EEOC Year-End Countdown

Court Orders The EEOC To Produce Internal Hiring Policies Regarding Background Checks

Posted in Discovery

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

In the closely watched case of EEOC v. BMW Manufacturing Co., LLC, 13-CV-1583 (D.S.C.), which concerns the EEOC’s “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Under Title VII (most recently discussed here, the parties have waged a discovery battle over whether the EEOC should be forced to respond to discovery concerning its own use of criminal background checks and credit histories during the hiring practices.  Although the EEOC won the initial battle when a Magistrate Judge held that the it did not have to produce this evidence, the dust has settled and BMW has won the war. In a ruling of December 8, 2014, U.S. District Court Judge Henry M. Herlong Jr. ordered the EEOC to produce “all documents that constitute, contain, describe, reflect, mention, or refer or relate to any policy, guideline, standard, or practice utilized by the EEOC in accessing the criminal conviction record of applicants for employment with the EEOC.” EEOC v. BMW Manufacturing Co., LLC, 13-CV-1583, 2014 U.S. Dist. LEXIS 169849, at *4 (D.S.C. Dec. 2, 2014).

This decision represents a big win for BMW as well as all employers staring down the barrel of the EEOC’s “do as we say, not as we do” enforcement policies.

Case Background

The EEOC filed suit against BMW alleging that “its criminal conviction background check policy constitutes an unlawful employment practice in violation of…Title VII…because BMW’s policy had, and continues to have, a significant disparate impact on black employees and applicants and is not job-related and consistent with business necessity.” Id. at *1. This case is one of a handful of systemic cases that the EEOC has filed in recent years over employers use of background check policies.  The EEOC has suffered several resounding defeats in their pursuit of this initiative, including the landmark case against Kaplan Higher Education Corp. (most recently discussed here) 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.”

The Court’s Decision

Upon the Magistrate Judge’s denial of its motion to compel, BMW filed Rule 72 objections with Judge Herlong requesting that he overrule the Magistrate Judge’s decision given the relevance of the requested information. Id. at *1. The Magistrate Judge denied BMW’s request because “considering the burdens of proof in a disparate impact case and in light of BMW’s motion to compel, BMW has failed to explain how production of the EEOC’s convictions policy contributes to its ability to prove that BMW’s criminal conviction policy at issue is job-related and/or is consistent with a stated business necessity.” Id. at *2-3.

Judge Herlong disagreed with the Magistrate Judge’s reasoning, instead finding that the EEOC had the burden of establishing “why its objections are proper given the broad and liberal construction of the federal rules” and that it failed to meet this burden. Id. at *3. Although Judge Herlong noted that the EEOC based its argument on the fact that its own policies are not relevant because “the positions for which the EEOC utilized its policy were not similar to the positions at issue in this litigation,” he held that BMW is not simply required to sit back and “accept the EEOC’s position” without discovery as to its policies or information concerning the positions for which they are used. Id. Accordingly, Judge Herlong ordered the EEOC to produce the requested information since “this production should not be burdensome to the EEOC, and the Court can perceive no harm to the EEOC in producing its internal policies.” Id.

Implications For Employers

This decision represents a big win for employers given the EEOC’s general reluctance to allow a “look behind the curtain.” This is not a surprise since in affirming dismissal of the EEOC’s case against Kaplan, the Sixth Circuit honed in on the fact that the EEOC had initiated a pattern or practice lawsuit against an employer for using “the same type of background check that the EEOC itself uses.” This is yet another decision that highlights the fact that simply because the EEOC says certain information is not relevant does not make it so. Employers should be able to put this ruling to good use for current and future discovery battles with the EEOC.

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

Separation Agreement Attack Redux – EEOC Takes Another Swing At Employer’s Standard Release Language, And Loses On Key Claims

Posted in EEOC Litigation

By Chris DeGroff and Laura Maechtlen

Earlier this year, we blogged about the EEOC’s aggressive attack on CVS Pharmacy Inc.’s standard release agreement which contained terms more expansive in favor of employees than the EEOC’s own interpretive guidance, and agreements held enforceable by in key court decisions. The EEOC v. CVS case was eventually dismissed on procedural grounds because the EEOC had not met its obligation to conciliate the claims filed in that case, so failed to provide additional guidance on the EEOC’s aggressive theories. Unfortunately, it also failed to quell the EEOC’s thirst to pursue similar claims, as evidenced by the EEOC’s complaint against CollegeAmerica Denver, Inc. that alleges the private college’s separation agreements improperly prevented employees from filing age discrimination complaints — claims similar to those the EEOC made against CVS.

On December 2, 2014, Judge Lewis Babcock of the U.S. District Court for the District of Colorado granted in part the defense motion to throw out the EEOC’s lawsuit. The decision in EEOC v. CollegeAmerica Denver, Inc., Case No. 14-CV-1232, 2014 U.S. Dist. LEXIS 167333 (D. Colo. Dec. 2, 2014), is well worth a read for corporate counsel.

Background To The Case

The CollegeAmerica action arose when the Charging Party, Debbi Potts, resigned her employment and afterwards entered in to a single settlement agreement with CollegeAmerica in which Potts agreed to:

(1.) … refrain from personally (or through the use of any third party) contacting any governmental or regulatory agency with the purpose of filing any complaint or grievance that shall bring harm to CollegeAmerica ….

(3.) To not intentionally with malicious intent (publicly or privately) disparage the reputation of CollegeAmerica….

Following execution of the individual agreement, CollegeAmerica notified Potts that it considered emails she exchanged with another former employee to be in violation of the non-disparagement provision, and it demanded repayment of consideration paid to her. Potts responded by filing three charges of discrimination with the EEOC. After the first charge was filed, CollegeAmerica filed a state court action against Potts alleging breach of the agreement’s non-disparagement clause.

The EEOC investigated the claims, and issued a Letter of Determination that CollegeAmerica had violated the Age Discrimination in Employment Act (ADEA).  After the letter of determination was issued,  CollegeAmerica provided the EEOC with four Separation and Release Agreements (“Separation Agreements”) that it routinely used, for the purpose of clarifying that the settlement agreement signed by Potts was not CollegeAmerica’s “form” severance agreement, as the EEOC mistakenly believed.  All of those agreements included a release of claims provision and a non-disparagement clause.  After receiving copies of the “form” agreements, the EEOC did not revise or supplement its findings or otherwise notify CollegeAmerica that the scope of the investigation had expanded beyond Potts’ individual agreement. The parties’ efforts to resolve the issues set forth in the Letter of Determination through conciliation were thereafter unsuccessful.

The EEOC then filed a lawsuit, asserting three claims: (1) that Potts’ settlement agreement denied her the full exercise of her rights under the ADEA and interfered with the agency’s ability to investigate charges of discrimination under the ADEA; (2) through the “form” standard separation agreements used with employees other than Potts, CollegeAmerica denied employees full exercise of their rights under the ADEA; and (2) CollegeAmerica retaliated against Potts by filing the state court action alleging breach of her settlement agreement’s non-disparagement clause.

Ruling On Motion To Dismiss

CollegeAmerica sought dismissal of all the EEOC’s claims and, in an Order issued this week, the Court agreed with a majority of the defense arguments.

CollegeAmerica first argued that there is not justiciable controversy over the first claim because it has never asserted, and would never assert, that Potts waived her ADEA rights via the individual settlement agreement. In support, CollegeAmerica provided evidence that it did not assert such a waiver in connection with her EEOC’s charges, or state court action, and provided an affidavit stating that the employer did not and would never assert that the individual settlement agreement constitutes a waiver of ADEA rights. The Court concluded that the claim was moot.

CollegeAmerica also argued that the Court lacked jurisdiction over the second claim because the EEOC failed to provide it with notice that the “form” separation agreements purportedly violate the ADEA or to engage in conciliation with respect to those Agreements. In response, the EEOC argued that notice and conciliation are not jurisdictional prerequisites to suit under the ADEA, trotting out the oft-cited case Arbaugh v. Y&H Corp., 546 U.S. 500 (2006), in which the Supreme Court addressed whether Title VII’s definition of “employer” was an issue of subject matter jurisdiction or an essential element of Title VII.  (For those employers who have litigated this issue with the EEOC, this case is and old standby for the EEOC, overly relied upon, and easily distinguishable in many instances). For obvious reasons, the Court distinguished Arbaugh, and recognized that that the Tenth Circuit has held that exhaustion of administrative remedies, including conciliation, is a jurisdictional prerequisite to filing suit.  It then found that — because the EEOC was unaware of the existence or terms of the “form” separation agreements before it issued its findings in the Letter of Determination — it could not serve as notice to CollegeAmerica that the EEOC was alleging that the “form” agreements violated the ADEA. The Court also found that the EEOC failed raise concerns about the “form” separation agreements at the conciliation meeting; thus, the EEOC failed to conciliate the issue. As a result, the Court dismissed the second claim for lack of jurisdiction.

Finally, CollegeAmerica was unsuccessful in its bid to dismiss the third cause of retaliation. The Court found that the EEOC pled sufficient facts to support a reasonable inference that CollegeAmerica filed the state court action in response to the first charge of discrimination.

Implications For Employers

Employers are well advised to review the separation agreement terms at issue in the EEOC v. CollegeAmerica and EEOC v. CVS cases. While these employers were successful in dismissing claims on procedural grounds, the EEOC appears focused on continuing to litigate terms of individual and/or form separation agreements. In doing so, the EEOC’s position attempts to significantly alter existing authority governing terms of severance agreements, regardless of the Agency’s own guidance and leading case law interpreting such terms.

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

Last Brief Filed Today With The SCOTUS in Mach Mining Case

Posted in EEOC Litigation

By Gerald L. Maatman, Jr.

As our loyal blog readers know, we have followed the course of the Supreme Court proceedings in Mach Mining v. EEOC , No. 13-1019 (U.S.) with keen interest. Our prior posts are here, here, here, and here. Simply stated, this case has the potential to be a real game-changer for employers.

This afternoon Mach Mining filed the last brief with the SCOTUS prior to the oral argument set for January 13, 2015. Mach Mining’s reply brief is here.

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 has 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 analyzed 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). 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.

Opening Brief And Amicus Briefs For The Defense

Mach Mining filed is opening brief on September 4, 2014. Subsequently, employer groups 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.

Mach Mining’s Reply Brief

The EEOC filed it opposition brief on October 27, 2014. Mach Mining’s reply brief takes the Government’s position to task. It argues that judicial review of the condition precedent for the EEOC instituting a lawsuit must be meaningful. It criticizes the EEOC’s contention that a simple letter of determination – attesting to the failure of conciliation – is perfunctory and a self-serving standard if that is all that Title VII requires. As Mach Mining put it, “[a]t best, the EEOC’s [proposed] letters would show that the Commission is satisfied that it has met its conciliation obligation[,…] but accepting an agency’s representation that it believes it has complied with the law amounts to no judicial review at all.” Reply Brief, at 2 (emphasis in original). Mach Mining asserts that nothing within Title VII “justifies such toothless review.” Id.

Implications For Employers

Next up is oral argument at the SCOTUS on January 13, 2015. Stay tuned.

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

Showdown At The Fifth Circuit: Texas Files Opening Appellate Brief In Its Challenge Of The EEOC’s Criminal Background Guidance

Posted in EEOC Litigation

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

Earlier this year, the U.S. District Court for the Northern District of Texas dismissed a high profile lawsuit brought by the State of Texas against the EEOC regarding its “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Under Title VII.  In State of Texas v. EEOC, Case No. 5:13-CV-255 (N.D. Tex. Aug. 20, 2014), the District Court held that Texas lacked standing to maintain its suit because it did not allege that any enforcement action had been taken against it in relation to the EEOC’s guidance.

Texas wasted no time and filed an appeal with the U.S Court of Appeals for the Fifth Circuit seeking to overturn the dismissal of its lawsuit. On November 19, 2014, Texas filed its opening brief in support of its appeal. It is a “must read” for all employers, especially those who have been caught in the EEOC’s “do as we say, not as we do” tactics (given that the EEOC itself conducts criminal background investigations as a condition of employment for all positions, and conducts credit background checks on approximately 90 percent of its positions).

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 termed the “Felon Hiring Rule.”

The District Court dismissed Texas’ lawsuit entirely on a lack of subject matter jurisdiction. Because Texas did not allege that any enforcement action had been taken against it by the Department of Justice (as the EEOC cannot bring enforcement actions against States) in relation to the Guidance, the District Court held that there was not a “substantial likelihood” that Texas would face future Title VII enforcement proceedings from the Department of Justice arising from the Guidance. As standing to bring suit cannot be premised on mere speculation the District Court held that Texas lacked the necessary standing to maintain its suit against the EEOC.

Texas’ Appellate Brief

In the opening pages of its Fifth Circuit brief, Texas sets the stage by noting that this case presents “issues of exceptional importance throughout the State of Texas and the Nation” as it concerns the EEOC’s “felon-hiring regulations” which it adopted “without allowing the public to see it or comment on it” and “preempts various state laws that ban employers from hiring felons.” Id. at 7.

Given that the District Court’s dismissal was based entirely on issues of standing, Texas sets forth several reasons why the District Court erred in dismissing the suit on this basis. Specifically, Texas asserts that its lawsuit is not based on the “mere speculation” of injury and that it has standing to pursue its challenge of the “Felon Hiring Rule” because:

  • In processing job applications, Texas state agencies apply various no-felons policies required by state law which are prohibited by the EEOC’s Felon Hiring Rule. The conflict makes the State an “object” of the EEOC’s administrative action thus satisfying the standing requirements of Article III”;
  • The EEOC cannot attempt to both change the State’s hiring policies [through adopting the Felon Hiring Rule] and nonetheless object to the State’s standing to change that attempt;
  • The Rule expressly purports to preempt state law no-felons policies, like those required by Texas law, and as a result, vests Texas with Article III standing to defend its laws;
  • The lawsuit represents a facial challenge to the EEOC’s rule, and because “without federal court intervention, the [EEOC] will be able to continue to use its threat of enforcement to bully employers into abandoning their no-felons policies;
  • The Felon Hiring Rule is a final agency action that is reviewable to the extent that it binds the EEOC’s staff and/or forces regulated entities to change their behavior; and
  • The fact that the Felon Hiring Rule is not a “legislative rule” does not foreclose judicial review since otherwise “agencies like the EEOC could promulgate self-proclaimed guidance documents, use them to bully regulated entities, and forever avoid judicial review of their coercive efforts.”

Id. at 16-19.

Implications For Employers

While the EEOC has yet to file its opposition brief, one can expect it to advance similar arguments that it made in support of its motion to dismiss. Namely, that the District Court lacked jurisdiction to hear the case because the EEOC’s guidance is not legally binding and does not constitute a final agency action and because its guidance has no binding authority, and thus renders Texas without standing to pursue its claims. This is most certainly “one to watch” given the stakes involved and the extent to which the EEOC has “gone to the mat” defending its criminal background guidance document. We will be sure to keep our readers informed as this case makes its way through the appeals process. Stay tuned!

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

“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.