By Christopher J. DeGroffMatthew J. Gagnon,  Gerald L. Maatman, Jr., and Kyla J. Miller

Seyfarth Synopsis: The uncertainty of a new administration’s impact on the EEOC that plagued FY 2017 is fading, but the results are not what some would expect. Not only has the EEOC brought a mountain of filings compared to the last four years, but also the agency has demonstrated a clear focus on sex-based discrimination and sexual harassment in the workplace in light of #MeToo, even surpassing FY 2017 numbers.

With a full fiscal year under its belt, the Trump Administration’s impact on EEOC-initiated litigation is still uncertain. With two Republican Commissioners and the General Counsel position still unconfirmed, it is difficult to discern if things will truly be “business as usual” under Trump or if those appointments, once confirmed, will change agency course. One thing is certain: the EEOC’s litigation program is not slowing down any time soon. Just as the waning months of FY 2017 showed a marked increase in filings, FY 2018 turned up the heat even more. Filings are up more than ever, with sex discrimination filings and #MeToo filings – i.e., complaints of sexual harassment – eclipsing previous years.

The total number of filings in FY 2018 demolished FY 2015 and 2016, and even surpassed FY 2017. (Compare here to here and here). This year, the EEOC filed 217 actions, 197 merits lawsuits and 20 subpoena enforcement actions.

Predictably, the EEOC waited until the last minute to push filings, with this past month showing the most filings compared to any other month this fiscal year. At the time of publication, 84 lawsuits were filed in September, including 45 in the last 3 days alone.  Notable this year, however, was the “ramp up” period in June, July and August, which accounted for 63 of the total filings. Almost half of those cases were brought in August. The total filings for the remaining months remain low, with the number of filings in October through February failing to hit double digits.

Filings in Chicago, Philadelphia and Los Angeles continue to top the charts, with 21, 21, and 17 total filings, respectively. These numbers remain relatively consistent to FY 2017, which showed 21 filings in Chicago, 19 in Philadelphia, and 22 in Los Angeles. On the lower end, the St. Louis and Memphis numbers were modest, with only 7 filings in St. Louis and 8 filings in Memphis. Of the remaining districts, the Phoenix and New York district offices rebounded after a slow FY 2017, each filing 6 more lawsuits in FY 2018 as compared to last year.

Sex Discrimination Takes Center Stage

Each fiscal year we analyze what substantive theories the EEOC is targeting. This year, Title VII claims remained the largest category of filings, on par with FY 2017, which boasted 53% of all filings. In FY 2018, Title VII filings accounted for 55% of all filings. Although FY 2016 showed a dip in Title VII filings at 41%, this year’s Title VII filings beat out FY 2015 and FY 2014 as well.

With a new Strategic Enforcement Plan in place to guide litigation activity for FY 2018-2022, many expected some shift in focus based on two notable changes from the old plan. Specifically, the new plan pledged to address discriminatory practices against those who are Muslim or Sikh, or individuals of Arab, Middle Eastern, or South Asian descent. Additionally, the new plan aims to expand the EEOC’s equal pay priority to include compensation discrepancies for race, ethnicity, age, and disability – moving beyond the EEOC’s focus on sex-based pay disparities. In fact, we have actually seen a decrease in Equal Pay Act filings, which could reflect the EEOC’s renewed focus on equal pay issues that affect other protected groups, which would not fall under the jurisdiction of the Equal Pay Act.

One trend has emerged this year – compared to FY 2017, race filings have decreased by 6 filings – with 18 filings in FY 2018 compared to 24 filings in FY 2017.

Perhaps the most striking trend of all is the substantial increase in sex-based discrimination filings, primarily the number of sexual harassment filings. As predicted, #MeToo added fuel to this area of the EEOC’s agenda, with 74% of the EEOC’s Title VII filings this year targeting sex-based discrimination. Compare this to FY 2017, where sex based discrimination accounted for 65% of Title VII filings. Of the FY 2018 sex discrimination filings, 41 filings included claims of sexual harassment. 11 of those filings were brought in the last three days of the fiscal year alone. The total number of sexual harassment filings was notably more than FY 2017, where sexual harassment claims accounted for 33 filings.

EEOC’s #MeToo Harassment Filing Surge

Implications For Employers

The dramatic increase in filings should be an eye-opener for employers in an era when many thought the EEOC might be hitting the brakes. Instead, the EEOC is increasing its enforcement activity, with a particular focus on sex discrimination and sexual harassment. The EEOC still strongly advises employers should update and aggressively enforce their EEO Policies. Now, more than ever, employers need to be on top of their game to avoid becoming the next target of EEOC-initiated litigation.

As most of our loyal readers know, this blog is merely a preview of the more extensive analysis of EEOC trends and developments affecting EEOC litigation that we publish at the end of the calendar year. Stay tuned for our in-depth analysis of FY 2018 filings, and particular danger areas for employers in this shifting political climate.

Readers can also find this blog post on our EEOC Countdown blog here.

By: Gerald L. Maatman, Jr.Christopher J. DeGroffMatthew J. Gagnon, and Kyla Miller

Seyfarth Synopsis: We are once again pleased to offer our loyal blog readers a breakdown of the five most intriguing developments in EEOC litigation in 2017, in addition to a pre-publication preview of our annual report on developments and trends in EEOC-initiated litigation. This year’s book, titled EEOC-Initiated Litigation: FY 2017, provides a comprehensive examination of the EEOC’s FY 2017 filings (from October 2016 through September 2017), and the major decisions handed down this year in pending EEOC litigation.

In our view, every employer should be monitoring EEOC activity – it is the surest way to avoid becoming the EEOC’s next target. That is why we conduct a thorough analysis of all EEOC activity every year to keep our readers up to date on current trends and, hopefully, provide a peek inside the EEOC’s decision-making process. Our annual report is targeted towards HR professionals, corporate counsel, and other corporate decision-makers. We hope that it proves useful as they attempt to steer clear of EEOC-initiated litigation in FY 2018.

This year, we have once again categorized our analysis of substantive developments in line with the EEOC’s strategic priorities. This year is the first year of the EEOC’s new Strategic Enforcement Plan, which covers Fiscal Year 2017 through 2021. The new SEP advances the same six strategic priorities as the previous strategic plan. It has been our experience that analyzing developments in EEOC litigation in light of the SEP priorities provides a better understanding of the EEOC’s focus and agenda.

The full publication will be offered for download as an eBook. To order a copy, please click here.

As always, we like to take a moment at the end of one year, and the beginning of the next, to look back at the most intriguing decisions and developments of the year.

Here is our list of the “top five” most intriguing developments of 2017.

A Year Of Transition: Litigation On Track Despite Changes On The Way

FY 2017 was a year of transition for the EEOC. It is still too early to tell how the changed political landscape will impact the future of EEOC litigation given the important positions that remain vacant for high-level agency personnel. But this did not stop the EEOC from charging full speed ahead. Total merits filings were up more than 100% over FY 2016. In fact, the EEOC filed more lawsuits in September than it did in all of FY 2016 combined. Although the 2017-2021 Strategic Enforcement Plan maintains its focus on the same six strategic enforcement priorities, it added two substantive areas as emerging issues, including complex employment relationships and “backlash discrimination” against Muslims, Sikhs, and other persons of Arab, Middle Eastern, or South Asian descent. Those are important issues to watch in FY 2018 and beyond. Our analysis of these issues can be found here.

A New Standard Of Review For EEOC Subpoena Enforcement Actions

In McLane Co. v. EEOC, the U.S. Supreme Court clarified the scope of review for appellate courts reviewing a lower court’s decision to enforce (or not) an EEOC administrative subpoena. In McLane, the Supreme Court held that such decisions are reviewable under the abuse-of-discretion standard, which is more akin to a hands-off type of review. The decision clarified that the District Courts should subject EEOC subpoenas to a searching, fact-intensive review, and that their judgment in this respect should be respected by the appellate courts. Although ostensibly a win for the EEOC, the decision makes it clear that the District Court cannot simply presume the relevance of information or documents the EEOC seeks with its administrative subpoenas. Instead, a District Court must give serious consideration to issues of relevancy and burden when deciding whether or not to enforce an EEOC subpoena. Our analysis of this trend can be found here.

Developments In Religious Discrimination Law: Accommodations May Be Required For Wide Swath Of Beliefs

In EEOC v. Consol Energy, Inc., the Fourth Circuit expanded the scope of religious accommodation requests employers must consider. In Consol, the EEOC alleged that the defendants refused to provide an employee with a religious accommodation by subjecting him to a biometric hand scanner to clock in and out of work. The employee believed a hand scanner was used to identify and collect personal information that would be used by the Christian Anti-Christ to identify followers with the “mark of the beast,” as described in the New Testament Book of Revelation. The Fourth Circuit affirmed the judgment of the District Court against the employer, finding that a religious accommodation was necessary. Our discussion of this development can be found here.

Sexual Harassment In The Workplace: Focus on “Manager”

Given all the recent news about sexual harassment in the workplace, and the fast developing #MeToo movement, we suspect that the EEOC is already preparing for an uptick in sexual harassment complaints in FY 2018. But recent decisions show that not all complaints alleging sexual harassment are a slam dunk for employees. In EEOC v. Autozone, Inc., the Sixth Circuit affirmed a U.S. District Court’s grant of an employer’s motion for summary judgment after finding that the harassing managerial employee was not a “supervisor” under Title VII. The employer was thus not liable for the employee’s actions. The Sixth Circuit held that just because someone is titled a “manager” does not necessarily mean that they are “supervisors” under Title VII. They must have the authority to take an employment action against the complaining employee. A further discussion on this development can be found here. We expect decisions in FY 2018 will dramatically reshape the landscape of harassment law, with the EEOC leading the way.

EEOC’s Penchant For Expanding Pattern Or Practice Cases

In FY 2017, the EEOC continued to try to expand its powers to prosecute large-scale pattern or practice cases. In EEOC v. Bass Pro Outdoor WorldLLC, a District Court in Texas was willing to reign it in. In that case, the EEOC attempted to add claims on behalf of individuals who had not yet applied to work for Bass Pro at the time the EEOC tried to conciliate its claims against Bass Pro. Title VII requires the EEOC to attempt to resolve charges of discrimination against an employer through means of conciliation before it seeks redress in the courts. In this case, the District Court was unwilling to allow the EEOC to add claimants on behalf of whom it could not have conciliated prior to bringing its lawsuit. A closer look at this development can be found here.

Although we are almost a full year into the Trump Administration and Republican control of Congress, it is still unclear what those political developments will mean for the future of EEOC litigation. The enforcement priorities are the same as the past four years. But how the EEOC chooses to interpret those priorities will undoubtedly change as high-level positions are filled by the Trump Administration. This makes FY 2018 a year of uncertainty as we await those changes in EEOC leadership. We look forward to keeping our readers apprised of these changes as they occur!

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.

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

Seyfarth Synopsis:  In the latest chapter of the ongoing legal battle between the EEOC and delivery company CRST Van Expedited regarding the agency’s sexual harassment claims, a federal district court ordered the EEOC to pay $1.9 million in attorneys’ fees to the company for pursuing claims that it knew or should have known were frivolous.

Employers should have this ruling handy when challenging whether the EEOC fulfilled its pre-suit obligations under Title VII. It is undoubtedly a signal ruling relative to the agency’s missteps in “suing now and aiming later…”

***

In a long and winding legal journey that made a pit stop at the U.S. Supreme Court, the EEOC v. v. CRST Van Expedited, Inc., No. 07-CV-95, 2017 LEXIS 155134 (N.D. Iowa Sept. 22, 2017),  litigation involves the largest fee sanction award ever levied against the EEOC – nearly $4.7 million. In August 2013, after the U.S. District Court for the Northern District of Iowa imposed the nearly $4.7 million award, the EEOC appealed, and the Eighth Circuit reversed and remanded several fee issues for further proceedings.  Id. at *2.  Following CRST’s appeal, the U.S. Supreme Court reversed and remanded the Eighth Circuit’s ruling.  On remand, the Eighth Circuit vacated its prior judgment and remanded back to the District Court.  Thereafter, CRST moved for a supplemental fee award in the amount of approximately $975,000, consisting of attorneys’ fees for work performed in the case following the District Court’s August 1, 2013 Order.  Judge Linda R. Reade of the U.S. District Court for the Northern District of Iowa ordered the EEOC to pay approximately $1.9 million in attorneys’ fees, out-of-pocket expenses and taxable costs to CRST, but denied CRST’s motion for a supplemental fee award.

For employers embroiled in EEOC litigation, the $1.9 million fee award is an exceedingly important example of a court holding the Commission accountable when it fails to satisfy its pre-suit investigation duties under Title VII.

Case Background

As we discussed in our blog post here, Section 706(k) authorizes district courts to award attorneys’ fees to the “prevailing party” in a Title VII case.  In relevant part, Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421 (1978) held that fee awards to a prevailing defendant are permissible only if the plaintiff’s lawsuit was “frivolous, unreasonable, or without foundation.”  After CRST successfully obtained the dismissal of the EEOC’s Title VII claims for sexual harassment, the District Court granted CRST’s motion for an award of attorneys’ fees and costs and directed the EEOC to pay CRST nearly $4.7 million, finding that the EEOC’s actions in pursuing this lawsuit were unreasonable, contrary to the procedure outlined by Title VII, and imposed an unnecessary burden on both CRST and the District Court.

After the EEOC appealed, the Eighth Circuit reversed and held that the District Court “did not make particularized findings of frivolousness, unreasonableness, or groundlessness as to each individual claim” and remanded these claims to the District Court to make such individualized determinations.  Further, the Eighth Circuit found that the District Court’s dismissal of 67 claims based on the EEOC’s failure to satisfy Title VII’s pre-suit obligations did not constitute a ruling on the merits, and that therefore, CRST was not a prevailing party as to these claims.  The Eighth Circuit also held that CRST could not satisfy the Christianburg standard for the same reason: “[P]roof that a plaintiff’s case is frivolous, unreasonable, or groundless is not possible without a judicial determination of the plaintiff’s case on the merits.”  Thereafter, following CRST’s petition for certiorari, the U.S. Supreme Court accepted the case for review.

The U.S. Supreme Court reversed the Eighth Circuit and remanded the case for further proceedings.  Id. at *5.  On June 28, 2016, the Eighth Circuit entered a judgment vacating its prior panel opinion and remanding to the District Court for further proceedings.  The District Court ordered briefing on the issues remanded by the U.S. Supreme Court, where CRST requested an additional a supplemental fee award in the amount of approximately $975,000, consisting of attorneys’ fees for work performed in the case following the District Court’s August 1, 2013 Order.

The Court’s Decision

On September 22, 2017, the District Court awarded nearly $1.9 million in attorneys’ fees, out-of-pocket expenses and taxable costs to CRST, but denied CRST’s motion for a supplemental fee award.  In ordering the $1.9 million award, the District Court found that CRST was the prevailing party as to the sixty-seven claims at issue, that the sixty-seven claims met the standard announced in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), and made individualized findings as to seventy-eight of the individual claimants for which the court granted CRST summary judgment.  Id. at *5-6.

CRST had moved for a supplemental fee award of $975,000 for the following work it performed: (1) briefs, oral argument, and rehearing petition in the EEOC’s appeal to the Eighth Circuit from the August 1, 2013 Order; (2) CRST’s petition for certiorari, briefs, and oral argument in the Supreme Court resulting in reversal of the Eighth Circuit’s opinion vacating the August 1, 2013 fee award; (3) CRST’s brief  resisting the Rule 60(b) Motion; and (4) CRST’s briefs on remand as required by the Eighth Circuit’s now vacated decision with respect to the fees awarded for claims dismissed on summary judgment.  Id. at *6-7.  The EEOC argued that CRST’s application for fees was untimely and that CRST could not demonstrate that any of the actions that the EEOC took with respect to the requested categories of fees were frivolous, unreasonable or groundless.  The EEOC further argued that the fees sought by CRST were unreasonable.

Regarding timeliness, the District Court accepted the EEOC’s argument and held that CRST’s motion for a supplemental fee award was filed more than 120 days after the latest final judgment for which CRST requests attorneys’ fees.  Regarding the EEOC’s argument that the fees sought by CRST were unreasonable, the District Court similarly found in favor of the EEOC, noting that neither its appeal of the District Court’s fee award to the Eighth Circuit nor CRST’s appeal to the Supreme Court were amenable to fees.  Id. at *12-13.  Accordingly, the District Court denied CRST’s motion for a supplemental fee award.

Implications For Employers

Although the formerly $4.7 million fee sanction against the EEOC was reduced to $1.9 million, this is nonetheless a major victory for employers.  This ruling will serve as a cautionary tale for the EEOC when it attempts to speed through its mandatory pre-suit duties in rushes to the courthouse to litigate claims.  For employers who are blindsided by such EEOC tactics, this ruling can be used as precedent to hold the Commission accountable when it abandons its pre-suit duties required under Title VII.

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

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

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

***

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

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

Case Background

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

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

The Sixth Circuit’s Decision

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

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

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

Implications For Employers

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

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

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

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

***

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

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

Case Background

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

The Fifth Circuit’s Decision

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

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

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

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

Implications For Employers

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

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

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

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

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

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

Case Background

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

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

The Court’s Decision

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

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

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

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

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

Implications For Employers

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

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

supreme court seal

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

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

Background

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

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

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

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

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

The Supreme Court’s Decision

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

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

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

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

Implications For Employers

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

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

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

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

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

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

Case Background

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

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

The Courts Decision

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

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

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

Implications For Employers

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

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

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Seyfarth Synopsis: In the high-profile EEOC race discrimination litigation against Bass Pro, the Court denied the EEOC’s motion for a ruling that would have allowed it to include in its § 706 claims those individuals who had not yet applied to work for Bass Pro when the mandatory Title VII conciliation process took place.

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The latest chapter of the EEOC’s race discrimination case against Bass Pro (which we blogged about here and here) involves yet another attempt by the government to cast a broad net and increase the number of claimants in its lawsuit.  This week, in EEOC v. Bass Pro Outdoor World, LLC, et al., Case No. 11-CV-3425 (S.D. Tex. Jan. 3, 2017), Judge Keith P. Ellison of the U.S. District Court for Southern District of Texas denied the EEOC’s motion for a ruling that would have allowed it to include claims in its lawsuit for individuals who had not yet applied to work for Bass Pro at the time conciliation took place, which is a mandatory pre-suit duty under Title VII.

For employers confronted with EEOC litigation, this ruling is positive in that shows how courts may be unwilling to allow to the EEOC to add claimants with whom it never conciliated.

Case Background

The EEOC brought a lawsuit alleging discriminatory hiring practices in violation of Title VII on behalf of a group of individuals allegedly discriminated against on the basis of their gender or race, both as a representative action (under § 706) and based on a pattern or practice theory (under § 707).  On March 4, 2014, the Court issued several rulings (which we blogged about here) regarding whether the EEOC had satisfied Title VII’s pre-suit requirements.  Id. at 1.  At the outset, the Court ruled that it must undertake a distinct analyses of the EEOC’s § 706 and § 707 claims on the issue of conciliation.  Accordingly, the Court held that while the EEOC had satisfied Title VII’s conciliation requirements with regards to its § 707 claims, it failed to do so with its § 706 claims.  The Court thus ordered a stay as the remedy for the EEOC’s failure to properly conciliate the § 706 claims.  Id. at 1-2.  Further, the Court dismissed from the case all individuals who had not yet applied to work for Bass Pro by April 26, 2010, the date on which the EEOC issued its Letter of Determination (hereinafter “post-LOD applicants”).  The Court reasoned that the EEOC could not have possibly conciliated the claims of these individuals as they had not yet applied to work for Bass Pro at the time the conciliation took place.

On July 30, 2014, in reversing an earlier ruling, the Court held (as we blogged about here) that the EEOC may prove its § 706 claims using the framework established in Franks v. Bowman Transportation Company, Inc., 424 U.S. 747 (1976), and later refined in International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977).  Id. at 2.  The Court further held that the EEOC had satisfied its Title VII administrative prerequisites (including its duties to investigate and conciliate) with regards to its § 706 claims, even for individuals not specifically identified in the investigation.  After this ruling was affirmed by the Fifth Circuit, the EEOC argued that the post-LOD applicants must be restored to eligibility in the § 706 class.

The Decision

The Court denied the EEOC’s motion for a ruling that the post-LOD applicants were eligible to participate with respect to the EEOC’s § 706 claims.  The EEOC claimed that Court’s dismissal of the post-LOD applicants was fundamentally tied to two rulings that were subsequently overturned: (1) that the § 706 and § 707 claims must be analyzed separately on the issue of conciliation, and (2) that the Franks/Teamsters model could not be applied to § 706 claims.  The Court rejected this argument, noting that when it dismissed the post-LOD applicants, it made no reference to those arguments and instead focused on the proper sequence of EEOC enforcement under Title VII.  Id. at 3.  Referencing its March 4, 2014 order, the Court explained that because by definition the post-LOD applicants applied after the EEOC’s investigation was completed, the EEOC could not possibly have conciliated their claims.  Accordingly, the Court opined that its reversal on the issues of separate conciliation and the application of the Franks/Teamsters model had no effect on the dismissal of the post-LOD applicants.  Thus, the Court denied the EEOC’s motion and held that the post-LOD applicants remained ineligible for the § 706 claims.

Implications For Employers

For employers facing EEOC litigation, any ruling that limits the size of the case is no doubt favorable in terms of minimizing potential financial exposure.  While employers should be encouraged by this Court’s willingness to hold the EEOC to its obligation to conciliate, there are several recent cases that argue that the courts’ review of the EEOC’s Title VII pre-suit duties remains limited.  Ideally, this ruling will send the EEOC a message that it must abide by the conciliation process or risk losing its ability to bring suit on behalf of claimants with whom it did not conciliate.

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