Employment Law -- Jan 22, 2014

by Manatt, Phelps & Phillips, LLP

In This Issue:

EEOC Reports On FY 2013: Charges Down But Recovery Up

Why it matters: The Equal Employment Opportunity Commission touted several achievements in its Performance and Accountability Report for fiscal year 2013, from a record-setting $372.1 million in monetary relief recovered by the agency to a decrease in the average time to investigate a charge and bring it to resolution. “The EEOC’s accomplishments are especially noteworthy in light of the extraordinary fiscal constraints and operational challenges in FY 2013,” EEOC Chair Jacqueline A. Berrien said in a statement. The statistics provide insight into the agency’s actions over the 12-month period and demonstrate the EEOC’s efforts with regard to its Strategic Enforcement Plan, particularly with respect to systemic enforcement. One of the agency’s stated goals for the Plan was to have 22 to 24 percent of its docket based on systemic cases by FY 2016 – a goal achieved in FY 2013. The agency promised that additional statistics for FY 2013 will be released in early 2014.

Detailed Discussion
The EEOC’s Performance and Accountability Report revealed many interesting statistics about the agency’s efforts during fiscal year 2013, covering the months between Oct. 1, 2012 to Sept. 30, 2013:

  • Charges filed: The agency received a total of 93,727 private sector discrimination charges, a decrease of roughly 6,000 charges over the previous three fiscal years.

  • Charges resolved: A total of 97,252 charges were resolved, also a decrease over the year before, which the EEOC attributed to “the decline in staffing and resources…including the impact from furloughs.” Resolution through conciliation occurred 1,437 times.

  • Average time: In FY 2012, the average time to investigate and bring charges to resolution was 288 days. The enforcement staff reduced that timeline by 21 days in FY 2013, to 267 days.

  • Monetary recovery: Charging parties recovered $372.1 million, a new record for the agency (up $6.7 million from the year prior).

  • Lawsuits filed: The EEOC filed 131 “merits lawsuits,” with 89 individual suits, 21 non-systemic class suits, and 21 systemic suits. Title VII formed the basis of the majority of the cases (78), followed by the Americans with Disabilities Act (51), the Age Discrimination in Employment Act (7), the Equal Pay Act (5), and the Genetic Information Nondisclosure Act (3).

  • Litigation results: Merits lawsuits in federal district courts yielded a total of $39 million in monetary relief for charging parties. A total of 209 merits lawsuits were resolved through litigation. In order of the most claims, the suits were based on: violations of Title VII (135), the Americans with Disabilities Act (59), the Age Discrimination in Employment Act (16), the Equal Pay Act (4), and the Genetic Information Nondiscrimination Act (1).

  • Trials: Of the 13 cases the EEOC went to trial on in FY 2013 (11 heard by a jury and two bench trials), the agency won nine, resolved one case by a consent decree, and lost one.

In addition to these statistics, the EEOC reported on the second year of its FY 2012-2016 Strategic Enforcement Plan, which has goals like “prioritizing systemic enforcement, expanding education and outreach, and improving customer service.”

With regarding to systemic enforcement, the agency certainly stepped up its efforts in FY 2013. Of the 231 cases on the EEOC’s active docket at year-end, 54 were systemic discrimination cases, or 23 percent – reaching the stated quota for systemic cases to make up 22 to 24 percent of the litigation docket by FY 2016, the end of the Plan period.

In addition, the agency noted that 300 systemic investigations occurred which resulted in 63 conciliation agreements or settlements for a total of $40 million in recovery.

To read the EEOC’s Performance and Accountability Report for FY 2013, click here.

7th Circuit Rejects “Failure to Conciliate” Defense

Why it matters: In a blow to employers, the Seventh U.S. Circuit Court of Appeals has split with six other federal appellate courts to hold that an employer may not escape a suit filed by the Equal Employment Opportunity Commission by arguing the agency failed to conciliate. “[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,” the court held. The Seventh Circuit rejected the employer’s affirmative defense on a number of grounds, including the language of Title VII as well as a concern that judicial review of the conciliation process could undermine the EEOC’s efforts to enforce the law. The federal appellate panel also expressed its displeasure with the idea that a procedural argument from an employer could distract from the underlying allegations. “The parties have spent nearly two years sparring over whether this is a sufficient ground for dismissing the discrimination case,” the court wrote. For employers, the implications of the decision – which the EEOC hailed as “landmark” – are not pretty. The Seventh Circuit took a hands-off approach to the agency’s pre-suit efforts, leaving employers in that circuit without judicial review of the conciliation process and the EEOC with a winning argument to try in other courts. However, with a split now in place between the federal appellate courts, the issue becomes more likely to appear before the U.S. Supreme Court.

Detailed Discussion
In 2008, a woman filed a charge of sex discrimination against Mach Mining with the EEOC. She claimed that the Illinois-based coal mining company refused multiple applications for coal mining jobs. The agency investigated and found reasonable cause to believe the company had discriminated against a class of female job applicants at one of its mines.

The agency then notified the parties of its intent to begin the conciliation process. Although the parties discussed possible resolution, they failed to reach an agreement. In September 2011, the EEOC informed Mach Mining that it had determined the conciliation process had been unsuccessful; the agency filed suit two weeks later.

Mach Mining responded to the complaint with a motion to dismiss, arguing that the EEOC failed to conciliate in good faith. The EEOC then moved for summary judgment on the grounds that failure to conciliate does not provide an affirmative defense to an unlawful discrimination lawsuit.

Striking out from its sister circuits, the Seventh Circuit sided with the EEOC.

The text of Title VII contains no express provision for such an affirmative defense, the three-judge panel wrote, and in the “‘context of a statute as precise, complex, and exhaustive as Title VII,’ this silence itself is compelling.”

According to the statute, “[i]f the Commission determines after such investigation that there is reasonable cause to believe that the charge is true, the Commission shall endeavor to eliminate any such alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion.” § 2000e-5(b).

The words used in the statute – “endeavor to eliminate” and “informal methods” – are “significant,” the court said. “What we have then is an instruction to the EEOC to try, by whatever methods of persuasion it chooses short of litigation, to secure an agreement that the agency in its sole discretion finds acceptable,” the court wrote. “It would be difficult for Congress to have packed more deference to agency decision-making into so few lines of text.”

Only one other reference to the conciliatory process can be found in the statute, in the requirement that all details of the process are strictly confidential (with criminal prosecution possible for violations). “An implied affirmative defense for failure to conciliate conflicts directly with the confidentiality provision,” the court said.

The panel’s second reason for rejecting the affirmative defense: no standard for review. “Title VII says nothing about the informal methods the EEOC is required to use – must it involve all three of conference, conciliation, and persuasion? – or how hard the agency should ‘endeavor’ to pursue them,” the court said. “Such an open-ended provision looks nothing like a judicially reviewable prerequisite to suit,” lacking guidance on how to establish a workable standard on how many offers, counteroffers, conferences, or phone calls would be necessary.

“Congress’s failure to provide even the outlines of such a standard tends to show that it did not intend for judicial review of conciliation through an implied affirmative defense,” the court concluded.

Judicial review would also undermine enforcement of Title VII and the conciliation process, the court said, and would tempt employers to distract from the underlying litigation by fighting over whether the EEOC did enough before going to court.

The panel recognized that its conclusion made it an outlier among other federal appellate courts. Six other circuits have recognized failure to conciliate as an affirmative defense under two standards. In the Second, Fifth, and Eleventh Circuits, a three-part inquiry reviews the conciliation process, while the Fourth, Sixth, and Tenth Circuits ask whether the EEOC’s efforts met a minimal level of good faith.

Neither standard met the Seventh Circuit’s approval. The panel said it found “no reason” to import a good faith requirement into the process and said the three-part test “appears to be no clearer in practice than on paper,” resulting in ad hoc assessments of different cases.

The panel – which noted that it circulated the opinion among all judges in the Seventh Circuit, none of whom sought a rehearing en banc on the issue – reversed denial of summary judgment for the EEOC and remanded the case for further proceedings on the merits.

To read the decision in EEOC v. Mach Mining, click here.

New Bill Would Prohibit Credit Inquiries

Why it matters: One of the hot trends in employment-related legislation just got hotter. Over the holidays, Sen. Elizabeth Warren (D-Mass.) introduced the Equal Employment for All Act, which would amend the Fair Credit Reporting Act to prohibit employers from obtaining a credit report from prospective employees or asking applicants about their credit history. Further, the bill would ban employment discrimination based on creditworthiness. Ten states already have legislation in place restricting the use of credit information by employers – California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington – and other states are considering similar bills. While the odds are stacked against passage of Sen. Warren’s new bill, the trend toward greater employee protections – particularly in the area of credit inquiries – continues.

Detailed Discussion
In conjunction with several other Democratic lawmakers, Sen. Elizabeth Warren (D-Mass.) recently introduced the Equal Employment for All Act.

Senate bill 1837 would prohibit both current and prospective employers from making an employment-related decision by using “a consumer report or investigative consumer report, or cause a consumer report or investigative consumer report to be procured, with respect to any consumer where any information contained in the report bears on the consumer’s creditworthiness, credit standing, or credit capacity.”

The prohibition remains in place even if the employee or applicant consents or otherwise authorizes the employer’s procurement of the report.

Two exemptions are included in the proposed law, allowing lawyers to review a credit report: if the job requires a national security clearance and “[w]hen otherwise required by law.”

In a press release about the bill, Sen. Warren cited research that “has shown that an individual’s credit rating has little to no correlation with his or her ability to be successful in the workplace.” She also referenced a 2013 report from the Federal Trade Commission that found errors in credit reports to be “common” and “difficult to correct.”

“A bad credit rating is far more often the result of unexpected medical costs, unemployment, economic downturns, or other bad breaks than it is a reflection on an individual’s character or abilities,” Sen. Warren said. “Families have not fully recovered from the 2008 financial crisis, and too many Americans are still searching for jobs. This is about basic fairness – let people compete on the merits, not on whether they already have enough money to pay all their bills.”

More than 40 groups – including the National Employment Lawyers Association and the AFL-CIO – have endorsed the proposed legislation.

To read the Equal Employment for All Act, click here.

To Seat or Not To Seat? The California Supreme Court Will Answer That Question

Why it matters: California employers have recently faced a host of class action suits alleging violations of state wage orders requiring that “suitable seating” be provided for certain employees. Confronted with the issue, the Ninth U.S. Circuit Court of Appeals decided to ask for help, certifying three questions to the California Supreme Court about interpretation of the labor laws. How the state’s highest court rules on the questions – like whether or not the employer’s business judgment should be considered – will have a significant impact on employers. The Ninth Circuit noted that a “conservative estimate would put the potential penalties in these cases in the tens of millions of dollars,” and liability could be imposed “upon a large number of employers throughout California,” depending on the court’s interpretation.

Detailed Discussion
Nyketa Kilby, a cashier at CVS Pharmacy, and Kemah Henderson, a teller at JPMorgan Chase Bank, brought putative class actions against their employers. Both women alleged that the defendants violated California Wage Orders by failing to provide employees with seats.

Wage Order 4-2001 covers professional, technical, clerical, mechanical, and similar occupations while Wage Order 7-2001 covers the mercantile industry. Both orders provide that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”

Kilby and Henderson argued that the orders are applicable to specific tasks performed by employees. If a bank teller can accept deposits and cash checks while seated or a CVS cashier can operate a register while sitting down, then the bank and the retailer must provide suitable seats, the plaintiffs said.

The employers advocated for a look at the bigger picture. Under this “holistic approach,” courts should consider the entire range of job functions the employee is required to perform – not a discrete task. Other considerations like the layout of the workplace and the business judgment of the employer should also be taken into account, the defendants contended.

Both federal district courts adopted a holistic approach when granting summary judgment to CVS and JPMorgan Chase. Noting that the wage orders do not define “nature of the work,” “reasonably permits,” or “suitable seats,” the Ninth Circuit said that while the different approaches would produce drastically different results, “the text of the regulation precludes neither.”

The federal appellate panel therefore certified three questions to the state’s highest court:

  • 1. “Does the phrase ‘nature of the work’ refer to an individual task or duty that an employee performs during the course of his or her workday, or should courts construe ‘nature of the work’ holistically and evaluate the entire range of an employee’s duties?

    • a. If the courts should construe ‘nature of the work’ holistically, should the courts consider the entire range of an employee’s duties if more than half of an employee’s time is spent performing tasks that reasonably allow the use of a seat?

  • 2. When determining whether the nature of the work ‘reasonably permits’ the use of a seat, should courts consider any or all of the following: the employer’s business judgment as to whether the employee should stand, the physical layout of the workplace, or the physical characteristics of the employee?

  • 3. If an employer has not provided any seat, does a plaintiff need to prove what would constitute ‘suitable seats’ to show the employer has violated [the wage orders]?”

The Ninth Circuit emphasized that the answers “could have a dramatic impact on public policy in California as well as a direct impact on countless citizens of that state, both as employers and employees.” Numerous actions are currently pending and liability could be imposed upon a large number of employers, the court noted, with a considerable amount of money at issue.

“A definitive decision from the California Supreme Court would avert the potential uncertainty of federal courts and state courts adopting different interpretations of [the wage orders] and would provide businesses in California with clear guidance on how to comply,” the panel wrote.

To read the certification order in Kilby v. CVS Pharmacy, click here.

Psssst…. Gossip policy Runs Afoul of NLRA, ALJ Rules

Why it matters: An employer’s prohibition on gossip – and firing an employee for breaking the rule – violated the National Labor Relations Act, an administrative law judge has determined. Laurus Technical Institute banned employees from gossiping (like talking about a person’s personal life outside of their presence and talking about a co-worker’s professional life without his or her supervisor present) and later cited the policy when terminating an admissions representative. Continuing a streak of casting a critical eye on employer policies ranging from a prohibition on hats to social media rules, the ALJ ruled against the employer. The decision found that the “overly broad” policy encompassed discussion of conditions of employment and therefore violated employee rights. Employers may see more clarification on the issue, however, as Laurus has already filed its notice of appeal to the National Labor Relations Board.

Detailed Discussion
Laurus Technical Institute, a Georgia-based for-profit technical school, adopted a “No Gossip Policy,” which stated that gossip was “not tolerated” and that employees who engaged in gossip “will receive disciplinary action.”

The policy defined gossip in multiple ways, including “[t]alking about a person’s personal life when they are not present,” “[t]alking about a person’s professional life without his/her supervisor present,” and “[c]reating, sharing, or repeating a rumor about another person.”

Admissions representative Joslyn Henderson violated the policy when she discussed the firing of three other employees with her co-workers. Worried about their job security at the school, they and Henderson reached out to a former co-worker now employed at another school about possible jobs.

Henderson was later fired. Her termination letter cited her “willful breach of company policies” as well as her “attempts to actively solicit and recruit coworkers to work for another company, a direct competitor.”

But Administrative Law Judge Donna N. Dawson found the “No Gossip Rule” violated Section 8(a)(1) on its face.

“The language in the no gossip policy is overly broad, ambiguous, and severely restricts employees from discussing or complaining about any terms and conditions of employment,” she wrote. “A thorough reading of this vague, overly broad policy reveals that it narrowly prohibits virtually all communications about anyone, including the company or its managers. In fact, read literally, this rule would preclude both negative and positive comments about a person’s personal or professional life unless that person and/or his/her supervisor are present.”

Because the termination letter admitted that Henderson was discharged in violation of the unlawful policy, her discharge was similarly unlawful. Henderson’s conversations with co-workers about their fear for job security prompted her inquiries about other job opportunities, the ALJ said. “[B]ut for the company’s recent overhaul of their department and the discharge of their supervisor,” Henderson would not have engaged in such activities.

Dawson rejected Laurus’ argument that Henderson had lost the protection of the Act. “[T]he evidence shows that what [Henderson’s supervisor] viewed as her disruptive behavior was in fact her protected concerted activity,” she wrote. Even though her activity looked toward employment by another employer, the ALJ said her actions were “in response to job insecurity among coworkers,” and did not constitute a solicitation to quit or harm Laurus.

Dawson ordered that Laurus cease and desist from maintaining or enforcing the no gossip policy and pay Henderson for lost earnings and other benefits lost.

To read the ALJ’s decision in Laurus Technical Institute, click here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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