EEOC Year-End Countdown

EEOC’s Motion For Sanctions Granted Over Employer’s Failure To Preserve And Produce Records

Posted in EEOC Litigation

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

Seyfarth Synopsis: In an EEOC lawsuit alleging that an employer failed to reasonably accommodate its Muslim employees’ requests for prayer breaks, a federal court in Colorado granted the EEOC’s motion for sanctions — as a result of the employer’s failure to preserve and produce various records — and barred the employer from presenting evidence, testimony, or arguments that unscheduled prayer breaks led to production line slowdowns or stoppages.  This ruling provides an important lesson for businesses regarding the preservation of documents in ongoing EEOC litigation.

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In EEOC v. JBS USA, LLC, Case No. 10-CV-02103, 2017 U.S. Dist. LEXIS 122908 (D. Colo. Aug. 4, 2017), the EEOC alleged that JBS USA, LLC (“JBS”), a meat packing company, discriminated against its Muslim employees on the basis of religion by engaging in a pattern or practice of retaliation, discriminatory discipline and discharge, harassment, and denying its Muslim employees reasonable religious accommodations.  After the EEOC moved for sanctions regarding JBS’s failure to produce two types of records relating to delays on JBS’s production line, Judge Phillip A. Brimmer of the U.S. District Court for the District of Colorado granted in part the EEOC’s motion and barred JBS from presenting evidence, testimony, or argument in its motions, at hearings, or at trial that unscheduled prayer breaks led to production line slowdowns or stoppages.

For employers involved in government enforcement litigation, this ruling serves as a cautionary tale regarding the importance of preserving and producing relevant records, and that the failure to do so might cost employers the ability to later use such records in their defense.

For more information on this lawsuit (and a similar Nebraska case where JBS successfully obtained summary judgment), see our blog posts here, here, here, here, here, here, and here.

Case Background

JBS operates a beef processing plant in Greeley, Colorado.  Id. at *2.  During the first week of Ramadan 2008, a dispute occurred between JBS and its Muslim employees over their opportunities to pray, resulting in hundreds of Muslim employees walking off the job.  On September 10, 2008, JBS fired 96 Muslim employees that refused to return to work.  After the mass termination, numerous former employees filed discrimination charges with the EEOC.  Id.  In response, on February 3, 2009, JBS submitted a position statement where it argued that granting prayer breaks to employees would be an undue burden, in part, due to losses resulting from “each minute of production down-time.”  Id.  JBS continued to assert its undue burden affirmative defense throughout the case, for instance, arguing in its summary judgment motion that production line slowdowns and downtime would have been caused by allowing prayer breaks to Muslim employees.

The EEOC sought discovery from JBS about its undue burden affirmative defense.  Relevant here, on November 21, 2012, the EEOC served a production request regarding the production of all reports or data showing all dates and times the fabrication lines on any and all shifts were stopped, as well as the speed of the lines.  In response, JBS produced documents that included records showing scheduled breaks, but did not provide or reference the Down Time Reports or Clipboards, which show unplanned downtime and slowdowns.  The EEOC thereafter moved for sanctions for the loss or destruction of documents directly relevant to JBS’s allegations of undue hardship.

The Court’s Decision

The Court granted the EEOC’s motion for sanctions.  While JBS had produced Clipboards from 2012-2016 and Down Time Reports from 2016, it claimed that all others had been destroyed.  JBS later testified via Rule 30(b)(6) deposition that the Down Time Reports were shipped to storage each year, but may have been destroyed.  After searching its warehouse for “a day” in 2017,  JBS later located and produced some additional records.  Id. at *6.  The Court thus found that JBS failed to supplement its production with responsive records in a timely manner.  The Court held that because JBS did not show that its failure to supplement was substantially justified or harmless, it would impose sanctions pursuant to Fed. R. Civ. P. 37(c)(1).  Id.

Next, the Court explained that spoliation occurs when a party loses or destroys evidence that it had a duty to preserve because it was relevant to proof of an issue at trial in current or anticipated litigation.  Id. at *7 (citation omitted).  JBS argued that it did not have a duty to preserve these documents because it had no way of knowing or anticipating that the EEOC would be interested in knowing the specific time of every instance of every day that the production line stopped for an unplanned or unexpected reason.  The Court rejected this argument, holding that JBS ignored the fact that it asserted an undue burden defense within a year of the September 2008 incident and after charges of discrimination had been filed against it.  As such, the Court held that JBS had a duty to preserve documents relevant to the burden posed by the proposed accommodations.  Id. at *8 (citation omitted).

Arguing that the lack of production of records did not cause a prejudice to the EEOC, JBS stated that the records did not show whether any slowdown or stoppage was related to a prayer break because the information they contained was “only as specific as the information known to the person filling out the Down Time Report.”  Id. at *10.  The Court rejected this argument, holding that “[r]ecords such as those sought, which potentially show the actual impact of unscheduled employee prayer breaks, are particularly important to understanding the impact such breaks would have on production line slowdowns or stoppages because they would provide contemporaneous records of whether unscheduled breaks led to production downtime.”  Id. at *12.  Accordingly, the Court found that the EEOC was prejudiced by JBS’s spoliation of evidence.  Id.

In fashioning a sanction that “appropriately addresses the prejudice to the EEOC resulting from JBS’s spoliation or failure to produce the records and is proportional to JBS’s culpability,” the Court held that it would bar JBS from presenting evidence, testimony, or argument in its motions, at hearings, or at trial that unscheduled prayer breaks led to production line slowdowns or stoppages.  Id. at *14.  The Court explained that this sanction was “tailored to the evidence lost, destroyed, or withheld by JBS because it alleviates the prejudice which the EEOC would otherwise suffer, namely, that JBS may present evidence of stoppages through witnesses, but the EEOC would not be able to rebut such testimony with records that would likely prove whether stoppages actually occurred and, perhaps, for what reason.”  Id.  Accordingly, the Court granted in part the EEOC’s motion for sanctions for the loss or destruction of documents.

Implications For Employers

An employer’s likelihood of defeating a workplace class action is often dependent on its ability maintain and preserve thorough employment records.  Here, the employer’s failure to preserve records that ultimately could have helped establish an affirmative defense resulted in the Court limiting the employer from using certain types of evidence in its defense of the litigation.  This sanction should serve as a cautionary tale for employers in regards to complying with the written discovery process, as employers are best-positioned to defeat workplace class actions when they have as many defenses as possible in their arsenal.

Readers can also find this post on our Workplace Class Action blog here.

More “Mark of the Beast” – Fourth Circuit Affirms Denial Of Employer’s Post-Verdict Motions In EEOC’s Anti-Christ Discrimination Case

Posted in EEOC Litigation

finger-150x112By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis: The Fourth Circuit recently affirmed a U.S. District Court’s denial of three post-verdict motions brought by an employer in an EEOC religious discrimination case alleging a failure to accommodate an employee’s Anti-Christ fears. The case is an interesting read for any employer involved in religious discrimination issues.

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Most religious accommodation lawsuits brought by the EEOC against employers concern mainstream religions. But when the EEOC successfully sues an employer for failing to accommodate an employee’s Anti-Christ fears, employers need to pay attention, especially when that cases involves a jury verdict awarding over $586,000 in total damages (as we blogged about here).

In EEOC v. Consol Energy, Inc., No. 16-1230, 2017 U.S. App. LEXIS 10385 (4th Cir. June 12, 2017), the EEOC alleged that the defendants (“Consol”) refused to provide an employee with a religious accommodation by subjecting him to a biometric hand scanner for purposes of clocking in and out of work.  The employee believed the hand scanner was used to identify and collect personal information that would be used by the Christian Anti-Christ, as described in the New Testament Book of Revelation, to identify followers with the “mark of the beast.”  Following a jury verdict in favor of the EEOC, the U.S. District Court for the Northern District of West Virginia denied Consol’s renewed motion for judgment as a matter of law under Rule 50(b), motion for a new trial under Rule 59, and motion to amend the Court’s findings and conclusions under Rule 59.  Following the employer’s appeal, the Fourth Circuit affirmed.

With the Fourth Circuit affirming the District Court’s ruling after an eyebrow-raising EEOC jury trial victory, it behooves the interests of employers to consider any and all religious accommodation requests.

Case Background

In the summer of 2012, Consol implemented a biometric hand-scanner system at the mine where the employee worked, in order to better monitor attendance and work hours. Id. at *4.  The scanner system required each employee checking in or out of a shift to scan his or her right hand; the shape of the right hand was then linked to the worker’s unique personnel number.  While Consol implemented the scanner to produce more efficient and accurate time reporting, the employee alleged it presented a threat to his core religious commitments.

As the employee consistently and unsuccessfully sought an accommodation that would preclude him from having to clock in with the scanner, Consol meanwhile allowed employees with injured hands to scan in using a different keypad system.  Id. at *7.  Eventually, the employee decided to retire in lieu of using the hand-scanner, and later found a lower paying job.  The EEOC thereafter brought an enforcement action against Consol on behalf of the employee, alleging a failure to accommodate religious beliefs and constructive discharge.  Id. at *9.  After the case ultimately proceeded to trial, the jury found Consol liable for failing to accommodate the employee’s religious beliefs.  The jury awarded $150,000 in compensatory damages and $436,860.74 in front and back pay and lost benefits.  Id. at *10-11.  Consol then filed a renewed motion for judgment as a matter of law under Rule 50(b), a motion for a new trial under Rule 59, and a motion to amend the Court’s findings and conclusions under Rule 59.  The District Court denied all three post-verdict motions, and Consol appealed.  Id. at *11.

The Fourth Circuit’s Decision

The Fourth Circuit affirmed the District Court’s denial of Consol’s three post-verdict motions.  First, Consol challenged the denial of its renewed motion for a judgment as a matter of law, arguing that the District Court erred in concluding that there was sufficient evidence to support the jury’s verdict against it.  Consol argued that it did not fail to reasonably accommodate the employee’s religious beliefs because there was in fact no conflict between his beliefs and its requirement that he use the hand scanner system.  The Fourth Circuit rejected this argument, noting that in both the employee’s request for an accommodation and his trial testimony, the employee carefully and clearly laid out his religious objection to use of the scanner system.  Id. at *13.

Next, regarding the District Court’s denial of its motion for a new trial under Rule 59, Consol raised a handful of objections that primarily related to the District Court’s exclusion of evidence and various issues related to jury instructions.  Id. at *20.  The Fourth Circuit noted that it would “ respect the [D]istrict [C]ourt’s decision absent an abuse of discretion, and will disturb that judgment only in the most exceptional circumstances.”  Id. (internal quotation marks and citation omitted).  Further, it opined that, “[w]hen, as here, a new trial is sought based on purported evidentiary errors by the district court, a verdict may be set aside only if an error is so grievous as to have rendered the entire trial unfair.”  Id.  Applying this standard, the Fourth Circuit found that the District Court did not abuse its discretion.  Regarding the jury instructions, the Fourth Circuit held that the District Court properly found that Consol failed to show any prejudice arising from any of the instructions at issue.  Id. at *26.

Finally, both parties cross-appealed the District Court’s rulings on lost wages and punitive damages.  The Fourth Circuit rejected Consol’s argument that the employee failed to adequately mitigate his damages by accepting a lower paying job, noting that whether a worker acted reasonably in accepting particular employment is preeminently a question of fact, and that it would not second-guess the District Court.  The Fourth Circuit also rejected the EEOC’s cross-appeal regarding punitive damages, holding that the district court did not err in concluding that the EEOC’s evidence fell short of allowing for a determination that Consol’s Title VII violation was the result of the kind of “reckless indifference” necessary to support an award of punitive damages.  Id. at *34.  Accordingly, the Fourth Circuit affirmed the District Court’s denial of Consol’s three post-verdict motions.

Implications For Employer

While it makes sense from a practical standpoint for employers to foster a work environment that is respectful of its employees’ religious beliefs, this ruling demonstrates that employers should also be tolerant of their employees’ religious accommodation requests for legal and financial reasons.  And although many employers will likely never encounter an employee requesting a religious accommodation to cope with his or her fear of the Anti-Christ, they nonetheless must seriously entertain any and all religious accommodation requests.  Equipped with an Appellate Court affirmation of its jury trial verdict, the EEOC may very well likely “smell blood” in the sea of religious discrimination charges in its backlog.  As such, the best practice for employers is to take a respectful and thoughtful approach to religious accommodation requests to avoid potential EEOC litigation and sometimes unforgiving juries.

Readers can also find this post on our Workplace Class Action blog here.

Sixth Circuit Signs Off On EEOC Subpoena In UPS Disability Discrimination Case

Posted in Investigation Tactics and Administrative Subpoenas

magnifier-1714172__340By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  The Sixth Circuit recently affirmed a U.S. District Court’s decision granting the EEOC’s application to enforce a subpoena in a disability discrimination investigation, finding that company-wide information regarding the employer’s use and disclosure of medical information was relevant to the investigation of a single employee’s charge of discrimination. The ruling underscores the challenges faced by employers in objecting to EEOC subpoenas.

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As we discussed in recent blog posts (here, here, and here), the EEOC has been aggressive in issuing expansive subpoenas that seek company-wide information from employers, as opposed to limiting the subpoena to seek information about an individual charging party.  In the latest round of EEOC versus employer subpoena litigation, in EEOC v. United Parcel Service, Inc., No. 16-2132, 2017 U.S. App. LEXIS 10280 (6th Cir. June 9, 2017), the U.S. Court of Appeals for the Sixth Circuit affirmed a decision of the U.S. District Court for the Eastern District of Michigan granting the EEOC’s application to enforce a subpoena that sought company-wide information, even though investigation concerned a single employee’s charge of discrimination.

This ruling provides yet another example of courts setting the bar low when considering what is “relevant” for purposes of the scope of an EEOC subpoena.  As such, employers can and should expect the EEOC to continue to be aggressive in firing off far-reaching subpoenas as it investigates high-stakes systemic discrimination claims.

Case Background

A UPS operations manager filed an EEOC charge claiming that UPS discriminated and retaliated against him in violation of the Americans With Disabilities Act of 1990 (“ADA”).  Id. at *1-2.  In particular, he claimed that UPS published confidential medical information about him and other employees on its intranet page.  Id. at *2.  The EEOC began an investigation into the employee’s claims, which resulted in the Commission issuing a subpoena that requested information about how UPS stored and disclosed employee medical information.  UPS opposed the subpoena, claiming that the requested information was irrelevant to his charge.  The EEOC thereafter filed an application to enforce the subpoena.  The District Court granted the EEOC’s application, and UPS appealed to the Sixth Circuit.

The Sixth Circuit’s Decision

The Sixth Circuit affirmed the District Court’s grant of the EEOC’s application to enforce the subpoena.  First, the Sixth Circuit explained that a subpoena enforcement proceeding is a summary process designed to expeditiously decide whether a subpoena should be enforced, and that the purpose is not to decide the merits of the underlying claim.  Id. at *4 (citation omitted).  Citing the U.S. Supreme Court’s recent ruling in McLane v. EEOC, 137 S. Ct. 1159, 1170 (2017), which we blogged about previously here, the Sixth Circuit further instructed that it would review the District Court’s decision to enforce the subpoena under an abuse of discretion standard.  Id.

After noting that in the Title VII context the Sixth Circuit has held that the EEOC is entitled to evidence that focuses on the existence of patterns of racial discrimination in job classifications or hiring situations other than those that the EEOC’s charge specifically targeted, the Sixth Circuit opined that it saw “no reason to hold differently with respect to discrimination on the basis of disability.”  Id. at *5 (citations omitted).  Further, “so long as a charge alleges unlawful use of medical examinations and inquiries, evidence of patterns of such unlawful use is relevant to the charge under investigation.”  Id.  UPS argued that the EEOC was only entitled to information regarding similarly-situated employees.  The Sixth Circuit rejected this argument, noting that there was no such restriction under the ADA.   Id.

UPS further argued that the EEOC’s requested information was overbroad because the databases referenced in the EEOC’s subpoena contained information about employees from other regions in the United States and Canada, including one database where the Charging Party’s information never appeared.  The Sixth Circuit rejected this argument, noting that the breach of confidentiality that the employee described in his amended charge was not limited to himself since he alleged that “all other employees subject to Health and Safety incident action/reports have had their confidentiality breached in the same manner as me.”  Id. at *6.  The Sixth Circuit further determined that the EEOC was entitled to search for evidence that showed a pattern of discrimination other than the specific instance of discrimination described in the charge.  Id.

Turning to UPS’s argument that the amended charge was not valid because it “appears to have been amended for an illegitimate purpose — to obtain documents that the subpoena otherwise could not reach,” the Sixth Circuit held that UPS forfeited this argument since it did not raise it before the District Court.  Id.  Further, the Sixth Circuit rejected UPS’s argument that the EEOC’s subpoena was overbroad because it provided no temporal scope, noting that regardless of when UPS developed the criteria for posting content on its intranet site, this piece of evidence may provide insight into how UPS categorizes information as confidential.  Id. at *7.  Finally, the Sixth Circuit dismissed UPS’s argument that producing the requested information would be unduly burdensome, noting that UPS did not identify how producing the requested evidence would be difficult, especially considering that both parties acknowledged it could be produced electronically.  Accordingly, the Sixth Circuit held that the District Court did not abuse its discretion in ordering UPS to comply with the subpoena, and it affirmed the District Court’s decision.  Id. at *7-8.

Implications For Employers

Armed with yet another decision holding that an expansive EEOC subpoena was relevant to an investigation, the further emboldened EEOC likely will continue to seek far-reaching, company-wide information in its investigations, including those that stem from a single employee’s charge of discrimination.  Despite this recent trend of unfavorable rulings, employers should not let their guard down when confronted with broad EEOC subpoenas.  Rather, employers must carefully scrutinize each EEOC subpoena and aggressively attack its relevance when appropriate.

Readers can also find this post on our Workplace Class Action blog here.

Sixth Circuit Shuts Down EEOC’s Appeal In Sex Harassment Suit

Posted in Motions for Summary Judgment

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

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

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

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

Case Background

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

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

The Sixth Circuit’s Decision

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

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

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

Implications For Employers

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

Readers can also find this post on our Workplace Class Action blog here.

Following U.S. Supreme Court Review, Ninth Circuit Remands EEOC Subpoena Case

Posted in Investigation Tactics and Administrative Subpoenas

 

100px-US-CourtOfAppeals-9thCircuit-Seal_svgBy Gerald L. Maatman, Jr., Christopher J. DeGroff and Alex W. Karasik

Seyfarth Synopsis: After the U.S. Supreme Court clarified in McLane Co. v. EEOC, No. 15-1248, 2017 U.S. LEXIS 2327 (U.S. 2017), that the scope of review for employers facing EEOC administrative subpoenas was the abuse-of-discretion standard, a relatively high bar of review, the Ninth Circuit applied that standard of review on remand and vacated the District Court’s original decision that denied the enforcement of an EEOC subpoena.

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An often contentious issue in EEOC investigations involves the scope of administrative subpoenas, which can be burdensome for employers when the subpoenas seek a broad range of company-wide information.  When analyzing the standard of review for decisions relating to the enforcement of EEOC subpoenas, in McLane Co. v. EEOC, No. 15-1248, 2017 U.S. LEXIS 2327 (U.S. Apr. 3, 2017), the U.S. Supreme Court held that such decisions were examined under an abuse-of-discretion standard.  The abuse-of-discretion standard sets a relatively high bar for review, as we blogged about here.  Following the U.S. Supreme Court’s remand to the Ninth Circuit in McLane, the Ninth Circuit vacated the District Court’s denial of enforcement of the subpoena and sent the matter back to the District Court for further proceedings.  EEOC v. McLane Co., No. 13-15126, 2017 U.S. App. LEXIS 9027 (9th Cir. May 24, 2017).

For employers, this is an important case to follow as it provides clarification as to the standard of review used when Appellate Courts address district court subpoena enforcement decisions.

Background

The EEOC issued an administrative subpoena as part of its investigation into a charge of discrimination filed by a former employee of a McLane subsidiary.  Id. at *3.  The employee alleged that McLane discriminated against her on the basis of sex when it fired her after she failed to pass a physical capability strength test.  Relevant here, the subpoena requested “pedigree information” (name, Social Security number, last known address, and telephone number) for employees or prospective employees who took the test.  Following the Court’s precedent at the time, the Ninth Circuit applied a de novo review to the District Court’s ruling that the pedigree information was not relevant to the EEOC’s investigation.  Id. at *3-4.  The U.S. Supreme Court vacated the Ninth Circuit’s judgment after holding that a district court’s decision whether to enforce an EEOC subpoena should be reviewed for abuse of discretion.  The U.S. Supreme Court remanded the case to the Ninth Circuit so that the Ninth Circuit could re-evaluate the District Court’s ruling under the proper standard of review.

 The Ninth Circuit’s Decision On Remand

After reviewing the District Court’s decision under the abuse-of-discretion standard, the Ninth Circuit still held that the District Court abused its discretion by denying enforcement of the subpoena.  Id. at *4.  The District Court found that the pedigree information was not relevant “at this stage” of the EEOC’s investigation because the evidence McLane had already produced would “enable the [EEOC] to determine whether the [strength test] systematically discriminates on the basis of gender.”  Id.  The Ninth Circuit rejected this approach, noting that the District Court’s ruling was based on the wrong standard for relevance.  The Ninth Circuit stated that under Title VII, the EEOC may obtain evidence if it relates to unlawful employment practices and is relevant to the charge under investigation.  Quoting EEOC v. Shell Oil Co., 466 U.S. 54, 68-69 (1984), the Ninth Circuit opined that the relevance standard encompasses “virtually any material that might cast light on the allegations against the employer.”  Id. at *5.

Applying Shell Oil, the Ninth Circuit found that the pedigree information was relevant to the EEOC’s investigation since conversations with other McLane employees and applicants who have taken the strength test “might cast light” on the allegations against McLane.  Id.  McLane argued that, given all of the other information it had produced, the EEOC could not show that the production of nationwide pedigree information was relevant to the Charge or its investigation under either a disparate treatment or disparate impact theory.  Id. at *6. The Ninth Circuit construed the District Court’s application of relevance to be a heightened “necessity” standard, and noted that the governing standard was “relevance,” not “necessity.”  Id.

The Ninth Circuit then found that the District Court erred when it held that pedigree information was irrelevant “at this stage” of the investigation.  Id.  Rejecting the District Court’s conclusion that the EEOC did not need pedigree information to make a preliminary determination as to whether use of the strength test resulted in systemic discrimination, the Ninth Circuit held that the EEOC’s need for the evidence—or lack thereof—did not factor into the relevance determination.  Id. at *6-7. While McLane had argued that the pedigree information was not relevant because the charge alleged only a “neutrally applied” strength test, which by definition cannot give rise to disparate treatment, systemic or otherwise, the Ninth Circuit rejected this approach, holding “[t]he very purpose of the EEOC’s investigation is to determine whether the test is being neutrally applied; the EEOC does not have to take McLane’s word for it on that score.”  Id. at *7.  Accordingly, the Ninth Circuit held that because the District Court based its ruling on an incorrect view of relevance, it necessarily abused its discretion when it held that the pedigree information was not relevant to the EEOC’s investigation.

The Ninth Circuit concluded by noting that on remand, McLane was free to renew its argument that the EEOC’s request for pedigree information was unduly burdensome.  Id. at *8. Further, explaining that it did not reach the issue in its original decision, the Ninth Circuit instructed that “[o]n remand, the district court should also resolve whether producing a second category of evidence — the reasons test takers were terminated — would be unduly burdensome to McLane.”  Id.  Accordingly, the Ninth Circuit vacated the District Court’s judgment and remanded for further proceedings.

Implications For Employers

As employers who are confronted with EEOC subpoenas may ultimately find themselves in a subpoena enforcement action, the McLane case is a must-follow in terms of what standard of review will be applied if those district court decisions are later reviewed.  The U.S. Supreme Court’s adoption of the more “hands off” abuse-of-discretion standard means that greater weight will be given to district court decisions.  Nonetheless, the Ninth Circuit’s ruling here illustrates that appellate courts may still be willing to overturn district court decisions to enforce or quash EEOC subpoenas depending on the circumstances.  The decision will also, no doubt, be cited by an emboldened EEOC as authority for its position that expansive pedigree information is relevant in a broad swath of cases.  Understanding these trends will provide useful guidance for employers when deciding if and how to challenge what often can be burdensome demands for information from the EEOC.

Readers can also find this post on our Workplace Class Action blog here.

Dueling Fifth Circuit Panel Deadlocks, No Rehearing For Bass Pro In “Big Fish” EEOC Case

Posted in EEOC Litigation

bassBy Gerald L. Maatman, Jr., Christopher J. DeGroff, and Alex W. Karasik

Seyfarth Synopsis: After a Fifth Circuit decision affirming a ruling by a U.S. District Court in Texas allowed the EEOC to seek compensatory and punitive damages in its high-profile Title VII pattern or practice race discrimination lawsuit against Bass Pro, a deadlocked Fifth Circuit denied Bass Pro’s petition for a rehearing en banc.  The highly contentious dissenting opinion, which prompted a response from the panel in favor of denying the rehearing, is a must-read for employers regarding judicial views on the damages the EEOC can seek in Title VII pattern or practice of discrimination litigation.

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One of the EEOC’s largest pending nationwide lawsuits, a Title VII pattern or practice race discrimination case concerning retailer Bass Pro’s hiring practices, has resurfaced in an appeal.  In EEOC v. Bass Pro Outdoor World LLC, No. 15-20078, 2017 U.S. App. LEXIS 7628 (5th Cir. Apr. 28, 2017), the U.S. Court of Appeals for the Fifth Circuit was tasked with deciding whether to grant Bass Pro’s petition for a rehearing en banc after it previously affirmed a decision of the U.S. District Court for the Southern District of Texas allowing the EEOC to seek compensatory and punitive damages by bringing claims under § 706 and 707 of Title VII.  Evident in a pair of pull-no-punches opinions, the Fifth Circuit panel of judges was deadlocked in a 7-7 split on whether to grant the rehearing, thus resulting in Bass Pro’s petition being denied.

As employers continue to challenge the EEOC’s willingness to stretch the bounds of pattern or practice Title VII litigation, the highly contentious dissenting opinion (“Dissent”), and equally provocative response from the panel in favor of denying the rehearing (“Panel”), are must-reads for employers.

Case Background

As we have discussed in previous blog posts (here, here and here), the EEOC brought a lawsuit alleging discriminatory hiring practices in violation of Title VII on behalf of a group of individuals allegedly discriminated against on the basis of their gender or race, both as a representative action (under § 706) and based on a pattern or practice theory (under § 707).  The Dissent noted that the 50,000 allegedly aggrieved individuals, Black and Hispanic applicants, was a number “asserted [by the EEOC] in shotgun fashion, with no development or refinement of who or where the individuals are.”  Id. at *4.  Further, the Dissent explained that “[t]he EEOC, after a three-year investigation, could identify zero discriminatees or even potential discriminatees. Upon being pressed by the [D]istrict [C]ourt, the EEOC identified about 100, and later, about 200, of the 50,000 mass.”  Ultimately, the District Court allowed the EEOC to pursue pattern or practice claims on behalf of the 50,000 claimants under § 706, seeking individualized compensatory and punitive damages.  On June 17, 2016, the Fifth Circuit affirmed the District Court’s decision.  Bass Pro thereafter filed an interlocutory appeal.  Id. at *5.

The Fifth Circuit’s Decision

As a result of a 7-7 split between the circuit judges, the Fifth Circuit denied Bass Pro’s petition for a rehearing en banc.  The Dissent initially summarized its argument by matter-of-factly noting “this ‘pattern or practice’ case cannot be brought under § 706 or § 707 as to provide individualized compensatory and punitive damages for a mass of 50,000 persons.”  Id. at *6.  In support of this assertion, the Dissent argued that the plain language and legislative history of the Title VII forbids § 706 “pattern or practice” suits, and the Panel’s contrary holding rendered § 707 of the Act a meaningless appendage to Title VII and hence superfluous.  Second, the Dissent argued that allowing pattern or practice suits for individualized compensatory and punitive damages poses insurmountable manageability concerns, which the Supreme Court has addressed before and rejected such suits.  Finally, the Dissent opined that allowing pattern or practice suits for individualized compensatory and punitive damages for the 50,000 allegedly aggrieved individuals necessarily ran afoul of the Seventh Amendment.

After the Dissent pointedly advocated this array of arguments, the Panel countered with a 16 page response, asserting that Bass Pro ignored “the independent role of the EEOC when it sues on behalf of the United States government . . . [and] asks us to hold as a matter of law that damages authorized by the 1991 amendments to the Civil Rights Act can only be recovered in individual suits.”  Id. at *20-21.  After clarifying the role of the EEOC in light of the 1991 amendments of the Civil Right Act of 1964, the Panel opined that, “Bass Pro’s argument rests upon a fundamental premise: that the EEOC’s enforcement authority and choice of remedies is tethered to the individuals for whose benefit it seeks relief. That premise is false.”  Id. at *23.  The Panel then argued that because the EEOC brought suit under both § 706 and 707, Bass Pro’s argument that the Commission was not entitled to punitive damages failed because it “would be truly perverse to withhold the remedy of punitive damages from the EEOC when it targets discrimination in its most virulent and damaging form: polices intentionally calculated to exclude protected minorities and perpetrated on a large scale.”  Id. at *35.

Finally, the Panel addressed Bass Pro’s argument that even if Congress did grant the EEOC the authority to seek compensatory and punitive damages via the pattern-or-practice model, this grant of authority was unconstitutional.  Noting that Bass Pro’s argument appeared to implicate due process concerns under the Seventh Amendment, the Panel held that Bass Pro’s reliance on Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), was misplaced as that case involved Rule 23 class actions, which  have “no force” in EEOC litigation.  Id. at *36.  After providing a hypothetical analysis as to how a jury may award various types of damages, the Panel concluded by finding Bass Pro’s manageability concerns to be unfounded, and its “claim that this suit cannot be tried is not a statement of fact but an advocate’s prayer.  Seeking to limit its exposure to liability, Bass Pro asks us to shut down this lawsuit before it even gets off the ground.”  Id. at *41-42.

Not to be outdone, the Dissent threw the final punch in a two paragraph dissent to the Panel’s response.  In an effort to clarify the procedural uniqueness of the Panel’s response to the dissenting opinion, the Dissent noted “[l]est there be any mistake, the [P]anel’s ‘response’ must not be confused with a binding opinion on the denial of an en banc petition, because no authority authorizes any such opinion.”  Id. at *42.  As such, the Dissent concluded by instructing that in no way should the Panel’s response be treated as precedential.

Implications For Employers

The Fifth Circuit’s ruling is certainly unfavorable for employers, as this gives the EEOC ammunition to seek a broad range of damages under § 706 and 707, and essentially pick and choose which section’s procedures it wants to follow at various stages of the litigation.  But when reading the tea leaves within the tenaciously written opinions by the divided panel, employers can find encouragement in that many judges – both in the Fifth Circuit and throughout the country – support the Dissent’s belief that the EEOC conflated its rights under § 706 and 707.  As such, employers should continue to follow this case and similar large-scale EEOC pattern or practice cases, which will likely continue to percolate following this government-friendly ruling.

Readers can also find this post on our Workplace Class Action blog here.

Denial Of Defenses: Illinois Court OK’s EEOC’s Pre-Suit Procedures

Posted in Motions for Summary Judgment

gavel on white backgroundBy Gerald L. Maatman, Jr., Christopher J. DeGroff, and Alex W. Karasik

Seyfarth Synopsis:  A federal district court in Illinois recently granted the EEOC’s motion for partial summary judgment in EEOC v. Dolgencorp, LLC, No. 13-CV-4307 (N.D. Ill. Apr. 10, 2017), relative to two defenses advanced by an employer, including: (1) the EEOC’s claims were barred as beyond the scope of the charges of discrimination and investigation; and (2) the EEOC failed to satisfy its Title VII pre-suit duty to conciliate with the employer. The ruling should be required reading for any employer facing or engaged in litigation with the Commission.

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An increasingly common issue in EEOC litigation against employers involves the scope of the Commission’s lawsuits as related to the charges of discrimination, as well as the EEOC’s conciliation efforts, or lack thereof.  In EEOC v. Dolgencorp, LLC, No. 13-CV-4307 (N.D. Ill. Apr. 10, 2017), the EEOC moved for partial summary judgment regarding two defenses enumerated by the defendant, Dolgencorp, LLC (“Dollar General”): (1) the EEOC’s claims were barred as beyond the scope of the charges of discrimination and investigation; and (2) the EEOC failed to satisfy its Title VII pre-suit duty to conciliate with the employer.  On April 10, 2017, Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois granted the EEOC’s motion for partial summary judgment as to these defenses asserted by Dollar General.

As Judge Wood acknowledged, many courts across the country have embraced defenses asserted by employers relating to the sufficiency of the EEOC’s investigation.  However, this ruling demonstrates that not all courts may be as receptive to those arguments.

Case Background

Two former Dollar General employees filed charges of discrimination with the EEOC regarding Dollar General’s allegedly discriminatory use of criminal background checks in hiring and firing determinations.  Id. at 1.  The EEOC investigated and determined that there was reasonable cause to believe that Dollar General had engaged in employment discrimination on the basis of race. The parties then engaged in written and oral communications regarding the alleged discrimination, which did not result in a conciliation agreement acceptable to the EEOC.  Id. at 2.  Thereafter, the EEOC brought a lawsuit against Dollar General under Title VII.

Amongst its enumerated defenses, Dollar General asserted that the EEOC’s claims were barred as beyond the scope of the charges of discrimination and investigation (its 7th enumerated defense), and that the EEOC failed to satisfy the statutory precondition for bringing suit when it failed to conciliate with Dollar General (its 8th enumerated defense). The EEOC moved for partial summary judgment as to Dollar General’s two enumerated defenses.  Id. at 3. The EEOC contended that, on the undisputed facts, these two defenses failed as a matter of law.

The Court’s Decision

The Court granted the EEOC’s motion for partial summary judgment regarding Dollar General’s two enumerated defenses.  Dollar General’s seventh enumerated defense relied upon two separate propositions: first, the EEOC’s claims were barred because they went beyond the claims delineated in the charges of discrimination that generated the EEOC’s lawsuit; and second, the EEOC’s claims were barred because the EEOC failed to investigate those claims adequately prior to bringing suit.  Id. at 4.  The Court rejected the first proposition, holding that when the EEOC files suit, it is not confined to claims typified by those of the charging party, and further, that any violations that the EEOC ascertains in the course of a reasonable investigation of the charging party’s complaint are actionable.  Id.  As to the second proposition, the Court similarly opined that the Seventh Circuit has held that if courts may not limit a suit by the EEOC to claims made in the administrative charge, they likewise cannot limit the suit to claims that are found to be supported by the evidence obtained in the Commission’s investigation.  Id.  Accordingly, the Court rejected Dollar General’s defenses insofar as it sought to dismiss the EEOC’s claims because they went beyond the charges of discrimination or because they were not subject to an adequate pre-suit investigation.  Id. at 4-5.

In addition, the Court addressed Dollar General’s eighth enumerated defense, which contended that the suit could not go forward because the EEOC did not satisfy its pre-suit statutory obligation to conciliate.  The EEOC sent two Letters of Determination to Dollar General that stated that the EEOC found reasonable cause to believe that Dollar General engaged in discrimination in violation of Title VII because, through application of its background check policy, a class of African-American applicants and employees were not hired, not considered for employment, or discharged.  Dollar General argued that this notice of the charge was not specific enough because it failed to identify the persons allegedly harmed and to identify the allegedly discriminatory practice.

Rejecting Dollar General’s argument regarding the specificity of notice, the Court held that the EEOC’s letters clearly set forth that there were African-American applicants and employees who were harmed by the allegedly discriminatory practice.  Id. at 6.  Further, the Court opined that as the Seventh Circuit has explained, the sufficiency of the EEOC’s investigation was not a matter for the judiciary to second-guess.  Dollar General also argued that the EEOC failed to specifically describe the allegedly discriminatory practice, and that merely pointing to the background check policy was not sufficient.  The Court rejected this argument, holding that the EEOC’s notice was sufficient since it identified the two complainants and further put Dollar General on notice that the EEOC’s allegations related to African-American applicants and employees that were not hired, not considered for employment, or discharged due to failing a background check.  Id. at 8-9.

Finally, Dollar General contended that the EEOC’s conciliation discussions were inadequate because the EEOC did not provide Dollar General with an opportunity to remedy the allegedly discriminatory practice.  Id. at 9.  Citing Mach Mining, LLC v. EEOC, 135 S. Ct. 1645, 1655-56 (2015) (which we analyzed here), the Court refused to examine the sufficiency of the EEOC’s investigation, noting it was beyond the scope of its review.  Id.  The Court thus rejected Dollar General’s argument that the EEOC did not adequately engage the employer in conciliation discussions.

Accordingly, the Court granted the EEOC motion for partial summary judgment on Dollar General’s seventh and eighth enumerated defenses.

Implications For Employers

While the Court did not find in the employer’s favor, other courts have routinely held the EEOC accountable in instances where it did not fulfill its pre-suit obligations.  With rulings such as this one, it can be expected that the EEOC will continue to test courts’ willingness to force the Commission to abide by its statutory duties under Title VII.  As such, employers should continue to be aggressive in attacking instances where the EEOC improperly expands its lawsuits beyond charges or fails to conciliate.

Readers can also find this post on our Workplace Class Action blog here.

U.S. Supreme Court Holds That An Abuse-Of-Discretion Standard Applies To Review Of EEOC Subpoenas

Posted in Investigation Tactics and Administrative Subpoenas

supreme court seal

By Gerald L. Maatman, Jr., Christopher J. DeGroff, and Matt Gagnon

Seyfarth Synopsis: Yesterday the U.S. Supreme Court handed down its long-awaited decision in McLane Co. v. EEOC, No. 15-1248, 2017 U.S. LEXIS 2327 (U.S. 2017), a decision that clarifies the scope of review for employers facing EEOC administrative subpoenas. The Supreme Court held that such decisions are reviewable under the abuse-of-discretion standard, which is a relatively high bar of review. At the same time, the Supreme Court’s ruling clarifies that EEOC subpoenas are subject to a searching, fact-intensive review that does not lend itself to a “one size fits all” approach.

Background

This case arose out of a Title VII charge brought by a woman who worked as a “cigarette selector,” a physically demanding job, requiring employees to lift, pack, and move large bins of products. After the charging party returned from three months of maternity leave, she was required to undergo a physical capabilities evaluation that was required for all new employees and employees returning from leave or otherwise away from the physically demanding aspects of their job for more than 30 days, regardless of reason. The charging party was allowed three times to meet the level required for her position, but failed each time.  McLane then terminated her employment.

The charging party claimed that her termination was because of her gender, and further alleged disability discrimination. During the investigation of her EEOC charge, the Commission requested, among other things, a list of employees who were requested to take the physical evaluation. Although McLane provided a list that included each employee’s gender, role at the company, evaluation score, and the reason each employee had been asked to take the evaluation, the company refused to provide “pedigree information,” relative to names, social security numbers, last known addresses, and telephone numbers of employees on that list. In the process of negotiating the scope of information that would be provided, the EEOC learned that McLane used its physical evaluation on a nationwide basis. The EEOC therefore expanded the scope of its investigation to be nationwide in scope, and also filed its own charge alleging age discrimination.

The District Court refused to order the production of pedigree information, holding that it was not “relevant” to the charge at issue because that information (or even interviews of the employees on the list provided by McLane) could not shed light on whether an evaluation represented a tool of discrimination. EEOC v. McLane Company, Inc., No. 12-CV-02469 (D. Ariz. Nov. 19, 2012) (See our blog post of the District Court’s decision here.)

On October 27, 2015, the U.S. Court of Appeal for the Ninth Circuit reviewed the District Court’s decision de novo and held that the District Court had erred in finding the pedigree information irrelevant to the EEOC’s investigation. EEOC v. McLane Company, Inc., Case No. 13-15126, 2015 U.S. App. LEXIS 187702 (9th Cir. Oct. 27, 2015). (See our blog post of the Ninth Circuit’s decision here.)

The Supreme Court granted certiorari to resolve the disagreement among the courts of appeals regarding the appropriate scope of review on appeal. The posture of the appeal was somewhat unusual because, after the grant of certiorari, the EEOC and McLane both agreed that the District Court’s decision should be reviewed for abuse of discretion, although the EEOC argued that the Ninth Circuit’s decision should stand as a matter of law. The Supreme Court therefore appointed an amicus curiae to defend the Ninth Circuit’s use of de novo review.

The Supreme Court’s Decision

The Supreme Court began its analysis by noting that in the absence of explicit statutory command, the proper scope of appellate review is based on two factors: (1) the history of appellate practice; and (2) whether one judicial actor is better positioned than another to decide the issue in question.

Regarding the first factor, the Supreme Court noted that abuse-of-discretion review was the longstanding practice of the courts of appeals when reviewing a decision to enforce or quash an administrative subpoena. In particular, the Supreme Court noted that Title VII had conferred on the EEOC the same subpoena authority that the National Labor Relations Act had conferred on the National Labor Relations Board (“NLRB”), and decisions of district court to enforce or quash an NLRB subpoena were reviewed for abuse of discretion.

Regarding the second factor, the Supreme Court held that the decision to enforce or quash an EEOC subpoena is case-specific, and one that does not depend on a neat set of legal rules. Rather, a district court addressing such issues must apply broad standards to “multifarious, fleeting, special, narrow facts that utterly resist generalization.” McLane Co. v. EEOC, 2017 U.S. LEXIS 2327, at *14 (U.S. 2017) (quoting Pierce v. Underwood, 487 U. S. 552, 561-62 (1988)). In particular, in order to determine whether evidence is relevant, the district court has to evaluate the relationship between the particular materials sought and the particular matter under investigation. These types of fact-intensive considerations are more appropriately done by the district courts rather than the courts of appeals.

The Amicus argued that the district court’s primary role is to test the legal sufficiency of the subpoena, which does not require the exercise of discretion. The Supreme Court held that this view of the abuse-of-discretion standard was too narrow. The abuse-of-discretion standard is not only applicable where a decision-maker has a broad range of choices as to what to decide, but also extends to situations where it is appropriate to give a district court’s decision an unusual amount of insulation from appellate revision for functional reasons. Those functional considerations weighed in favor of the abuse-of-discretion standard rather than a de novo standard of review. Because the Ninth Circuit did not apply that standard on appeal, the Supreme Court remanded the case to the Ninth Circuit for further proceedings.

Implications For Employers

The McLane case is important for employers because it clarifies the standard of review that is applied to the review of district court decisions enforcing or quashing EEOC subpoenas. Although the Supreme Court adopted the more “hands off” abuse-of-discretion standard, thus giving even more weight to the district court’s judgment, it did so because it identified the fact-intensive nature of these judgment calls, including important decisions about how difficult it would be for the employer to produce the requested information weighed against the need for that information, and the relationship between the particular materials sought and the particular matter under investigation.

At the very least, this language shows that the EEOC does not get to automatically presume relevance of its administrative subpoenas at the outset, as the EEOC sometimes likes to argue. Rather, employers should be able to cite to language in the Supreme Court’s opinion to reinforce the fact that the district court must give serious consideration to issues of relevancy and burden (also whether the subpoena is “too indefinite” or for an “illegitimate purpose”) when deciding whether to enforce an EEOC subpoena.

Readers can also find this post on our Workplace Class Action blog here.

Tennessee Court Rejects EEOC’s Supersized Subpoena Served On Fast Food Employer

Posted in Investigation Tactics and Administrative Subpoenas

gavel on white backgroundBy Gerald L. Maatman, Jr., Mark W. Wallin, and Alex W. Karasik

Seyfarth Synopsis: A federal court in Tennessee denied the EEOC’s application for an Order to Show Cause why its administrative subpoena should not be enforced.  This ruling highlights the importance and benefits of employers understanding the contours of the charges being investigated by the EEOC, so that the employer can guard against improper fishing expeditions.

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Although courts typically grant the EEOC wide latitude to obtain information regarding its investigations of workplace discrimination, this access is not limitless.  One such limit was recently highlighted in EEOC. v. Southeast Food Services Company, LLC d/b/a Wendy’s, Case No. 3:16-MC-46 (E.D. Tenn. Mar. 27, 2017 ), where Magistrate Judge H. Bruce Guyton of the U.S. District Court for the Eastern District of Tennessee denied the EEOC’s Application for an Order to Show Cause Why an Administrative Subpoena Should Not Be Enforced (“Application”).  The Court refused to enforce the EEOC’s subpoena, finding that the request for contact information of all of Southeast Food Services Company, LLC, d/b/a Wendy’s (“Wendy’s”) current and former employees, among other things, was not relevant to the individual charge of discrimination being investigated by the EEOC.

This ruling illustrates the importance to employers of understanding the scope of the EEOC charge being investigated, and provides a roadmap for pushing back against agency overreach when the Commission seeks information that is not pertinent to the investigation at issue.

Case Background

In September 2014, Wendy’s hired Christine Cordero as a crew member at one of its restaurant locations.  Id. at 2.  Shortly thereafter, Wendy’s promoted Cordero to crew leader.  Id.  As part of her promotion, Wendy’s requested that Cordero sign a general release of all claims she may have against Wendy’s up to that point, but not including future claims.  Id.  For the past 20 years, Wendy’s had conditioned promotions on signing this release. Id.  Despite not having any claims against Wendy’s, Cordero refused to sign the release.  Id.  As a result of her refusal, Cordero did not receive the promotion, but still received training for the position and a small raise that accompanied the promotion.   Id.

Ms. Cordero continued to work for Wendy’s, but filed a charge of discrimination with the EEOC in December 2014.  Id.  In the charge, Cordero alleged that Wendy’s retaliated against her by not promoting her due to her refusal to sign the release. Id.  In the course of its investigation of Cordero’s charge of discrimination, the EEOC learned of Wendy’s longtime practice of requiring employees to sign a release of claims as a condition of promotion, and thereafter sent Wendy’s a letter indicating it intended to expand the investigation.  Id.  In this letter, the EEOC also requested information from Wendy’s regarding current and former employees who had worked for Wendy’s since December 2012.  Id.  Wendy’s, however, refused to provide this additional information, and the EEOC then issued a subpoena seeking the same information.  Id. at 2-3.

The EEOC’s subpoena sought the identity and contact information of all current and former employees since December 2012, including employees who signed the release of claims and who had been promoted.  Id. at 3.  In addition, the subpoena sought the employees’ dates of hire, promotion and termination, reasons for termination, and titles, as well as copies of all releases that Wendy’s had employees sign during that period, among other things.  Id.  Wendy’s continued to object, and refused to provide the information subpoenaed.  Id.  Thereafter, on November 18, 2016, the EEOC filed the Application with the Court, to which Wendy’s responded on February 22, 2017.

The Court’s Decision

The Court denied the EEOC’s Application and declined to enforce the subpoena.  The EEOC argued that it “require[d] the contact information for [Wendy’s] employees to mail questionnaires in order to determine if those employees gave up any claim in order to receive promotions.”  Id. at 4.  In response, Wendy’s asserted that the sole issue with regard to the instant charge was whether its uniform policy regarding a signed release as a condition of promotion was sufficient to sustain Cordero’s Title VII retaliation claim, and that the information sought for the questionnaires was neither relevant nor necessary to the EEOC’s investigation.  Id. at 4-5.  Siding with Wendy’s, the Court rejected the EEOC’s argument, finding that “whether other ‘employees gave up any claim in order to receive promotions’ [was] irrelevant to resolving Ms. Cordero’s charge.”  Id. at 5.

The EEOC further argued that sending the questionnaires to other employees was the only way to verify Wendy’s contention that no other employees aside from Cordero refused to sign the release.  The Court again rejected the EEOC’s argument, noting it was “unclear how another employee’s refusal to sign a release ‘might cast light’ on the instant charge, particularly where there is no dispute that for the past 20 years, all employees have been required to sign a general release of all claims as a condition of promotion.”  Id. at 6.  The Court further reasoned that the potential unlawfulness of Wendy’s employment practice was not dependent on how many other employees signed a release.  Id. at 7.  Accordingly, the Court held that the EEOC did not meet its burden in demonstrating that the information subpoenaed is relevant to Cordero’s charge, and declined to enforce the subpoena.

Implication for Employers

In what has become “go-to” play in the EEOC’s investigation playbook, the Commission has been aggressive in taking individual charges of discrimination as means to seek company-wide personnel information from employers through subpoenas.  Employers that encounter requests for expansive personnel data in the course of single employee investigations can add this ruling to their own playbooks in defending against overzealous EEOC investigations.  While the Commission likely will continue to be aggressive in seeking massive amounts of information from employers in investigations, this ruling provides optimism for employers who are willing to firmly oppose such tactics.

Readers can also find this post on our Workplace Class Action blog here.

Keys To Successor Liability: EEOC Discrimination Suit In Alabama

Posted in EEOC Litigation

200px-NDAla_sealSeyfarth Synopsis: An Alabama district court granted a temporary staffing company’s motion to dismiss all claims in one of the EEOC’s most high-profile lawsuits asserting hiring discrimination and abuse of vulnerable workers. The ruling illustrates the procedural defenses that employers possess to ensure that pre-lawsuit investigations undertaken by the EEOC accord with its obligations under the law.

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A recent mission of the EEOC has been to aggressively pursue lawsuits on behalf of “vulnerable workers” who may not always be aware of their rights. A result of the EEOC’s recent aggressiveness is that the Commission often neglects to fulfill its pre-suit obligations under Title VII and overlooks jurisdictional requirements when racing to the courthouse. These tactics came under scrutiny in EEOC v. Labor Solutions of Alabama, Inc. f/k/a East Coast Labor Solutions, No. 16-CV-1848 (N.D. Ala. Mar. 17, 2017), where Judge Virginia Emerson Hopkins of the U.S. District Court for the Northern District of Alabama granted Labor Solutions of Alabama, Inc.’s (“LSA”) motion to dismiss the EEOC’s complaint. The Court found that the EEOC lacked subject-matter jurisdiction and failed to exhaust its administrative remedies after suing LSA for alleged conduct that occurred by its supposed predecessor before LSA was ever formed.

This ruling is a signal victory for employers involved in EEOC litigation regarding potential successor liability, as well as any employer involved in EEOC litigation where the Commission fails to exhaust its pre-suit duties under Title VII.

Case Background

The EEOC investigated charges of discrimination against a company called East Coast Labor Solutions, LLC (“East Coast”), alleging that East Coast discriminated against the charging parties on the basis of their national origin and failed to accommodate their disabilities. Following its investigation, the EEOC issued East Coast a letter of determination finding reasonable cause to believe that Title VII and the ADA were violated with respect to the charging parties and a class of current and former employees. Id. at 8.  The EEOC thereafter unsuccessfully attempted to conciliate with East Coast.  In November 2013, East Coast ceased operations.  LSA was formed in October 2014.

Despite the fact that LSA was not in existence when the alleged misconduct occurred, the EEOC filed a Complaint alleging that LSA subjected the Claimants to discriminatory treatment based on their national origin and failed to accommodate their disabilities. While East Coast partnered with its owner Labor Solutions (a different entity than LSA), the only Defendant named in the lawsuit was LSA.  Thereafter, LSA moved to dismiss the Complaint because it failed to allege that LSA employed the Claimants, thereby meaning the Complaint should be dismissed for lack of subject matter jurisdiction and failure to state a claim under Title VII and the ADA. Id. at 9.  LSA also argued that the EEOC failed to exhaust administrative prerequisites, noting that LSA was not named in the original EEOC charge or in any amendment thereto.

The Courts Decision

The Court granted LSA’s motion to dismiss. First, the Court addressed the EEOC’s argument that it alleged plausible facts to infer so-called “successor liability.” Id. at 11.  After thoroughly examining various Eleventh Circuit precedents regarding successor liability, the Court explained that “[a]lthough the Court agrees with the EEOC that successorship does not have to be conclusively determined at this stage of the litigation, that does not absolve the agency from pleading facts which make its existence plausible.” Id. at 26.

Applied here, the Court determined there were “no facts suggesting substantial (or even any) continuity in business operations from East Coast to LSA. The Complaint contains no allegations that there was any sale of East Coast, or any of its assets, to LSA.”  Id. at 27.  Finding there was no successor liability, the Court further reasoned that East Coast had been defunct nearly an entire year before LSA was formed; there was no allegation that LSA employed substantially the same work force and/or supervisors as East Coast; the Complaint did not allege that LSA operated at the same location as East Coast; there was no allegation as to whether East Coast could have provided relief before or after any alleged sale or transfer; and there was no allegation as to whether LSA could provide any relief now.

The Court further rejected the EEOC’s argument that East Coast and LSA were both temporary staffing agencies and that both entities shared the same managing officers, principal office address, and company email accounts, holding this was not enough to demonstrate continuity when one considered the break in time between when East Coast ceased operations and LSA began. Finally, the Court opined that even if the Complaint had plausibly alleged that LSA was the successor to East Coast, it would still be dismissed since it was undisputed that LSA was not named in the original EEOC charge, or in any subsequent amendment.  Accordingly, the Court granted LSA’s motion to dismiss, but noted the EEOC may file an amended complaint to attempt to cure its deficiencies.

Implications For Employers

For employers with intricate corporate structures and ties to defunct entities, this ruling is a major victory. Employers with corporate officers who previously worked at a similar but defunct entity can use this ruling to as a roadmap to navigate EEOC lawsuits concerning allegations from before their business was ever formed. In sum, this is yet another example of a court pumping the brakes on procedurally improper EEOC litigation.

Readers can also find this on our Workplace Class Action Blog here.