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

Seyfarth Synopsis:  In an ADEA action brought by the EEOC alleging that the New Mexico Department of Corrections failed to promote correctional officers over the age of 40, a federal district court in New Mexico denied the employer’s motion to dismiss but ordered the EEOC to file a supplemental pleading identifying previously unnamed aggrieved parties.

For employers facing EEOC age discrimination claims, this ruling provides insight into how to attack allegations relative to unidentified aggrieved individuals and to flush out the true size and scope of an EEOC systemic lawsuit.

***

In EEOC v. State of New Mexico, Dep’t of Corrections, No. 15-CV-879, 2017 U.S. Dist. LEXIS 198770 (D.N.Mex. Dec. 4, 2017), the EEOC alleged that from January 2009 to at least December 2014, the New Mexico Department of Corrections (“NMDC”) denied employment opportunities to three specific workers and a group of unidentified aggrieved individuals aged 40 and over on the basis of their age.  The NMDC moved to dismiss with respect to the unidentified aggrieved individuals, arguing those claims were insufficiently plead, and further, that the EEOC failed to provide sufficient notice about any additional aggrieved individuals during the pre-filing conciliation period.

The EEOC moved to convert the motion to dismiss to a motion for summary judgment after the NMDC attached to its motion exhibits relating to the EEOC’s investigation and conciliation.  Judge Kenneth J. Gonzales of the U.S. District Court for the District of New Mexico denied both motions, but  ordered the EEOC to file a supplemental pleading listing the names of each aggrieved party.

Employers can use this decision in ADEA litigation to argue that the EEOC should identify any unnamed aggrieved individuals at the outset of litigation. In this respect, it is a key ruling for employers.

Case Background

The EEOC alleged that the NMDC failed to promote three correctional officers to various positions at the Central New Mexico Correctional Facility because they were over the age of 40.  The former warden allegedly told the officers that “while [two Claimants] were qualified for the [position], he selected a 31-year-old candidate because he was looking for someone with ‘longevity.’”  Id. at *2.  The EEOC also alleged that the warden: (1) made many of the decisions to deny employment opportunities to older workers; (2) used ageist comments about longevity, preferring younger workers, and not promoting employees near retirement; and (3) instilled a culture of age discrimination that continued to be applied by the NMDC.  As such, the EEOC sought an injunction requiring policy changes and money damages for any individual adversely impacted by the discrimination.

Arguing that the EEOC failed to provide sufficient notice about any additional aggrieved individuals during the pre-filing conciliation period, the NMDC moved to dismiss the amended complaint.  In support of its motion, NMDC sought to offer several exhibits, including: (1) requests for information propounded on the NMDC by the EEOC; (2) the EEOC’s letter to the NMDC’s employees soliciting information or claims; and (3) letters and e-mails between the parties relating to EEOC’s efforts at conference, conciliation, and investigation.  Id. at *5.  The EEOC argued that if the Court was willing to entertain evidence regarding pre-filing communications, then the motion to dismiss should be converted to a motion for summary judgment.  Id. at *3.

The Court’s Decision

The Court denied the NMDC’s motion to dismiss, denied the EEOC’s motion to convert the convert the motion to dismiss to a motion for summary judgment, and ordered the EEOC to file a supplemental pleading listing the names of each aggrieved party involved in this lawsuit.  First, the Court addressed the NMDC’s argument that the exhibits were “implicitly referenced” in the EEOC’s allegations regarding its pre-filing investigation.  Id. at *5.  The Court rejected this argument, opining that “implicit, subtle, or passing references to extraneous evidence” did not justify their inclusion.  Id.  As such, the Court excluded the NMDC’s exhibits, and therefore denied the EEOC’s motion to convert.

Second, the Court addressed the NMDC’s argument that the Court should consider the lack of actual pre-litigation notice as part of the notice pleading inquiry, including its knowledge about the potential number of claimants, facilities, and wrongdoers.  Id. at *6.  According to the NMDC, any potential recovery should be limited to the claimants the EEOC actually knew about when conciliation concluded in September of 2013.  The Court held that it would allow the parties to amend their pending summary judgment motions to supplement any evidence and arguments regarding actual pre-litigation notice and timeliness, but that “a motion to dismiss typically is not the correct vehicle for determining whether a claim is barred based on when it arises.”  Id. at *7.

Third, the Court addressed the NMDC’s argument that the EEOC failed to meet the pleading standards defined in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).  The Court opined that there is no binding case law addressing how much information the EEOC’s complaint must provide about unidentified parties.  Id. at *9.  Further, it instructed that courts are more permissive about the class-type allegations where the complaint is very specific about the charging parties.  Id. at *10 (citations omitted).  Applying these principles, the Court held that the complaint stated a plausible claim for relief on behalf of the unidentified aggrieved individuals since it described the types of discrimination at issue (age); the group of workers (NMDC workers over the age of 40); and the duration of the discriminatory conduct (since 2009 and ongoing).  Id.  Accordingly, the Court denied the NMDC’s motion to dismiss.

Finally, at oral argument, the EEOC offered to file an amended complaint to satisfy the party plaintiff rule, if the Court found it applied.  Id. at *12.  Instructing that the ADEA incorporated the requirements of 29 U.S.C. § 216(c), the Court ordered the EEOC to identify each aggrieved individual in the record by filing a supplemental pleading.  Id. at *11-12.  The Court also permitted the NMDC the option to file a response, but advised that the Court would prefer to address additional substantive arguments through the summary judgment proceedings.  Accordingly, the Court denied the NMDC’s motion to dismiss, denied the EEOC’s motion to convert the convert the motion to dismiss to a motion for summary judgment, and ordered the EEOC to file a supplemental pleading listing the names of each allegedly aggrieved worker on whose behalf the EEOC sought recovery.

Implications For Employers

In its Strategic Enforcement Plan for Fiscal Years 2017-2021, the EEOC identified eliminating barriers in recruitment and hiring as one of its six priorities (as we blogged about here).  One of the prime areas where the EEOC has been targeting employers involves age discrimination.  This litigation should put employers on notice that promotional and hiring decisions will be closely scrutinized by the EEOC.

Further, although the Court did not reach the issue of whether the EEOC fulfilled its conciliation obligations with respect to the unnamed group of allegedly aggrieved individuals, this employer’s attack of the EEOC’s failure to fulfill its pre-suit obligations under Title VII resulted in the Court ordering the Commission to file a supplemental pleading identifying such individuals.  Although the employer’s motion to dismiss was denied, employers can cite to this ruling in ADEA litigation when arguing that the EEOC should “put its cards on the table” and disclose who exactly is part of the lawsuit.

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

By Matthew J. GagnonChristopher J. DeGroff, and Gerald L. Maatman, Jr.

Seyfarth Synopsis: With uncertain times and profound changes anticipated for the EEOC, employers anxiously await what enforcement litigation the EEOC has in store. Although 2016 showed a marked decline in filings, fiscal year 2017 shows a return to vigorous enforcement filings, with a substantial number of filings in the waning days of the fiscal year.

Employers are living in uncertain times. The impact of a Trump Administration and the EEOC’s new Strategic Enforcement Plan (SEP) for fiscal years 2017-2021 are still working themselves out in the FY 2017 filing trends. Nonetheless, one trend has reemerged: a vigorous number of EEOC case filings. It looks like the anemic numbers of FY 2016 were just a bump in the road, as FY 2017 has revealed an increase in total filings, even eclipsing the numbers from FY 2015 and 2014. (Compare here to here and here.) This year, the EEOC filed 202 actions, 184 merits lawsuits and 18 subpoena enforcement actions.

The September filing frenzy is still an EEOC way-of-life, as this past month yet again holds the title for most filings compared to any other month. At the time of publication, 88 lawsuits were filed in September, including 21 in the last two days alone. In fact, the EEOC filed more cases in the last three months of FY 2017 than it did during all of FY 2016. The total number of filings for the remaining months remains consistent with prior years, including a noticeable ramp up period boasting double digit numbers through the summer.

Filings out of the Chicago district office were back up in FY 2017 after an uncharacteristic decline to just 7 total filings in 2016. This year, Chicago hit 21 filings, an enormous increase from last year. This is closer to the total number of Chicago filings in FY 2015 and 2014 (26 in each year). The Los Angeles district office also increased its filings, hitting a high of 22, a substantial jump compared to previous years and the most of any district office in FY 2017. On the other end of the spectrum, the Phoenix district office has seen a notable drop, with only 7 filings compared to 17 in FY 2016.

New SEP, Same Focus

Every year we analyze what the EEOC says about its substantive focus as a way to understand what conduct it is targeting. This year, Title VII takes center stage. Although Title VII has consistently been the largest category of filings, last year showed a dip in the percentage of filings alleging Title VII violations, at only 41%. Nonetheless, this year Title VII has regained its previous proportion, accounting for 53% of all filings. This is on par with FY 2015 and 2014, showing once again that FY 2016 seems to have been an outlier.

Although the 2017-2021 SEP outlined the same general enforcement priorities as the previous version of the SEP (covering FY 2012 to 2016), the new SEP added “backlash discrimination” towards individuals of Muslin/Sikh/Arab/Middle Eastern/South Asian communities as an additional focus. One would expect this focus might increase the number of Title VII claims alleging either religious, racial, or national origin discrimination. However, those filings stayed relatively even, and were even a bit down from previous years. Religious, national origin, and race discrimination claims made up 42% of all Title VII claims, compared to 50% in 2016 and 46% in 2015.

Uncertainty For Equal Pay Claims

With a new administration came a new Acting Chair for the EEOC. President Trump appointed Victoria Lipnic as Acting Chair on January 25, 2017. Employers expected the EEOC’s new leader to steer the EEOC’s agenda in a different direction. Some believed Lipnic was foreshadowing future trends when she made it clear at her first public appearance – hosted by none other than Seyfarth Shaw – that she is “very interested in equal pay issues.” (See here.) And indeed, we have seen a slight uptick in the number of EPA claims filed in FY 2017. In FY 2017, The EEOC filed 11 EPA claims, compared to 6 in 2016, 5 in 2015, and 2 in 2014.

However, on June 28, 2017, President Trump tapped Janet Dhillon as Chair of the EEOC. Dhillon would come to the EEOC with extensive experience in a big law firm and as the lead lawyer at three large corporations, US Airways, J.C. Penney, and Burlington Stores Inc. Although it is too early to know how she could change the direction of the agency if confirmed, it is entirely possible that she could back away from previous goals to pursue equal pay claims more aggressively.

The Trump Administration has also made other moves that may indicate a change in direction with respect to equal pay initiatives. On February 1, 2016, the EEOC proposed changes to the EEO-1 report that would require all employers with more than 100 employees to submit more detailed compensation data to the EEOC, including information regarding total compensation and total hours worked by race, ethnicity, and gender. This was a change from the previous EEO-1 report, which only required employers to report on employee gender and ethnicity in relation to job titles. However, on August 29, 2017, the new EEO-1 reporting requirements were indefinitely suspended. We will have to wait and see whether the slight uptick in EPA claims in FY 2017 was a one-year anomaly.

Implications For Employers

The changes brought by the Trump Administration are still in the process of working themselves down into the rank and file of many federal agencies. The EEOC is no exception. Despite all of the unrest and uncertainty about where the EEOC may be headed, the FY 2017 filing trends largely show a return to previous years, albeit with a slight uptick in EPA claims. Certainly, changes in top personnel will have an impact on how the EEOC pursues its enforcement agenda. Exactly what that impact will be remains to be seen.

Loyal readers know that this post is merely a prelude to our full analysis of trends and developments affecting EEOC litigation, which will be published at the end of the calendar year. Stay tuned for our continued analysis of FY 2017 EEOC filings, and our thoughts about what employers should keep an eye on as we enter FY 2018. We look forward to keeping you in the loop all year long!

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

thCAD0SFA4By Gerald L. Maatman, Jr. 

As the EEOC’s fiscal year wound down as of September 30th, the Commission filed a slew of lawsuits. This year, the EEOC filed 62 lawsuits in September.

LXBN TV profiled our analysis of this “lawsuit filing frenzy,” which is offered here for our loyal blog readers.

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

calendar-660670_640By Matthew J. Gagnon, Christopher DeGroff, and Gerald L. Maatman, Jr.

As the clock ticked down on the EEOC’s fiscal year (which ended on September 30), we are struck once again by the eerily consistent trend in the agency’s federal court filing trends. Employers around the country are seemingly trapped in the “Groundhog’s-day-like” loop that occurs each September. FY2015 was a blockbuster year in major EEOC-litigation decisions from the U.S. Supreme Court on down, leaving many areas of the law in flux. But one thing has remained constant: as we have reported for several years (see here, here, and here), the EEOC has once again rushed to file a blitz of federal court complaints just under the fiscal year wire.

Although we expect some additional filings will continue to filter in overnight, as the courts on the West Coast closed for the day, the raw numbers show that the EEOC filed 157 lawsuits in FY2015 (up from the 145 filed in FY2014). But most significantly, in the last 48 hours of its fiscal year alone, the EEOC launched 27 cases from coast to coast. Indeed, as the following graph depicts, the EEOC filed more complaints in the last quarter of FY2015 than the entire rest of the year put together.

Cases By Month

Where Was The EEOC’s Subject Matter Focus In FY2015?

We have once again crunched the numbers underlying the EEOC’s FY2015 filings to tease out where the EEOC is focusing its substantive enforcement efforts. We have analyzed the EEOC’s FY2015 filings according to the statutes pursued and the theories of discrimination that it has alleged. The following two charts show our breakdown of the EEOC’s filings in FY2015 by statute, and then a further breakdown of Title VII cases by discrimination theory.

Cases By Statute

Cases By Discrimination Type

We continue to see the same focus on sex/pregnancy discrimination and disability discrimination that we have seen in prior years. This year sex/pregnancy discrimination cases made up 54% of all Title VII filings, roughly on par with the 55% in FY2014. ADA cases made up 36% of all EEOC filings, which is also fairly consistent with previous years. (Disability cases made up 32% of all EEOC filings in FY2014, and 36% in FY2013.)

Suits alleging discrimination on the basis of race, however, are back on the upswing. Race discrimination cases were somewhat underrepresented last year as compared to earlier years. There were 15 race discrimination cases launched in FY2014, as compared with 17 in FY2013. This year, there were 24 lawsuits filed alleging race discrimination, which amounts to 26% of all Title VII filings.

Our analysis of the filings also confirms yet again that the likelihood of being tagged by the EEOC is not unlike the real estate market — it is all about location, location, location. Certain district offices emerge from the pack both in terms of the sheer number of case filings and the aggressiveness with which they pursue those cases. Here is this year’s breakdown by district office.

EEOC Map 2015

As with prior years, the Chicago office, led by regional attorney John Hendrickson, is on top with 26 filings in FY2015, the same number that it filed in FY2014. The Philadelphia and Phoenix offices also continued their historical trend of filing a large number of cases. Those offices racked up 18 and 16 filings in FY 2015, respectively, as compared to the 17 and 14 from FY2014. The Indianapolis and Charlotte offices rounded out the top five with 13 filings each. Last year, we noted that the New York office had a new regional attorney appointed in May 2014, and we wondered whether he would continue that office’s tradition of aggressive enforcement. If FY2015 is any indication, we now know the answer: the New York office was quite active in FY2015, filing 10 cases – two more than it filed in FY2014. The office earning the “biggest mover” honors is Los Angeles, jumping over 400% from only two cases in FY2014 to nine in FY2015 – still modest in comparison to some of the perennially active offices, but a trend to watch for our West Coast readers.

Old Questions Answered; New Questions Raised

We are now entering the final years of the EEOC’s 2012 Strategic Enforcement Plan (“SEP”) The SEP was issued by the EEOC in 2012 as the blueprint to guide its enforcement initiatives from 2012 through 2016. We closely followed the SEP through its stages of development, and, to a large extent, have relied on it as the lens through which we view trends and developments in the EEOC’s litigation activity. (See, e.g., here, herehere, and here.)

Over the past few years, we have seen how the EEOC’s enforcement activity has progressed and taken shape under the influence of the SEP. From the beginning, it was clear that the EEOC was making the prosecution of systemic cases a key priority. We have watched as the EEOC has continued to expend considerable resources litigating high-level, pattern or practice, policy, and class cases. And we have seen that with that increased focus on systemic cases has come an increased focus on the procedural mechanisms that the EEOC relies on to prosecute those cases – and that employers use to defend against them. In our view, FY2015 was a watershed year for determining the future direction of EEOC systemic cases. The Supreme Court has decided some key procedural and substantive issues underpinning the EEOC’s strategic initiatives of the past few years. And the EEOC has weighed in with its own guidance and interpretations concerning its own powers and the scope of Title VII and other anti-discrimination statutes.

To be sure, those developments have answered many of the open questions of the past few years. But even as those questions were answered, more questions arose to take their place. Here are just a few:

  • On April 29, 2015, the Supreme Court issued its long-awaited decision in Mach Mining, LLC v. EEOC, in which it considered whether the EEOC gets to operate beyond judicial review during its pre-suit conciliation phase. (In a word: “No!”) But that has only opened the door to many new questions about how the lower federal courts will apply that decision to decide employers’ challenges to the EEOC’s conciliation process. FY2016 will be a defining year in that respect.
  • Similarly, the Supreme Court unanimously rejected the EEOC’s pregnancy discrimination guidance in Young v. United Parcel Service, leaving employers to wonder how that guidance applies to their workplace and their employees.
  • The EEOC’s boundary-pushing theory of transgender discrimination – which we saw the first glimmers of at the very end of FY2014 – has become a full-blown trend. This rapidly solidifying theory of discrimination was aggressively pursued in FY2015, and we have every reason to expect that it will continue to develop in FY2016 and beyond.
  • The EEOC has repeatedly stated its intention to continue to litigate background check cases despite its initial string of embarrassing losses on this issue. FY2015 saw the EEOC gain ground in this area. Employers will need to wait to see whether those wins embolden the agency to pursue more of those types of cases in FY2016.
  • In a widely reported decision last year, the EEOC unsuccessfully tried to stop a company’s health and wellness plan in its tracks. That litigation position resulted in torrents of withering criticism from Congress and others. On April 16, 2015, the EEOC published a Notice of Proposed Rulemaking to clarify its position. But employers are still left scratching their heads because those proposed regulations appear to conflict with the implementing regulations of the Affordable Care Act.

Insight & Implications For Employers

The fact that we are asking these questions – and not others – is a direct result of how the EEOC has interpreted and pursued the enforcement objectives that it identified for itself in the 2012 Strategic Enforcement Plan. We have seen how the SEP has guided and shaped the EEOC’s enforcement initiatives, from an increased focus on systemic litigation, to the pursuit of boundary-pushing theories of discrimination. FY2016 is the last year covered by the 2012 SEP. Now that we are entering the final year, we are starting to see clearly how those enforcement priorities have materialized into actual litigation, and what they have meant in terms of the types of case that are filed and the industries affected. Those choices, in turn, have established new precedent, both in terms of the procedural aspects of EEOC-initiated litigation, and the substance, that will have a lasting effect for years to come.

This fiscal year has just ended. As we do every year, we will continue to analyze the data and filings from FY2015 to see what else we can learn about the EEOC’s priorities, and what employers should watch out for in FY2016 and beyond. Seyfarth Shaw LLP will publish that detailed analysis in a book at the end of the calendar year. We hope that you are looking forward to that publication as much as we are, and that you continue to find it a useful reference and guide to developments in EEOC litigation. Please stay tuned, loyal blog readers!

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

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

Shortly after publishing its FY2016 budget justification (here) asking for an additional $8.6 million and authorization to hire hundreds of additional employees (over FY2014 levels), the EEOC released its FY2014 charge and litigation statistics (here and here).  Charge receipts, while still historically high, fell to 88,778, down from a high of 99,922 in FY 2010 at the height of the last recession.  The EEOC’s rate of finding reasonable cause was down, as was its effectiveness in successfully conciliating those charges.  Indeed, the monetary benefits secured through its investigations plummeted by over $75 million, or roughly 20%.  The EEOC’s litigation program filed 133 merits suits, down roughly 50% from FY2011 and down 65% over FY2005 levels.  In addition, the litigation program secured only $22.5 million for alleged victims of discrimination, down from a high of $168.6 million in FY2004.

A more in depth look at the numbers is below.

The EEOC’s Private Sector Investigations Program

Retaliation claims remain the number one allegation in EEOC charges with 37,955 (42.8%).  Race, sex, and disability discriminations charges were the top three alleged substantive violations. Claims under the Equal Pay Act and the Genetic Nondiscrimination Act were the least alleged violations.

                                                     

On a state-by-state basis, Texas, Florida, and California led the way with 8,035, 7,528, and 6,363 charges, respectively.  Wake Island was the only U.S. Territory without an EEOC charge on file.

The EEOC resolved 87,442 charges under investigation in FY2014.  The agency only found reasonable cause in 2,745 (3.1%) cases.  Between FY2010 and FY2013, the EEOC made reasonable cause determinations ranging from 3,515 and 4,981 cases annually, which represented 3.6% to 4.7% of its charges filed.

By statute, the EEOC must attempt to conciliate all of its reasonable cause findings before initiating litigation.  In FY2014, the EEOC reported that it successfully conciliated 1,031 of its reasonable cause findings.  This represents a significant drop from FY2012 and FY2013, when the EEOC successfully conciliated 1,437 and 1,591 cases, respectfully.

On the whole, the EEOC’s private sector investigation program secured $296.1M for alleged victims of discrimination, down from $372.1M in FY2013 and approximately $365M in both FY2011 and FY2012.

The EEOC’s Litigation Program

The EEOC filed 133 merits cases in FY2013.  While on par with the most recent two fiscal years, this represents a decrease in filings of roughly 50% compared to FY2011 and over 65% compared to FY2005.  The EEOC filed 76 Title VII suits, 49 ADA suits, 12 ADEA suits, 2 Equal Pay suits, 2 GINA suits and 7 suits alleging violations of multiple statutes.

The EEOC’s litigation program secured $22.5 million in monetary benefits for alleged victims of discrimination, down from $38.6 million in FY2013, $91 million in FY2011, and a high of $168.6 million in FY2005.

Implications For Employers

At a time when the EEOC was seeking an expanded budget, as it has in each of the years during the current Administration (here), the EEOC’s performance and recoveries for alleged victims of discriminations were something of a fizzle in FY2014 when compared to its historical results.  With focus on systemic litigation, it appears as that other potentially meritorious claims have received less, if any, attention.  While the President’s request for additional funds is dead on arrival for lack of even Democratic support, it remains to be seen what, if any, increase in appropriated funds will make its way to the EEOC for FY2016.  Regardless, the EEOC is likely feeling significant pressure to post big wins with its budget on the line.  Employers take note:  this may translate to even more aggressive agency enforcement tactics.

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

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.

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

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

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

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

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

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

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

The EEOC Is Still Fighting The Giants From Previous Years

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

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

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

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

Clearing The Underbrush For An Enhanced Systemic Program

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

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

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

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

Pushing The Envelope On Non-Substantive Legal Theories

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

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

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

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

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

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

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

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

Aggressive Regional Offices

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

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

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

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

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

Insight For Employers

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

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

By Matthew Gagnon and Gerald L. Maatman, Jr.

The EEOC has taken some high-profile hits lately, see here and here, but in EEOC v. Baltimore County, No. 13-1106 (4th Cir. Mar. 31, 2014), the EEOC scored a victory against Baltimore County, Maryland, which had an employee retirement benefit plan that the EEOC alleged unlawfully discriminated against older workers in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-634. The Fourth Circuit held that it is unlawful to require older employees to contribute a larger percentage of their salaries to a retirement plan that bases retirement eligibility on years of service rather than meeting a specified retirement age. 

Background

In 1945, Baltimore County established a retirement benefit plan that provided that employees were eligible to retire and receive pension benefits at age 65, regardless of the length of their employment. Baltimore Cnty., at 4. The plan was funded, in part, from contributions by employees who contributed a fixed percentage of their annual salaries to the plan. Id. at 5. To ensure that all employees received the same level of benefits, contribution rates were based on, among other things, the number of years that an employee would contribute to the plan before being eligible to retire at age 65. Id. Older employees therefore ended up paying a greater percentage of their salaries to the plan. Id. at 6.

Over the years, the County modified its plan so that correctional officers became eligible to retire after only 20 years of service, regardless of age, or at age 65 with five years of service. Id. at 6-7. Two correctional officers filed charges of discrimination with the EEOC, alleging that the disparate contribution rates discriminated against them on the basis of age. Id. at 7-8.

The County actually won on summary judgment back in 2009. The District Court held that the plan’s disparate contribution rates were not motivated by age, but rather by the number of years remaining until an employee reached retirement age. The different contribution rates were permissible because older new-hires had less time to accrue earnings on their contributions and because of the “time value” of money. EEOC v. Baltimore Cnty., No. 07-CV-2500 (D. Md. Jan. 21, 2009). The Fourth Circuit vacated that judgment, holding that the District Court had considered only the age-based retirement eligibility requirement, and had failed to consider the plan’s separate provision for service-based eligibility. EEOC v. Baltimore Cnty., No. 09-1688 (4th Cir. June 25, 2010). On remand, the District Court granted partial summary judgment in favor of the EEOC. EEOC v. Baltimore Cnty., No. 07-CV-2500 (D. Md. Oct. 17, 2012).

Fourth Circuit Decision

The County’s primary argument on appeal was that the District Court had failed to apply the factors identified by the Supreme Court in Kentucky Retirement Systems v. EEOC, 554 U.S. 135 (2008). But the Fourth Circuit held that that case was inapplicable to the District Court’s analysis because it presented a different question: whether “pension status” unlawfully constituted a “proxy for age.” In that case, the plan treated employees differently based on their pension status rather than on their age. But Baltimore County’s plan required different contribution rates explicitly in accordance with employees’ ages at the time of their enrollment in the plan. The employee’s eligibility to retire (i.e., “pension status”) therefore had no bearing on the disparate treatment in that case, i.e., that older employees were required to contribute a higher percentage of their salaries to the plan than younger employees. Baltimore Cnty., at 13-15.

An employer violates the ADEA by relying on a facially discriminatory policy where age is the “but-for” cause of disparate treatment of older employees. Accordingly, the only question in Baltimore County was whether the disparate contribution rates were lawfully based on a reasonable factor other than age. Id. at 15. While there may have been some basis for such disparate treatment at the plan’s inception – when the only basis for reaching retirement eligibility was reaching retirement age – that justification disappeared when the plan was modified to allow employees to retire based solely on a set number of years of service. Id. 

Under the terms of the plan, correctional officers were eligible for retirement after 20 years of service. So a 20-year-old and a 40-year-old would both be eligible to retire after 20 years, but the 40-year-old would still have to contribute more of his or her income to the plan over the same twenty years to receive the same retirement benefits. Because the plan required older employees to contribute more of their income to the plan regardless of whether they chose to retire after reaching retirement age or after working the required number of years, the number of years until retirement age could not be the basis for the disparate rates. Id. at 15-16. Accordingly, the disparate rates were not motived by anything other than age, and were a violation of the ADEA. Id.

Implications For Employers

This case demonstrates the complexities and potential pitfalls employers face while trying to navigate the ADEA. It often makes sense to treat older and younger employees differently under a retirement plan in order to ensure that all employees receive the same level of plan benefits. But employers must be aware that any such differences will be considered facially discriminatory and therefore must be based on a reasonable factor other than age. The plan must be carefully structured so that any age-based disparities are actually justified by the different financial considerations that might apply to older employees when calculating plan benefits and contributions.

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