a decision point. Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices in numerous jurisdictions at the same time. Hence, workplace class actions can impair a corporation’s business operations, jeopardize or cut short the careers of senior management, and cost millions of dollars to defend. For these reasons, workplace class actions remain at the top of the list of challenges that keep business leaders up late at night with worries about compliance and litigation. Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making this challenge any easier for companies. They are continuing to develop new theories and approaches to the successful prosecution of complex employment litigation and government-backed lawsuits.

New rulings by federal and state courts have added to this patchwork quilt of compliance problems and risk management issues. In turn, the events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses are continuing to accelerate at a rapid pace while also undergoing significant change. Notwithstanding the transition to new leadership in the White House with the Trump Administration, governmental enforcement litigation pursued by the U.S. Equal Employment Commission (“EEOC”) and other federal agencies continued to manifest an aggressive agenda, with regulatory oversight of workplace issues continuing as a high priority. Conversely, litigation issues stemming from the U.S. Department of Labor (“DOL”) reflected a slight pull-back from previous efforts to push a pronounced pro-worker/anti-business agenda. The combination of these factors are challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. These challenges are especially acute for businesses in the context of complex workplace litigation. Adding to this mosaic of challenges in 2019 is the continuing evolution in federal policies emanating from the Trump White House, the recent appointments of new Supreme Court Justices, and mid-term elections placing the Senate in control of Republicans and the House in control of Democrats. Furthermore, while changes to government priorities started on the previous Inauguration Day and are on-going, others are being carried out by new leadership at the agency level who were appointed over this past year. As expected, many changes represent stark reversals in policy that are sure to have a cascading impact on private class action litigation.

While predictions about the future of workplace class action litigation may cover a wide array of potential outcomes, the one sure bet is that change is inevitable and corporate America will continue to face new litigation challenges.

Key Trends Of 2018

An overview of workplace class action litigation developments in 2018 reveals five key trends. First, class action litigation has been shaped and influenced to a large degree by recent rulings of the U.S. Supreme Court. Over the past several years, the U.S. Supreme Court has accepted more cases for review than in previous years – and as a result, has issued more rulings that have impacted the prosecution and defense of class actions and government enforcement litigation. The past year continued that trend, with several key decisions on complex employment litigation and class action issues that were arguably more pro-business than decisions in past terms. Among those rulings, Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) – which upheld the legality of class action waivers in mandatory arbitration agreements – is a transformative decision that is one of the most important workplace class action rulings in the last two decades. It is already having a profound impact on the prosecution and defense of workplace class action litigation, and in the long run, Epic Systems may well shift class action litigation dynamics in critical ways. Coupled with the appointments of Justices Neil Gorsuch and Brett Kavanaugh to the Supreme Court in 2018, litigation may well be reshaped in ways that change the playbook for prosecuting and defending class actions.

Second, the plaintiffs’ bar was successful in prosecuting class certification motions at the highest rates ever as compared to previous years in the areas of ERISA and wage & hour litigation, while suffering significant defeats in employment discrimination litigation. While evolving case law precedents and new defense approaches resulted in good outcomes for employers in opposing class certification requests, federal and state courts issued many favorable class certification rulings for the plaintiffs’ bar in 2018. Plaintiffs’ lawyers continued to craft refined class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). As a result, in the areas of wage & hour and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in federal courts in 2018 (over comparative figures for 2017). Class actions were certified in significantly higher numbers in “magnet” jurisdictions that continued to issue decisions that encourage or, in effect, force the resolution of large numbers of claims through class-wide mechanisms. Furthermore, the sheer volume of wage & hour certification decisions in 2018 increased as compared to last year, and plaintiffs fared better in litigating those class certification motions in federal court than in the prior year. Of the 273 wage & hour certification decisions in 2018, plaintiffs won 196 of 248 conditional certification rulings (approximately 79%), and lost only 13 of 25 decertification rulings (approximately 52%). By comparison, there were 257 wage & hour certification decisions in 2017, where plaintiffs won 170 of 233 conditional certification rulings (approximately 73%) and lost 15 of 24 decertification rulings (approximately 63%). In sum, employers lost more first stage conditional certification motions in 2018, and saw a reduction of their odds – a decrease of 11% – of fracturing cases with successful decertification motions.

Third, filings and settlements of government enforcement litigation in 2018 did not reflect a head-snapping pivot from the ideological pro-worker outlook of the Obama Administration to a pro-business, less regulation/litigation viewpoint of the Trump Administration. Instead, as compared to 2016 (the last year of the Obama Administration), government enforcement litigation actually increased in 2018. As an example, the EEOC alone brought 199 lawsuits in 2018 as compared to 184 lawsuits in 2017 and 86 lawsuits in 2016. However, the settlement value of the top ten settlements in government enforcement cases decreased dramatically – from $485.25 million in 2017 to $126.7 million in 2018. The explanations for this phenomenon are varied, and include the time-lag between Obama-appointed enforcement personnel vacating their offices and Trump-appointed personnel taking charge of agency decision-making power; the number of lawsuits “in the pipeline” that were filed during the Obama Administration that came to conclusion in the past year; and the “hold-over” effect whereby Obama-appointed policy-makers remained in their positions long enough to continue their enforcement efforts before being replaced in the last half of 2018. This is especially true at the EEOC, where the Trump nominations for the Commission’s Chair, two Commissioners, and its general counsel were stalled in the Senate waiting for votes of approval (or rejection), and one of the two nominees withdrew at year-end due to the delay. These factors are critical to employers, as both the DOL and the EEOC have had a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue. As 2019 opens, it appears that the content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration will continue to tilt away from the pro-employee/anti-big business mindset of the previous Administration. Trump appointees at the EEOC and the DOL are slowly but surely “peeling back” on positions previously advocated under the Obama Administration. As a result, it appears inevitable that the volume of government enforcement litigation and value of settlement numbers from those cases will decrease in 2019.

Fourth, the monetary value of the top workplace class action settlements decreased dramatically in 2018. These settlement numbers had been increasing on an annual basis over the past decade, and reached all-time highs in 2017. While the plaintiffs’ employment class action bar and governmental enforcement litigators were exceedingly successful in monetizing their case filings into large class-wide settlements this past year, they did so at decidedly lower values in 2018 than in previous years. The top ten settlements in various employment-related class action categories totaled $1.32 billion in 2018, a decrease of over $1.4 billion from $2.72 billion in 2017 and a decrease of $430 million from $1.75 billion in 2016. Furthermore, settlements of wage & hour class actions experienced over a 50% decrease in value (from $525 million in 2017 down to $253 million in 2018); ERISA class actions saw nearly a three-fold decrease (from $927 million in 2017 down to $313.4 million in 2018); and government enforcement litigation registered nearly a fourfold decrease (from $485.2 million in 2017 down to $126.7 million in 2018). Whether this is the beginning of a long-range trend or a short-term aberration remains to be seen as 2019 unfolds.

Fifth, as it continues to gain momentum on a worldwide basis, the #MeToo movement is fueling employment litigation issues in general and workplace class action litigation in particular. On account of new reports and social media, it has raised the level of awareness of workplace rights and emboldened many to utilize the judicial system to vindicate those rights. Several large sex harassment class-based settlements were effectuated in 2018 that stemmed at least in part from #MeToo initiatives. Likewise, the EEOC’s enforcement litigation activity in 2018 focused on the filing of #MeToo lawsuits while riding the wave of social media attention to such workplace issues; in fact, fully 74% of the EEOC’s Title VII filings this past year targeted sex-based discrimination (compared to 2017, where sex based-discrimination claims accounted for 65% of Title VII filings). Of the EEOC’s 2018 sex discrimination lawsuit filings, 41 filings included claims of sexual harassment. The total number of sexual harassment filings increased notably as compared to 2017, where sexual harassment claims accounted for 33 filings. Employers can expect more of the same in the coming year.

Implications For Employers

The one constant in workplace class action litigation is change. More than any other year in recent memory, 2018 was a year of great change in the landscape of Rule 23. As these issues play out in 2019, additional chapters in the class action playbook will be written.

The lesson to draw from 2018 is that the private plaintiffs’ bar and government enforcement attorneys at the state level are apt to be equally, if not more, aggressive in 2019 in bringing class action and collective action litigation against employers.

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 2019.

By: Mark Wallin, Christopher DeGroff, and Gerald Maatman, Jr.

Seyfarth Synopsis:  The EEOC operates with limited resources, yet has the daunting responsibility of enforcing an alphabet soup of anti-discrimination laws.  The EEOC has become quite savvy at leveraging the press as a pulpit for publicizing its agenda, especially in litigation.  An employer need only visit the EEOC’s website to understand the role of media statement’s in the Commission’s enforcement process.

In the life-cycle of EEOC initiated litigation, the agency will almost invariably issue two media statements: one issued when the suit is filed, and another when the suit is resolved.  But not all media statements are the same.  Depending on the posture of the case, whether the case theories align with the EEOC’s strategic goals, and even how the EEOC views the employer, media statements can vary dramatically.  This post discusses what employers can expect from these releases, including typical language, elements, and timing.   

EEOC’s Publicity Philosophy

The EEOC has acknowledged that press coverage is part of its deterrent message and mission.  Notably, the Commission’s 2006 Systemic Task Force report provides that the “EEOC engage[s] in high impact litigation and publicity efforts that change the workforce status of affected groups and/or improve employment policies, practices, or procedures in affected workplaces.”  (See also opening statement of Sen. Alexander regarding the Commission’s apparent strategy, in filing certain lawsuits, to “achieve a maximum amount of publicity.”)

The EEOC’s litigation media statement is one of the tools in the Commission’s toolbox that it will wield with an aim to achieve its strategic enforcement goals.

Often Two Media Statements During The Course Of EEOC Initiated Litigation

In the life of a lawsuit initiated by the EEOC, there will ordinarily be two media statements. The first will be published when the suit is filed, and the second if the case is resolved.  Although all media statements published upon filing of a suit will have roughly the same cadence and tone, those published upon resolution can vary greatly.

Initial Media Statement

A media statement issued at the outset of the litigation tends to have a stern tone, regarding the alleged actions of the employer.  The statement will lead off with a general assertion of the legal claims lodged against employer, including the statute at issue.  For example, the statement may declare that a female employee suffered through a hostile work environment at the hands of her supervisor, in violation of Title VII.  The statement will then go on to recite the key allegations of discrimination, harassment, or retaliation proffered in the complaint.  These allegations are often delivered as fact, not issues that will be proven – or not – during the litigation.  Often times the statement will also describe the employer, perhaps sharing a website, states of operation, and a brief description of the work done by the business. Finally, the applicable District Director and/or one of the trial attorneys for the matter will offer a quote in the nature of a sound bite concerning the allegations, which will emphasize the Commission policy underlying its prosecution of the lawsuit.  In the most recent batch of EEOC filings, for instance, which occurred in September, combating sexual harassment and discrimination (“me too”) is the most common EEOC policy articulated. It is not surprising that many employers who have been the subject of the EEOC’s media statements have deemed the Commission’s tactics to be unfair and designed to apply extra-judicial pressure to settle litigation.

Media Statement Upon Resolution

When a suit is resolved, typically through an agreed upon consent decree (but occasionally after a rare trial win), the EEOC will publish yet another media statement.  The tone and content of this statement, however, can vary from highly aggressive to fairly measured, and can even verge on “friendly.”  The direction taken by the EEOC in this statement will depend largely on the resources devoted to the litigation, how contentious the litigation was, as well as whether the claims and allegations at issue align with the Commission’s strategic goals.  Some insight into the Commission’s process can be found in the Regional Attorney’s manual, published here. Notably, before the resolution of “significant litigation” a Regional Attorney is required to advise the Office of the General Counsel.  The Commission defines “significant” to mean a lawsuit “expected to involve significant monetary or injunctive relief”; “a favorable jury verdict or court decision”; or resolution which “is likely to receive national or significant local attention due to the notoriety of the defendant, ongoing media interest in the lawsuit and/or issues involved, or other factors that may have spurred significant media scrutiny.”  Whether or not the litigation is deemed “significant” may well play a role in the tone of the media release as well.

The more resources expended, and the more closely aligned the claims are with the Commission’s strategic goals, the more likely the EEOC will publish an aggressive media statement.  The hallmarks of such a statement will be not only the recitation of the most salacious of the allegations, but also a detailed description of the monetary and programmatic relief obtained in the consent decree.  For example, in a recent matter involving an Illinois restaurant, the EEOC’s media statement set forth that “numerous employees … were routinely sexually harassed by coworkers and managers, including offensive sexual comments, groping, physical threats, and, in one instance, attempted forced oral sex with a management employee.” The statement went on to detail the programmatic relief, followed by harsh admonishments from a Regional Attorney and District Director, specifically:

“Employers are responsible for preventing workplace harassment – and their failure to do so hurts both their employees and their bottom line,” said Andrea G. Baran, Regional Attorney for the EEOC’s St. Louis District. “Business owners and CEOs must be proactive and involved in making sure all managers and employees understand that harassment will not be tolerated, harassers will be punished, and those who report harassment will be protected from retaliation. Prevention starts at the top.”

Moving down the spectrum, the Commission may take a more measured tone where the litigation is less protracted and the claims are not necessarily consistent with its strategic goals. For instance, in a recent ADA case settled by the EEOC concerning an employer’s alleged discriminatory termination of a disabled employee, which had been pending less than a year, the media statement provided scant details concerning the claims brought. Further, after a short description of the programmatic relief contained in the lone statement of a Regional Attorney was far more benign:

“This settlement is both strong and just,” said Rudy Sustaita, regional attorney for the EEOC’s Houston District Office. “[The employer] has given us every indication that it intends to comply with the ADA in the future.”

And on occasion, it will even boarder on “friendly” — including a statement of appreciation to the employer for its cooperation in resolving the litigation. In a suit brought in Wisconsin, filed and settled within five months, the Commission was quoted as stating:

“We thank [the employer] for its commitment to settle this case before the sides incurred significant costs and its willingness to ensure a level playing field for its pregnant employees seeking job modifications, including light duty work, otherwise available to non-pregnant employees,” said EEOC Chicago Regional Attorney Gregory M. Gochanour. “The EEOC will continue to enforce the federal laws so that all pregnant employees have the same opportunities as non-pregnant employees to contribute to our thriving economy,” said Julianne Bowman, the EEOC’s District Director for the Chicago District Office.

Although “friendly” media statements are the exception, not the rule, the EEOC is more likely to publish such a statement to incentivize other employers to similarly resolve enforcement actions.

A Word On Conciliation Media Statements

Historically, the EEOC has generally issued media statements for lawsuits only, as conciliation is intended to be a confidential process.  Indeed, one of the chief reasons for employers to engage in pre-suit conciliation is the carrot of confidential resolution.  Interestingly, however, we have seen a trend of the EEOC issuing presumably agreed-upon media statement for matters settled in conciliation.  Accordingly, the employer has a degree of leverage in negotiating these publications.  As one might imagine, conciliation media statements are, thus, more positive in tone. Further, on occasion, the employer may also make a statement, which at minimum disclaims any liability — something rarely, if ever, allowed in a litigation media statement.

Elements Of A Media Statement

Regardless of the tone, EEOC media statements are consistent in their basic elements and structure.

First, there will be a headline crafted to be eye-catching, such as “Paramount Mailing Company Punished Female Employees for Complaining About Abuse, Federal Agency Charges.”  Below is a word cloud, highlighting the most common words and phrases employed by the EEOC in its 2018 headlines.  Not surprisingly, in the current environment, “Sexual” and “Harassment” play prominently.

Second, the media statement will include a statement of claims, describing the complained of discrimination, harassment, and/or retaliation, including factual and legal allegations.  The more aggressive press releases will set forth the most sensational and detailed allegations, whereas the measured versions may state the allegations in more bland terms, which can sometimes be so vague that it is difficult to divine what the claims were based upon in the first place.

Third, the Commission will include quotes from the relevant District Director and possibly a Regional Attorney involved in the litigation.  The tone of the EEOC’s quotes can vary greatly, depending on, among other things, the importance of the issue to the Commission’s strategic goals, the duration of the litigation, and resources expended.  Excluding conciliation media statements, on very rare occasions, the EEOC may allow a quote from the employer on the resolution of the lawsuit.  Although it is unlikely the Commission will agree to such a statement, if the litigation and settlement proceed amicably, it is certainly worth attempting to negotiate the point.

Finally, the media statement will conclude with a statement of the EEOC’s mission (e.g. “The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination”).  Additionally, where applicable, the statement will indicate where the resolved litigation is among the EEOC’s strategic goals — “[p]reventing workplace harassment through systemic litigation and investigation is one of the six national priorities identified by the Commission’s Strategic Enforcement Plan (SEP).”  Media statements that make note of the SEP are more likely to be among the more aggressive.

Emerging Issues With Media Statements

As the Commission media strategy has evolved, it has made continued efforts to increase its audience and distribution of these statements for maximum effect. The EEOC has also been known to conduct press conferences announcing a new suit or trumpeting an EEOC victory. But now the EEOC also publishes many of its media statements on social media, like Twitter.  It has also taken to issuing relevant media statements in multiple languages depending upon the employees and employer at issue. For as long as the EEOC places a priority on publicity, it will no doubt continue to search for new ways to increase their audience.

Implications for Employers

For employers who find themselves involved in an EEOC enforcement action, it is important not to lose sight of the Commission’s use of its media statement as both carrot and stick.  The EEOC places considerable value on shining a spotlight on its enforcement efforts, especially those which advance its strategic goals.  While it is unlikely that the Commission will allow the employer too much say in the issued statement, when negotiating resolution with the EEOC, where possible, employers should use the Commission’s goal of publicity as a possible bargaining chip to achieve the best possible outcome for the inevitable media statement.  Moreover, by understanding the Commission’s strategic goals, employers will gain a greater awareness of what tone and tenor the EEOC’s statement will take upon resolution, and can prepare accordingly.

 

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

By Matthew J. GagnonChristopher J. DeGroff, and Gerald L. Maatman, Jr.

Seyfarth Synopsis: With uncertain times and profound changes anticipated for the EEOC, employers anxiously await what enforcement litigation the EEOC has in store. Although 2016 showed a marked decline in filings, fiscal year 2017 shows a return to vigorous enforcement filings, with a substantial number of filings in the waning days of the fiscal year.

Employers are living in uncertain times. The impact of a Trump Administration and the EEOC’s new Strategic Enforcement Plan (SEP) for fiscal years 2017-2021 are still working themselves out in the FY 2017 filing trends. Nonetheless, one trend has reemerged: a vigorous number of EEOC case filings. It looks like the anemic numbers of FY 2016 were just a bump in the road, as FY 2017 has revealed an increase in total filings, even eclipsing the numbers from FY 2015 and 2014. (Compare here to here and here.) This year, the EEOC filed 202 actions, 184 merits lawsuits and 18 subpoena enforcement actions.

The September filing frenzy is still an EEOC way-of-life, as this past month yet again holds the title for most filings compared to any other month. At the time of publication, 88 lawsuits were filed in September, including 21 in the last two days alone. In fact, the EEOC filed more cases in the last three months of FY 2017 than it did during all of FY 2016. The total number of filings for the remaining months remains consistent with prior years, including a noticeable ramp up period boasting double digit numbers through the summer.

Filings out of the Chicago district office were back up in FY 2017 after an uncharacteristic decline to just 7 total filings in 2016. This year, Chicago hit 21 filings, an enormous increase from last year. This is closer to the total number of Chicago filings in FY 2015 and 2014 (26 in each year). The Los Angeles district office also increased its filings, hitting a high of 22, a substantial jump compared to previous years and the most of any district office in FY 2017. On the other end of the spectrum, the Phoenix district office has seen a notable drop, with only 7 filings compared to 17 in FY 2016.

New SEP, Same Focus

Every year we analyze what the EEOC says about its substantive focus as a way to understand what conduct it is targeting. This year, Title VII takes center stage. Although Title VII has consistently been the largest category of filings, last year showed a dip in the percentage of filings alleging Title VII violations, at only 41%. Nonetheless, this year Title VII has regained its previous proportion, accounting for 53% of all filings. This is on par with FY 2015 and 2014, showing once again that FY 2016 seems to have been an outlier.

Although the 2017-2021 SEP outlined the same general enforcement priorities as the previous version of the SEP (covering FY 2012 to 2016), the new SEP added “backlash discrimination” towards individuals of Muslin/Sikh/Arab/Middle Eastern/South Asian communities as an additional focus. One would expect this focus might increase the number of Title VII claims alleging either religious, racial, or national origin discrimination. However, those filings stayed relatively even, and were even a bit down from previous years. Religious, national origin, and race discrimination claims made up 42% of all Title VII claims, compared to 50% in 2016 and 46% in 2015.

Uncertainty For Equal Pay Claims

With a new administration came a new Acting Chair for the EEOC. President Trump appointed Victoria Lipnic as Acting Chair on January 25, 2017. Employers expected the EEOC’s new leader to steer the EEOC’s agenda in a different direction. Some believed Lipnic was foreshadowing future trends when she made it clear at her first public appearance – hosted by none other than Seyfarth Shaw – that she is “very interested in equal pay issues.” (See here.) And indeed, we have seen a slight uptick in the number of EPA claims filed in FY 2017. In FY 2017, The EEOC filed 11 EPA claims, compared to 6 in 2016, 5 in 2015, and 2 in 2014.

However, on June 28, 2017, President Trump tapped Janet Dhillon as Chair of the EEOC. Dhillon would come to the EEOC with extensive experience in a big law firm and as the lead lawyer at three large corporations, US Airways, J.C. Penney, and Burlington Stores Inc. Although it is too early to know how she could change the direction of the agency if confirmed, it is entirely possible that she could back away from previous goals to pursue equal pay claims more aggressively.

The Trump Administration has also made other moves that may indicate a change in direction with respect to equal pay initiatives. On February 1, 2016, the EEOC proposed changes to the EEO-1 report that would require all employers with more than 100 employees to submit more detailed compensation data to the EEOC, including information regarding total compensation and total hours worked by race, ethnicity, and gender. This was a change from the previous EEO-1 report, which only required employers to report on employee gender and ethnicity in relation to job titles. However, on August 29, 2017, the new EEO-1 reporting requirements were indefinitely suspended. We will have to wait and see whether the slight uptick in EPA claims in FY 2017 was a one-year anomaly.

Implications For Employers

The changes brought by the Trump Administration are still in the process of working themselves down into the rank and file of many federal agencies. The EEOC is no exception. Despite all of the unrest and uncertainty about where the EEOC may be headed, the FY 2017 filing trends largely show a return to previous years, albeit with a slight uptick in EPA claims. Certainly, changes in top personnel will have an impact on how the EEOC pursues its enforcement agenda. Exactly what that impact will be remains to be seen.

Loyal readers know that this post is merely a prelude to our full analysis of trends and developments affecting EEOC litigation, which will be published at the end of the calendar year. Stay tuned for our continued analysis of FY 2017 EEOC filings, and our thoughts about what employers should keep an eye on as we enter FY 2018. We look forward to keeping you in the loop all year long!

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

armor-158430__340By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  In a sexual harassment lawsuit brought by the EEOC, the Sixth Circuit affirmed a U.S. District Court’s grant of an employer’s motion for summary judgment after finding that the harassing employee was not a supervisor under Title VII, and therefore the company was not vicariously liable for his actions. It is a decidedly pro-employer ruling.

***

In EEOC v. AutoZone, Inc., No. 16-6387 (6th Cir. June 9, 2017), the EEOC alleged that AutoZone was liable under Title VII for a store manager’s alleged sexual harassment of three female employees.  After the U.S. District Court for the Western District of Tennessee granted the employer’s motion for summary judgment, the EEOC appealed.  The Sixth Circuit affirmed the District Court’s grant of summary judgment, finding that because the store manager did not take any tangible employment action against his co-workers and had no authority to do so, he was not a supervisor under Title VII, and thus AutoZone was not vicariously liable for the conduct alleged.  The Sixth Circuit further held that even if the store manager was found to be a supervisor under Title VII, AutoZone established an affirmative defense to liability.

For employers facing EEOC lawsuits alleging that they are vicariously liable for sexual harassment claims brought against employees with managerial job titles, yet who have limited authority to take tangible employment actions, this ruling can be used as a blueprint to attack such claims in motions for summary judgment.

Case Background

In May 2012, AutoZone transferred a store manager to its Cordova, Tennessee location.  Id. at 2.  The store manager could hire new hourly employees and write up employees at the store for misbehaving, but could not fire, demote, promote, or transfer employees.  Authority over firing, promoting, and transferring rested with the district manager for the store.

After an employee claimed that the store manager made lewd comments to her, AutoZone internally investigated the allegations.  As part of AutoZone’s internal investigation, two other female employees who worked at the Cordova location confirmed that the store manager made lewd sexual comments.  Despite his denial of the allegations, AutoZone ultimately transferred and terminated the store manager.  Thereafter, the EEOC brought a lawsuit alleging that AutoZone subjected the three female employees to sexual harassment.  Following discovery, AutoZone moved for summary judgment.  The District Court granted AutoZone’s motion for summary judgment, finding that the store manager was not a supervisor under Title VII and therefore AutoZone was not vicariously liable for his actions.  The EEOC appealed the District Court’s grant of summary judgment to the Sixth Circuit.

The Sixth Circuit’s Decision

The Sixth Circuit affirmed the District Court’s grant of AutoZone’s motion for summary judgment.  First, the Sixth Circuit instructed that under Title VII, if the harassing employee is the victim’s co-worker, the employer is liable only if it was negligent in controlling working conditions, or in other words, if the employer knew or should have known of the harassment yet failed to take prompt and appropriate corrective action.  Id. at 4 (internal quotation marks and citation omitted).  However, if the harasser is the victim’s supervisor, a non-negligent employer may become vicariously liable if the agency relationship aids the victim’s supervisor in his harassment.  Id.  The Sixth Circuit further explained that an employee is a “supervisor” for purposes of vicarious liability under Title VII if he or she is empowered by the employer to take tangible employment actions against the victim.  Id.

Applied here, the Sixth Circuit found that AutoZone did not empower the store manager to take any tangible employment action against his victims since he could not fire, demote, promote, or transfer any employees.  Id. at 5.  Further, the Sixth Circuit held that the store manager’s ability to direct the victims’ work at the store and his title as store manager did not make him the victims’ supervisor for purposes of Title VII.  The Sixth Circuit also noted that while the store manager could initiate the disciplinary process and recommend demotion or promotion, his recommendations were not binding, and his ability to influence the district manager did not suffice to turn him into his victims’ supervisor.  Id. at 5-7.  Finally, the Sixth Circuit held that the store manager’s ability to hire other hourly employees was irrelevant since he did not hire the employees he harassed.  Id. at 7.

After finding that the store manager was not a supervisor for purposes of Title VII, the Sixth Circuit further held that even if he was found to be a supervisor, AutoZone established an affirmative defense to liability.  The defense has two elements: (1) that the employer exercised reasonable care to prevent and promptly correct any sexually harassing behavior; and (2) that the harassed employees unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.  Id.  The Sixth Circuit held that AutoZone met the first element by utilizing an appropriate anti-harassment policy to prevent harassment, and by transferring and later terminating the store manager promptly after it investigated the allegations.  Regarding the second element, the Sixth Circuit held that AutoZone satisfied this prong since the victims failed to report the store manager’s behavior for several months.  The Sixth Circuit thus held that AutoZone established an affirmative defense to liability.  Accordingly, the Sixth Circuit affirmed the District Court’s grant of AutoZone’s motion for summary judgment.  Id. at 10.

Implications For Employers

Employers often utilize employees that may be “managers” in title, yet do not have the authority to take tangible employment actions.  When those employers are sued by the EEOC for the conduct of managers with limited authority, this ruling can be used to argue that such employees are not “supervisors” under Title VII, and therefore the employer is not vicariously liable for their actions.  Nonetheless, given the EEOC’s aggressiveness in attempting to use the theory of vicarious liability to hold “deep-pockets” large-scale employers liable for the conduct of employees, employers would be prudent to invest in harassment-prevention training to minimize the likelihood of such behavior occurring.  But in the event that such incidents of harassment arise and lead to EEOC lawsuits, employers can use this decision to tailor their arguments to focus on the authority of the harasser, as opposed to his or her job title.

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

th7OX71VIZBy Julie G. Yap and Alison H. Hong

Seyfarth Synopsis: The EEOC obtains a multi-million dollar default judgment against an out-of-business company in a case alleging “human trafficking” discrimination claims.

In a ruling on April 26, 2016, in EEOC v. Global Horizons, Inc., Case No. 2:11-CV-03045 (E.D. Wash. Apr. 26, 2016), Judge Edward F. Shea of the U.S. District Court for the Eastern District of Washington entered a default judgment of over $7.6 million in the EEOC’s favor against an essentially defunct business, Global Horizons, Inc.  This multi-million dollar judgment harkens back to the $8.7 million default judgment entered in favor of the EEOC against this same defendant (and another out-of-business defendant) less than two years ago in the U.S. District Court for the District of Hawaii, the agency’s biggest judgment in 2014.  This Judgment – most likely symbolic, as it is apt to be uncollectable – finally closes the door on five years of litigation arising from the EEOC’s purported pursuit of “human trafficking” discrimination claims.

Background To The Case

In 2011, the EEOC brought claims against Defendant Global Horizons, Inc. (“Global Horizons”), among others, in federal district courts in both Hawaii and Washington, alleging a pattern or practice of unlawful discriminatory employment practices against foreign migrant workers based on their Asian race and/or Thai national original.  The EEOC also asserted claims for harassment and hostile work environment, retaliation, and constructive discharge.  The Asian and Thai workers were employed by Global Horizons under the U.S. Department of Labor H2‑A guest worker program to provide farm labor at various locations in California, Hawaii, and Washington.  The Commission had additionally sued other companies that had contracted with Global Horizons to supply workers to their farms and operations.  Subsequent to the litigation, Global Horizons went out of business.

By 2014, the EEOC litigation initiated in Hawaii had largely resolved, with most of the companies securing dismissals of the EEOC’s claims against them or reaching resolutions.  In December 2014, the EEOC obtained default judgment against Global Horizons and another out-of-business defendant in the amount of $8.7 million. It was the largest judgment obtained by the Commission that year.

In early 2015, in the U.S. District Court for the Eastern District of Washington, the EEOC sought default judgment against Global Horizons.  The other companies the Commission had sued in Washington obtained dismissal of the EEOC’s claims against them and were awarded attorneys’ fees and costs just shy of $1 million against the EEOC.

However, with respect to its claims against Global Horizons, the EEOC sought $300,000 for both compensatory and punitive damages for 66 individual claimants, submitting a 152 page supplemental table in support of its request as well as a number of declarations from the individual claimants.  In total, the EEOC sought entry of default judgment against Global Horizons in the amount of $19.8 million.  Based on those submission, the Court entered findings of fact and conclusions of law relative to the EEOC’s claims against Global Horizons on April 26, 2016 in a 30-page order.

The Court’s Ruling

The Court rejected the EEOC’s requests and entered an award of compensatory damages of $5,000 per month worked for Global Horizons to every claimant based on the Defendant’s default and uncontested liability for the pattern or practice of discrimination, a hostile work environment, and retaliation relative to the claimants that Global Horizons brought to work in Washington state.  In addition to compensatory damages, the Court also awarded each claimant $15,000 per month in punitive damages.  The Court further concluded that claimants who were detained by police for almost an entire day were each entitled to additional compensatory damages in the amount of $2,500 per claimant and additional punitive damages in the amount of $7,500 per claimant.  Based on these conclusions, the Court apportioned judgments to claimants ranging from $4,000 (for six days of work) to $210,000 (for ten months of work as well as police detention).  In total, the Court entered default judgment in the amount of $7,658,500.

It remains to be seen what to make of the judgment. It may be worth less than the paper on which it is written, as it is likely not collectable.

Implications For Employers

Since the judgment is likely not to be paid, the EEOC may still hope to use it as a basis for negotiation in like cases. Employers should be mindful of the Commission’s likely arguments as to the “value” of such cases.

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

gavel on white backgroundBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In EEOC v. Northern Star Hospitality, Inc., No. 12-CV-214 (W.D. Wis.), a case we have blogged about previously here, Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin imposed contempt sanctions on an employer for failure to cooperate in post-judgment discovery and granted the EEOC’s request for attorneys’ fees for the time it spent bringing the contempt motion.

The ruling is a cautionary tale for employers, and shows how the EEOC can seek attorneys’ fees despite the fact that its attorneys do not bill a client, and demonstrates that the EEOC will pursue collection of even small judgments against unsuccessful defendants.

Case Background

Dion Miller, an African-American, was a cook for Northern Star Hospitality, Inc. d/b/a Sparx Restaurant (“Sparx”).  On October 1, 2010, when Miller arrived at Sparx to begin his shift, a co-worker told him to look in the kitchen cooler.  In the cooler was a one-dollar bill with a noose drawn around President Washington’s neck and a sketch of a hooded Klansman on horseback with “KKK” written on the hood.  Also in the cooler was a picture of the late Gary Coleman.

Miller had a co-worker take a photograph of the display in the cooler and lodged a complaint with the restaurant’s general manager.  The general manager learned that two of Miller’s superiors – the kitchen manager and kitchen supervisor – admitted that they were responsible for the display.  As a result of the complaint, the kitchen supervisor was given a warning, with the kitchen manager receiving no discipline at all.

After Miller’s complaint, the kitchen manager and supervisor began to criticize Miller’s performance.  Miller was then terminated less than one month after the display was put up.

On March 27, 2012, the EEOC filed suit against Sparx on Miller’s behalf, claiming that he was the victim of racial harassment and that he was wrongfully terminated for opposing that harassment.  On February 25, 2014, after a jury verdict in favor of the EEOC, the Court entered a $64,795.50 judgment against Sparx.  That judgment was upheld by the Seventh Circuit on January 29, 2015.

After the judgment was affirmed, the EEOC served interrogatories on Sparx, seeking information about its assets.  Deeming Sparx’s responses insufficient, the EEOC moved to compel Sparx to provide adequate answers to its interrogatories and for attorneys’ fees expended in seeking adequate interrogatory answers.  The Court granted the motion on June 16, 2015, ordering Sparx to provide further interrogatory answers and to pay the EEOC attorneys’ fees for time spent preparing the motion to compel.

Despite the order, Sparx failed to pay the EEOC’s fees and failed to provide updated interrogatory answers.  On July 27, 2015, the EEOC moved for sanctions for contempt of the Court’s order on the motion to compel.  It also sought attorneys’ fees for the time it spent preparing the motion for a finding of contempt.

The Court’s Ruling

The Court granted the EEOC’s motion for a finding of contempt.  It ordered Sparx to pay a $1,000 per day fine starting three days following the finding of contempt for each day Sparx did not provide updated interrogatory answers and did not pay the EEOC’s fees for the motion to compel.  It further awarded the EEOC $1,000 in fees for the two-and-a-half hours it spent drafting the motion for a finding of contempt.

Implications For Employers

This case will provide further support for the EEOC’s position that, despite the fact its attorneys do not bill any client for their time, it should be entitled to attorneys’ fees in the right circumstances.  Moreover, the case indicates that the EEOC will pursue judgments, no matter how small, that it has won.

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

 

apple-full2.jpgBy Christopher DeGroff and Robb McFadden

Fresh on the heels of a full defense verdict in one of the EEOC’s highest profile sexual harassment cases of 2012-2013, the Commission was dealt another blow on April 19, 2013, when the U.S. District Court for the Eastern District of Washington dismissed a closely related retaliation case because of the lack of admissible evidence supporting those claims. The ruling — EEOC v. Evans Fruit, No 10-CV-3093, 2013 U.S. Dist. LEXIS 56668 (E.D. Wash. Apr. 19, 2013) — represents another significant setback for the Commission and a rebuke of its questionable litigation tactics.  

Factual Background

In EEOC v. Evans Fruit, No 10-CV-3093 (E.D. Wash.), the EEOC sued Evans Fruit on behalf of 10 charging parties who claimed that they were retaliated against for participating in the EEOC’s investigation into allegations of sexual harassment. The retaliation claims stemmed from a meeting between EEOC attorneys and the claimants, a group of former Evans Fruit employees, at a public library in Sunnyside, Washington. One of the charging parties recognized two men at the library who he believed were Evans Fruit employees. The EEOC argued that the employees’ presence at the library was meant to intimidate the claimants and further asserted that several of the individuals were threatened after they attended the meeting. In moving for summary judgment, Evans Fruit challenged the evidentiary basis for the EEOC’s assertions and argued that there was no proof of retaliation. 

The Court’s Decision

On April 19, 2013, Judge Lonny R. Suko granted Evans Fruit’s motion for summary judgment, dismissing all 10 of the EEOC’s retaliation claims. Significantly, the Court noted that unlike sexual harassment claims that take into account whether the alleged victim subjectively believed the work environment was hostile or abusive, retaliation claims are based on an objective, reasonable person standard. Thus, although “out of court statements relayed to a sexual harassment claimant regarding similar acts of harassment in the workplace may be admissible for the purpose of showing the effect on the listener (the claimant),” such statements serve no legitimate purpose in evaluating the charging parties’ retaliation claims because the “subjective effect of a statement on a particular claimant is irrelevant.”  Id. at *10.

In reviewing the EEOC’s purported evidence of retaliation, the Court found that none of the claimants could reasonably have believed that their presence at the library was retaliatory based on what they knew at the time, particularly because all but one of the claimants were either unaware of the two men’s presence at the library or did not believe their presence was significant at the time. Critically, the Court ruled that the claimants’ testimony that they later came to believe that they had been retaliated against — after they learned of the men’s identities and heard that threats had been made by third parties against those who attended the meeting — was based on out of court statements offered to prove the truth of the matter asserted. Finding that nearly all of the EEOC’s evidence was based on inadmissible hearsay, the Court granted Evans Fruit’s motion for summary judgment and dismissed all 10 of the claimants’ retaliation claims.

Implications For Employers

The EEOC has shown from time to time that it will play fast and loose with the “facts,” oftentimes claiming that second-hand rumors, gossip, and even its own pleadings and arguments are “evidence” of Title VII violations. Courtesy of the rule against hearsay, the Court’s decision in Evans Fruit shattered these smoke-and-mirrors tactics. 

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