EEOC Year-End Countdown

“One Step Too Far” — Court Shoots Down The EEOC’s Kitchen Sink Subpoena

Posted in Investigation Tactics and Administrative Subpoenas

By Christopher DeGroff and Gerald L. Maatman, Jr.

Employers have become accustomed to the federal courts rubber stamping EEOC subpoenas seeking company-wide information based on a single charge of discrimination. In light of the EEOC’s systemic focus — and the agency’s desire to transform single allegations into a blockbuster systemic actions — aggressive and extensive EEOC subpoenas requests are more and more prevalent, with very little case law authority to cabin the EEOC’s authority. The Court in EEOC v. Forge Industrial Staffing Inc., No. 14-MC-90 (S. D. Ind. Nov. 24, 2014), however, had enough of the EEOC’s strong-arm tactics. In rejecting the Commission’s broad subpoena, Magistrate Judge Mark Dinsmore authored an opinion that provides employers with ammunition to fight “everything and the kitchen sink…” subpoena requests.

Factual Background

In EEOC v. Forge Industrial Staffing Inc., a former employee filed an EEOC charge four months after her termination alleging sexual harassment and retaliation. The Commission sought extensive information from the company as part of its administrative investigation. In its subpoena, the EEOC requested all employment applications for roughly a two and a half year period because the applications purportedly required employees to agree to file all employment-related claims within six months of the event, except as prohibited by law. The EEOC views this provision as an impermissible waiver of an applicant’s statutory rights. The company argued that the requested information was irrelevant to the charge and complying with it would be unduly burdensome.

The Court’s Decision

At the hearing, the EEOC argued that the application waiver related to the “overall conditions of the workplace.” Id. at 5. The Court rejected the EEOC’s position for several reasons. First, the charge did not contain pattern or practice allegations – claims that would suggest a pervasive violation of the law. Second, the charging party filed the charge within four months of the termination, meaning the clause had no impact on her willingness to file a charge. As a result, the waiver could not be relevant to the charge under investigation. The Court recognized that accepting the “overall condition of the workplace” argument would eviscerate the meaning of “relevance” because it would allow the EEOC to subpoena any information about a company at the EEOC’s whim. Id. at 5-6.

Finally, the Court rejected the EEOC’s standard argument that it has a broad mandate to promote the public interest, and therefore, can seek to remedy violations not alleged in a charge. Based on a plain reading of Title VII, which requires relevance to the charge under investigation, the Court reasoned that the EEOC could not expand a single charge into a pattern or practice case with wholly different allegations. The Court noted that the plain language of the statute does not permit an investigation into an violation not alleged in the charge.

Implications For Employers

The ruling in EEOC v. Forge Industrial Staffing Inc. marks the second time in a month that courts have limited the EEOC’s subpoena enforcement authority (see our blog posting here on the recent Eleventh Circuit’s defense ruling on an EEOC subpoena). Although many federal courts continue to grant the EEOC significant deference in subpoena matters, these recent decisions provide a glimmer of hope. Just because the EEOC says information is relevant does not make it so. When confronted with an expanded investigation based on a single charge, without pattern or practice allegations, there is a solid, common sense argument for employers to challenge the subpoena on both relevance and timeliness grounds. Employers should be aware of this and other recent decisions limiting the EEOC’s subpoena authority.

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

Senator Alexander’s Report Puts The Spotlight On The EEOC — And Promises Further Oversight In The Next Congress

Posted in EEOC Litigation

By Christopher DeGroff, Paul Kehoe, and Gerald L. Maatman, Jr.

Sen. Lamar Alexander (R-TN), the current Ranking Member and soon to be Chairman of the Senate Health, Education, Labor & Pensions Committee, today issued a report entitled EEOC: An Agency on the Wrong Track?  Litigation Failures, Misfocused Priorities, and Lack of Transparency Raise Concerns About Important Anti-Discrimination Agency, which can be found here. On the heels of a grueling confirmation hearing for EEOC General Counsel David Lopez, Sen. Alexander’s report highlights the concerns raised by employers during the past several years, including the shortcomings of the EEOC’s litigation program and lack of transparency. For example, the report discusses a significant decrease in the number of cases submitted to the Commissioners for approval prior to filing and the courts sanctioning the EEOC to pay attorneys’ fees ten times since 2011 in cases that were deemed frivolous or mismanaged by the EEOC’s attorneys. In addition, the report notes that the EEOC’s litigation recoveries have decreased to a 16-year low.

The report received widespread media attention throughout the day, including in the Wall Street Journal in an article entitled “Chronicling EEOC Abuses.”

Despite the increase in sanctions and the decrease in verdicts and settlements, Mr. Lopez still stands to be confirmed to another four-year term at the EEOC, along with a five-year term for nominee Ms. Charlotte Burrow as Commissioner. On November 19, 2014, the Senate HELP Committee approved Ms. Burrows’ nomination by voice vote and Mr. Lopez’s renomination on a 12-10 party line vote. On November 20, 2014, Senate Majority Leader Harry Reid (D-NV) filed cloture on their nominations, among others. One can anticipate the Senate to hold a cloture vote shortly after the Thanksgiving recess. If 51 senators vote for cloture, the nominations will head to the floor for a confirmation vote.

These appointments would likely face stiff opposition come January. The coming months will be critical in determining how a Republican Congress and Democratic Administration will approach these questions and other important labor and employment issues for the next two years. Regardless, there will be plenty of activity from agencies trying to adopt new policy positions in the final two years of the Administration. If the tenor of this report and the previous hearings are any indication, the Senate HELP Committee may also consider increased oversight over the EEOC’s activities in the coming months and years.

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

EEOC’s 2014 Performance And Accountability Report Reflects Continued Efforts To Pursue High Priority, Systemic Litigation

Posted in EEOC Litigation

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

On November 18, 2014, the EEOC released its 2014 Performance and Accountability Report (“PAR”).  The Report is an annual scorecard of sorts for the EEOC. It reflects the progress of the EEOC’s continued efforts to follow enforcement priorities outlined in its 2012 strategic enforcement plan (“SEP”) (read more here), including its systemic litigation initiative.

The Report ought to be required reading for any corporate counsel involved in compliance efforts relative to workplace laws. Upon reviewing the Report, one might ask if the Commission is doing its job in fair and effective fashion.

By way of background, the launch of the SEP underscored the EEOC’s efforts to champion bigger, more media-focused “systemic” cases, including pattern or practice cases where the alleged discrimination “has a broad impact on an industry, occupation, business, or geographic area.”  In the SEP, the EEOC set forth a goal to ensure that systemic cases make up at least 20% of its annual litigation docket and at least 22% to 24% of its litigation docket by 2016.

In its 2014 PAR, the EEOC reported that it has continued to implement its SEP and has met, partially met, or exceeded its target results.  Or so the Commission claims…

The EEOC’s Overall Results

The EEOC’s results reflect a mixed bag for employers, with fewer systemic lawsuits filed (17 in 2014, compared with 21 in 2013), but more on-going systemic lawsuits in the court system (57 in 2014, compared with 54 in 2013), and far more pre-lawsuit settlements (78 in 2014, compared with 63 in 2013).

Overall, we do not expect the EEOC to back off its systemic initiative in 2015, and but to be more aggressive in pursuing those cases that fit within its agenda. So numbers aside, these metrics reflect an agency committed to “big impact” lawsuits that “send a message” to the employer community.

Lawsuits

In its 2014 PAR, the EEOC reported that, in fiscal year 2014, the EEOC filed 133 merits lawsuits, 17 (13%) of which were systemic suits.  At the end of fiscal year 2014, the agency had 228 cases on its active docket, of which 57 (or 25%) involved challenges to systemic discrimination.  As a percentage, this represents the largest proportion of systemic suits on the EEOC’s active docket since tracking began in 2006. Yet, at the same time, the numbers are down, not up. One explanation is that the EEOC has pursued expensive, time-consuming cases, and it lacks the resources to increase its docket.

Systemic Investigations

With respect to investigations, the agency reported that it, in fiscal year 2014, it completed 260 systemic investigations.  The EEOC resolved 78 (30%) of those by voluntary agreements, including 34 pre-determination settlements before any findings of discrimination and 44  conciliation agreements.  The EEOC secured $13 million in monetary relief.

These numbers are down from fiscal year 2013 in several categories.  In 2013, the EEOC reported that it had filed 131 merits lawsuits, 21 (16%) of which were systemic suits.  At the end of fiscal year 2013, the EEOC had 231 cases on its active docket, of which 54 (23%) involved challenges to systemic discrimination.  And, by the end of 2013, the EEOC had launched 300 systemic investigations, resulting in 63 settlements or conciliation agreements that recovered approximately $40 million.

According to the PAR, based on the volume of systemic charges currently in investigation, the EEOC expects the quantity of systemic lawsuits and their representation on its total docket to remain high.  As defense counsel in many of these cases, we sense the EEOC means what it says.

Pushing-The-Envelope Activities

As we discussed in previous blog posts (read more here), the SEP also reinforced the Commission’s efforts to continue addressing emerging and developing legal theories.  To that end, in 2014, the EEOC launched a series of novel attacks that sought to expand the reach of Title VII.  Those efforts, to put it mildly, met some resistance.  One view is that these efforts to “push-the-envelope” backfired, and represented wasteful expenditures of time and costs, with little to nothing to show for it.

For example, most notably, on October 7, 2014, in EEOC v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill.), Judge John Darrah of the U.S. District Court for the Northern District of Illinois dismissed the EEOC’s efforts to challenge provisions of CVS’s settlement agreements, holding that there is no separate cause of action for “resisting” employment laws.  (Read more here.)  On November 6, 2014, in EEOC v. Honeywell International, Inc., Case No. 14-CV-4517, 2014 U.S. Dist. LEXIS 157945 (D. Minn. Nov. 6, 2014), Judge Ann Montgomery of the U.S. District Court for the District of Minnesota denied the EEOC’s request for a preliminary injunction to prevent Honeywell from levying penalties against employees who refuse to participate in Honeywell’s corporate wellness program.  (Read more here.)

Thus far, the EEOC has experienced more defeats than successes when it comes to expanding the frontiers of employment discrimination laws.

Implications For Employers

Although the EEOC filed fewer systemic cases in fiscal year 2014, and completed fewer systemic investigations, it settled a higher number of systemic cases pre-litigation — but for less money.  We expect the trends revealed by the 2014 numbers to continue.  We expect the EEOC to continue to search for and to initiate systemic investigations, but to focus its efforts and invest its resources on those cases that it views as priority cases, including those that seek to expand the reach of Title VII.  In spite of several stunning defeats, we do not expect the EEOC to back down on its systemic initiative in 2015.  Rather, we anticipate that those defeats will inspire the EEOC to more aggressively pursue those actions that fit within its agenda.

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

Minnesota District Court Shoots Down The EEOC’s Request For Preliminary Injunction Over Wellness Program

Posted in Remedies

By Gerald L. Maatman, Jr., and Alexis P. Robertson

On November 6, 2014, in EEOC v. Honeywell International, Inc. Case No. 14-CV-4517, 2014 U.S. Dist. LEXIS 157945, (D. Minn. Nov. 6, 2014), Judge Ann Montgomery of the U.S. District Court for the District of Minnesota denied the Equal Employment Opportunity Commission’s (“EEOC”) request for a preliminary injunction enjoining Honeywell International Inc. (“Honeywell”) from levying penalties against employees who refused to undergo biomedical testifying in conjunction with Honeywell’s corporate wellness program. The Court held that, amongst other things, no irreparable harm would result from the refusal to issue an injunction.

The EEOC made much of this case filing in the press, and the Court’s rejection of the EEOC’s request for a preliminary injunction is a significant set-back for the Commission.

Case Background

Honeywell employees and their families had the option of participating in the Corporation’s wellness program, which was designed to inform participants about their health status, encourage improvements of specific health goals and to ultimately reduce claim costs.  Employees who participated in the program had to undergo biometric testing. Employees who declined participation were not disciplined or terminated, but were subject to financial surcharges.

The biomedical testing, administered as part of the program, required a blood sample the screened for various data points. Employees completed the testing for free through Quest Diagnostics (“Quest”), or, in the alternative, employees could have their personal physician fill out a form providing the same health information. Quest would relay the collected data to an independent health management company. Honeywell would receive the aggregate data, but was not informed of the individual employee results.

Employees who participated in the program, and who earned less than $100,000 a year, were eligible to participate in the company’s Health Savings Account (“HSA”). Honeywell would then make an annual contribution to the HSA, ranging from $250 to $1500. Employees who choose not to participate in the wellness program did not qualify for the company-sponsored HSA and had to also pay a $500 surcharge that went towards their annual health insurance contribution.  Honeywell employees and their spouses could also be subject to a $1000 nicotine surcharge. Those how refused to undergo the biomedical testing were presumed to be tobacco users. However, this presumption could be rebutted by enrolling in a tobacco cessation program (actual cessation not required), submitting a report from their physician, or working with a health advocate to establish that they are nicotine free.

Three employees filed complaints with the EEOC alleging that the program violated the Americans With Disabilities Act (“ADA”) and the Genetic Information Non-discrimination Act (“GINA”). All three employees had already submitted to biometric testing. Subsequently, the EEOC sued Honeywell over the wellness program, and moved for immediate injunctive relief.

The Decision Of The District Court

The Court applied the traditional factors reviewed in determining whether to issue a preliminary injunction, including: (1) threat of irreparable harm to the movant, (2) the balance between the harm alleged and the harm that the relief may cause the non-moving party, (3) the likelihood of success on the merits, and (4) the public interest. Based on these factors, the Court denied the EEOC’s motion.

The Court held that the EEOC could not establish the threat of irreparable harm. The Honeywell employees did not face an actual threat of injury because all three had already submitted to biometric testing for the 2015 calendar year.  Further, the EEOC had failed to demonstrate that the biometric testing jeopardized any employees’ right to privacy in their health information. And, even if the EEOC were to go on to prevail on the merits, “the only harm suffered by Honeywell employees is monetary,” which could be cured “through the most basic legal remedies: monetary damages.” Id. at *6.

The Court also found that the balance of harms favored Honeywell. If an injunction, freezing all surcharges was ordered, Honeywell employees who opted-out of the biometric testing may ultimately need to pay a surcharge if Honeywell prevailed on the merits. In contrast, if the EEOC were to prevail on the merits, Honeywell employees who were initially wrongfully assessed a surcharge based on their decision to forego the testing could easily be made whole by a refund.

Finally, the Court reviewed the EEOC’s likelihood of success and the public interest in issuing a preliminary injunction. Amongst other things, the EEOC argued that Honeywell violated the ADA because the biomedical testing constituted an involuntary medical exam that was not job-related, and that Honeywell violated GINA because it collected medical information about family members. Honeywell countered that its wellness program was covered under the ADA’s safe harbor provisions, and that its testing was not considered a “genetic test” under GINA. The Court ruled that there was uncertainty surrounding the interaction of the ADA, GINA, and the Affordable Care Act.  The Court reasoned that this uncertainty surrounding the legal questions presented in the case prevented it from being able to determine whether one party was more likely to succeed on the merits.

Implications For Employers

The ruling was a slap-down of the EEOC. What it claimed was clear and illegal was nothing of the sort based on the Court’s decision.

Employers will have to wait and see how the Court rules once it is able to review the merits of the unique issues presented in this case. In the interim, we are reminded that a Court will not issue a preliminary injunction when employees are not at risk for immediate injury and when monetary damages can easily cure any damages incurred by them. Employers should pay attention to this case as it will likely influence the fate of corporate wellness programs across the country.

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

Eleventh Circuit Refuses To Enforce EEOC’s Broad Subpoena

Posted in Investigation Tactics and Administrative Subpoenas

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

As we noted in our EEOC Fiscal Year 2014 Scorecard, 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. In fact, in FY 2014, the EEOC prosecuted 24 subpoena actions versus the 17 that were filed in 2013.

FY 2015 has started out with a big win for employers fending off overly broad and unduly burdensome EEOC administrative subpoenas. In EEOC v. Royal Caribbean Cruises, Ltd., No. 13-13519 (11th Cir. Nov. 6, 2014), the Eleventh Circuit Court upheld a decision of the U.S. District Court for the Southern District of Florida refusing to enforce an administrative subpoena served by the EEOC on grounds that the information sought was not relevant to the individual charge the EEOC was investigating and because compliance with the subpoena would be unduly burdensome. Id. at 4.

The Eleventh’s Circuit’s ruling is a big win for employers, and a must read for corporate counsel involved in EEOC litigation.

Background

In 2010 Royal Caribbean discharged an Argentinean national employed as an assistant waiter on one of its cruise ships because he was diagnosed with HIV and Kaposi Sarcoma. Id. at 2. The employee subsequently filed a charge with the EEOC. Id. Royal Caribbean admitted discharging the employee based on his medical condition, but argued both that the Americans With Disabilities Act was inapplicable as the charging party was a foreign national who worked on a ship that operated in the Bahamas and because the Bahamas Maritime Authority’s (“BMA”) medical standards – which Royal Caribbean is required to follow – mandated discharge given the employee’s diagnosis. Id. at 2-3.

During the investigation the EEOC issued an administrative subpoena seeking a list of all employees who were discharged due to a medical reason for the year preceding the filing of the charge along with detailed information for each of these discharged employees, including their personnel files, contact information and information concerning who from Royal Caribbean hired/fire each employee. Id. at 3. The EEOC also requested similar information with respect to any person Royal Caribbean did not hire because of a medical reason. Id. at 4. Both a Magistrate Judge and District Court Judge in the U.S. District Court for the Southern District of Florida refused to enforce the EEOC’s subpoena. Id.

The Eleventh Circuit’s Decision

The Eleventh Circuit’s acknowledged that the EEOC is entitled to inspect and copy any evidence that is “relevant to the charge under investigation,” but it cautioned that such a standard, while broad, should not be construed “so broadly that the relevancy requirement is rendered a nullity.” Id. at 4-5.

The Eleventh Circuit determined that the disputed information at issue did not concern the Charging Party who filed the EEOC charge; instead, it concerned the EEOC’s attempt to discover “a potential class of employee or applicants who suffered from a pattern or practice of discrimination rather than fleshing out [the Charging Party’s] charge.” Id. at 5. While statistical and comparative data in some cases may be relevant, the EEOC is nonetheless required to make “some showing that the requested information bears on the subject matter of the individual complaint.” Id. at 5-6.

The Eleventh Circuit rejected the EEOC’s argument that the requested information “might cast light on the allegations” against Royal Caribbean given that it is not clear “why company-wide data regarding employees and applicants around the world with any medical conditional, including conditions not specifically covered by the BMA medical standards or similar to [Charging Party’s], would shed light on [the Charging Party’s] individual charge that he was fired because of his HIV and Kaposi Sarcoma diagnoses.” Id. at 6.

In arguing that its subpoena should be enforced, the EEOC contended that the information was relevant because “the EEOC is entitled to expand the investigation to uncover other potential violations and victims of discrimination on the basis of disability.”  Id. at 7. The Eleventh Circuit rejected this argument, as it refused to construe the relevancy standard so broadly and because “the relevancy that is necessary to support a subpoena for the investigation of an individual charge is relevant to the contested issues that must be decided to resolve that charge, not relevance to issues that may be contested when and if future charges are brought by other.” Id. at 7 (emphasis added). On this basis the Eleventh Circuit rejected the EEOC’s subpoena as the information sought was “at best tangentially relevant” to the claims of the Charging Party and because it “failed to present a cogent argument as to how the additional information sought…would further aid the Commission in resolving the issues in dispute…” Id. at 9.

The Eleventh Circuit acknowledged that the EEOC has the ability to file a Commissioner’s Charge alleging a pattern or practice of discrimination that could support a request for the broad scope of information that it sought. However, the Eleventh Circuit rejected the EEOC’s apparent attempt to short circuit this process and cautioned the EEOC that it “may not enforce a subpoena in the investigation of an individual charge merely as an expedient bypass of the mechanisms required to file a Commissioner’s charge.” Id.

Finally, the Eleventh Circuit also held that the burden on producing the requested information – which Royal Caribbean estimated would require between five to seven employees working forty hours per week for two months solely to gather the requested information – outweighed the “limited need” of the subpoenaed information. Id. at 10.

Implications For Employers

Case law authority supports the notion that significant deference is accorded the EEOC’s subpoena powers, and the EEOC likes to remind employers of this when it seeks information that goes far beyond the individual charge that it is investigating. However, as this decision highlights, employers caught in the crosshairs of the EEOC’s subpoena enforcement activity are not without recourse. The Eleventh Circuit’s ruling demonstrates that simply because the EEOC says certain information is relevant does not make it so. Employers should keep this decision in their back pocket as ammunition against a runaway EEOC investigation.

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

Amicus Filed Today In Support Of The Government’s Position In Mach Mining v. EEOC

Posted in Procedural and Jurisdictional Issues

By Gerald L. Maatman, Jr.

This afternoon six advocacy groups representing the interests of workers and plaintiffs’ class action lawyers filed an amicus brief with the U.S. Supreme Court in Mach Mining v. EEOC, No. 13-1019. A copy is here. Authored by the Civil Rights Clinic of the Dickinson School of Law and The Impact Fund, the amicus brief represents the collective views of multiple public interest organizations, including the National Employment Lawyers Association, The Impact Fund, the American Association of Retired Person, the Asian Americans Advancing Justice-Asian Law Caucus, Disability Rights California, and Public Counsel.

The amicus brief was filed in support of the U.S. Equal Employment Opportunity Commission, which filed its Reply Brief with the SCOTUS on October 27, 2014. In supporting the government’s position, the amicus asserted that the its brief represents the “perspective of the victims of discrimination of workplace discrimination whom Title VII is intended to protect.” See Amicus Brief at 4.

Given the importance of this case and the issue presented, the new amicus brief is well worth a read by employers.

The Context And The Stakes

Mach Mining v. EEOC is a big case for employers and for government enforcement litigation. In a game-changing decision in December 2013, the U.S. Court of Appeals for 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 EEOC. That decision had far-reaching, real world significance to the employment community, for it means the EEOC is virtually immune from review in terms of the settlement positions it takes – “pay millions or we will sue and announce it in a media release – prior to suing employers.

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 Seventh Circuit reported at 738 F.3d 171 (7th Cir. 2013). Readers can find the previous posts here and here and here. 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 also backed Mach Mining’s request for SCOTUS review to resolve the disagreement among the courts of appeals regarding the EEOC’s conciliation obligations. Given the stakes, the SCOTUS accepted Mach Mining’s petition for certiorari in short order to resolve this issue.

Amicus Briefs For The Defense

Employer groups have lined up behind Mach Mining to support reversal of the Seventh Circuit’s decision. Seyfarth Shaw LLP submitted an amicus brief to the U.S. Supreme Court on behalf of the American Insurance Association in Mach Mining. For our loyal blog readers interested in our amicus brief, a copy is here.

Today’s Amicus Brief Filed In Support Of The EEOC

Today’s amicus submission to the Supreme Court asserts that interpreting Title VII to allow judicial review of conciliation efforts by the EEOC would harm alleged victims of discrimination by violating the mandate of the statute that conciliation remain confidential. Judicial review, the amicus brief asserts, would chill full and frank settlement discussions; expose sensitive information about pre-lawsuit negotiations to the public, and hurt the cases of allegedly injured workers because federal judges might be potentially influenced by irrelevant settlement communications. The amicus brief also argues that if the SCOTUS interprets the statute to allow judicial review of pre-lawsuit conciliation efforts by the EEOC, dismissal is an overly harsh remedy where those efforts are determined to be inadequate (and instead the parties should be ordered to engage in further settlement negotiations).

The point of the amicus brief about compromising the impartiality of federal judges – by exposing the court to settlement discussions in conciliation – is somewhat surprising. Federal judges conduct mediations and settlement conferences as a matter of course, and are “exposed” to settlement discussions routinely.

Next Up On The Docket

Mach Mining’s answering brief is due on November 26, 2014, and then the SCOTUS will set the case for oral argument for January of 2015.

We will keep our loyal blog readers updated as developments occur in this litigation.

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

The EEOC’s Most Important Brief Of The Year Filed With The U.S. Supreme Court – The Lines Are Drawn In The Mach Mining Appeal

Posted in EEOC Litigation

By Gerald L. Maatman, Jr. and Rebecca Bjork

Yesterday evening the U.S. Equal Employment Opportunity Commission filed its Reply Brief with the U.S. Supreme Court in Mach Mining v. EEOC, Case No. 13-1019. It draws the battle lines for the upcoming oral argument before the SCOTUS in January of 2015. Given the importance of this case and the issue presented, the Commission’s pleading is well worth a read.

The Context

Mach Mining v. EEOC is a big case for employers and for government enforcement litigation. In a game-changing decision in December 2013, the U.S. Court of Appeals for 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 EEOC. That decision had far-reaching, real world significance to the employment community, for it means the EEOC is virtually immune from review in terms of the settlement positions it takes – “pay millions or we will sue and announce it in a media release – prior to suing employers.

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 Seventh Circuit reported at 738 F.3d 171 (7th Cir. 2013). Readers can find the previous posts here and here.  In essence, the Seventh Circuit determined that the EEOC’s pre-lawsuit conduct in the context of conciliation activities cannot be judicially reviewed.

Grant Of Certiorari

Subsequently, in what many SCOTUS watchers found ironic, even the though the EEOC prevailed in the Seventh Circuit, the Government also backed Mach Mining’s request for SCOTUS review to resolve the disagreement among the courts of appeals regarding the EEOC’s conciliation obligations.

Given the stakes, the SCOTUS accepted Mach Mining’s petition for certiorari in short order to resolve this issue.

Amicus Briefs For The Defense

Employer groups have lined up behind Mach Mining to support reversal of the Seventh Circuit’s decision. Seyfarth Shaw LLP submitted an amicus brief to the U.S. Supreme Court on behalf of the American Insurance Association in Mach Mining. For our loyal blog readers interested in our amicus brief, a copy is here.

The EEOC’s Brief

The Commission’s submission to the Supreme Court last night asserts that federal judges cannot adjudicate any issue relative to the EEOC’s conciliation efforts. It relies heavily on the statutory language of Title VII, and argues that Congress left it to the Commission “to decide which informal methods of conference, conciliation, and persuasion would be appropriate.” EEOC Reply Brief at 8. Given that that Congress entrusted the Commission exclusive authority of whether to enter into pre-lawsuit settlements, this demonstrates that the process “is committed to the agency’s discretion” and further any such settlements – by way of a conciliation agreement – are confidential and cannot be made public. Id. at 9. Hence, the EEOC contends, this process is fundamentally “incompatible with judicial review of the conciliation process.” Id.

Not surprisingly, the EEOC also argues that judicial review of the adequacy of the Commission’s conciliation efforts “undermines the effective enforcement of Title VII.” Id. at 11. It asserts that employers have used the defense as a potent weapon to fight EEOC litigation through discovery and delay. Id. The EEOC contends that allowing for judicial review of its conciliation efforts would mean that employers would exploit it for litigation advantage, “stockpiling exhibits for the coming court battle.”  Id. at 40.

Next, in reciting legislative history for Title VII to support its view that the adequacy of its conciliation should not be reviewed, the EEOC relies on “basic principles of administrative law” to conclude that because conciliation failure is not final agency action, it is committed to the agency’s discretion.  Id. at 32-33.

Finally, and not unexpectedly, the EEOC contends that judicial review is unnecessary, as it has “powerful incentives” to conciliate in good faith and “has a long history of doing so.” Id.

Next Steps

We anticipate that worker advocacy groups will file their own amicus briefs with the SCOTUS supporting the EEOC in the next 10 days. Thereafter, Mach Mining will file its final brief before oral argument is set. So stay tuned for more developments…

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

Not Impressed By The Chutzpah: Court Refuses To Bless The EEOC’s Attempt To Create A New Form Of Pattern Or Practice Litigation

Posted in Defenses to Pattern or Practice Cases

By Christopher DeGroffMatthew Gagnon, and Gerald L. Maatman, Jr.

Judge John Darrah of the U.S. District Court for the Northern District of Illinois issued a decision this week in the EEOC’s landmark case against CVS Pharmacy. As we have previously blogged about here, in EEOC v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill.), the EEOC staked out new ground in Title VII litigation by taking aim at certain provisions of CVS’s standard severance agreement. As we reported here, the Court decided to dismiss the case a few weeks ago but had not yet issued a decision. That decision came out on October 7, 2014. While we expected an important decision about the substance of Title VII’s protections, what we got instead was a landmark ruling on the scope of the EEOC’s enforcement authority. It is a stunner of a defeat for the Commission.

Case Background

In February of this year the EEOC brought suit against CVS, alleging that certain provisions of CVS’s standard severance agreement violate Title VII because they interfere with an employee’s right to file charges, communicate voluntarily with the EEOC and other state agencies, and participate in agency investigations. The case arose out of a former CVS pharmacy manager who was discharged in July 2011. She filed a charge with the EEOC, alleging that CVS terminated her due to her sex and race. On June 13, 2013, the EEOC dismissed the charge, but it then sent CVS a letter saying that it had reasonable cause to believe that CVS was engaged in a pattern or practice of resistance to the full employment of rights secured by Title VII by virtue of the severance agreements that the charging party and others signed at termination. Id. at 2-3. Specifically, the EEOC claimed that the agreement deters the filing of charges and interferes with the employee’s ability to communicate voluntarily with the EEOC and other federal and state agencies.

The Court’s Decision

Judge Darrah decided the case on purely procedural grounds. It was undisputed that the EEOC did not engage in any effort to conciliate prior to bringing suit. Id. at 3. The EEOC argued that it was not required to engage in conciliation procedures because it was not bringing a garden-variety pattern or practice claim under section 707(e), but rather was alleging a pattern or practice of resistance to the full enjoyment of rights created by Title VII. That “resistance” claim was brought under section 707(a), which does not mandate the same pre-suit procedures as are required under section 707(e).

Judge Darrah dove into the history of Title VII  to dismantle the EEOC’s argument. When Title VII was originally enacted, the Attorney General was given the power to bring civil complaints under section 707(a) when there was a reasonable cause to believe that an employer engaged in “a pattern or practice of resistance” to the full enjoyment of any of the rights secured by Title VII.  That power was transferred to the EEOC in March 1974. Under section 707(e), the Commission was given the authority to investigate and bring pattern or practice claims either on behalf of a person aggrieved, or on behalf the Commission itself. However, section 707(e) expressly mandates that all such actions must be conducted in accordance with the procedures set forth in section 706, which, among other things, requires the EEOC to engage in conciliation procedures before filing suit.

The EEOC’s argument was that the Attorney General was not required to adhere to section 706 pre-suit obligations when it exercised authority under section 707(a). Since the Attorney General’s authority was transferred to the EEOC, the EEOC was similarly not required to follow the pre-suit procedures of section 706.

The Court disagreed, holding that the transfer of authority may have granted the EEOC the power to bring charges of a pattern or practice of discrimination, but it did not create a separate cause of action. Judge Darrah reasoned that: “[I]t is clear that the transfer of prosecutorial authority in 707(a) from the Attorney General was not intended to create a cause of action for the EEOC other than those specifically conferred on the commission pursuant to 707(e) and subject to the procedures provided in 706, including the obligation of conciliation.” Id. at 7. In other words, there is no separate cause of action for “resisting” employment laws under section 707(a). The EEOC is stuck with the pattern or practice claims under section 707(e) and the procedural requirements of section 706.  Because the EEOC did not adhere to those procedures when it failed to conciliate, it was not authorized to file suit against CVS, and CVS was entitled to judgment as a matter of law.

Implications For Employers

One has to admire the EEOC’s creativity as it seeks to boost its power. In the same case it sought to open up whole new territory for itself through a novel interpretation of the substantive protections of Title VII, while at the same time advancing a theory that would further dismantle the procedures that protect employers from the EEOC’s trigger finger. As we blogged about here, the EEOC is spending a considerable amount of time and resources easing its path to bringing systemic pattern or practice cases. This case touches on one of the most visible of those efforts: its attempt to immunize itself from any judicial scrutiny of how it conducts its pre-suit obligations, especially its conciliation obligations. If the EEOC had its way against CVS, then it would be able to dispense with that obligation altogether for some pattern or practice cases. Thanks to Judge Darrah’s ruling, that protection remains, at least for now.

While this turned out to be quite an interesting ruling on the procedural aspects of defending against EEOC litigation, it leaves the EEOC’s substantive challenges to CVS’s severance agreements unresolved. The EEOC is pursuing a similar theory against a different employer in the U.S. District Court for the District of Colorado. See EEOC v. CollegeAmerica Denver, Inc., Case No. 14-CV-01232-LTB-MJW (D. Colo.). That may provide another opportunity to see if the EEOC’s substantive theory holds water. Stay tuned.

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

Court Bucks Notion That There Is Nationwide Jurisdiction If The EEOC Sues Under Title VII

Posted in EEOC Litigation

By Gerald L. Maatman, Jr.

On September 22, 2014, in EEOC v. Vicksburg Healthcare LLC, et al., Case No. 3:13-CV-895 (S.D. Miss. Sept. 22, 2014), Judge Keith Starrett the U.S. District Court for the Southern District of Mississippi granted defendant’s motion to dismiss an EEOC lawsuit for lack of personal jurisdiction and insufficient service of process. The EEOC had filed a disability discrimination claim on behalf of a nurse who worked at hospital owned by a subsidiary of defendant. The Court held that the EEOC, which sued a subsidiary hospital in Mississippi and its Tennessee-based parent corporation, did not put forth prima facie evidence of the necessary factors to satisfy personal jurisdiction requirements for the parent corporation in Mississippi. While this ruling is favorable for non-Mississippi parent corporations who operate subsidiaries in Mississippi, it has larger significance for employers. It shows that nationwide jurisdiction is not a given when the EEOC sues. Additionally, the ruling provides the framework for how to prevent liability by avoiding personal jurisdiction.

Case Background

The EEOC filed an action on behalf of Beatrice Chambers alleging disability discrimination under Title I of the Americans With Disabilities Act of 1990. Id. at 1. The complaint named Community Health Systems, Inc. (“CHSI”) and Vicksburg Healthcare, LLC (“VHL”) as Defendants, alleging that both CHSI and VHL have been continuously doing business as River Region Medical Center (“River Region”) in Vicksburg, Mississippi. Id. The EEOC alleged that the Defendants terminated Chambers, who worked as a nurse at River Region for approximately 36 years, because of her unspecified disability, and additionally failed to provide her with reasonable accommodations in violation of the ADA. Id. at 1-2. VHL was a subsidiary of CHSI, which was incorporated in Delaware and had its principal place of business in Tennessee. Id. at 2. While VHL admitted doing business as River Region and admitted employing Chambers, CHSI denied doing business as River Region and denied employing Chambers. Id. Further, in its motion to dismiss, CHSI asserted the affirmative defenses of lack of personal jurisdiction, insufficient process, and insufficient service of process. Id           

The Court’s Decision

In granting CHSI’s motion to dismiss, the Court held that the issue of personal jurisdiction was controlling. Id. The EEOC has the burden of establishing a prima facie case for personal jurisdiction. Id. at 5. The Court noted that a non-resident defendant is amenable to being sued in Mississippi if: (1) Mississippi’s long-arm statute confers jurisdiction over the defendant; and (2) the exercise of personal jurisdiction comports with the requirements of federal due process. Id. at 3. The Mississippi long arm statute consists of three prongs, including: (i) the contract prong; (ii) the tort prong; and (iii) the doing-business prong. It was undisputed that the “doing-business” prong was case dispositive. Id.

CHSI submitted an affidavit from its Senior Vice President and Chief Litigation Counsel to the effect that it did not conduct business in Mississippi and that it lacked sufficient minimum contacts to be hauled into court in Mississippi. Id. at 6. The affidavit confirmed that CHSI is a holding company with no employees; CHSI indirectly owned subsidiaries including VHL; CHSI neither operated nor controlled the day-to-day operations of River Region; CHSI and River Region maintained separate banking records and did not co-mingle funds; CHSI did not employ nor have control over any River Region staff; CHSI never made any employment decisions regarding Chambers; CHSI and River Region observed corporate formalities (including no overlap between the Board of Trustees of River Region and the Board of Directors of CHSI; the respective Boards of River Region and CHSI each convened separate meetings; and the Boards maintained separate minutes and records); and CHSI is not qualified to do business in Mississippi, owns no property there, has no offices there, does not market there, and does not pay taxes there. Id. at 6-7. Following well-established precedent, the Court found this aggregation of factors to be dispositive. It held that the EEOC lacked personal jurisdiction to sue CHSI in Mississippi. Id. at 7.

The Court rejected the EEOC’s three arguments in opposition of dismissal.  Id. at 7-8. First, the EEOC argued that the 10-K form submitted by CHSI to the SEC demonstrated CHSI’s intent to do business in Mississippi as it often used language such as “we” when referring to the hospital. Id. at 8. The Court rejected this argument, noting that the 10-K form also contained a provision saying the hospitals are expressly owned and operated by the subsidiaries. Id. Next, the EEOC mistakenly speculated that the River Region employee handbook contained references to CHSI. Id. at 9-10. The Court cited an affidavit from CHSI’s litigation counsel clarifying that the entity referred to in the handbook was a different indirect subsidiary, and not the parent corporation. Id. at 10. Finally, the EEOC erroneously relied on another case involving CHSI - Bass v. Community Health Systems, Inc., Case No. 2:00cv193 (N.D. Miss.). Id. at 12. The Court noted that no facts from that case illustrated that CHSI should be amenable to personal jurisdiction. Id.

Implications For Employers

 When out-of-state parent corporations conduct business in Mississippi through subsidiaries, it is imperative that they observe corporate formalities to clearly maintain the parent-subsidiary relationship. Further, in documents such as 10-K forms and employee handbooks, employers must explicitly indicate that subsidiaries, and not the parent, own and operate local entities. If parent corporations follow the teachings of EEOC v. Vicksburg Healthcare, LLC, et al., they can avoid unwittingly submitting to personal jurisdiction in Mississippi courts while their subsidiaries do business there.

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

The EEOC’s Litigation Scorecard For FY2014 – What Does It Mean For Employers

Posted in EEOC Litigation

By Gerald L. Maatman, Jr.

The EEOC’s fiscal year ended on September 30, 2014.

So what did the EEOC’s litigation record look like for the past year?

Our analysis is here, along with a video presentation on the highlights of what this all means for employers.

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