By Scott Rabe and Sam Schwartz-Fenwick

Seyfarth Synopsis: In landmark decision, the Second Circuit joined the Seventh Circuit in holding that Title VII prohibits discrimination on the basis of sexual orientation as a subset of sex discrimination. The ruling is important for all employers given the stakes in this litigation over the scope of federal workplace bias laws.

In a landmark decision in Zarda v. Altitude Express, Inc., No. 15-3775, the Second Circuit ruled en banc that Title VII prohibits discrimination on the basis of sexual orientation as a subset of discrimination on the basis of sex. The Second Circuit has now joined the Seventh Circuit, the EEOC, and a number of district and administrative courts across the country that have interpreted Title VII to extend its prohibition of sex discrimination to sexual orientation.  Chief Judge Katzmann authored the decision for the plurality, in which four judges joined in full, five judges joined in part, and to which three judges dissented.  In total, eight of the thirteen judges issued an opinion.

In Zarda, a former skydiving instructor sued his employer, alleging that he was terminated from his job after he revealed to a customer that he was gay.  Specifically, he alleged sex discrimination under Title VII and asserted that his employment was terminated because he failed to conform to male sex stereotypes because he was gay.  The district court dismissed Zarda’s Title VII claim at the summary judgment stage, holding that, although there was sufficient evidence to permit his claim for sexual orientation discrimination to proceed under New York law, which explicitly prohibits discrimination on the basis of sexual orientation, plaintiff had failed to establish a prima facie case of gender stereotyping under Title VII based on his sexual orientation.  The district court explained that in reaching this decision it was constrained by Second Circuit precedent in Simonton v. Runyon and Dawson v. Bumble & Bumble, which held that Title VII did not prohibit discrimination on the basis of sexual orientation. On appeal, the Second Circuit reversed, and in doing so, explicitly stated that it was overturning its prior opinions in Simonton and Dawson.

In the plurality opinion, Judge Katzmann explained that sexual orientation discrimination should be treated as a subset of sex discrimination for several reasons.  He observed that “sexual orientation is defined by one’s sex in relation to the sex of those to whom one is attracted,” that “sexual orientation discrimination is . . . based on assumptions or stereotypes about how members of a particular gender should be, including to whom they should be attracted,” and that “sexual orientation discrimination is associational discrimination because an adverse employment action that is motivated by the employer’s opposition to association between members of particular sexes discriminates against an employee on the basis of sex.”   The plurality also found compelling that, while the consensus among federal circuits and the EEOC in 2000 at the time of Simonton was that Title VII did not protect against discrimination on the basis of sexual orientation, the EEOC and the Seventh Circuit both changed their stance on this issue and judges across the country continue to analyze this evolving issue.

The main dissent, written by Judge Lynch and joined in part by two circuit judges, argued primarily that under a strict textual interpretation of Title VII, the statute did not protect against discrimination on the basis of sexual orientation, as it is clear Congress could have but did not include sexual orientation as a protected class.  This is the same rationale employed in 2017 by the Eleventh Circuit in Evans v. Georgia Regional Hospital, which held in a divided opinion that Title VII’s prohibition on sex discrimination does not encompass discrimination on the basis of sexual orientation.

The Second Circuit’s decision widens the circuit split on this issue.  Further, the diverse array of opinions among the judges on the Second Circuit mirrors the nationwide divergence in views regarding the protections that Title VII affords employees based on their sexual orientation.  While the EEOC has now taken the clear position that discrimination against workers because they are lesbian, gay, or bisexual is sex discrimination under Title VII, the U.S. Department of Justice has issued guidance and sought to enforce an interpretation of Title VII that discrimination on the basis of sexual orientation is not prohibited under Title VII as sex discrimination.  Circuit, district, and administrative courts are also split.  With the circuit divide, complicated by vastly divergent interpretations of Title VII by the very agencies entrusted to enforce Title VII, the issue is poised for review by the U.S. Supreme Court.

Implications For Employers

In light of the current uncertainty regarding the ultimate interpretation of Title VII as it applies to sexual orientation, as well as gender identity, see our prior post, and because numerous state and local laws already explicitly prohibit discrimination on the basis of sexual orientation, employers should regularly review their policies to ensure that adequate protections are provided to employees on the basis of their sexual orientation or gender identity.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Workplace Policies and Handbooks Team or the Labor & Employment Team.

 

By Gerald L. Maatman, Jr.

Today I had the privilege of attending the 6th Annual Forum on Defending Employment Discrimination Litigation hosted by the American Conference Institute in New York, New York (I spoke on defense strategies for defending high stakes, multi-party age discrimination lawsuits).

Constance Barker, one of the five Commissioners at the Equal Employment Opportunity Commission, gave the keynote address at the program. Her presentation was fascinating, and focused largely on the swirling controversy relative to the EEOC’s recent issuance of new enforcement guidance on the Pregnancy Discrimination Act (which we blogged on previously here). Commissioner Barker made public statements about the PDA Guidance – immediately after the EEOC posted the Guidance on its website – questioning the wisdom of the EEOC’s action on procedural and substantive grounds. She asserted that in adopting the new Guidance, the Commission sought to legislate changes to, rather than interpret, Title VII (her written comments dated July 14, 2014, are here.

In broader terms, this squarely raises the issue of the proper role and responsibility of the EEOC. Should it enforce the law or expand the law to maximize the reach and public policies within employment discrimination prohibitions? Many critics of the EEOC have cited the new Guidance as further evidence that the Commission is an activist agency that is result-oriented and willing to do whatever it takes to pursue litigation enforcement strategies it deems appropriate.

In response to questions from floor at today’s program in New York, Commission Barker agreed that there is some truth to the criticism that the EEOC has sought to use its enforcement power and enforcement litigation to, in a sense, “legislate” behavior in the employer community. She agreed that while societal goals and aspirations might counsel that a law like the PDA should be interpreted in the manner the new Guidance advocates, the role of the EEOC is not to engage in “social engineering.” Instead, the role of the EEOC is to enforce the law as written, and leave policy decisions about the expansion of the law to Congress. In this respect, she reiterated her position that the new PDA Guidance represented an effort by the Commission to “jump ahead” of Congress and the courts in fashioning the contours of employer obligations and employee rights under the law.

Commissioner Barker predicted that the EEOC’s action may become “an embarrassment” for the Commission depending on how the U.S. Supreme Court adjudicates certain issues in Young v. United Parcel Serv., 707 F.3d 437 (4th Cir. 2013), in its next term (and may well grant the new Guidance no deference or criticize how the EEOC went about issuing the Guidance).

This issue is sure to heat up further. Stay tuned.

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

By Chris DeGroff and Brian Wong

In the world of EEOC systemic enforcement, court-imposed injunctive relief accompanies nearly every settlement of Title VII claims. The parties memorialize this relief in the form of a consent decree to be approved by the Court and entered as an enforceable order. Though the parties and the public tend to focus primarily on the dollar value of systemic action settlements, employers bound by consent decrees must remember that failure to comply with agreed-upon injunctive mandates could result in significant exposure for the company.

In EEOC v. Supervalu, Inc. and Jewel-Osco, Case No. 1:09-CV-05637 (N.D. Ill. July 15, 2014), the EEOC tried to send this very message to employers.

Background

On September 11, 2009, the EEOC sued Supervalu, Inc. and Jewel-Osco (collectively “Jewel”) in the U.S. District Court for the Northern District of Illinois, alleging Jewel engaged in a pattern or practice of violating Title I of the Americans with Disabilities Act.  Specifically the EEOC alleged Jewel prohibited disabled employees from returning to work after disability leaves unless they could return without accommodation, and that Jewel terminated such employees at the end of their one-year leave period.

On January 14, 2011, the EEOC and Jewel entered into a three-year Consent Decree to resolve the case. Among other provisions, the Consent Decree required Jewel to make monetary payments to eligible claimants, provide training to certain employees who administer disability leaves, and engage a “job description consultant” and “accommodations consultant” to improve job descriptions and assist in identifying possible accommodations for disabled employees.

The case was over. But was it?

The next year, on March 26, 2012, the EEOC filed a motion seeking civil contempt sanctions against Jewel for failing to follow the requirements of the Consent Decree as to three former employees. The EEOC also sought limited discovery on the issue, which the Court initially denied, but thereafter granted following written objections by the parties. After the parties engaged in limited discovery, the Court conducted evidentiary hearings on March 17 and 18 and April 7, 2014, before U.S. Magistrate Judge Michael T. Mason.

The Magistrate Judge’s Recommendation

Judge Mason filed his Report and Recommendation on July 15, 2014, determining that Jewel violated the terms of the Consent Decree by failing to accommodate and ultimately terminating three disabled employees.  According to the Court, Jewel failed to follow its own interactive process guidelines and declined to consider a list of possible accommodations generated by the accommodations consultant the company itself had appointed per the Consent Decree.  According to Magistrate Judge Mason, “[q]uite simply, the evidence [was] overwhelming that the company did not do what it was supposed to do under the Decree.” Id. at 46.

After determining clear and convincing evidence showed Jewel violated the Consent Decree, the Court recommended: (i) a finding of contempt on the part of Jewel; (ii) compensatory sanctions of over $82,000 in back pay for the three aggrieved individuals; (iii) a one year extension of the term of the Consent Decree; (iv) retention of a company-paid “special master” to review prospective accommodation decisions made by Jewel in the future; and (v) company payment of reasonable fees and costs incurred by the EEOC in pursuing its contempt motion.

But the saga continues.  Jewel has until July 29, 2014 to file objections to Judge Mason’s Report and Recommendations.  So blog readers, please stay tuned.

Implications For Employers

Regardless of the outcome of the ongoing briefing, this action brought by the EEOC serves as a cautionary tale for any employer living under the terms of an EEOC consent decree.  Companies bound by consent decrees must remain vigilant, as the EEOC frequently looks for opportunities to retake the spotlight by making allegations about supposed compliance issues.  As EEOC Chicago Regional Attorney John Hendrickson has warned, “Consent decrees have teeth.” The attraction of these compliance actions for the EEOC is clear: tag-along actions like those discussed here have all of the publicity elements of an actual lawsuit, while expending minimal governmental resources. Because consent decrees often contain exhaustive injunctive mandates, robust documentation of those efforts can be a critical safeguard against aggressive EEOC allegations of non-compliance.

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

By Christopher J. DeGroff and Laura J. Maechtlen

Background

As many of our loyal readers are aware, the Equal Employment Opportunity Commission filed suit in the U.S. District Court for the Northern District of Illinois against CVS Pharmacy this year, alleging that a standard severance agreement used by the company violates Title VII of the Civil Rights Act of 1964 because it is allegedly “overly broad, misleading and unenforceable….” Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., Case No. 14-CV-863 (N.D. Ill. Feb. 7, 2014). The high-profile case has the potential to have serious impact in many industries, including the retail industry. 

The EEOC alleges that various specific provisions of CVS’s Agreement violates Title VII because it interferes with employees’ rights to file charges, communicate voluntarily, and participate in investigations with the EEOC and other state agencies, including the following: 

  • Cooperation: requiring an employee to “notify the Company’s General Counsel by telephone and in writing” of a legal proceeding including an “administrative investigation” by “any investigator, attorney or any other third party…”
  • Non-disparagement: prohibiting the employee from making any disparaging statements about the Company and its officers, directors and employees.
  • Non-disclosure of confidential information: prohibiting disclosure of confidential information without prior written permission of the Company’s chief human resources officer.
  • General release of claims: which includes a release of all “causes of action, lawsuits, proceedings, complaints, charges, debts contracts, judgments, damages, claims, and attorney fees…”
  • No pending actions; covenant not to sue: in which an employee represents the employee has no pending “complaint, claim, action or lawsuit” of any kind “in any deferral, state, or local court, or agency,” agrees not to file “any action, lawsuit, complaint or proceeding” asserting the released claims, and requires an employee to promptly reimburse “any legal fees that the Company incurs” for breach of the covenant. 
  • Breach by employee: allowing CVS to obtain injunctive and other relief, including attorney fees upon material breach.

The EEOC alleges in the CVS suit that the allegedly offending restrictions are limited only by a “single qualifying sentence” which reads that nothing in the covenant not to sue was “intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with any such agency in its investigation.” Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 14-CV-863, at pg. 4.    

Highlights From The Retail Litigation Center Amicus Brief

The Retail Litigation Center, Inc. (the “RLC”) recently asked for permission to file a brief in support of CVS on April 28, 2014.  Over the EEOC’s objection, the Court allowed the RLC to weigh in on the case.

In its brief the RLC raises a number of key points related to the CVS litigation, demonstrating how and why the EEOC’s position is untenable and overreaching.  

First, the RLC argues that the CVS separation agreement contains standard terms widely used in the industry, and by other employers. Indeed, the same terms in the CVS agreement have been approved by federal courts and do no otherwise violate Title VII. Furthermore, the terms conform with standard industry practice, not only in the retail industry, but in other industries as well. 

The RLC also argues that the EEOC’s theory fails to provide employers with a discernible standard to guide their conduct, and violates employers’ due process rights. Indeed, based on the EEOC’s guidance, and relevant case law, CVS had no prior notice that its conduct violated federal law. Indeed, the RLC argues that most of the EEOC’s objections to the CVS agreement are “atmospheric,” claiming that the form and style of the Agreement restrain employees’ right under Title VII. The RLC further argues that the EEOC’s new “standard” for evaluating severance agreements could (and would) invite arbitrary enforcement by the EEOC and courts. This is because the EEOC attempts to replace the prevailing guidance governing separation agreements in favor of an “undefined” and “subjective” standard. Id. at 11.

Finally, the RLC adeptly argues that a ruling against CVS would undermine the important societal goals of finality, and informal dispute resolution underlying Title VII. It notes that separation agreements are common devise used by “countless” employers and employees alike, across hundreds of industries, to the mutual benefit of employers, employees and the judicial system. The RLC argues that the EEOC’s approach would sacrifice those benefits and make resolution of disputes more difficult and costly. 

Implications For Employers

Employers are well-served to watch the EEOC v. CVS case carefully. The EEOC’s position attempts to signficantly alter existing authority governing terms of severance agreements.  Indeed, portions of the CVS agreement follow — or are more expansive for employees — of the EEOC’s own guidance here and here, and agreements held enforceable by in key court decisions relied upon by employment practitioners. See, e.g., EEOC v. Eastman Kodak Co., Case No.. 06-CV-6489 (W.D.N.Y. 2006). The RLC’s amicus brief effectively demonstrates sincere concern felt by the employer community regarding the significant implications of the EEOC’s position. 

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

By Gerald L. Maatman Jr., Howard M. Wexler, and Nadia Bandukda

In a case we previously blogged about (here and here), EEOC v. Womble Carlyle Sandridge & Rice, LLP, 13-CV-46 (E.D.N.C. Mar. 24, 2014), Magistrate Judge L. Patrick Auld held the EEOC liable for spoliation sanctions based on the “negligence, if not gross negligence” exhibited by the charging party it brought suit on behalf of – one Ms. Charlesetta Jennings (“Ms. Jennings”). On March 24, 2014 Magistrate Judge Auld ordered the EEOC responsible for $22,900 as the reasonable costs incurred by Womble Carlyle that the EEOC must pay. On April 29, 2014, Judge Eagles of the U.S. District Court for the Middle District of North Carolina issued an order affirming Judge Auld’s sanction award and rejecting the EEOC’s contention that the amount was too high.

Background

The EEOC filed suit on behalf of Ms. Jennings in 2013 alleging that Womble Carlyle failed to accommodate her disability and subsequently terminated her employment because of the disability in violation of the Americans With Disabilities Act (“ADA”). As the EEOC sought back pay on behalf of Ms. Jennings, Womble Carlyle served document demands and interrogatories designed to determine whether she properly mitigated her damages by seeking alternative employment. While being deposed in September 2013, Ms. Jennings testified that she had previously maintained a detailed log chronicling her efforts to obtain alternative employment while she was receiving unemployment insurance benefits; however, once these benefits ended in February 2013, she shredded the log. Further, she testified that she discarded additional material regarding her efforts to obtain employment in June of 2013 – which was after the EEOC had already filed its lawsuit on behalf of Ms. Jennings in January 2013.

Based on Ms. Jennings’ destruction of these documents, Womble Carlyle sought sanctions for spoliation of evidence, which the Magistrate Judge granted and ordered the EEOC to reimburse Womble Carlyle its costs and fees associated with having to bring the spoliation motion.  As a result, Womble Carlyle submitted a Statement of Expenses totaling $29,651.00. On March 24, 2014, Magistrate Judge Auld ordered the EEOC to pay Womble Carlyle $22,900 in sanctions. The EEOC timely filed Rule 72 objections to Judge Auld’s Report and Recommendation as to the money awarded to Womble Carlyle.

The Court’s Decision

In her two page Order, Judge Eagles noted that she reviewed Magistrate Judge Auld’s Report and Recommendation de novo and determined that “the amount awarded by the Magistrate Judge is appropriate.” Id. at 1. As such, Judge Eagles affirmed and adopted the sanction award and ordered the EEOC to pay Womble Carlyle the full $22,900 amount within 120 days “to reimburse the defendant for its reasonable expenses incurred in attempting to conduct additional discovery regarding mitigation of damages and in bringing its motion for sanctions.” Id. at 2.

Implications For Employers

As this case demonstrates, decisions made regarding the preservation of evidence issues at the beginning of, and even leading up to, litigation can have very serious implications, whether in the form of sanctions, an adverse inference at trial or even outright dismissal. This decision (and Magistrate Judge Auld’s prior Report and Recommendation) should be added to employers’ defense toolkits, as the preservation of documents and information is a two-way street that employees (and the EEOC) must also follow once litigation is reasonably foreseeable – or proceed at their own peril.

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

By Gerald L. Maatman, Jr. and  Kathryn “Chris” Palamountain 

We normally pass on blogging about briefs filed by a party before a court ruling, but Texas’ litigation against the EEOC and U.S. Attorney General Eric Holder is not shaping up to be just an everyday lawsuit. 

This is a must read for employers. It goes to the heart of what the EEOC is doing these days, and how it is carry out its duties.

Case Background

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

Against this backdrop is a growing firestorm of litigation initiated by the EEOC over hiring checks based on criminal backgrounds. We have blogged about those cases and rulings previously (here, here, here, here, and here).

Earlier this month, the EEOC filed a motion to dismiss Texas’ lawsuit. In its motion the EEOC offered three primary arguments. First, the EEOC contends that the U.S. District Court lacks jurisdiction to hear the case because the EEOC’s guidance is not legally binding and does not constitute a final agency action. Second, and in part because the EEOC claims its guidance has no binding authority, the EEOC argues that Texas lacks standing to pursue its claims. As the EEOC stated, “[t]he state may disagree with the EEOC’s interpretation of the law, but that does not imbue the interpretation with any legal consequences. Third, the EEOC that the State’s claims should be dismissed because they are not ripe. 

The State Of Texas Reply

In its brief, Texas started by pointing out other cases in which the EEOC pursued administrative investigations and lawsuits against employers and invoked its 2012 guidance. Making the point that the EEOC was attempting to have its cake and eat it too, the State characterized the EEOC as arguing that the guidance as “not worth the paper it’s printed on — even though it urges other courts to defer to it.” Reply at 1.   

Having set the theme, Texas turned to its legal arguments. The State argued that whether or not the 2012 guidance was a “final agency action” was not a jurisdictional issue, as the EEOC contended it was. Nevertheless, the State explained why the 2012 guidance in fact constituted a “final agency action” under the Administrative Procedure Act. Texas argued that the EEOC’s argument that only those rules and regulations that were entitled to Chevron deference were reviewable improperly narrowed the term “action” in a way that “no case from any court in the history of the Nation” had adopted. Reply at 3. Texas also pointed out that the EEOC could not prevent review under the APA simply by re-characterizing its process in order to avoid judicial scrutiny under the Act. 

Turning to the standing  issue, Texas identified three types of injury it has suffered, each of which independently established Article III standing, including (i) as an employer, the State of Texas is subject to the EEOC’s “Felon Hiring Rule,” and the EEOC issuance of a right-to-sue letter to an applicant denied a job after a criminal background check demonstrates that the State has been subjected to enforcement of the rule; (ii) Texas is seeking to enforce its right to participate in the notice-and-comment provisions of the APA, and the EEOC’s failure to comply with the APA had denied Texas its right to do that; and (iii) Texas has been injured by the EEOC’s purported preemption of the State’s laws. As evidence of this final injury, Texas pointed to the EEOC’s own website, which states that the Felon Hiring Rule “says that state and local laws or regulations are preempted by Title VII” if they cause a disparate impact. Reply at 7. 

On the ripeness question, Texas argued that, despite the EEOC’s attempts to recast its 2012 guidance  as not requiring “individualized assessments” of all job applications, the case remained ripe for adjudication because it presents the “purely legal question”  of whether “the State of Texas can continue to follow its facially neutral blanket no-felons policies …or whether the State must abandon those facially neutral policies.” Reply at 9. 

Implications For Employers

In defending against Texas’ case, the EEOC may have compromised future efforts to enforce its “guidance” against employers in Texas and other jurisdictions. To the extent the EEOC attempts to rely upon its 2012 statements as the basis for prosecuting disparate impact cases focused on criminal background check practices, particularly in cases where the EEOC alleges that an employer willfully violated Title VII, employers need only turn to the EEOC’s representations to the U.S. District Court for fodder in their own defense. Stay tuned for the upcoming ruling in this case.

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

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

Calling all loyal blog readers – the EEOC-Initiated litigation webinar is scheduled for Tuesday, February 25, 2013. Click here to register and attend.

Our readers have given us wide-ranging feedback since the launch of our annual EEOC litigation study, EEOC-Initiated Litigation: Case Law Developments In 2013 And Trends To Watch For In 2014. This publication is a definitive source of information that focuses exclusively on EEOC-related litigation (click here to order a copy). Our webinar will provide a comprehensive review of these workplace litigation trends and provide attendees with updates on 2014 rulings. 

The book’s Co-authors Gerald L. Maatman, Jr. and Christopher J. DeGroff, co-chairs of the firm’s Complex Discrimination Litigation practice group, will lead this interactive discussion.

Some substantive trends to be discussed are:

• A Transforming Docket: Systemic Initiative– Evolution in the EEOC’s agenda to champion bigger, more complex, and more media-driven cases was prevalent in 2013.

• ADA Cases a Key Priority– Even though it is not expressly one of the EEOC’s “Big Six” national priorities, assertion of disability claims was a chart-topper for the EEOC in FY 2013.

• EEOC Focused on Pregnancy Discrimination– The EEOC is clearly focused on breaking the “maternal wall” with its litigation of pregnancy discrimination litigation and its declaration that it is a “widespread problem in the workplace, no matter the size of the employer.

• Religion Lawsuits on the Rise– Religious discrimination lawsuits filed by the EEOC rose 33 percent in 2013.

• 2013: Mixed Bag for Subpoena Enforcement Actions – EEOC filings dropped by nearly half, down from 33 in 2012 to 17 in 2013, but the EEOC v. Aerotek and EEOC v. HomeNurse opinions provide employers with critical “goal posts” delineating the scope of the EEOC’s subpoena authority.

The time and date of the webinar is Tuesday, February 25, 2014 at:

1:00 p.m. to 2:00 p.m. Eastern

12:00 p.m. to 1:00 p.m. Central

11:00 a.m. to 12:00 p.m. Mountain

10:00 a.m. to 11:00 a.m. Pacific

Speakers Christopher J. DeGroff  and Gerald L. Maatman Jr.

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

By Christopher DeGroff, Reema Kapur, and Gerald L. Maatman, Jr.

We are pleased to offer a year-end bonus for all of our loyal readers of our blog – a pre-publication preview of our annual study of EEOC litigation is here: the launch of our book entitled EEOC-Initiated Litigation: Case Law Developments In 2013 And Trends To Watch For In 2014. Distribution of the report is set for early January 2014.

This publication focuses exclusively on EEOC-related litigation; and it covers more decisions than ever before.  The attached Executive Summary excerpted from our book explores the key drivers of the EEOC’s enforcement and litigation activity in FY 2013 and in the near term. As we did last year, this publication will be offered for download as an eBook. To order a copy, please click here

Further, as in the past, this year we selected a short list of what we consider the five most intriguing EEOC-related decisions handed down in 2013. See previous blog postings here and here for past year’s rulings of note. 

So what are the 5 most intriguing decisions? Here are our picks:

1.    EEOC v. Mach Mining, LLC, No. 13-2456, 2013 WL 6698515 (7th Cir. Dec. 20, 2013).   

In recent years, the EEOC has become increasingly aggressive in its enforcement efforts, even as its resources have dwindled. With mounting pressure to “do more with less,” the EEOC is re-imagining itself.  Some argue (convincingly) that the agency appears to be moving away from its mandate to combat discrimination by encouraging employers’ voluntary compliance and, instead, is focused on a “scorched earth” litigation agenda. Especially troubling are instances where the EEOC has rushed to file high-profile lawsuits that splash allegations of systemic discrimination across headlines, only to have its claims dismissed altogether or whittled down to a single claimant.  In some instances, courts have stepped in to right the balance and sanctioned the EEOC for failing to do its homework.  (See e.g., EEOC v. The Original Honeybaked Ham, EEOC v. CRST Van Expedited, Inc., EEOC v. Bloomberg LP, and EEOC v. Peoplemark, Inc., where courts sanctioned the EEOC for conducting haphazard and questionable investigations and conciliation efforts in its rush to court.)

Against this backdrop, the Seventh Circuit decision in EEOC v. Mach Mining, LLC, is stunning. On December 20, 2013, the Seventh Circuit broke from a majority of the U.S. Courts of Appeal when it held that the EEOC’s pre-suit conciliation efforts are not subject to judicial review, at all. This ruling has stark implications for employers in the Seventh Circuit – it arguably extinguishes the traditional failure to conciliate defense to an EEOC lawsuit.

The Seventh Circuit’s reasoning is puzzling. It brushes aside the agency’s mandate to encourage voluntary compliance with employment laws, noting: “[t]he statutory directive to the EEOC to negotiate first and sue later does not implicitly create a defense for employers who have allegedly violated Title VII.” It defers entirely to the agency’s ability to police itself and rejects the notion that “EEOC field offices are so eager to win publicity or to curry favor with Washington by filing more lawsuits that they will needlessly rush to court.” The 27-page opinion does not delve into the facts that recently have lead numerous courts to chastise the agency for precisely the type of conduct the Seventh Circuit characterizes as implausible. 

The Mach Mining decision, in effect, condones the EEOC’s questionable tactics. Because of the legal importance of the issues involved and the Circuit split on this issue, we expect that it is only a matter of time before the U.S. Supreme Court accepts a certiorari petition and weighs in on the issue. In the interim, all employers, and not just those in the Seventh Circuit, should expect the EEOC to enter 2014 vigorously challenging employers’ ability to challenge the sufficiency of conciliation efforts.

2.    EEOC v. Abercrombie & Fitch Stores, Inc., 731 F.3d 1106 (10th Cir. 2013). 

Abercrombie’s “Look Policy,” which requires its employees to dress in a manner that “exemplifies a classic East Coast collegiate style of clothing” has been intensely scrutinized, both in the courtroom and in the public arena.  Indeed, the Look Policy has been challenged in several lawsuits, one of which recently culminated in a Tenth Circuit ruling clarifying an employer’s duty to accommodate religious practices where an employer has notice that the practice conflicts with a job requirement or work policy.  We followed the case closely as it wound its way through the courts, taking sometimes unpredictable turns. The district court granted summary judgment for the EEOC, but the Tenth Circuit did an about face, not only reversing the district court’s judgment, but also granting summary judgment to Abercrombie.  On December 4, 2013, the EEOC filed a Petition for Rehearing En Banc seeking review of the Tenth Circuit decision.

This is a significant, employer-friendly decision regarding the relative burdens in religious discrimination claims alleging a failure to accommodate. The Tenth Circuit placed the burden of notice squarely on the applicant or employee who is uniquely qualified to know whether a particular practice is religiously motivated, and whether a workplace accommodation may be necessary. It  noted that the EEOC itself warns employers against asking about an applicant’s or employee’s religious practices, which are intensely personal and individual-driven, or making assumptions about religious practices based on stereotypes. Further, it acknowledged a line of cases holding that an employer’s actual, particularized knowledge of a conflict between a religious practice and workplace policy may be enough to trigger an employer’s duty to engage in the interactive process, but ruled that no such facts were present in this case. 

The EEOC is seeking reconsideration of the Tenth Circuit’s ruling, arguing that something less than an employer’s particularized, actual knowledge should suffice. If this argument finds traction in the courts, it would put employers in an impossible position: an employer would be penalized for not acting on stereotypical assumptions regarding an applicant’s or employee’s religious beliefs, an outcome that is directly opposed to Title VII’s goals. As the final chapter in this saga has yet to be written; employers should watch this case closely in FY 2014.

3.    EEOC v. Kaplan Higher Learning Educ. Corp., No. 10-CV-2882, 2013 WL 322116 (Jan. 28, 2013).

In December 2010, the EEOC filed a lawsuit alleging that Kaplan’s use of credit checks in connection with employment decisions had an unlawful disparate impact on African-American individuals in violation of Title VII.  The lawsuit was one of the Commission’s highest profile cases concerning a national priority under the current Strategic Enforcement Plan — “target[ing] class-based recruitment and hiring practices that discriminate against racial, ethnic and religious groups, older workers, women, and people with disabilities.” 

On January 28, 2013, the court granted summary judgment to the defense and dismissed the EEOC’s suit. The EEOC’s claim faltered at the outset — its statistical evidence was unreliable. Specifically, the Court excluded the EEOC’s  expert reports and testimony of its expert as inadmissible because the EEOC failed to show that the expert’s methodology was reliable. The court tossed the entire case because without expert testimony, EEOC could not prove its disparate impact theory. 

Not only did Kaplan win the war (complete dismissal of the lawsuit), in the course of the litigation, it also won important battles including persuading the Court to compel the Commission to disclose its own consideration of credit history in connection with employment decisions. In doing so, Kaplan successfully turned the tables on the agency’s “do as I say, not as I do” litigation strategies. 

The court did not reach the merits of the EEOC’s underlying disparate impact theory; rather, it held that the methodology the EEOC chose to prove its claims was flawed. Indeed, the EEOC is appealing the ruling and in the summer of 2013 filed a new round of lawsuits attacking employers’ use of background screening tools based on the same disparate impact theories. Employers should expect that the EEOC to continue to aggressively litigate this theory in 2014.

4.    EEOC v. Boh Brothers Constr. Co., 731 F.3d 444 (5th Cir. 2013).  

The EEOC scored a significant win in the Boh Brothers case, when the Firth Circuit held that harassment based on gender-stereotypes can be actionable “because of sex” under Title VII. This case exemplifies the edge-of-the-envelope theories that the EEOC championed in 2013, in its drive to stretch the boundaries of existing law or make new law. 

In Boh Brothers, an ironworker was allegedly subjected to “almost-daily verbal and physical harassment.” The EEOC presented evidence that the supervisor thought the victim was not a “manly-enough man.” The Fifth Circuit held that the EEOC could prove that the same-sex harassment was “because of sex” by presenting evidence that the harassment was based on a perceived lack of conformity with gender stereotypes.

Almost immediately after the decision on appeal, the EEOC issued a press release touting the Fifth Circuit’s ruling. It remains to be seen whether other courts will adopt the Fifth Circuit’s reasoning. While Boh Brothers is arguably an extreme case of gender-stereotype discrimination, a colorful dissenting opinion (a must-read) highlighted the difficulty of identifying actionable conduct at predominately male-populated worksites, like construction sites and oil/gas fields. In the interim, we expect that the EEOC will continue to push the boundaries of Title VII to encompass cutting edge harassment theories.

5.    EEOC v. Hill Country Farms, Inc. d/b/a Henry’s Turkey’s Servs., No. 11-CV-41 (S.D. Iowa). 

In a record breaking and widely publicized jury trial award, the EEOC recovered $240 million in an ADA case on behalf of a class of mentally disabled men who suffered mistreatment and discrimination on the basis of their disability. To put the $240 million award in context – between 1997 and 2012, the EEOC secured a total of $89 million in damages for all ADA claims. The EEOC’s complaint alleged that the 32 claimants were verbally and physically abused in a variety of ways over three decades.  Before the case proceeded the trial, the EEOC won summary judgment on a claim that the claimants were paid lower wages than their non-disabled counterparts.  On May 1, 2013, after a six-day trial on the remaining claims, the jury awarded $7.5 million in compensatory and punitive damages for each of the 32 claimants, totaling $240 million. The court later reduced the award per claimant to $50,000 ($1.6 million total for all claimants) pursuant to the ADA’s statutory cap on damages. On August 12, 2013, Hill Country Farms filed an  appeal raising two issues: one, that another entity, West Liberty Foods, Inc., should have been joined in the action as a necessary party, and two, that the court erred in admitting evidence regarding activities in the Bunkhouse. The outcome of the appeal is still pending. 

The egregious facts of this case drove the record-breaking verdict.  Nevertheless, the EEOC’s recent and growing focus on ADA claims should be taken as fair warning to employers that the EEOC will pursue any and all perceived violations.  

We hope you find this retrospective on 2013 and EEOC-Initiated Litigation helpful to corporate counsel. It was quite a year, and we expect 2014 will be no different.

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

By Gerald L. Maatman Jr., Pamela Q. Devata, and Howard M. Wexler

In a scathing opinion issued today in EEOC v. Freeman, No. 09-CV-2573 (D. Md. Aug. 9, 2013), Judge Roger Titus of the U.S. District Court for the District of Maryland dismissed a nationwide pattern or practice lawsuit brought by the EEOC (previously discussed here and here) that alleged that Freeman, Inc., a service provider for corporate events, unlawfully relied upon credit and criminal background checks that caused a disparate impact against African-American, Hispanic, and male job applicants. This decision marks yet another blow to the EEOC’s use of systemic lawsuits to challenge employers’ reliance on background checks in making hiring decisions.

The Court’s Opinion

Prior to analyzing the EEOC’s disparate impact claim, Judge Titus discussed the utility of credit and criminal background checks, as well as the EEOC’s recent targeting of employers for such background checks, including the recent cases it filed against BMW and Dollar General Corp. In discussing these lawsuits, Judge Titus noted that:

“Because of the higher rate of incarceration of African-Americans than Caucasians, indiscriminate use of criminal history information might have the predictable result of excluding African-Americans at a higher rate than Caucasian. Indeed, the higher rate might cause one to fear that any use of criminal history information would be in violation of Title VII.  However, this is simply not the case. Careful and appropriate use of criminal history information is an important, and in many cases essential, part of the employment process of employers throughout the United States. As Freeman points out, even the EEOC conducts criminal background investigations as a condition of employment for all positions, and conducts credit background checks on approximately 90 percent of its positions.”

Id. at 2. Turning to the specific case before him, Judge Titus focused on whether the EEOC provided the requisite evidentiary foundation that Freeman’s policies had a disparate impact based on reliable and accurate statistical analysis. Judge Titus held that the EEOC had not made such a showing and spent a majority of his 32-page ruling bashing the “expert” reports prepared by Dr. Kevin R. Murphy, the EEOC’s statistical expert. This is not the first time a U.S. District Court Judge has criticized the EEOC’s reliance on Dr. Murphy’s statistical analysis.  As previously reported here, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment to the defense in EEOC v. Kaplan Higher Education Corp. (discussed here) – in part based on the “great concern” she had regarding several aspects of Dr. Murphy’s disparate impact analysis in that case.

Judge Titus pulled no punches in taking the EEOC to task based on the flaws in the data it relied upon in support of its disparate impact claims, labeling Dr. Murphy’s expert reports as:  “laughable”; “based on unreliable data”;  “rife with analytical error”; containing “a plethora of errors and analytical fallacies” and a “mind-boggling number of errors”; “completely unreliable”; “so full of material flaws that any evidence of disparate impact derived from an analysis of its contents must necessarily be disregarded”; “distorted”;  “both over and under inclusive”; “cherry-picked”; “worthless”; and “an egregious example of scientific dishonesty.” Id. at 14-20.

Given Dr. Murphy’s “continued pattern of producing a skewed database plagued by material fallacies” the EEOC left Judge Titus with “no choice but to entirely disregard his disparate impact analysis.” Id. at 24-25. Left without credible expert analysis, Judge Titus held that the EEOC’s case cannot survive as “it is sufficient for Defendants to point out the numerous fallacies in Murphy’s report, which raise the specter of unreliability” to defeat the EEOC’s prima facie case. Id. at 24.

Finally, Judge Titus held that even putting aside the unreliability of Dr. Murphy’s expert reports, the EEOC nonetheless failed to identify the specific policy or policies causing the alleged disparate impact and made “no effort to break down what is clearly a multi-faceted, multi-step policy.” As the EEOC could not demonstrate “which such factor is the alleged culprit” of the purported disparate impact, Judge Titus held that the EEOC failed to meets its prima facie case of discrimination. Id. at 25-28.

Implications for Employers

The defeat of the EEOC’s case is significant. Judge Titus’ decision is yet another favorable opinion for employers who fall victim to the EEOC’s “do as I say, not as I do” litigation tactics, especially in pattern or practice cases that rely heavily on the use of statistical analysis. While the criticism of Dr. Murphy’s statistical analysis is noteworthy given his use as an expert in many of the EEOC’s larger cases, an equally important take-away for employers is the fact that Judge Titus rejected the EEOC’s argument that it had no duty to identify the specific aspect of Freeman’s policies that caused the alleged disparate impact and could merely rely upon the policy in general in support of its claims – a tactic frequently advanced by the EEOC in these type of cases.

Given the magnitude of this decision, it is possible (if not likely) the EEOC will appeal Judge Titus’ decision, and we will keep you posted with any further updates regarding this important systematic case.

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

By Gerald L Maatman Jr. and Howard M. Wexler

In a highly anticipated decision issued yesterday in one of the EEOC’s most high profile cases, Chief Judge Linda R. Reade of the U.S. District Court for the Northern District of Iowa ordered the EEOC to pay $4,694,442.14 in attorneys’ fees, expenses, and costs in the case of EEOC v. CRST Van Expedited, Inc., Case No. 07-CV-95, 2013 U.S. Dist. LEXIS 107822 (N.D. Iowa Aug. 1, 2013). As we blogged in the past about this litigation, the District Court previously entered a fee award against the EEOC in 2010 totaling $4,560.281.11, however, this award was reversed without prejudice by the U. S. Court of Appeal for the Eighth Circuit, which remanded the case back to the District Court. See EEOC v. CRST Van Expedited, Inc., 679 F.3d 657 (8th Cir. 2012).

In yesterday’s decision, the Court found that CRST was in fact a prevailing party, and thus, entitled to recover attorneys’ fees under 42 U.S.C. § 2000e-5(k). In so ruling, Judge Reade flatly dismissed the EEOC’s argument that because CRST did not “prevail” as to the claim it brought on behalf of the Charging Party (the parties settled the Charging Party’s claim after the Eighth Circuit’s remand order) CRST could not, as a matter of law, be considered a “prevailing party.”  Judge Reade summarized the EEOC’s argument in this regard as being “as long as it names one individual in a complaint and succeeds as to that individual, it can include as many frivolously allegations in wishes in a complaint using vague language and a class of similarly situated individuals without ever being liable for a defendant’s attorney’s fees.” Judge Reade rejected this argument and held that “such a result clearly contravenes the congressional policy behind allowing prevailing parties to recover fees in Title VII.” 

As the Court found that CRST was the prevailing party as to the EEOC’s pattern-or-practice claim and 153 of the EEOC’s individual claims, it next had to decide whether these claims in which CRST prevailed were frivolous, unreasonable or groundless, thus entitling CRST to recover attorneys’ fees. Judge Reade held that the EEOC’s conduct was in fact “frivolous, unreasonable or groundless” given its blatant failure to exhaust Title VII’s administrative prerequisites, including its failure to investigate and conciliate prior to bringing suit. Additionally, Judge Reade found that the EEOC’s pattern-or-practice claim was unreasonable as it presented only anecdotal evidence in support of its claim and failed to present any expert evidence, statistics, or legal authority in support of its systemic claims.

Given the finding that the EEOC’s pattern-or-practice claim and 153 of its individual claims were unreasonable or groundless, the Court found that CRST was entitled to recover its reasonable attorneys’ fees and expenses. In determining the fee award, the Court ruled that CRST was entitled to recover an additional $465,230.47 incurred during the EEOC’s appeal of its 2010 decision to the Eighth Circuit given that CRST would not have incurred these appellate fees “but for the EEOC’s unreasonable or groundless claims.”

Implications For Employers

This is a significant if not stunning decision. It is believed to be the largest fee sanction award against the EEOC in its history.

The ruling represents yet another powerful broad-side to attack the EEOC’s systemic litigation tactics and provides employers with more ammunition with which to challenge unreasonable and groundless claims by the EEOC. Particularly important for employers is the Court’s rejection of the EEOC’s argument that as long as it names one individual in a complaint and succeeds as to that individual, regardless of the frivolousness or unreasonableness of the remainder of its claim, an employer cannot be deemed a “prevailing party” entitled to recover its fees. 

Given the magnitude of this decision, it is possible the EEOC will once again seek reprieve from the Eighth Circuit, and we will keep you posted with any further updates regarding this groundbreaking case.

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