By: Gerald L. Maatman, Jr., and Christina M. Janice

Seyfarth Synopsis: On February 4, 2019, in Woods-Early v. Corning Corp., Case No. 18-CV-6162, a race discrimination class action, Judge Frank P. Geraci, Jr. of the U.S. District Court for the Western District of New York refused to strike class allegations of discrimination in promotions on the basis of race and color in violation of Title VII and the New York State Human Rights Law.  Although Plaintiff’s amended complaint failed to identify a single promotion she was denied on the basis of race and color, the Court found that allegations of discriminatory decision-making by a small group of upper-level management exercising unfettered discretion over an employer’s performance review process was sufficient to survive a motion to dismiss the class claims under Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).  

Background

In 2018 an employee of Corning, a multinational technology company specializing in designing and manufacturing materials for industrial and scientific applications, brought a class action alleging that the employer discriminated against her on the basis of her color and race (Black, African-American) in violation of Title VII and the New York State Human Rights Law. Plaintiff asserted that by utilizing a performance evaluation tool and process that disadvantaged Black, African-American employees in obtaining access to promotion opportunities, the employer violated the law.  Plaintiff alleged that the Company used an evaluation tool that allowed supervisors, without sufficient training, to exercise unfettered discretion in evaluating employee performance on the basis of ill-defined “Corning Values,” and that these ratings then were advanced to a group of high-level executives called the “brain trust,” who themselves had unfettered discretion to change the ratings.

The discriminatory result alleged by Plaintiff was that African-American employees routinely received lower ratings than their non-minority counterparts, and because of this they were unable to achieve the “Emerging Talent” internal designation and higher salary bands required by Corning to access training and other executive networking opportunities necessary to obtain promotional opportunities.  Plaintiff did not, however, identify any single promotional opportunity she was denied.

Defendant filed a motion to dismiss the class allegations as well as any allegations of discrimination against Plaintiff in promotions.  Relying on Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), the Company argued that discrimination claims based on the exercise of managerial discretion in the performance evaluation process lack sufficient commonality to proceed in litigation.  Moreover, Defendant argued that allegations that its executive “brain trust” controlled the performance evaluation process, and had the unfettered discretion to change performance ratings and determine who is designated “Emerging Talent,” were merely “conclusory and implausible.”  It further argued that Plaintiff’s claims should fail because she could not link any discriminatory, low performance ratings to an adverse action against her.

The Court’s Ruling

Observing that parties often mistake the import of Wal-Mart as requiring that sustainable class allegations present common questions, the Court opined that the proper inquiry in scrutinizing class allegations is whether the class mechanism is appropriate to find common answers to the allegations.  Noting that the Supreme Court in Wal-Mart emphasized that in Title VII claims implicating many employment decisions there must be a “glue” holding the alleged reasons for the decisions together, the Court stated that this “glue” can come in different forms, such as a biased testing procedure or general policy of discrimination manifested in promotions practices.

The Court followed the lead of the Fourth and Seventh Circuits respectively in Scott v. Family Dollar Stores, Inc., 733 F.3d 105 (4th Cir. 2013), and Chicago Teachers Union, Local No. 1 v. Bd. Of Educ. Of Chicago, 797 F.3d  426 (7th Cit. 2015), each of which found that the commonality required to sustain class treatment is satisfied when discretion is exercised uniformly by higher-level management.  As a result, the Court ruled that allegations of the unfettered discretion of the Company’s “brain trust” — to determine employee performance ratings, the incentive of this singular and cohesive group to manipulate performance ratings to impact the individuals designated as “Emerging Talent,” and the effect of the exercise of that discretion to bar African-American employees from advancing to higher pay bands and the access to executives and training needed for promotions — were sufficient to survive the motion to dismiss.

The Court also rejected Defendant’s challenge that although Plaintiff alleged that she suffered discriminatorily low performance ratings, her claim for discrimination in promotions should be dismissed for failing to allege any promotional opportunity for which she applied and was qualified, and that she had been denied.  The Court rejected the contention that Plaintiff must allege the adverse action of a specific promotion sought and denied in order to survive a motion to dismiss a claim of discrimination in promotions.  Rather, the Court determined that Plaintiff’s allegations of a discriminatory performance evaluation and rating process, and a link between the alleged discriminatory actions of the Company’s “brain trust” and tangible adverse impacts to African-Americans, including herself, was sufficient for her promotions claims to proceed.

Implications For Employers

This decision is one of a growing body of case law authority interpreting and expanding the contours of class actions maintainable in the aftermath of Wal-Mart.  Over time, employers may expect the plaintiffs’ class action bar to test and refine theories to obtain class certification in “managerial discretion” cases.  To get ahead of this curve, employers should periodically review their performance evaluation processes for disparate impact and other vulnerabilities.  Evaluating performance management programs for well-communicated expectations, detailed and sufficiently objective metrics, disciplined scoring, and standardized supervisor training, also is a proactive step for savvy employers to take to enhance the workplace while reducing risk.

By Gerald L. Maatman, Jr.

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

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

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

Wage & Hour Certification Trends

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

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

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

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

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

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

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

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

The following chart illustrates this trend for 2018:

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

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

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

The certification statistics for 2018 confirm these factors.

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

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

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

Employment Discrimination & ERISA Certification Trends

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

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

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

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

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

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

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

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

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

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

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

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

A map illustrating these trends is shown below:

Overall Trends

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

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

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

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

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

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

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

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

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

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

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

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

Lessons From 2018

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

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

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

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

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

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

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

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: Gerald L. Maatman, Jr.Christopher J. DeGroffMatthew J. Gagnon, and Kyla J. Miller

Seyfarth Synopsis: We are once again pleased to offer our readers an analysis of the five most intriguing developments in EEOC litigation in 2018, in addition to a pre-publication preview of our annual report on developments and trends in EEOC-initiated litigation. This year’s book, entitled EEOC-Initiated Litigation: FY 2018, provides a comprehensive examination of the EEOC’s FY 2018 filings, and the major decisions handed down this year in pending EEOC litigation.

Each year, we conduct a thorough analysis of new lawsuits filed by the EEOC and major case decisions handed down by courts across the country in EEOC litigation. Our goal is to identify key trends regarding new areas of focus for the EEOC and significant procedural or substantive developments in EEOC litigation. We package those trends and developments into one comprehensive volume, EEOC-Initiated Litigation: FY 2018, which we provide to our clients so they can use that information in structuring their compliance programs and to avoid becoming a target of the EEOC’s enforcement agenda. Our annual report is targeted towards HR professionals, corporate counsel, and other corporate decision-makers.

This year, we have analyzed trends and developments in light of the strategic priorities identified by the EEOC itself in its Strategic Enforcement Plan. Over the years, we have consistently found that those strategic priorities guide the EEOC’s actual enforcement agenda. How the EEOC has interpreted and defined its agenda in light of those priorities is one of the key insights that we hope to provide in our annual report.

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

As always, we like to take a moment at the end of the year to reflect on what we consider to be the most intriguing EEOC-related decisions and developments of the year. Here is our list of the “top five” most intriguing developments of 2018.

Intriguing Developments 1 and 2: Pleading Tactics

A pair of cases decided under the ADA brought some interesting insight into the relative advantages and disadvantages the EEOC enjoys at the pleading stage.

In EEOC v. UPS Ground Freight, Inc., the EEOC took the unusual and aggressive step of arguing, in a motion for judgment on the pleadings, that the language of a collective bargaining agreement established a prima facie case of a discriminatory policy under the ADA because it paid drivers disqualified for medical reasons less than what it paid drivers disqualified for non-medical reasons. The Court granted the EEOC’s motion, and issued a permanent injunction against the company, holding that the agreement’s language was plain and unambiguous, and that no case-by-case analysis was required because the language itself was enough to establish that unlawful discrimination was part of the employer’s “standard operating procedure.” This decision is remarkable for a number of reasons, but perhaps most especially because of the EEOC’s unusually aggressive – and successful – tactic to establish a prima facie case of liability at the very outset of the case. Employers should be wary of the EEOC using this tactic in future cases.

In EEOC v. Prestige Care, Inc., however, the EEOC did not fare so well.  The EEOC sued Prestige Care on behalf of 13 identified claimants for violations of the ADA, arguing that the employer followed policies that did not permit reasonable accommodations for qualified individuals. In a motion to dismiss, the employer argued that the EEOC’s complaint was deficient as to ten of the 13 claimants because it failed to allege they had impairments that affected a major life activity, or failed to identify essential job functions, and therefore had not alleged that they had plausible ADA claims. The EEOC argued that it was not required to do so because it has the unique and broad authority to bring lawsuits in its own name on behalf of a group of unnamed individuals. The Court disagreed, holding that the EEOC is not immune to normal pleading requirements. When the EEOC identifies additional victims who have allegedly suffered disability discrimination, it must plausibly allege that those individuals are protected by the ADA. In other words, despite the often lopsided relationship between employers and the agency during the investigative stage, the parties are on equal footing in the court system.

Intriguing Developments 3 and 4: LGBT Discrimination, The Debate Rages On

For the past several years, the EEOC has maintained that discrimination on the basis of sexual orientation or gender identity is a form of sex discrimination prohibited by Title VII because it is tantamount to discrimination for failure to adhere to perceived gender stereotypes. The U.S. Department of Justice under the Trump administration has conspicuously broke with the EEOC, arguing in a number of amicus briefs that Title VII does not cover those forms of LGBT discrimination. Nevertheless, the EEOC and private plaintiffs continue to rack up victories on this front. In Zarda v. Altitude Express, Inc., the Second Circuit ruled en banc that Title VII prohibits discrimination on the basis of sexual orientation. The Second Circuit has now joined the Seventh Circuit, the EEOC, and a number of district and administrative courts across the country that have interpreted Title VII to extend its prohibition of sex discrimination to sexual orientation.

Will the Supreme Court step in? With the federal circuits divided on this issue, not to mention the vastly divergent interpretations of Title VII by the agencies entrusted to enforce Title VII, many observers considered this issue ripe for review by the U.S. Supreme Court. And, in fact, the Supreme Court had set a date in November of 2018 to decide whether to grant review of three cases, including Zarda, which had addressed this issue. In November of 2018, the Supreme Court delayed consideration of that issue and then, abruptly, removed it from its calendar altogether. The original date had been set in September of 2018, before the bruising confirmation fight over Justice Kavanaugh. Some have speculated that this is evidence that the Supreme Court is trying to avoid controversial cultural issues during Kavanaugh’s first term to allow time for the dust to settle from his confirmation battle. In the meantime, employers are forced to contend with a confusing patchwork of interpretations regarding the scope of Title VII that can vary from Circuit to Circuit, and from District to District.

Intriguing Development 5: The #MeToo Movement Surges

Our last pick as a top 5 development of the year is actually an aggregation of the dozens of cases the EEOC filed alleging sexual harassment. As we previously reported here, one of the most striking trends of FY 2018 has been the huge spike in sex-based discrimination filings, especially those alleging sexual harassment. Lest there be any doubt as to whether this represents a significant shift in priorities, on October 4, 2018, just four days after the end of the EEOC’s 2018 fiscal year, the agency took the unusual step of announcing its preliminary FY 2018 sexual harassment data. Employers usually must wait until the EEOC releases its Performance and Accountability Report in mid-November to see that kind of data. The EEOC trumpeted filing 66 harassment lawsuits in FY 2018, 50% more than FY 2017. Given the intense focus on this issue, we strongly suspect that this trend is here to stay for the foreseeable future.

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

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

Seyfarth Synopsis: Happy Holiday season to our loyal readers of the Workplace Class Action Blog! Our elves are busy at work this holiday season in wrapping up our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report. We anticipate going to press in early January, and launching the 2019 Report to our readers from our Blog.

This will be our Fifteenth Annual Report, and the biggest yet with analysis of over 1,400 class certification rulings from federal and state courts in 2018.  The Report will be available for download as an E-Book too.

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 are humbled and honored by the recent review of our 2018 Annual Workplace Class Action Litigation Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. 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 will analyze 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, and ERISA class actions, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

Information on downloading your copy of the 2019 Report will be available on our blog in early January. Happy Holidays!

By Christopher M. Cascino And Gerald L. Maatman, Jr.

Seyfarth Synopsis: In a major end-of-the-year ruling, employers scored a significant victory in terms of the denial of class certification in a major gender discrimination case that has been closely watched by the media and the bar alike. It underscores the power of U.S. Supreme Court rulings as a bulwark for defending class action litigation.

Introduction

On November 30, 2018, Judge Lorna Schofield of the U.S. District Court for the Southern District Of New York denied certification of a proposed nationwide Title VII class action alleging discrimination on the basis of sex by KPMG. In the decision, Kassman v. KMPG LLP, No. 11 Civ. 3743 (S.D.N.Y. Nov. 30, 2018), the Court rejected Plaintiffs’ argument that KPMG established a framework for managers to exercise their discretion in making compensation and promotion decisions that led to discrimination on the basis of sex. This case represents a significant win for employers as the Court rebuffed a novel attempt to create commonality out of discretionary decision-making after the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). It also provides further guidance to employers about how to make pay and promotion decisions in a manner that avoids potential class action lawsuits.

Case Background

On June 2, 2011, Plaintiffs filed suit against KMPG, alleging that it discriminates against women in making pay and promotion decisions. Id. at 1. Shortly thereafter, the U.S. Supreme Court issued its landmark decision in Wal-Mart, which the Court characterized as “provid[ing] a roadmap to avoid class certification of a nationwide class asserting gender discrimination.” Id

After the Supreme Court decided Wal-Mart, KPMG utilized a decentralized system for determining pay and promotions. Id. at 2.  However, that decentralized system still had a structure. Id. Among other things, compensation decisions were made under the direction of a National Director of Compensation Strategies within a framework designed to pay KPMG employees at the appropriate market rate. Id. at 2, 5-6. Additionally, KPMG also conducted performance reviews within a framework containing standards for, among other things, years of experience necessary for particular promotions. Id. at 7-9.

Plaintiffs argued that the framework within which KPMG made decentralized compensation and promotion decisions led to discrimination against women on both a disparate impact and disparate treatment basis. They moved for certification of a nationwide class, a New York State class, and a collective action.

The Court’s Decision

The Court first analyzed Plaintiffs’ disparate impact claim.  Unsurprisingly, it began with an analysis of Wal-Mart.  It observed that, under Wal-Mart, discretionary pay and promotion procedures can only satisfy the commonality requirement of Rule 23 if decision-makers operate under “a common mode of exercising discretion that pervades the entire company, such that individual discretionary decisions nonetheless produce a common answer to the question ‘why was I disfavored.’”  Id. at 35 (quotation marks omitted).  The Court found that the appropriate way to analyze if such a common mode of exercising discretion was present is to analyze four factors, including: “(1) the nature of the purported class; (2) the process through which discretion is exercised; (3) the criteria governing the discretion and (4) the involvement of upper management.”  Id. at 36.

Applying the first factor, the Court opined that the large size of the putative class – at least 10,000 women – and the fact it was located across the country weighed against a finding of a common mode of exercising discretion. Id. at 36-37. The Court observed that it is much more difficult for a common mode of exercising discretion to exist when decisions are being made by large numbers of decision-makers across the country. Id. at 37.

Turning to the second factor, the Court considered whether the framework within which pay and promotion decisions were made weighed in favor of finding that a common mode of exercising discretion existed. The Court found that “KPMG’s pay and promotion procedures act more as a framework that dictates who will make discretionary decisions rather than how they will exercise their discretion.” Id. at 38. While finding that pay ranges were set at a company-wide level, the Court reasoned that the fact that compensation decisions were made within that range weighed against a finding that a common mode of exercising discretion existed. Id.

The Court next analyzed whether the criteria governing the discretion weighed in favor of finding that a common mode of exercising discretion existed.  Id. at 41.  It observed that “whether a set of criteria creates a common mode of exercising discretion depends on the rigidity of the criteria. Subjective criteria, prone to different interpretations, generally do not provide common direction.”  Id.  Finding that the criteria applied by KPMG, such as “‘professionalism,’ ‘integrity,’ ‘reputation’ and potential to be a ‘partner candidate’” were “amorphous” and thus weighed against a finding that a common mode of exercising discretion existed.  Id. at 42.

Finally, the Court analyzed the fourth factor of “the involvement of top management in the discretionary decision-making.” Id. The Court determined that Plaintiffs’ argument that all pay and promotion decisions must ultimately be approved by two individuals unpersuasive because there was no evidence that these two individuals were doing anything other than approving aggregate promotion and pay numbers rather than at an individual level. Id. at 43. Accordingly, the Court noted that the fourth factor also weighed against a finding that a common mode of discretion existed. Id

With all four factors weighing against such a finding, the Court concluded that Plaintiffs had not established commonality and denied class certification of Plaintiffs’ disparate impact claim. Id. at 43-44. 

Turning to Plaintiffs’ disparate treatment claim, the Court held that Plaintiffs did not show that their statistical evidence demonstrated disparate treatment because Plaintiffs had not shown that promotion policies and practices were uniform across KPMG as required to make statistical evidence relevant under Wal-MartId. at 46-47.  The Court further found that Plaintiffs’ argument that KPMG ignored evidence of gender discrimination did not comport with the record, and that their anecdotal evidence was insufficient to show intentional discrimination.  Id. at 48-50.  Accordingly, the Court denied certification of Plaintiffs’ disparate treatment claim. Id.

Finally, the Court denied certification of a New York state class because Plaintiffs did not provide any evidence of New York state-specific practices, and it denied certification of an Equal Pay Act collective action because Plaintiffs failed to prove the members of the putative collective action worked in a single establishment and that they were similarly-situated. Id. at 51-60.

Conclusion

This case represents a significant win for employers. After Wal-Mart, plaintiffs’ lawyers have tried to develop new theories to secure certification of classes even where decisions are made in a decentralized manner. In Kassman, the Court not only rebuffed the latest such attempt, but also provided employers with additional ways to structure their pay and promotion policies to avoid potential class actions.

By Gerald L. Maatman, Jr. and Michael L. DeMarino

Seyfarth SynopsisThe government’s anti-discrimination watchdog can be extremely aggressive in pursuing discrimination claims, including pursuing those claims after an employer files for bankruptcy. Normally, after a bankruptcy petition is filed, the Bankruptcy Code’s automatic stay enjoins other actions against the debtor. But in EEOC v. Tim Shepard M.D., PA d/b/a Shepherd Healthcare, 17-CV-02569 (N.D. Tex. Oct. 11, 2018), the U.S. District Court for the Northern District of Texas sided with the EEOC and concluded that the EEOC’s Title VII lawsuit fell within an exception to the Bankruptcy Code’s automatic stay. This case is a good reminder that the Bankruptcy Code’s protections do not necessarily stave off an EEOC action. Importantly, the EEOC often will not back down from a fight simply because its target filed a bankruptcy petition, and depending on the nature of the EEOC action, it may fall within an exception to the automatic stay.  

The Decision

In EEOC v. Tim Shepard M.D., PA d/b/a Shepherd Healthcare, 17-CV-02569 (N.D. Tex. Oct. 11, 2018), the EEOC filed suit in the U.S. District Court for the Northern District of Texas for alleged violations of Title VII of the Civil Rights Act of 1964. After a year of litigation, the defendant filed a voluntary petition under Chapter 7 of the Bankruptcy Code. As a result of the bankruptcy proceeding, the court entered an automatic stay under 11 U.S.C. § 362 and administratively closed the EEOC’s action.

The Bankruptcy Code’s automatic stay provides fundamental protection to a debtor in a bankruptcy by automatically enjoining certain actions against the debtor. The purpose of the automatic stay is to preserve the bankruptcy estate so that it can be orderly distributed to creditors.

Although the court stayed and administratively closed the EEOC’s enforcement action, the EEOC filed a motion to reopen the case, arguing that its discrimination lawsuit fell within the governmental unit or police and regulatory exception to the automatic stay found in 11 U.S.C. § 362(b)(4). Section 362(b)(4) provides that the filing of a bankruptcy petition “does not operate as a stay” of:

the commencement or continuation of an action or proceeding by a governmental unit . . . to enforce such governmental unit’s . . . police and regulatory power, including the enforcement of a judgment other than a money judgment, obtained in an action or proceeding by the governmental unit to enforce such governmental unit’s . . . police or regulatory power.

11 U.S.C. § 362(b)(4).

Because Fifth Circuit has not addressed whether an EEOC enforcement action under Title VII falls within Section 362(b)(4)’s exception to the automatic stay, the court explained that it “must assess whether the EEOC’s primary purpose for bringing this action is to protect public policy and welfare as opposed to adjudicating private rights or represents an attempt to recover property from [the defendant’s] bankruptcy estate.” Id. at 2. The court then analyzed the nature of the lawsuit and the relief sought to make this determination.

Specifically, the court found that the EEOC was primarily seeking a permanent injunction and that there was no indication that it was protecting a pecuniary interest in the bankruptcy estate. In addition, the court highlighted that the EEOC was vindicating the public interest by seeking to prevent discrimination in the workplace. Based on these findings, the court concluded that the EEOC’s primary purpose for bringing the action was to protect public policy and welfare. Thus, the court held that the EEOC’s action was not subject to the Bankruptcy Code’s automatic stay.

Implication For Employers:

This case is a valuable reminder for employers that the EEOC will not be deterred by the threat, or filing of, a bankruptcy petition. Employer’s facing bankruptcy and enforcement actions should assess whether the EEOC’s action will likely be an exception to the automatic stay. As this case makes clear, if the EEOC is primarily seeking injunctive relief, there is a good chance that the Bankruptcy Code’s automatic stay will not enjoin the EEOC’s enforcement action.

 

By Christopher J. DeGroffMatthew J. Gagnon,  Gerald L. Maatman, Jr., and Kyla J. Miller

Seyfarth Synopsis: The uncertainty of a new administration’s impact on the EEOC that plagued FY 2017 is fading, but the results are not what some would expect. Not only has the EEOC brought a mountain of filings compared to the last four years, but also the agency has demonstrated a clear focus on sex-based discrimination and sexual harassment in the workplace in light of #MeToo, even surpassing FY 2017 numbers.

With a full fiscal year under its belt, the Trump Administration’s impact on EEOC-initiated litigation is still uncertain. With two Republican Commissioners and the General Counsel position still unconfirmed, it is difficult to discern if things will truly be “business as usual” under Trump or if those appointments, once confirmed, will change agency course. One thing is certain: the EEOC’s litigation program is not slowing down any time soon. Just as the waning months of FY 2017 showed a marked increase in filings, FY 2018 turned up the heat even more. Filings are up more than ever, with sex discrimination filings and #MeToo filings – i.e., complaints of sexual harassment – eclipsing previous years.

The total number of filings in FY 2018 demolished FY 2015 and 2016, and even surpassed FY 2017. (Compare here to here and here). This year, the EEOC filed 217 actions, 197 merits lawsuits and 20 subpoena enforcement actions.

Predictably, the EEOC waited until the last minute to push filings, with this past month showing the most filings compared to any other month this fiscal year. At the time of publication, 84 lawsuits were filed in September, including 45 in the last 3 days alone.  Notable this year, however, was the “ramp up” period in June, July and August, which accounted for 63 of the total filings. Almost half of those cases were brought in August. The total filings for the remaining months remain low, with the number of filings in October through February failing to hit double digits.

Filings in Chicago, Philadelphia and Los Angeles continue to top the charts, with 21, 21, and 17 total filings, respectively. These numbers remain relatively consistent to FY 2017, which showed 21 filings in Chicago, 19 in Philadelphia, and 22 in Los Angeles. On the lower end, the St. Louis and Memphis numbers were modest, with only 7 filings in St. Louis and 8 filings in Memphis. Of the remaining districts, the Phoenix and New York district offices rebounded after a slow FY 2017, each filing 6 more lawsuits in FY 2018 as compared to last year.

Sex Discrimination Takes Center Stage

Each fiscal year we analyze what substantive theories the EEOC is targeting. This year, Title VII claims remained the largest category of filings, on par with FY 2017, which boasted 53% of all filings. In FY 2018, Title VII filings accounted for 55% of all filings. Although FY 2016 showed a dip in Title VII filings at 41%, this year’s Title VII filings beat out FY 2015 and FY 2014 as well.

With a new Strategic Enforcement Plan in place to guide litigation activity for FY 2018-2022, many expected some shift in focus based on two notable changes from the old plan. Specifically, the new plan pledged to address discriminatory practices against those who are Muslim or Sikh, or individuals of Arab, Middle Eastern, or South Asian descent. Additionally, the new plan aims to expand the EEOC’s equal pay priority to include compensation discrepancies for race, ethnicity, age, and disability – moving beyond the EEOC’s focus on sex-based pay disparities. In fact, we have actually seen a decrease in Equal Pay Act filings, which could reflect the EEOC’s renewed focus on equal pay issues that affect other protected groups, which would not fall under the jurisdiction of the Equal Pay Act.

One trend has emerged this year – compared to FY 2017, race filings have decreased by 6 filings – with 18 filings in FY 2018 compared to 24 filings in FY 2017.

Perhaps the most striking trend of all is the substantial increase in sex-based discrimination filings, primarily the number of sexual harassment filings. As predicted, #MeToo added fuel to this area of the EEOC’s agenda, with 74% of the EEOC’s Title VII filings this year targeting sex-based discrimination. Compare this to FY 2017, where sex based discrimination accounted for 65% of Title VII filings. Of the FY 2018 sex discrimination filings, 41 filings included claims of sexual harassment. 11 of those filings were brought in the last three days of the fiscal year alone. The total number of sexual harassment filings was notably more than FY 2017, where sexual harassment claims accounted for 33 filings.

EEOC’s #MeToo Harassment Filing Surge

Implications For Employers

The dramatic increase in filings should be an eye-opener for employers in an era when many thought the EEOC might be hitting the brakes. Instead, the EEOC is increasing its enforcement activity, with a particular focus on sex discrimination and sexual harassment. The EEOC still strongly advises employers should update and aggressively enforce their EEO Policies. Now, more than ever, employers need to be on top of their game to avoid becoming the next target of EEOC-initiated litigation.

As most of our loyal readers know, this blog is merely a preview of the more extensive analysis of EEOC trends and developments affecting EEOC litigation that we publish at the end of the calendar year. Stay tuned for our in-depth analysis of FY 2018 filings, and particular danger areas for employers in this shifting political climate.

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

By Gerald L. Maatman, Jr. and Lauren E. Becker

Seyfarth Synopsis: The U.S. District Court for the District of New Jersey recently issued a ruling with respect to Defendants’ “compelling” exhaustion argument that Plaintiffs failed to exhaust administrative remedies with respect to their disparate treatment and disparate impact theories of Title VII claims relied on to support their motion for class certification, as those claims were outside the scope of Plaintiffs’ underlying EEOC charges. In rejecting Defendants’ argument, the Court invited Defendants to raise their argument more appropriately on a motion for summary judgment. The decision is an important one for employers facing employment discrimination class actions.

Case Background

In Smith v. Merck & Co., No. 13-CV-2970, 2018 U.S. Dist. LEXIS 129126 (D.N.J. July 31, 2018), a former Merck & Co. employee filed a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”), individually and on behalf of a class of similarly-situated employees, alleging that Merck violated Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e, and other state and federal laws. Id. at 2. After receiving a Right-To-Sue Notice from the EEOC, Plaintiff filed a Complaint in the U.S. District Court for the District of New Jersey against Merck & Co. raising claims consistent with those alleged in her EEOC charge.

Plaintiff twice amended her Complaint.  First, she added several more named plaintiffs, each of whom had filed administrative charges with the EEOC on behalf of a class. The Second Amended Complaint added named Defendants, Merck Sharp & Dohme, Corp. and Intervet, Inc., and fourteen causes of action.  Id. at 3.

Plaintiffs moved for class certification based on disparate treatment and disparate impact. Defendants filed their own motion for partial judgment on the pleadings under Federal Rule of Civil Procedure 12(c), which permits a party to secure a dismissal after the pleadings close without delaying trial. Id. at 6. Defendants argued that Plaintiffs failed to exhaust their administrative remedies with regards to the disparate impact and disparate treatment claims, as required by Title VII, because those claims were not supported by the pleadings or underlying EEOC charges. Id. at 5. Instead, Defendants argued that the disparate impact and treatment claims were “newly asserted challenges,” based on at least four policies that Plaintiffs obtained and learned about during discovery. Id. at 4. At the EEOC charge stage, Plaintiffs had not asserted disparate treatment by evidencing a facially neutral policy that adversely impacted Plaintiffs. Id. Instead, Plaintiffs’ EEOC charges asserted discrimination exclusively based on the actions of individual managers. Id. Plaintiffs’ disparate impact claim failed, Defendants’ argued, because neither the EEOC charges nor the Complaint supported “discrimination based on high-level facially neutral policies that Merck allegedly implemented to discriminate” against Plaintiffs. Id. at 5.

Plaintiffs argued that the EEOC charges supported their motion for class certification, the requirements of which “are separate from, and more stringent than, the administrative exhaustion standard for Title VII cases.” Id. at 5.

The Court’s Decision

On July 31, 2018, the Court denied Defendants’ motion for partial judgment on the pleadings, without ruling on the exhaustion defense. Id. at 9.

First, the Court addressed the standard by which courts in the Third Circuit determine a motion for partial judgment on the pleadings. Id. at 6. Specifically, the Court viewed all facts and inferences garnered from the pleadings in the light most favorable to plaintiffs and would grant Defendants’ motion only where it “clearly establish[ed]” that there were no remaining issues of material fact. Id.

Then the Court articulated Title VII’s exhaustion requirements. Id. at 7-9. Specifically, before filing a Title VII action in federal court, plaintiffs first must exhaust administrative remedies by filing an administrative charge of discrimination with the EEOC, and then either resolving the claim with the EEOC or obtaining a right-to-sue letter. Id. at 7. According to the Court, these “essential” elements of Title VII’s “statutory plan” are designed to promote judicial efficiency and provide employers adequate notice of the claims that may be filed against them. Id. at 7-8.

To rule on Defendants’ exhaustion argument, the Court opined that it would have to assess the appropriate scope of the federal court action, as defined by the EEOC’s investigations into Plaintiffs’ claims. Id. at 8.  Specifically, the Court would have to assess whether Plaintiffs’ disparate treatment and disparate treatment claims “should have been included in a reasonable investigation conducted by the EEOC, based upon the information contained in the Charge.” Id. at 8-9. If found to be outside the scope of Plaintiffs’ EEOC claims, then Plaintiffs had failed to exhaust their administrative remedies with respect to the disparate treatment and disparate impact claims, which rendered those claims insufficiently ripe to be heard by the Court. Id.

The Court declined to conduct the exhaustion analysis as Rule 12(c) prohibits consideration of separate motion papers when determining a motion for partial judgment on the pleadings. Id. at 9. Nonetheless, the Court indicated a willingness to consider Defendants’ “compelling” exhaustion argument, if raised on Defendants’ own motion for summary judgment, which it characterized as the “appropriate procedural vehicle.” Id. at n. 3.

Implications For Employers

The Court, if it chose to do so, could have converted the motion on the pleadings to a motion for summary judgment sua sponte.  Alternatively, it could have decided the motion under Rule 12(c) because the matters outside of the pleadings are public record.  Nonetheless, the Court’s recognition of Defendants’ “compelling” exhaustion argument is significant because it indicates the Court’s likely ruling, if and when Defendants pursue the argument in a motion for summary judgment.

Employers and class action attorneys should pay close attention to the scope of discrimination litigation at the class certification stage, particularly where Plaintiffs’ raise claims in federal litigation that fall outside the scope of those raised in support of an administrative charge of discrimination before the EEOC.

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

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

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

***

Case Background

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

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

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

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

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

The Court’s Decision

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

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

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

Implications For Employers

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