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.

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Case Background

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

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

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

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

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

The Court’s Decision

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

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

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

Implications For Employers

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

 

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

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

***

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

Case Background

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

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

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

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

Jurisdiction

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

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

Successor Liability And The Applicability Of Title VII To Undocumented Workers

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

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

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

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

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

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

Implications For Employers

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

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

Seyfarth Synopsis: Over the past few weeks, two federal appellate courts have issued major decisions on the scope of workplace discrimination protections covered under Title VII of the Civil Rights Act of 1964 (“Title VII”).  In addition to creating a conflict between various past appellate court precedents, these decisions highlight an ideological divide between two major federal government agencies.  In this video blog, Associate Alex Karasik and Partner Jerry Maatman of Seyfarth Shaw discuss the importance of these decisions, and what employers can expect to see in the evolving debate over Title VII protections.

On February 26, 2018, the U.S. Court of Appeal for the Second Circuit issued an impactful decision in Zarda, et al. v. Altitude Express, d/b/a Skydive Long Island, et al., No. 15-3775 (2d Cir. Feb. 26, 2018), which fueled the debate over protections for sexual orientation under Title VII. The Second Circuit ruled in favor of a (now-deceased) skydiving instructor who claimed to be fired because he was gay, therefore ruling that sexual orientation is a protected category under Title VII.

Then, just last week, the U.S. Equal Employment Opportunity Commission (“EEOC”) notched a major win when the Sixth Circuit sided with the Commission’s position in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., Nos. 16-2424 & 2018 (6th Cir. Mar. 7, 2018).  We previously blogged about this decision here.  This case considered a transgender worker.

These recent appellate court decisions have agreed with the EEOC’s position on the definition of sex discrimination under Title VII.  However, there is also significant opposition to this position – namely by the U.S. Department of Justice (“DOJ”).  In the Zarda case mentioned above, the EEOC and DOJ both submitted amicus briefs, taking completely opposite sides on this issue.  Additionally, the 11th Circuit issued a decision in March of 2017 entitled Evans v. Georgia Reg’l Hosp., No. 15-15234 (11th Cir. Mar. 10, 2017), which sided with the DOJ and a more strict interpretation of the workplace discrimination laws at hand.

In today’s video, Jerry and Alex discuss this controversial topic in detail, and provide their own insights on the matter.  As Jerry states in the video, what this issue looks to be driving towards is, “a showdown in the U.S. Supreme Court, or the halls of Congress, over the scope and parameters over the protections of Title VII.”

By Scott Rabe, Gerald L. Maatman, Jr., and Marlin Duro

Seyfarth Synopsis: In its recent decision in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., No. 16-2424, 2018 U.S. App. LEXIS 5720 (6th Cir. Mar. 7, 2018), the U.S. Court of Appeal for the Sixth Circuit has sent the strong message that the Religious Freedom Restoration Act (“RFRA”) has minimal impact on the Equal Employment Opportunity Commission’s (“EEOC”) authority to enforce the anti-discrimination laws under Title VII of the Civil Rights Act of 1964 (“Title VII”).  The ruling is a big win for the EEOC.

In EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., a Sixth Circuit panel held in a unanimous decision that: (i) Title VII’s proscription of discrimination on the basis of sex encompasses a prohibition on discrimination based on transgender status, and that (ii) in this case the RFRA would not limit the EEOC’s authority to enforce anti-discrimination laws under Title VII.  With this decision, the Sixth Circuit became the first federal Court of Appeals to address the extent to which the RFRA may limit the EEOC’s power to enforce Title VII.[1]

Case Background

By way of background, the EEOC brought suit against a funeral home on behalf of a transgender employee, Aimee Stephens, who was terminated from her employment shortly after informing her employer that she intended to transition from male to female.  The EEOC alleged the funeral home violated Title VII by terminating Stephens’ employment on the basis of her transgender or transitioning status and her refusal to conform to sex-based stereotypes.  The funeral home argued that Title VII did not prohibit discrimination on the basis of transgender status and that the funeral home was protected from enforcement of Title VII by the  RFRA as the government action would constitute an unjustified substantial burden upon the funeral home owner’s exercise of his sincerely held religious beliefs.

Both parties moved for summary judgment and the district court found in favor of the funeral home on both motions  The district court found that Title VII did not protect against discrimination based on transgender status and that, while Stephens had suffered discrimination based on sex stereotyping, the RFRA prevented the EEOC from suing on her behalf.

The Sixth Circuit Appeal

On the EEOC’s appeal, the Sixth Circuit reversed the district court with respect to both motions and  granted summary judgment in favor of the EEOC. First, the Sixth Circuit held that the funeral home’s conduct violated Title VII, reinforcing its prior holdings that discrimination against employees because of their gender identity and transgender status are illegal under Title VII’s prohibition of sex discrimination based on sex stereotyping.  The Sixth Circuit explained that “discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex” and found that firing a person because he or she will no longer represent him or herself as the gender that he or she was born with “falls squarely within the ambit of sex-based discrimination” forbidden under Title VII.  Id. at *18.

Second, the Sixth Circuit held that the EEOC’s enforcement of Title VII against the funeral home did not violate the funeral home’s rights under the RFRA.  A viable defense based on the RFRA requires a demonstration that the government action at issue would substantially burden a sincerely held religious exercise.  Although the Sixth Circuit treated the running of the funeral home as a sincere religious exercise by the owner, it held that the alleged burden caused by the enforcement of Title VII was not “substantial” within the meaning of RFRA.  The Sixth Circuit reasoned that tolerating an employee’s understanding of his or her sex and gender identity was not “tantamount to supporting it” and that mere compliance with Title VII, “without actually assisting or facilitating transition efforts,” did not amount to an endorsement by the employer of the employee’s views.  Id. at *59, *61.  Nor, the Sixth Circuit explained, could the funeral home rely on customers’ “presumed biases” against transgender individuals to meet the substantial burden test. Accordingly, the Sixth Circuit held that the funeral home had not demonstrated a substantial burden on the its religious exercise.

While the Sixth Circuit could have ended its analysis there, it went on to hold that even if tolerating Stephens’ gender identity and transitioning status were a “substantial burden” on the funeral home’s religious exercise, the EEOC did not violate the RFRA because the agency had a compelling interest in eradicating all forms of invidious employment discrimination, and enforcement of Title VII through its enforcement function was the least restrictive means for eradicating discrimination in the workforce.  This analysis, if found not to apply only to the facts of this case, could ostensibly doom any defense to a Title VII action within the Sixth Circuit where an employer raises a defense based on the RFRA.

Implications For Employers

The Sixth Circuit’s opinion is an important one, as it addresses two of the more hot button topics in employment jurisprudence:  the scope of the definition of “sex discrimination” under Title VII and the impact of laws protecting the free exercise of religion in the workplace.  On the former, this opinion joins the recent trend in decisions finding that gender identity is inextricably linked with sex and therefore is protected under Title VII.  And on the latter, the Sixth Circuit has laid down a gauntlet as the first federal circuit addressing the RFRA’s impact on the EEOC’s Title VII enforcement power.  The decision is clearly intended to send a strong message that the RFRA has limited application, if any, in defense of a Title VII action brought by the Commission.  While time will tell whether other federal circuits will adopt a similar interpretation, if the Sixth Circuit’s legal rationale is followed, employers will be hard-pressed to defend Title VII claims brought by the EEOC based on the alleged exercise of religious freedom.

In light of the current uncertainty regarding the ultimate interpretation of Title VII as it applies to gender identity, employers should regularly review their policies to ensure that adequate protections are provided to employees on the basis of their gender identity, and transgender and transitioning status.  As always, we also invite employers to reach out to their Seyfarth contact for solutions and recommendations regarding anti-harassment and EEO policies and addressing compliance with LGBTQ+ issues in the law.

[1]              The RFRA, enacted in 1993, prohibits the government from enforcing a law that is religiously neutral against an individual, if the natural law “substantially burdens” the individual’s religious exercise and is not the least restrictive way to further a compelling government interest.  Importantly, the RFRA applies only in the context of government action, and therefore would not provide a defense for an employer in a civil suit brought by a private plaintiff.

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

Seyfarth Synopsis:  In a showdown between the State of Texas and the EEOC – whereby Texas alleged that the EEOC’s “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII” interfered with its authority to limit the hiring of felons – a federal district court in Texas recently granted the EEOC’s motion for summary judgment, and denied in part Texas’s motion for summary judgment and request for declaratory relief.

This decision signals to employers that the Commission’s position on the unlawful nature of categorical bans on the hiring of felons remains viable.

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Case Background

In State of Texas v. EEOC, No. 5:13CV-255, 2017 U.S. Dist. LEXIS 30558 (N.D. Tex. Feb. 1, 2018) (which we previously blogged about here), Texas argued that the EEOC’s Guidance directly interfered with its authority to impose categorical bans on hiring felons and to be able to discretionarily reject felons for certain jobs.  Id. at *1.  In its Second Amended Complaint, Texas brought two causes of action.  The first cause of action, brought under the Declaratory Judgment Act, sought a declaration that Texas has a right to maintain and enforce its laws and policies that absolutely bar convicted felons (or certain categories of convicted felons) from serving in any job the State and its Legislature deem appropriate; and (2) an injunction preventing the EEOC and the U.S. Attorney General from enforcing the interpretation of Title VII that appears in the Guidance, and from issuing right-to-sue letters.  Id. at *2.  The second cause of action, brought under the Administrative Procedures Act, asked the Court to hold the Guidance unlawful and to set it aside as (1) a substantive rule issued without notice and opportunity for comment; (2) outside the statutory scope given to the EEOC; and (3) an unreasonable interpretation of Title VII. Id.

The EEOC argued that the Guidance had not yet been enforced against Texas, and therefore, the issue was not ripe for adjudication.  Id.  Further, the EEOC asserted that the only purpose of the Guidance was to update and consolidate all of the EEOC’s prior policy statements about Title VII and the use of criminal records in employment decisions.  The EEOC additionally contended that the Guidance was not an expansion of Title VII’s prohibition against hiring policies that create a disparate impact upon protected classes (in this instance, certain racial classes are alleged to be disproportionately impacted by consideration of felony convictions as a ban for employment opportunities).

The District Court’s Decision

The Court granted the EEOC’s motion for summary judgment, and denied in part Texas’s motion for summary judgment and request for declaratory relief.  First, the Court opined that Texas did not have a right to maintain and enforce its laws and policies that absolutely bar convicted felons (or certain categories of convicted felons) from serving in any job that the State and its Legislature deemed appropriate.  Id. at *3.  The Court explained that although there were many categories of employment for which specific prior criminal history profiles of applicants would be a poor fit and pose far too great a risk to the interests of the State and its citizens, there were also many conceivable scenarios where otherwise qualified applicants with felony convictions would pose no objectively reasonable risk.  Accordingly, the Court held that “a categorical denial of employment opportunities to all job applicants convicted of a prior felony paints with too broad a brush and denies meaningful opportunities of employment to many who could benefit greatly from such employment in certain positions.” Id.

Further, the Court addressed Texas’s request that it enjoin the EEOC from issuing right-to-sue letters in relation to the denial of employment opportunities based on the criminal history of the job applicant.  The Court rejected this request, holding the issuance of a right to sue letter was not a determination by the EEOC that a meritorious claim exists. However, the Court did grant Texas’s motion for summary judgment as to its APA claim, noting the Guidance was a substantive rule issued without notice and the opportunity for comment. The Court thus enjoined the EEOC from enforcing the guidance until the notice and comment requirements were satisfied. Accordingly, the Court granted the EEOC’s motion for summary judgment, and denied in part Texas’s motion for summary judgment and request for declaratory relief. Id. at *3-4.

Implications For Employers

This decision has a heavy dose of procedure, but assuming the District Court’s decision remains in place, it nonetheless puts employers on notice that courts will likely give strong deference to the EEOC’s Guidance when considering categorical bans regarding the hiring of felons.  Further, the EEOC will likely use the momentum it gained from this ruling to continue enforcement of its Guidance in an aggressive fashion and investigate businesses with such sweeping hiring practices.

While employers in certain industries may have legitimate reasons for not hiring particular felons (for instance, a bank refusing to hire a felon convicted of embezzlement), businesses need to be cautious about implementing blanket hiring prohibitions of felons.  Accordingly, the best practice for employers is to focus on the qualifications of applicants, and make hiring decisions based on merit.

 

 

Seyfarth Synopsis: At 878 pages, Seyfarth’s 14th Annual Workplace Class Action Litigation Report analyzes 1,408 rulings and is our biggest and most voluminous Report ever.

Click here to access the microsite featuring all the Report highlights. You can read about the four major trends of the past year, order your copy of the eBook, and download Chapters 1 and 2 on the 2018 Executive Summary and key class action settlements.

The Report was featured today in an exclusive article in the Wall Street Journal. 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 definitive ‘must-have’ for legal research and in-depth analysis of employment-related class action litigation.  Anyone who practices in this area, whether as an 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. You can read more about the review here.

The 2018 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 2017 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 increased exponentially over the past decade. More often than not, class actions pose unique “bet-the-company” risks for employers. 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 adversely impact a corporation’s business operations, jeopardize or cut short the careers of senior management, and cost millions of dollars to defend. For these reasons, risks from workplace class actions are at the top of the list of challenges that keep business leaders up late at night.

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. 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 in 2017, governmental enforcement litigation pursued by the EEOC and the U.S. Department of Labor (“DOL”) continued to manifest an aggressive “push-the-envelope” agenda by agencies, with regulatory oversight of workplace issues continuing as a high priority.

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 2018 is the continuing evolution in federal policies based on a new political party occupying the White House for part of 2017. Furthermore, while changes to government priorities started on Inauguration Day and are on-going, others are being carried out by new leadership at the agency level who were appointed in the fourth quarter of 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 2017

An overview of workplace class action litigation developments in 2017 reveals four key trends.

First, the monetary value of the top workplace class action settlements rose dramatically in 2017. These numbers increased over past years, even after they had reached all-time highs in 2014 to 2016. The plaintiffs’ employment class action bar and governmental enforcement litigators were exceedingly successful in monetizing their case filings into large class-wide settlements, and they did so at decidedly higher values than in previous years. The top ten settlements in various employment-related class action categories totaled $2.72 billion in 2017, an increase of over $970 million from $1.75 billion in 2016. Furthermore, settlements of employment discrimination class actions experienced over a three-fold increase in value; statutory workplace class actions saw nearly a five-fold increase; and government enforcement litigation registered nearly a ten-fold increase. Whether this is the beginning of a long-range trend or a short-term aberration remains to be seen as 2018 unfolds, but the determinative markers suggest this upward trend will rise further in 2018, at least insofar as private plaintiff class actions are concerned.

Second, while federal and state courts issued many favorable class certification rulings for the plaintiffs’ bar in 2017, evolving case law precedents and new defense approaches resulted in better outcomes for employers in opposing class certification requests. 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 employment discrimination and ERISA class actions, the plaintiffs’ bar scored well in securing class certification rulings in federal courts in 2017 (over comparative figures for 2016). Class actions were certified in significant 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. Yet, while the sheer volume of wage & hour certification decisions in 2017 increased as compared to last year, employers actually fared better in litigating those class certification motions in federal court than last year. Of the 257 wage & hour certification decisions in 2017, plaintiffs won 170 of 233 conditional certification rulings (approximately 73%), but lost 15 of 24 decertification rulings (approximately 63%). By way of comparison, there were 224 wage & hour certification decisions in 2016, where plaintiffs won 147 of 195 conditional certification rulings (approximately 76%) and lost 13 of 29 decertification rulings (approximately 45%). In sum, employers beat slightly more first stage conditional certification motions in 2017, and dramatically increased their odds – a jump of 18% – of fracturing cases with successful decertification motions.

Third, filings and settlements of government enforcement litigation in 2017 did not reflect a head-snapping pivot from the ideological pro-worker (or anti-big business) outlook of the Obama Administration to a pro-business, less regulation/litigation viewpoint of the Trump Administration. Instead, as compared to 2016, government enforcement litigation actually increased in 2017. As an example, the EEOC alone brought 184 lawsuits in 2017 as compared to 86 lawsuits in 2016. Further, the settlement value of the top ten settlements in government enforcement cases jumped dramatically – from $52.3 million in 2016 to $485.25 million in 2017. The explanations for this phenomenon are wide and 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 2017. This trend is 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 2018 opens, it appears that the content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration will tilt away from the pro-employee/anti-big business mindset of the previous Administration. Trump appointees at the DOL and the EEOC 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 2018. The ultimate effect, however, may well prompt the private plaintiffs’ class action bar to “fill the void” and expand the volume of workplace litigation pursued against employers over the coming year as the DOL and the EEOC adjust their litigation enforcement activities.

Fourth and finally, class action litigation increasingly has been shaped and influenced 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 – and 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 years. More cases also were accepted for review in 2017 that are positioned for rulings in 2018, including what may be the most high-stakes issue impacting employers since the Wal-Mart ruling in 2011 – the Epic Systems, Murphy Oil, and E & Y trilogy of cases on the legality of workplace arbitration agreements with class action waivers. The ruling expected in the Epic System, Murphy Oil, and E & Y cases in 2018 may well change the class action playing field in profound ways. Coupled with the appointment of Justice Neil Gorsuch in 2017 and potential additional appointments to the Supreme Court by President Trump in 2018 and beyond, litigation dynamics may well be re-shaped in ways that further change the playbook for prosecuting and defending class actions.

Implications For Employers

The one constant in workplace class action litigation is change. More than any other year in recent memory, 2017 was a year of great change in the landscape of Rule 23. As these issues play out in 2018, additional chapters in the class action playbook will be written.

The lesson to draw from 2017 is that the private plaintiffs’ bar and government enforcement attorneys at the state level are apt to be equally, if not more, aggressive in 2018 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 2018.

 

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 2018 Report to our readers from our Blog.

This will be our Fourteenth Annual Report, and the biggest yet with analysis of over 1,350 class certification rulings from federal and state courts in 2017.  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 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 definitive ‘must-have’ for legal research and in-depth analysis of employment-related class action litigation.  Anyone who practices in this area, whether as an 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.’”  You can read more about the review here.  Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation.

The 2018 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 2017 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 2018 Report will be available on our blog in early January. Happy Holidays!

Seyfarth Synopsis: On October 5, 2017, U.S. Attorney General Jeff Sessions issued an agency memorandum stating that the language contained in Title VII of the Civil Rights Act of 1964, “does not prohibit discrimination based on gender identity per se, including transgender status.” It represented a head-snapping pivot of the position of the U.S. Department of Justice. In this video, Jerry Maatman of Seyfarth Shaw, LLP gives blog readers an overview of the recent history regarding legal interpretation of Title VII. Jerry discusses potentially conflicting statutes and court rulings, as well as the ways in which this Department of Justice memorandum could affect businesses and those who litigate under Title VII.

Summary

Title VII of the Civil Rights Act of 1964 has been a prevalent federal statute since its passage over 50 years ago. Therefore, it is an especially important statute to understand for nearly every employer. During the Obama Administration, Attorney General Eric Holder stated in a 2014 memorandum that the Department of Justice does, in fact, apply the concept of sex discrimination in the workplace to transgender workers. However, Congress has rejected all attempts thus far to amend Title VII. To that end, the language of the law leaves legal interpretation open for debate.

The EEOC’s current view of Title VII is that it includes protections for transgender workers. In addition, 20 states and the District of Columbia include both sexual orientation and gender identity as protected categories under their discrimination statutes. The recent statement by the Department of Justice has renewed the widespread debate over the definition of sex discrimination, a dispute which we suspect will not end any time soon. Make sure to stay tuned to our blog and Twitter account for updates and insights on this important legal issue!

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.

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

Seyfarth Synopsis:  In the latest chapter of the ongoing legal battle between the EEOC and delivery company CRST Van Expedited regarding the agency’s sexual harassment claims, a federal district court ordered the EEOC to pay $1.9 million in attorneys’ fees to the company for pursuing claims that it knew or should have known were frivolous.

Employers should have this ruling handy when challenging whether the EEOC fulfilled its pre-suit obligations under Title VII. It is undoubtedly a signal ruling relative to the agency’s missteps in “suing now and aiming later…”

***

In a long and winding legal journey that made a pit stop at the U.S. Supreme Court, the EEOC v. v. CRST Van Expedited, Inc., No. 07-CV-95, 2017 LEXIS 155134 (N.D. Iowa Sept. 22, 2017),  litigation involves the largest fee sanction award ever levied against the EEOC – nearly $4.7 million. In August 2013, after the U.S. District Court for the Northern District of Iowa imposed the nearly $4.7 million award, the EEOC appealed, and the Eighth Circuit reversed and remanded several fee issues for further proceedings.  Id. at *2.  Following CRST’s appeal, the U.S. Supreme Court reversed and remanded the Eighth Circuit’s ruling.  On remand, the Eighth Circuit vacated its prior judgment and remanded back to the District Court.  Thereafter, CRST moved for a supplemental fee award in the amount of approximately $975,000, consisting of attorneys’ fees for work performed in the case following the District Court’s August 1, 2013 Order.  Judge Linda R. Reade of the U.S. District Court for the Northern District of Iowa ordered the EEOC to pay approximately $1.9 million in attorneys’ fees, out-of-pocket expenses and taxable costs to CRST, but denied CRST’s motion for a supplemental fee award.

For employers embroiled in EEOC litigation, the $1.9 million fee award is an exceedingly important example of a court holding the Commission accountable when it fails to satisfy its pre-suit investigation duties under Title VII.

Case Background

As we discussed in our blog post here, Section 706(k) authorizes district courts to award attorneys’ fees to the “prevailing party” in a Title VII case.  In relevant part, Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421 (1978) held that fee awards to a prevailing defendant are permissible only if the plaintiff’s lawsuit was “frivolous, unreasonable, or without foundation.”  After CRST successfully obtained the dismissal of the EEOC’s Title VII claims for sexual harassment, the District Court granted CRST’s motion for an award of attorneys’ fees and costs and directed the EEOC to pay CRST nearly $4.7 million, finding that the EEOC’s actions in pursuing this lawsuit were unreasonable, contrary to the procedure outlined by Title VII, and imposed an unnecessary burden on both CRST and the District Court.

After the EEOC appealed, the Eighth Circuit reversed and held that the District Court “did not make particularized findings of frivolousness, unreasonableness, or groundlessness as to each individual claim” and remanded these claims to the District Court to make such individualized determinations.  Further, the Eighth Circuit found that the District Court’s dismissal of 67 claims based on the EEOC’s failure to satisfy Title VII’s pre-suit obligations did not constitute a ruling on the merits, and that therefore, CRST was not a prevailing party as to these claims.  The Eighth Circuit also held that CRST could not satisfy the Christianburg standard for the same reason: “[P]roof that a plaintiff’s case is frivolous, unreasonable, or groundless is not possible without a judicial determination of the plaintiff’s case on the merits.”  Thereafter, following CRST’s petition for certiorari, the U.S. Supreme Court accepted the case for review.

The U.S. Supreme Court reversed the Eighth Circuit and remanded the case for further proceedings.  Id. at *5.  On June 28, 2016, the Eighth Circuit entered a judgment vacating its prior panel opinion and remanding to the District Court for further proceedings.  The District Court ordered briefing on the issues remanded by the U.S. Supreme Court, where CRST requested an additional a supplemental fee award in the amount of approximately $975,000, consisting of attorneys’ fees for work performed in the case following the District Court’s August 1, 2013 Order.

The Court’s Decision

On September 22, 2017, the District Court awarded nearly $1.9 million in attorneys’ fees, out-of-pocket expenses and taxable costs to CRST, but denied CRST’s motion for a supplemental fee award.  In ordering the $1.9 million award, the District Court found that CRST was the prevailing party as to the sixty-seven claims at issue, that the sixty-seven claims met the standard announced in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), and made individualized findings as to seventy-eight of the individual claimants for which the court granted CRST summary judgment.  Id. at *5-6.

CRST had moved for a supplemental fee award of $975,000 for the following work it performed: (1) briefs, oral argument, and rehearing petition in the EEOC’s appeal to the Eighth Circuit from the August 1, 2013 Order; (2) CRST’s petition for certiorari, briefs, and oral argument in the Supreme Court resulting in reversal of the Eighth Circuit’s opinion vacating the August 1, 2013 fee award; (3) CRST’s brief  resisting the Rule 60(b) Motion; and (4) CRST’s briefs on remand as required by the Eighth Circuit’s now vacated decision with respect to the fees awarded for claims dismissed on summary judgment.  Id. at *6-7.  The EEOC argued that CRST’s application for fees was untimely and that CRST could not demonstrate that any of the actions that the EEOC took with respect to the requested categories of fees were frivolous, unreasonable or groundless.  The EEOC further argued that the fees sought by CRST were unreasonable.

Regarding timeliness, the District Court accepted the EEOC’s argument and held that CRST’s motion for a supplemental fee award was filed more than 120 days after the latest final judgment for which CRST requests attorneys’ fees.  Regarding the EEOC’s argument that the fees sought by CRST were unreasonable, the District Court similarly found in favor of the EEOC, noting that neither its appeal of the District Court’s fee award to the Eighth Circuit nor CRST’s appeal to the Supreme Court were amenable to fees.  Id. at *12-13.  Accordingly, the District Court denied CRST’s motion for a supplemental fee award.

Implications For Employers

Although the formerly $4.7 million fee sanction against the EEOC was reduced to $1.9 million, this is nonetheless a major victory for employers.  This ruling will serve as a cautionary tale for the EEOC when it attempts to speed through its mandatory pre-suit duties in rushes to the courthouse to litigate claims.  For employers who are blindsided by such EEOC tactics, this ruling can be used as precedent to hold the Commission accountable when it abandons its pre-suit duties required under Title VII.

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