EEOC Year-End Countdown

Déjà Vu All Over Again: EEOC’s Fiscal Year-End Lawsuit Blitz Once Again Catches Dozens Of Employers In Litigation Net

Posted in EEOC Litigation

By Gerald L. Maatman, Jr., Christopher DeGroff, and Matthew Gagnon

In the words of the immortal bard Yogi Berra, “it’s like déjà vu all over again.”

As we have reported in years past (see here and here), the EEOC has a predictable trend of filing a flurry of lawsuits in the last days of its fiscal year, which ends on September 30. Fiscal year 2013-14 was no different. Like clockwork, the EEOC filed a spate of lawsuits as time ran out, yet again enmeshing dozens of employers across the country in government initiated litigation. Indeed, the EEOC filed an astonishing 58 lawsuits in September 2014 alone, up 10 lawsuits over September 2013.  But does this year-end-rush accomplish the EEOC’s goals and square with its statutory mandate? The following post explores this annual governmental filing phenomenon and what it means to employers in its aftermath.

Different Year, Same Spike: FY 2014 Cases Filed By Month

As this graph shows, the year-end-rush is still a very real phenomenon for employers, with a gradual increase in filings throughout the year, punctuated by a final blast in September. Readers may note the uptick in December 2013. This was most likely due to clearing a backlog caused by the October 2013 government shut-down; we expect that, like most other government agencies, the EEOC needed a few weeks to get its legs back beneath it before it got back to business as usual.

The end-of-year rush pushed the total number of suits filed up a bit from last year, increasing to 142 from last year’s 134. But this is still a dramatic drop from the high point of 261 filings in 2011. This drop, however, is consistent with the EEOC’s 2012 strategic enforcement plan, which directed the regional offices to pursue more systemic, class-wide employment discrimination cases. In short, the EEOC continues to strive for getting the most bang for the taxpayer buck.

But with fewer total filings, what has consumed the EEOC’s resources this year? Where does the money go? We have developed some ideas based on our study of EEOC activity:

The EEOC Is Still Fighting The Giants From Previous Years

The EEOC has finite resources. Predictably, one problem the EEOC faces with an increased focus on systemic cases is that these whopper cases take up more resources and last longer than garden-variety matters. The EEOC is still fighting some of the same major cases that it filed during the high-water mark for filings. For example, the EEOC recently convinced U.S. District Judge Keith Ellison to reverse, at least in part, his earlier employer-friendly decision in EEOC v. Bass Pro Outdoor World, LLC, et al., Case No. 11-CV-3425 (S.D. Tex. July 30, 2014). That large-scale case still remains in its relative infancy, even though it was filed in 2011.

The EEOC has also continued its battle against employers – and at least one state – over the legality of using credit and criminal background checks to make hiring and employment decisions. We have blogged often about this beleaguered EEOC initiative over the past few years. At least one of those cases came to a spectacular end this year in a stunning defeat for the EEOC, while other battles continue to rage on. As we previously blogged about here, the EEOC recently lost a landmark case against Kaplan Higher Education Corp. where the Sixth Circuit upbraided the EEOC for the “homemade” methodology that the agency used to determine race in that case – namely, by asking “race raters” to assign race based on drivers’ license photographs – concluding that it was “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”

But this EEOC theory lives on in the EEOC v. Freeman case, which is up for appellate review before the Fourth Circuit, and in the November 2013 case that Texas brought to enjoin the enforcement of the EEOC’s criminal history guidance. As we discussed here, that suit was dismissed on August 20, 2014 in State of Texas v. EEOC, Case No.5:13-CV-255 (N.D. Tex. Aug. 20, 2014). The Court held that Texas lacked standing to maintain its suit because Texas did not allege that any enforcement action had been taken against it in relation to the EEOC’s guidance. While an important victory for the EEOC, this decision left untouched the important substantive issues regarding the EEOC’s guidance, which will have to be fought another day.

The key to this retrospective is that when analyzing EEOC activity, it is often necessary to look back at filings from previous years, as that activity impacts the EEOC’s resources and strategies today.

Clearing The Underbrush For An Enhanced Systemic Program

The EEOC also appears to be taking another strategic direction in FY2014: deploying considerable resources to litigate high-level, defining issues that will have a major impact on its ability to carry out its systemic initiative. As we previously blogged about here, in 2012 the EEOC issued its strategic enforcement plan that outlined the priorities for the Commission’s enforcement activity through 2016. We have dissected the potential ways that the SEP would guide enforcement priorities as it was implemented (see, e.g., here, here, and here). But by FY2014, we start to see the EEOC’s agenda snap into clearer focus, and note how the government has adjusted its activities to pursue the SEP objectives. Of course, one of the EEOC’s most important strategic objectives is an increased focus on pattern or practice, policy, or class cases where the alleged discrimination has a broad impact on an industry, profession, company or geographic area. These so-called “systemic” cases are developing into its single most important litigation driver.

But this year, the agency has focused substantial resources to tackle the legal issues that could, if the EEOC is successful, sweep away certain procedural prerequisites to filing suit that the EEOC believes just get in the way of its enforcement efforts, especially concerning systemic cases.

Perhaps chief among those procedural brake-pumps is the EEOC’s statutorily mandated obligation to conciliate in good faith before bringing suit against an employer. On June 30, 2014, the Supreme Court granted certiorari in Mach Mining, LLC v. EEOC (No. 13-1019). As we have discussed a length here, the outcome of that case could be a game-changer in EEOC litigation because the EEOC seeks to effectively immunize itself from any attack on its failure to meaningfully conciliate with an employer before bringing a lawsuit. The Seventh Circuit ruled in December 2013 that the EEOC’s failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit.  The Court held that such pre-suit obligations were beyond judicial scrutiny as long as the EEOC’s complaint pleads it has complied with all procedures required under Title VII, and the relevant documents are facially sufficient. This decision is now up for review by the Supreme Court because of the conflict among the circuits created by the Seventh Circuit’s decision. As we previously blogged about here, Seyfarth Shaw submitted an amicus brief to the Supreme Court on behalf of the American Insurance Association, questioning the underpinning of the Seventh Circuit’s decision.

But conciliation is not the only procedural hurdle that the EEOC seeks to dismantle. It is also challenging the court’s ability to inquire into the scope of the EEOC’s pre-suit investigation as well. On March 10, 2014, in EEOC v. Sterling Jewelers Inc., Case No. 08-CV-706 (W.D.N.Y. Mar. 10, 2014), Judge Richard J. Arcara of the U.S. District Court for the Western District of New York dismissed the EEOCs’ entire case against Sterling Jewelers with prejudice. In so doing, the Court rejected the EEOC’s contention that a court may not inquire as to the scope of the EEOC’s pre-lawsuit investigation, and found no evidence that the EEOC had actually investigated the nationwide claims that it had brought against Sterling prior to bringing suit. The EEOC promptly appealed that decision, which is now being litigated at the Second Circuit.

Pushing The Envelope On Non-Substantive Legal Theories

Not content to continue to pursue the novel issues raised in prior years, the EEOC is also attempting to add new weapons to its enforcement arsenal. In EEOC v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill. Feb. 7, 2014), the EEOC challenged various provisions of CVS’s standard severance agreement, arguing that it violates Title VII because it interferes with an employee’s right to file charges, communicate voluntarily, and participate in investigations with the EEOC and other state agencies. In addition to the general release and the covenant not to sue – which were already areas of concern for the EEOC – the EEOC also challenged the agreement’s requirements that employees notify the company of any legal proceedings or administrative investigations, the non-disparagement provision, and the agreement’s prohibition on the disclosure of confidential information without the company’s consent. Although preliminary comments from the judge strongly suggest that this case will be dismissed, the EEOC is already pursuing a different employer under a similar theory in the District of Colorado. See EEOC v. CollegeAmerica Denver, Inc., Case No. 14-cv-01232-LTB-MJW (D. Colo.).

And in EEOC v. Supervalu, Inc. and Jewel-Osco, Case No. 1:09-CV-05637 (N.D. Ill.), the EEOC attacked an employer for supposedly failing to comply with the injunctive mandates that the employer had agreed to as part of a consent decree entered into with the EEOC.  The EEOC had sued Supervalu, Inc. and Jewel-Osco (“Jewel”) in 2009, alleging that it engaged in a pattern or practice of violating the Americans with Disabilities Act. On January 14, 2011, the EEOC and Jewel entered into a three-year consent decree to resolve the case. Jewel agreed, among other things, to engage an “accommodations consultant” to assist in identifying possible accommodations for disabled employees.

But just a year later, on March 26, 2012, the EEOC sought civil contempt sanctions against Jewel for failing to follow the requirements of the consent decree. Magistrate Judge Mason of the Northern District of Illinois filed his Report and Recommendation on July 15, 2014, ruling that Jewel violated the terms of the consent decree by allegedly failing to follow its own procedures, including the use of an accommodations consultant, and failing to accommodate and ultimately terminating three disabled employees. The EEOC almost always insists on some form of injunctive relief when it settles a case through a consent decree. If enforcement of the terms of those decrees is the new cause of action de jour, then this poses an entirely new threat to employers, who could face substantial exposure even after a case is settled and “over.”

Finally, the EEOC has been steadily increasing its use of its subpoena power to gather as much information as possible from employers prior to filing suit. Fiscal year 2014 saw 24 subpoena actions versus the 17 that were filed last year. As we have discussed here, although some employers have been successful in reigning in the EEOC’s subpoena power, many courts continue to give the agency considerable leeway to conduct searching pre-suit investigations, even where those investigations have little or no connection to the underlying charge.

What Types Of Cases Did The EEOC Focus On In FY2014?

Of course, the legal shifts discussed above are not the only story coming out of the EEOC’s FY2014 filings. We can also discern significant trends in the types of cases that the EEOC is choosing to pursue.  The following chart offers a breakdown of the EEOC’s filings by statute:

We continue to see a strong focus on disability issues: disability cases make up 34% of all EEOC filings this year, fairly close to the number of cases we saw filed last year (36% in 2013). Race cases were somewhat underrepresented this year when compared with past years (14 in 2014, as compared with 17 in 2013), but there has been a fairly sizable uptick in age discrimination filings (nine this year, compared with only five in 2013).

By far, sex and pregnancy issues are the dominant discrimination theories alleged in Title VII cases in FY2014. The Commission filed 6 pregnancy discrimination cases in September alone, and has repeatedly emphasized that this is a priority for the agency. In a recent case filing announcement, for example, the EEOC’s press release stressed that “[t]he law is clear – employers cannot refuse to hire or discharge women because of their pregnancy,” and that “[c]ombating pregnancy discrimination remains a priority.” Indeed, sex/pregnancy discrimination cases make up 61% of all Title VII cases filed in 2014:

Aggressive Regional Offices

Finally, as with prior years, FY2014 saw significant disparities in the number and types of filings coming out of the EEOC’s 15 districts. Five districts in particular are unusually aggressive in the number of cases they file, the types of cases they bring, and how aggressive they pursue those cases. Here is a breakdown of how many cases were filed where:

The EEOC’s Chicago district office, led by regional attorney John Hendrickson, remains one of the most aggressive in the country, pursuing not only a large number of cases (26 in FY2014), but also cases that are themselves large and important in terms of their impact on U.S. employers. CVS, Jewel, and Mach Mining, discussed above, all started in Chicago.

The Philadelphia office is also consistently active and aggressive. That office took the lead in a handful of cases alleging that employers’ use of criminal and credit history background checks had an adverse impact on minority applicants. Although one of those cases, EEOC v. Kaplan, Inc., resulted in a stinging defeat for the agency at the district court and the Sixth Circuit, another case, EEOC v. Freeman, lives on at the appellate level. The Fourth Circuit is set to decide that case after a Maryland federal judge granted summary judgment to the company.

The New York office has also been quite active, and is pursuing a handful of high profile pregnancy and sex discrimination cases that are still winding their way through the Courts. Chief among those are the Sterling case discussed above, which is now before the Second Circuit, and a pregnancy discrimination suit against Bloomberg LP, which was gutted by the district court in September 2013, and which the EEOC was forced to walk away from in August of this year.

Rounding out the list of hard-hitting regional offices are the Houston office and the Phoenix office, which are both known to file high-profile cases and aggressively pursue them. Those offices filed 9 cases and 14 cases respectively in 2014.

Insight For Employers

Fiscal Year 2014 was curious in many ways. We can see the unquestionable fingerprints of the 2012 SEP in the EEOC’s filings, and we can expect to see those trends continue. But we also see the agency making more nuanced, strategic decisions with how it uses its finite resources – choosing to fight a number of procedural issues that may pave the way (at least if the EEOC has its way) to an open door to the federal courthouse in years to come, unfettered by procedural prerequisites. The 2014 fiscal year has just ended, and we continue to process this data. The EEOC’s official published statistics are typically released in November, which will give us additional insight into this often confounding agency. Stay tuned, loyal blog readers.

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

EEOC Pushes Its Strategic Enforcement Plan And Advocates For Transgender Workplace Protections Under Title VII

Posted in Regulatory / Guidance Issuance

By Laura J. Maechtlen

No federal statute explicitly prohibits employment discrimination based on gender identity or expression. Nevertheless, in recent years, the EEOC has advocated — including as part of its strategic plan — that it would pursue protections for transgender workers under Title VII’s prohibition against “sex” discrimination and harassment. Indeed, on April 20, 2012, the agency issued a landmark administrative ruling titled Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 0120120821 (April 23, 2012) in which it held that transgender individuals may state a claim for sex discrimination under Title VII. Read our prior analysis of the Macy decision here.

Following Macy, on September 25, 2014, the EEOC filed two separate lawsuits—EEOC v. Lakeland Eye Clinic, P.A. (Middle District of Florida, Tampa Division) and EEOC v. R.G. & G.R. Harris Funeral Homes Inc. (Eastern District of Michigan, Southern Division) — on behalf of transgender workers. The crux of the EEOC’s theory is that Title VII protects transgender workers based on “sex.”

Facts And Claims Alleged

In EEOC v. Lakeland Eye Clinic P.A., the EEOC asserts that the employer fired its director of hearing services, Brandi M. Branson, after she began wearing feminine clothing to work and informed the clinic she was transitioning from male to female. Managers and employees allegedly made derogatory comments about Branson’s appearance, and Branson was thereafter deprived of her client base by the employer. Branson was terminated, and the EEOC alleges that, two months after Branson was terminated, the clinic hired a male worker in the same position who conformed to traditional gender norms.

In R.G. & G.R. Harris Funeral Homes, the EEOC alleges that a Detroit-based funeral home illegally fired a funeral director and embalmer named Aimee Stephens, weeks after Stephens gave the funeral home a letter saying she was undergoing a gender transition from male to female. She was allegedly terminated, and told by the owner of the employer that what she was “proposing to do” was “unacceptable.”

In both cases, the EEOC alleges various theories of “sex” discrimination on behalf of the claimants. The EEOC alleges that the decision to terminate each of these employees was motivated by “sex-based” considerations because the employee is transgender, because of the employee’s transition from male to female, and/or because the employees did not confirm to the employers sex- or gender-based preferences, expectations or stereotypes.

Implications For Employers

The theories of liability articulated in these lawsuits clearly follow the EEOC’s prior ruling in Macy, in which the EEOC found that discrimination against a transgender worker was — per se — sex discrimination. See Macy at *6. The EEOC also uses as a basis for liability the decision in Price Waterhouse v. Hopkins, 490 U.S. 228, 239 (1989), in which the U.S. Supreme Court held that Title VII bars discrimination based on gender stereotypes, in other words, failing to act and appear according to expectations defined by gender — a form of sex discrimination that has since been described as “sex stereotyping,” and one alternative way of proving sex discrimination.  The EEOC has made clear that, while gender identity and/or expression are not independent classifications for protection under federal law, the agency will attempt to establish a case of sex discrimination through a variety of different formulations.

In order to avoid potential pitfalls in this emerging area of law, employers must be mindful of issues related to gender identity and/or expression that might arise during interviewing, hiring, discipline, promotion and termination decisions.  Employers should be particularly vigilant when an employee identifies as transgender, or announces a plan to undergo a gender transition. Moreover, the theories articulated in these cases are not just limited to transgender employees—many forms of “sex stereotyping” may give rise to actionable claims, not just discrimination or harassment against individuals who identify as transgender. Employers must also be aware that transgender individuals may be affirmatively protected under state or local laws (see our analysis of a recent California case here), and that any allegations concerning transgender discrimination, gender stereotyping or gender identity, require the same analysis, investigation and response as a traditional sex discrimination complaint. Finally, employers should consider whether to implement gender transition guidelines for human resources and/or management that define a process through which employees and management approach an employee gender transition in the workplace.

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

After The Charge Has Gone: Court Gives EEOC Free Reign To Press Systemic Investigation Even After Charging Party Withdraws

Posted in Investigation Tactics and Administrative Subpoenas

By Gerald L. Maatman, Jr. and Jason J. Englund

As we have blogged previously, the EEOC is increasingly wielding its subpoena power in pre-lawsuit investigations and subpoena enforcement proceedings to conduct expansive, nationwide investigations. While courts traditionally have given the EEOC wide latitude in exercising its subpoena power, in recent years numerous courts have curbed the EEOC’s efforts to push its subpoena power beyond reasonable limits (see, for example, here and here). As a recent decision by Judge James Moody of the U.S. District Court for the Middle District of Florida shows, however, some courts continue to give the EEOC virtually free reign to conduct open-ended investigations having little or no connection with the underlying charge that ostensibly served as the initial basis for the EEOC’s jurisdiction.

The ruling in EEOC v. KB Staffing, LLC, Case No. 14-MC-41 (M.D. Fla. Sept. 16, 2014), illustrates how difficult it can be for an employer seeking to protect itself from burdensome and seemingly over broad investigations by the EEOC.

Background To The Case

The EEOC’s investigation in EEOC v. KB Staffing, LLC stemmed from a charge filed by Rose Marie Porter, alleging that KB Staffing violated the Americans With Disabilities Act (“ADA”) by requiring job applicants to complete a pre-offer health questionnaire. The charge alleged that KB Staffing refused to hire her after she declined to complete the health questionnaire in connection with her application for employment in August 2012. By the time Ms. Porter filed her charge with the EEOC in February 2013, KB Staffing had already discontinued the use of the health questionnaire as of December 2012.

While the EEOC investigation was pending, Ms. Porter filed suit in Florida state court alleging that KB Staffing’s pre-offer health questionnaire violated Florida state law. The parties later settled Ms. Porter’s individual claim, and Ms. Porter withdrew her EEOC charge pursuant to the parties’ agreement on May 13, 2014.  With Ms. Porter’s charge withdrawn and the employment practice at issue discontinued, the employer thought that the EEOC had no reason to continue its investigation. Notably, there were no class allegations raised in the charge, and the settlement seemingly resolved the issue.

Nevertheless, the EEOC issued a broad administrative subpoena against KB Staffing on May 23, 2014 — after Ms. Porter had already settled her claim and withdrawn her charge. The subpoena sought copies of the health questionnaires of every single person who applied for employment with KB Staffing within the three years prior to the date of Ms. Porter’s charge, as well as the health questionnaires for all current employees. KB Staffing filed a petition with the EEOC to revoke or modify the subpoena. KB Staffing asserted that the EEOC’s subpoena greatly exceeded the scope of the underlying charge, but the EEOC denied the petition and filed an administrative enforcement action in federal court to enforce the subpoena.

The Court’s Ruling

U.S. Magistrate Judge Anthony Porcelli enforced the EEOC’s subpoena. He found that the EEOC retained authority to continue its investigation even after the charging party withdrew the underlying charge, reasoning that the EEOC maintains discretion to vindicate the public interest in combating systemic discrimination because the EEOC’s authority is not “merely derivative” of the claims asserted by a charging party.

The Magistrate Judge also rejected the defendant’s argument that the EEOC lacked authority to seek information for three years prior to the date of the charge when the appropriate statute of limitations period was only one year. Indeed, as the defendant pointed out in its briefing, the limitations period had already run for any claims that other applicants might bring based on the questionnaire because KB Staffing had discontinued its use of the questionnaire well over a year before the date of the EEOC’s subpoena.  The magistrate gave the defendant’s limitations argument short shrift, simply noting that any statute of limitations arguments may be asserted as a defense following initiation of a court action, rather than in response to the subpoena.

Despite the fact that the Magistrate Judge’s decision failed to explain how the EEOC’s investigation could combat systemic discrimination when the defendant had already discontinued the use of the pre-offer questionnaire, KB Staffing did not file Rule 72 objections to the order.

On September 16, 2014, Judge James S. Moody adopted the Report and Recommendation of Magistrate Judge Porcelli directing KB Staffing to comply with the EEOC’s subpoena.  Judge Moody indicated that based on his independent review of the dispute, the Magistrate Judge did not abuse his discretion in ordering compliance with the Commission’s subpoena.

Implications or Employers

The ruling in EEOC v. KB Staffing is a disturbing ruling for employers dealing with EEOC investigations. If there was ever a situation where the facts suggested an overreach by the EEOC, the facts in this case seemed custom-made to do so. The decision by Judge Moody demonstrates that some courts remain willing to allow the EEOC to turn individual charges into open-ended nationwide investigations.  The case is particularly troubling because it gives the EEOC a green light to go fishing through an employer’s files even after the underlying charge and the claims of any other potential claimants are moot.

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

The Defense Amicus Briefs Submitted To The SCOTUS In EEOC v. Mach Mining

Posted in EEOC Litigation

By Gerald L. Maatman, Jr., Lorie Almon, Rebecca Bjork, and Christopher DeGroff

Today Seyfarth Shaw LLP submitted an amicus brief to the U.S. Supreme Court on behalf of the American Insurance Association in Mach Mining v. EEOC, No. 13-1019 (S. Ct.), perhaps the most important EEOC-related case to reach the SCOTUS in years. For our loyal blog readers interested in our amicus brief, a copy is here.

Mach Mining’s opening brief was filed last week – a copy is here if you missed it.

We have blogged on this case at various points before, as the litigation winded through the lower courts and culminated in the precedent-setting decision of the U.S. Court of Appeals for the Seventh Circuit reported at 738 F.3d 171 (7th Cir. 2013). Readers can find the previous posts here and here. In a game-changing decision for employers, in December 2013, the Seventh Circuit ruled that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit brought by the Commission. In essence, the Seventh Circuit determined that the EEOC’s pre-lawsuit conduct in the context of conciliation activities cannot be judicially reviewed. Subsequently, in what many SCOTUS watchers found ironic, even the though the EEOC prevailed in the Seventh Circuit, the Government backed Mach Mining’s request for SCOTUS review to resolve the disagreement among the courts of appeals regarding the EEOC’s conciliation obligations.

Our amicus brief questioned the underpinning of the Seventh Circuit’s decision – that employers asserting the failure-to-conciliate defense deflect judges from the merits and that there need not be any judicial review of the Commission’s conduct because the EEOC follows its obligations. We argued that the modern American judicial system does not work in that manner and that the Seventh Circuit’s ruling should be reversed.

Insofar as the Seventh Circuit’s ruling forbids judicial review of the EEOC’s satisfaction of its statutory obligation to conciliate discrimination claims in good faith, this undermines the ability of employers and insurers to reasonably assess settlement issues. When Congress enacted Title VII of the Civil Rights Act of 1964 (“Act”), it mandated that the EEOC engage in conciliation proceedings with employers prior to bringing lawsuits. 42 U.S.C. §2000e-5(b), (f)(1). While the language of the Act does not specify how conciliation proceedings must be conducted or the quantum of information that must be disclosed or exchanged, it clearly requires that the EEOC engage in good faith proceedings before bringing lawsuits. Id. Congress enacted this requirement in the interests of judicial economy, providing both the EEOC and employers with an avenue to resolve disputes confidentially, voluntarily, informally and without burdening the dockets of federal courts.

First, contrary to this clear Congressional intent that courts have followed over the last several decades, in EEOC v. Mach Mining, LLC, the Seventh Circuit held that this obligation is not judicially reviewable, and that, in essence, the EEOC may skip the statutory requirement of conciliation without any consequence. The Seventh Circuit opined that “failures by the EEOC in the conciliation process simply do not support an affirmative defense for employers charged with employment discrimination.” 738 F.3d at 181.  In support of its conclusion that employers may not use failure-to-conciliate as an affirmative defense, the Seventh Circuit noted “as a practical matter, there is little reason to expect the potential for dismissal to promote conciliation. The employer in a dismissed case has little incentive to resume talks, of course. The next employer the EEOC investigates will have seen the benefit of using the conciliation process as a strategic defense rather than a chance to settle.” Id. at 184-85. Contrary to Congress’s view that conciliation proceedings must be conducted as a vehicle to foster judicial economy, the Seventh Circuit decided that the requirement of conciliation proceedings was merely a formality that mostly benefitted employers who sought the dismissal of claims when the EEOC neglected to follow mandatory procedure.

Second, while the Seventh Circuit focused on critiquing certain employers’ potential defense strategies, it failed to account for the practical realities of its holding. The Seventh Circuit’s ruling encourages the EEOC to abstain from the procedural requirement of meaningful conciliation established by Congress and ignores the fact that employers and their insurance carriers – along with alleged victims of discrimination who may be desirous of settling – have both financial and business-reputation reasons to resolve litigation as quickly and cost-efficiently as possible. In reality, an insurer needs the EEOC’s help before it can authorize payment, due to insurers’ fiduciary obligations to their stockholders and legal obligations to regulators not to pay claims unless there is sufficient indicia that they have merit.  In this way, the Seventh Circuit failed to consider how the ruling impacts multiple constituents, including already over-burdened federal courts, which will now face more EEOC litigation; employers who face such claims; and the insurance industry, which bears the cost of defending the time-consuming and expensive litigation through employment practices liability insurance. In short, when the EEOC cooperates, alleged victims receive compensation more quickly, whether because insurers gain some leverage over employers who are otherwise resistant to settle, or because the carrier and the employer are better equipped to assess the EEOC’s demands and their litigation costs and risks. Employers always benefit, as fulsome information regarding the EEOC’s claims and settlement demands is necessary to make an informed and intelligent decision about whether to settle a claim or accept the reality of having to defend an EEOC lawsuit in federal court.

Implications For Employers

An eventual ruling by the Supreme Court on these issues will be important for any employer dealing with the EEOC.  If federal district courts cannot review its pre-lawsuit conciliation efforts, the EEOC will have free reign to pay mere lip service to its conciliation obligations and approach any negotiations in a “take-it-or-leave-it” manner. It remains to be seen whether the Supreme Court will agree with the Seventh Circuit’s approach. Stay tuned.

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

The EEOC Continues To Struggle To Overcome Case Law Rejecting Its Open-Ended Litigation Strategy

Posted in Procedural and Jurisdictional Issues

By Gerald L. Maatman, Jr.

The nightmare scenario for a corporate counsel is being on the receiving end of an EEOC lawsuit where the Commission sues on behalf of a class of allegedly injured individuals based on a purported discriminatory pattern or practice. More often than not, the EEOC does not limit the temporal scope of its claims, and sues for relief since the “inception” of the alleged discriminatory pattern or practice. This pleading theory poses significant risks and financial exposure to an employer, since such a litigation position is unencumbered by any statute of limitations. Indeed, having briefed this issue multiple times, the refrain I have heard from the government is “We [the EEOC] don’t have a statute of limitations for our lawsuits…”

Employers have racked victory after victory in challenging this litigation strategy by invocation of the 300-day statute of limitations in Title VII of the Civil Rights Act of 1964 (i.e, claims can only be asserted that arise within 300 days of the initial EEOC administrative charge that triggered the subsequent EEOC investigation and lawsuit). We have blogged on these decisions previously (here, here, and here). We also recently published a law review article in the ABA Journal of Labor & Employment Law on this body of case law.

This issue surfaced again this week in one of the key lawsuits brought by the EEOC over the past year – EEOC v. Freeman, a case now pending in the U.S. Court of Appeals for the Fourth Circuit. Our previous blog posts on this litigation are here and here. The case is currently pending for oral argument over the EEOC’s appeal of a summary judgment order granted to the employer (on various grounds, including previous rulings rejecting the EEOC’s litigation strategy relative to the statute of limitations).

Most recently, after briefing was concluded, the EEOC submitted an additional letter brief to the Fourth Circuit on the statute of limitations issue. The letter brief is here.

The district court’s ruling in EEOC v. Freeman seems us to have been on very solid ground, so one wonders if the EEOC has selected a poor candidate in which to raise the statute of limitations issue at the appellate level.

Implications For Employers

The growing body of case law favors the defense arguments in this area on the statute of limitations defense in EEOC lawsuits. Courts have overwhelmingly rejected the notion that the EEOC should have carte blanche to litigate in derogation of Title VII’s statute of limitations. Stay tuned for further adjudication of this issue in the Fourth Circuit.

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

Court Upholds Jury Verdict That EEOC Is Not Entitled To Award Of Punitive Damages

Posted in Defenses to Pattern or Practice Cases

By Courtney K. Bohl and Laura J. Maechtlen

On August 21, 2014, in the case EEOC v. Swissport Fueling, Inc., Case No. CV-10-02101-PHX-GMS (D. Ariz. Aug. 21, 2014) (a case we previously blogged about here), Judge G. Murray Snow of the U.S. District Court for the District of Arizona denied the EEOC’s motion to set aside the jury’s answers regarding its rejection of an award of punitive damages.  The Court also denied the EEOC’s motion for judgment as a matter of law or new trial with respect to Swissport Fueling, Inc.’s (“Swissport”) affirmative defense to punitive damages under Kolstad v. Amer. Dental Ass’n, 527 U.S. 526 (1999).

This ruling is a good read for employers faced with a trial on employment discrimination claims where the EEOC is seeking punitive damages.  The ruling provides insight into how courts handle seemingly inconsistent jury verdicts, and also provides employers tools for defending against a motion for a judgment as a matter of law on the Kolstad affirmative defense.

Background Of The Case

The EEOC brought suit against Swissport alleging claims of race, national origin, and color discrimination on behalf of fourteen current or former Swissport employees (the “Claimants”).  Id. at 1.  The Court held a jury trial in March 2014.  Id.  At the conclusion of the trial, the Court instructed the jurors that they could only award punitive damages if they found Swissport’s conduct was malicious, oppressive, or in reckless disregard of the Claimants’ rights.  Id. at 2.

The jurors were then given a verdict form that asked the jury to decide for either the EEOC or Swissport.  Id. at 2-3.  The form instructed the jurors that if they find in favor of the EEOC on any of the Claimant’s claims, they need to (i) state the amount of compensatory damages, if any, and (ii) state whether Swissport acted with malice or reckless indifference to the federally protected rights of the Claimants.  Id.

The jury reached a unanimous verdict regarding six of the Claimants’ claims, but was unable to reach a unanimous verdict regarding the other eight Claimants’ claims.  For seven of the eight remaining Claimants (“Remaining Claimants”) the jury unanimously held that the EEOC was not entitled to punitive damages.  Id. at 1.

The EEOC moved to set aside the jury’s answers regarding punitive damages for the Remaining Claimants and also renewed its Motion for Judgment as a Matter of Law Under Rule 50 Or For a New Trial Under Rule 59 with respect to Swissport’s affirmative defense to punitive damages. Id.

The Court’s Ruling

The Court denied the EEOC’s motion to set aside the jury’s answers regarding punitive damages, finding that the jury’s verdict was not inconsistent and did not violate the Court’s express instructions.  Id. at 5-6.  The EEOC argued that the jury’s answers to the punitive damages question regarding the Remaining Claimants should be dismissed as surplusage because the jury should not have answered any damages questions once they failed to reach a unanimous verdict.  Id. at 2.  The Court first noted that the jury’s responses were not internally inconsistent because it is not illogical that the jury was unable to reach a unanimous decision on Claimant’s harassment or retaliation claim, but could determine Swissport had not acted with malice or reckless indifference to the Claimant’s rights.  Id. at 5.  Next, the Court held that the jury did not disobey the Court’s express instructions.  The Court reasoned that the jury was instructed that they could only award punitive damages if they first found for the EEOC on at least one of the Claimants’ claims.  Id.  The jury instructions did not reference whether or not the jury might determine whether Swissport acted with malice or reckless indifference even in the event they could not reach a unanimous decision on liability.  Thus, the Court found there was no violation of its instructions.  Id.

The Court also denied the EEOC’s motion for judgment as a matter of law with respect to Swissport’s affirmative defense to punitive damages.  Id. at 8.  In support of its motion, the EEOC argued that there was no legally sufficient basis on which a reasonable juror could have found that Swissport was entitled to the Kolstad affirmative defense (which holds that employers may not be vicariously liable for punitive damages if they make “good faith efforts” to comply with anti-discrimination law).  Id. at 7.  Specifically, the EEOC argued that the defense cannot be asserted regarding Jim Vescio’s, Swissport’s highest ranking official in its Arizona facility, purported improper conduct because a high ranking official is a proxy for the company.  The Court, however, held that a reasonable jury could have found Vescio’s testimony more credible than conflicting testimony and determined he acted appropriately responding to the complaints and made good faith efforts to comply with the law.  The Court also ruled that Swissport did not waive this affirmative defense by failing to specifically name it in its Answer or Final Pretrial Order.  Id.

Finally, the Court denied the EEOC’s motion for a new trial, holding that the EEOC failed to demonstrate that the jury’s verdict was against the weight of the evidence.  The Court noted that Swissport was entitled to the Kolstad defense and the jury did not actually reach the issue as the jurors did not find any punitive damages liability.  Id. at 8.

Implications For Employers

In the course of his opinion, Judge Snow showed his unwillingness to disrupt the jury’s findings on the issue of whether the EEOC is entitled to punitive damages.  This is helpful authority for employers faced with post-trial motions relating to punitive damages, as it outlines useful arguments employers can make when faced with inconsistent jury verdicts and/or a motion for judgment as a matter of law on the Kolstad defense.

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

Round One – Texas Loses Its Suit Against The EEOC Over Its Criminal Background Guidance

Posted in Regulatory / Guidance Issuance

By Gerald L. Maatman Jr. and Howard M. Wexler

There continues to be growing firestorm of litigation initiated by the EEOC over hiring checks based on criminal backgrounds. In one of the most high profile cases addressing this issue (that we previously blogged about here and here,) Judge Sam R. Cummings of the U.S. District Court for the Northern District of Texas issued an decision in State of Texas v. EEOC, Case No.5:13-CV-255 (N.D. Tex. Aug. 20, 2014), granting the EEOC’s motion to dismiss a lawsuit brought against it by the State of Texas regarding the its “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Under Title VII.”

Texas argued that the EEOC did not have the authority to issue the Guidance and that the EEOC’s position that Title VII trumps conflicting state laws violates its state sovereignty. Judge Cummings rejected the State’s arguments in this first-of-its-kind attack on the EEOC’s authority.

Case Background

In April 2012, the EEOC issued guidance urging businesses to avoid a blanket rule against hiring individuals with criminal convictions, reasoning that such rules could violate Title VII if they create a disparate impact on particular races or national origins. Like various other states, Texas has enacted statutes prohibiting the hiring of felons in certain job categories.  In November 2013, Texas sued the EEOC, seeking to enjoin the enforcement of this guidance, which Texas has nicknamed the “Felon Hiring Rule.” Id. at 2. In March of this year, Texas amended its complaint to include more specific allegations of injury. Id. For example, Texas alleged that the EEOC’s issued a right-to-sue letter to an applicant who had been rejected by the Texas Department of Public Safety after disclosing on his application that he had been convicted of a felony (unauthorized use of a motor vehicle). Texas claims that the job involved “access to sensitive personal information for all 26 million Texans.”

The EEOC offered three primary arguments as to why Texas’ lawsuit should be dismissed, including: (1) lack of jurisdiction because the EEOC’s guidance is not legally binding and does not constitute a final agency action; (2) Texas lacks standing to pursue its claims given that the guidance has no binding authority; and (3) Texas’ claims are not ripe. Id.

The Court’s Decision

Judge Cummings based his decision entirely on a lack of subject matter jurisdiction. Because “Texas does not allege that any enforcement action has been taken against it by the Department of Justice (as the EEOC cannot bring enforcement actions against states) in relation to the Guidance,” Judge Cummings held that there is not a “substantial likelihood” that Texas “will face future Title VII enforcement proceedings from the Department of Justice arising from the Guidance.” Id. at 7. As standing to bring suit “cannot be premised on mere speculation” Judge Cummings determined that Texas lacked the necessary standing to maintain its suit against the EEOC.

While acknowledging that the EEOC did in fact issue a right-to-sue letter to an applicant who was rejected by the Texas Department of Public Safety who believed he was discriminated against based on a prior felony conviction, that was still not enough for the Court since “there are no allegations that any enforcement action has been taken by the EEOC or Department of Justice” based on Texas’ “felony conviction” rule. Id. Accordingly, since the Guidance is not a final agency action and because no enforcement proceeding is pending against Texas, Judge Cummings dismissed the case as “seeking a premature adjudication in the abstract without any actual facts and circumstances relating to the employment practices at issue.” Id. at 7-8.

Implications For Employers

While Judge Cummings’ decision is a blow to one of the most high profile challenges to the EEOC’s Guidance, the dismissal is solely based on procedural grounds and is in no way an acceptance of the Guidance and/or the litigation initiated by the EEOC over hiring checks based on criminal backgrounds.

Furthermore, while the EEOC may have won the battle in round one of this lawsuit, the war is likely far from over. To this end, employers obtained strong ammunition to use going forward based on certain arguments advanced by the EEOC in pursuing the dismissal of Texas’ case.  In furtherance of its lack of standing argument, the EEOC admitted that the Guidance is neither “legally binding” nor does it carry with it any “legal consequences.” As such, to the extent the EEOC attempts to rely upon the Guidance moving forward as the basis for prosecuting disparate impact cases focused on criminal background checks, particularly in cases where the EEOC alleges that an employer willfully violated Title VII, employers need only turn to the EEOC’s representations to the U.S. District Court for fodder in their own defense. It remains to be seen whether Texas will appeal this ruling. Stay Tuned!

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

EEOC Signals More Widespread Use Of Summary Judgment Tool To Obtain Relief And Defeat Affirmative Defenses

Posted in Motions for Summary Judgment

By  Gerald L. Maatman, Jr. and Jennifer A. Riley

On August 7, 2014, the U.S. District Court for the Western District of Oklahoma entered its decision in EEOC v. Midwest Regional Medical Center, LLC, No. CIV-13-789-M (W.D. Okla. Aug. 7, 2014), and granted partial summary judgment in favor of the EEOC.

In a rare partial summary judgment win, the EEOC obtained a ruling as a matter of law that the individual on whose behalf it filed suit was disabled within the meaning of the ADA because she had a record of having skin cancer prior to her termination.

The EEOC also sought summary judgment on the defendant’s affirmative defenses of failure to conciliate and failure to mitigate damages. Although the defendant withdrew its conciliation defense, and the Court found an issue of material fact with respect to its mitigation defense, the motion may foreshadow a shift in tactics by the EEOC.

Once fairly rare, employers litigating with the EEOC should anticipate motions for summary judgment on merits issues, as well as affirmative defenses such as failure to conciliate, and plan their litigation strategy with an eye toward anticipating and defeating such motions.

Factual Background

On July 13, 2013, the EEOC filed suit against Midwest Regional Medical Center, LLC (“MRMC”) on behalf of Janice Withers, a former employee, claiming that the company discriminated against her in violation of the ADA when it terminated her employment.  Id. at 1-2.

On November 17, 2011, Withers was diagnosed with skin cancer.  She informed her supervisor, Susan Milan, of her diagnosis. Id. at 1. Withers started radiation treatments on December 9, 2011, and concluded the treatments on January 5, 2012. At the conclusion of her treatments, her physician noted that “the patient tolerated the procedure well and there was no evidence of recurrent or residual disease at the end of the therapy.” Id. at 2. Withers never returned for a follow up.

Thereafter, Withers was periodically absent from work.  She called in sick on February 9, 2012, and failed to report as scheduled on February 10, 12, 13, 14, 28, and March 2, 3, and 4, 2012. On March 5, 2012, Milan placed Withers on a leave of absence. Id. at 2. Milan issued a letter that stated, “[y]ou must bring a work release without restrictions in order to return to work. . . I expect that you will return to work no later than March 12, 2012.” Id.

On March 9, 2012, MRMC terminated Withers for no call/no show on March 6, 7, and 8, 2012. Id.

MRMC moved for summary judgment on the EEOC’s discrimination claim, and the EEOC moved for partial summary judgment on four issues: (1) whether Withers is a person with a disability under the ADA; (2) whether MRMC terminated Withers because of her disability; (3) whether Withers reasonably mitigated her damages; and (4) whether the EEOC fulfilled its conciliation obligation. Id. at 3.

The Court’s Opinion

The Court entered summary judgment in favor of the EEOC as to whether Withers was a person with a disability within the meaning of the ADA. It held that, although there was a dispute as to whether Withers was actually disabled following the conclusion of her radiation treatments, Withers had a record of having skin cancer and, thus, a “record of disability” under prong two of disability as defined by the ADA. Id. at 5-8. The Court also found a genuine issue of material fact as to whether MRMC terminated Withers because of her disability and as to whether MRMC’s proffered reason for Withers’ discharge – excessive absenteeism – was worthy of belief. It held that the “temporal proximity” between when Withers was placed on a leave of absence (March 5, 2012) and when she was discharged (March 9, 2012) “could lead to an inference of discriminatory intent.” Id. at 9-10. Further, the company failed to identify who actually made the decision to put Withers on a leave of absence, and it ostensibly required Withers to call in every day after it put her on a leave of absence, a requirement that is inconsistent with MRMC’s leave policy. Id. at 11-12.

The EEOC also moved for summary judgment on MRMC’s affirmative defenses of failure to conciliate and failure to mitigate.  MRMC withdrew its failure to conciliate defense. Id. at 3 n.2. The Court found a genuine issue of material fact as to MRMC’s failure to mitigate defense because Withers worked only part time following her termination from MRMC. Id. at 13.

Implications For Employers

Although the EEOC was successful in EEOC v. Midwest Regional Medical Center in obtaining partial summary judgment only as to whether its claimant was “disabled” within the meaning of the ADA, its attempt to win its claims and knock out MRMC’s affirmative defenses on summary judgment may foreshadow more widespread use of this litigation tactic by the EEOC. Employers litigating against the EEOC should plan their litigation strategy with this in mind and take care to position themselves to anticipate and defeat such motions.

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

Court Finds EEOC Satisfied “Low Hurdle” Of Pre-Suit Conciliation As Employers Anxiously Await Supreme Court’s Future Mach Mining Decision

Posted in Procedural and Jurisdictional Issues

By Gerald L. Maatman Jr. and Howard M. Wexler

As we previously blogged about, most recently here, the U.S. Supreme Court’s decision to grant certiorari in Mach Mining, LLC v. EEOC (No. 13-1019) could be a game changer in EEOC-related litigation. In Mach Mining, the Seventh Circuit ruled that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit and that it will not scrutinize the EEOC’s pre-suit obligations, so long as the EEOC’s complaint pleads it has complied with all procedures required under Title VII, and the relevant documents are facially sufficient. By granting certiorari, the Supreme Court is set to weigh in during its next term relative to conflicting rulings amongst the circuit courts about judicial authority and standards for reviewing the EEOC’s pre-suit conduct.

In the meantime, however, the show must go on! To that end, a recent decision out of the U.S. District Court for the Western District of Missouri highlights why the Supreme Court’s eventual ruling in Mach Mining is important. In EEOC v. New Prime, Inc., Case No. 11-CV-3367 (W.D. Mo. Aug. 14, 2014), Judge Douglas Harpool granted, in part, the EEOC’s motion for summary judgment, finding that it satisfied its pre-suit investigation and conciliation obligation despite noting that the Court was “underwhelmed by the EEOC’s attempt at conciliation.” Id. at 13.

Background

In EEOC v. New Prime, a trucking company maintained a company-wide “same-sex training policy” which required all applicants who did not meet Prime’s experience requirements to receive over-the-road training by an instructor and/or trainer who is the same gender as the applicant unless there is some pre-existing relationship between the female applicant and male instructor/trainer. Id. at 3. The effect of this policy was that when a female applicant was ready to be assigned to a trainer or instructor in order to receive the necessary “over the road” training, a female driver had to be available. Id. However, based on the number of female drivers available to train, Prime would place female applicants on a “female waiting list” when drivers were not available. Id. at 3-4. Prime implemented this policy after it was involved in a sexual harassment case brought by three female truck driver trainees. Id.

A female job applicant brought a charge with the Missouri Commission on Human Rights (“MCHR”) and alleged that Prime told her that her application had been accepted, but she could not be hired because she was female and there were no female trainers were available then or in the near future. Id. at 4. After the MCHR issued a Probable Cause finding, it transferred the case to the EEOC for further investigation. Id. at 5. On April 1, 2010, the EEOC sent Prime a letter stating “the EEOC’s investigation of this charge is nation-wide in scope.” Id. One year later the EEOC issued its Letter of Determination, which stated “[b]ased on the foregoing, there is reasonable cause to believe that Respondent has subjected Charging Party and a class of female trainees to unlawful discrimination by adopting a policy that denies female trainees training and employment opportunities that are not denied to similarly-situated male trainees.” Id. at 5. On this same date, the EEOC sent its letter regarding conciliation that focused on relief not only for the charging party who brought the charge, but also “all identified and still-to-be identified victims.” Id.

On June 7, 2011, Prime submitted its response to the conciliation proposal, which indicated that it was “not interested” in engaging in class-wide conciliation and would only negotiate concerning the individual who filed the EEOC charge. Id. at 6. One week later the EEOC informed Prime that conciliation failed and subsequently brought suit in federal court. Id.

The Decision

Both the EEOC and Prime argued that they were entitled to summary judgment on the merits as well as on several evidentiary (e.g. spoliation) and damage (punitive damages) issues. However, especially relevant with Mach Mining on the horizon is the fact that the EEOC decided to move for summary judgment on whether all conditions precedent to the filing of the lawsuit were met. Prime filed its own motion on this point, arguing that the EEOC failed to adequately investigate and conciliation the matter before filing suit.

The Court acknowledged that the EEOC is obligated to conciliate in good faith, and that in order satisfy the statutory requirement of good faith conciliation, the EEOC must “(1) outline to the employer the reasonable cause for its belief that the law has been violated; (2) offer an opportunity for voluntary compliance; and (3) respond in a reasonable and flexible manner to the reasonable attitudes of the employer.” Id. at 8. Furthermore, the Court held that whether the EEOC adequately fulfilled its obligation to conciliate is dependent upon the “reasonableness and responsiveness of the [EEOC’s] conduct under all the circumstances.” Id.

With respect to its investigatory function, the Court held that the EEOC’s initial letters put Prime on notice that it was investigating on behalf of “similarly situated individuals with regard to the same-sex training policy.” Id. at 10. Furthermore, Prime was put on notice through the initial charge and the subsequent investigation that any females that were subject to the policy, or more specifically put on the waiting list, were part of the EEOC’s investigation. Id. Since it held that “the EEOC’s scope of the investigation in this matter was clear – it pertained to the same-sex training policy implemented by Prime, including the female waiting list for potential applicants, trainees and potential employees,” the Court held that the EEOC adequately investigated the matter with respect to its class-wide claims prior to filing suit. Id. at 11.

With respect to conciliation, the Court found that the EEOC met the “low hurdle of attempting a reasonable and responsive conciliation process” despite shutting down conciliation one week after Prime submitted its initial response to the EEOC. Id. at 13. The Court was “not persuaded that this is enough to prevent the case from meeting the requirements for the filing of the instant lawsuit” given that Prime expressed no interest in considering compensation for any women affected by the policy – which is something the EEOC informed Prime it sought as a result of the company-wide alleged discriminatory policy. Id. at 14. Accordingly, the Court granted the EEOC’s motion for summary judgment, finding that it satisfied all conditions precedent to filing this lawsuit. Id.

Implication For Employers

As this case demonstrates, the eventual ruling by the Supreme Court in Mach Mining has the potential to be a game changer for any employer dealing with the EEOC. If federal courts cannot review its pre-lawsuit conciliation efforts, the EEOC, in effect, will have free reign to pay mere lip service to its conciliation obligations and approach any negotiations in a “take-it-or-leave-it” manner. We will continue to follow developments as the parties and amicus groups file their briefs, and keep our readers informed.

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

An About-Face By The Court Could Put Bass Pro Back On The Hook

Posted in EEOC Litigation

By Christopher J. DeGroff, Gerald L. Maatman, Jr., and Julie G. Yap

In the spirit of “it ain’t over ‘till it’s over,” this week’s decision in EEOC v. Bass Pro Outdoor World, LLC, et al., Case No. 11-CV-3425 (S.D. Tex. July 30, 2014), by Judge Keith Ellison of the U.S. District Court for Southern District of Texas is a stark about-face from the Court’s own ruling from earlier this year (which we blogged about previously here.) In the process, the Court makes several sweeping rulings concerning EEOC-initiated litigation procedure and addresses the very fabric of Title VII itself.  The sheer scope of the Court’s ruling makes it an important read for employers and practitioners alike. Of course, the case is not without controversy, especially given the Court’s tacit invitation to Bass Pro to appeal its ruling.

Background

Historically, the EEOC has used two avenues for suing employers for alleged discrimination under Title VII — Section 706 and Section 707 actions. Section 706 cases have traditionally been viewed as a “representative” actions, where the EEOC steps into the shoes of individual claimants and sues on their behalf (some of these actions are one-off, single-claimant actions, while others involve a group of similar claimants). Section 706 claimants can be awarded typical economic damages, as well as compensatory and punitive damages. Section 707, on the other hand, authorizes the EEOC to bring a systemic case alleging a universally applied “pattern or practice” of discrimination. Because a § 707 case is brought directly by the EEOC on its own behalf, it may only obtain equitable relief and damages, such as back pay. Pattern or practice cases follow a burden-shifting framework first articulated in Franks v. Bowman Transportation Company, Inc., 424 U.S. 747 (1976), and later refined in International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977). The Teamsters framework typically requires a showing by the EEOC that discrimination is the employer’s “standard operating procedure.” If the government meets that difficult burden of proof, it arguably creates a presumption that all individuals in the EEOC’s “class” were victims of discrimination, leaving it to the employer to rebut individual claims, often years after employment decisions were made. Obviously, a class-wide presumption of discrimination is deeply troubling for employers.

This all sets the stage for the case against Bass Pro. There, the EEOC has attempted to bring a  “hybrid” claim, where it seeks to use the Teamsters pattern or practice framework typically used under § 707, in a § 706 action (with the full boat of damages allowable under that section). Bass Pro, of course, vigorously opposed the EEOC’s play, insisting that to cut-and-paste the Teamsters model into § 706 would essentially make a § 707 case redundant and obsolete.

And the Court agreed with Bass Pro.  At least at first.

On May 31, 2012, the Court sided with Bass Pro, holding that “the EEOC cannot bring a hybrid pattern or practice claim that melds the respective frameworks of § 706 and § 707.” Id. at 29. The Court noted that § 707, unlike § 706, expressly authorized the use of a pattern-and-practice framework for determining claims and that the differences in remedies available under each section counseled in favor of applying two different frameworks. Id.

The Court’s About-Face

But the EEOC repeatedly asked the Court to revisit its decision, and eventually the Court relented and took another look.  Judge Ellison took his original ruling, and turned it on its head. Specifically, the Court held that the Teamsters analysis can apply to both § 706 and § 707 claims. Id. at 2. In doing so, the Court rejected the Defendants four primary arguments, though not without noting the strength of the Defendants’ positions:

  •  First, even though Section 707 expressly authorizes pattern-or-practice litigation (and Section 706 does not), the Court held that because Congress knew about the Teamsters framework, it must have implicitly included it in drafting Section 706, even though it expressly included it in Section 707.  Id. at 23-26.
  • Second, even though Congress authorized different damages under Sections 706 and 707, the Court concluded that this distinction did not limit the way in which the EEOC could prove facts to support any sort of relief, albeit equitable relief or monetary damages.  Id. at 26-28.
  • Third, the Court rejected Defendants’ position that applying a Teamsters framework in a jury trial on Section 706 claims — in contrast to § 707 proceedings where evidence is presented to a court — would create Seventh Amendment problems because a second jury may be required to re-examine facts already decided by a first jury.  The Court deferred the constitutional concerns for another day, noting that it “will carefully consider the Seventh Amendment implications . . . when the Court revisits a case management plan.”  Id. at 30.
  • Fourth, the Court declined to adopt the reasoning of analogous cases cited by Defendants, instead relying heavily on the Sixth Circuit’s decision in Serrano v. Cintas Corp.  The Court noted, however, that “lower courts have been riven by disagreement” and that “this is an area of law ripe for further illumination from the appellate courts.”  Id. at 2.

Finally, in the same order, the Court again addressed the EEOC’s conciliation obligations — an issue that has been a bone of contention in this case for years, as discussed here and here. Defendants moved for summary judgment, asserting that the EEOC had not sufficiently fulfilled its obligations to conciliate the Section 706 claim on behalf of individuals who had not been identified before filing suit. The Court rejected this argument, noting that the EEOC could conduct an adequate investigation, even where it does not know the specific identities of all those allegedly aggrieved. The decision appears to leave untouched the Court’s earlier ruling that the EEOC cannot sue on behalf of claimants that had not even applied at the time the parties conciliated the underlying claims.

Where does this leave Bass Pro? In a fairly stunning move, Judge Ellison acknowledged that he was “fully sensitive to the strength of the antithesis” of his decision. Id. at 2. Indeed, the Court went so far as to express that it “would look favorably upon a motion for certification” of an appeal of his decision.  Id. at 46. The Court has essentially invited Bass Pro to appeal his ruling to the U.S. Court of Appeals for the Fifth Circuit. Readers of this blog should stay tuned, as we suspect that is precisely what Bass Pro will do.

Implications For Employers

The Court’s decision in Bass Pro has sent reverberations throughout the employer community, and may further muddy the waters on some fundamental structural issues of EEOC-initiated litigation. Of course, this is just one court’s take on the Section 706/707 issue, and even the judge acknowledged that there was “ample support” for Bass Pro’s positions. Thus, this case has limited presidential value, but we expect the EEOC will attempt to expand the impact of the Bass Pro decision to other jurisdictions or even different legal theories. The EEOC v. Bass Pro decision essentially leaves employers with less clarity on the rules of the road in government-initiated litigation than ever before.

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