Workplace Class Action Litigation

Seyfarth Shaw Submits Guidance To The EEOC On Its Quality Control Plan "Draft Principles"

Seyfarth Shaw LLP — Fri, 24 May 2013 17:10:03 -0600

By Rebecca Bromet, Christopher DeGroff and Gerald L. Maatman, Jr.

On May 10, 2013, the EEOC released its Quality Control Plan (“QCP”) draft principles. In an accompanying press release, the EEOC said that the “[Quality Control Plan] will revise criteria to measure the quality of agency investigations and conciliations throughout the nation.”

If the Plan is a “blueprint” for the EEOC’s enforcement activity, the “draft principles” could only be called a rough and high-level sketch of the ultimate structure. The EEOC’s Strategic Enforcement Plan for Fiscal Years 2012 - 2016 requires the EEOC to develop a QCP that “establishes criteria for evaluating the quality of its investigations and conciliations and a peer review system to conduct assessments of investigations and conciliations.” The draft principles are intended to address “issues of quality and timeliness.”

The EEOC set a short window for public input on the draft principles. Today, Seyfarth Shaw submitted its recommendations to the Commission for ways in which it can meaningfully evaluate its investigation and conciliation functions without losing sight of its mission: “to encourage voluntary compliance with anti-discrimination laws and to assist employers, employees and stakeholder groups to understand and prevent discrimination.”

Seyfarth Shaw’s recommendations include:

Measurable criteria: The EEOC has touted a commitment to a “national law firm” model, but employers still confront “consistent inconsistency” with the agency characterized by wide variation among the procedures used by EEOC’s District, Field, Area, and Local offices. In an effort to standardize EEOC’s practices, the draft principles outline the criteria for “quality” investigations and conciliations. Unfortunately, the principles are too general. Seyfarth’s submission expresses encouragement for the EEOC’s move in the right direction, but observes that the devil will be in the details. Seyfarth suggests that measurable criteria are necessary to give true incentive to the EEOC’s definition of “quality” and to ensure “timeliness.”

Separation of fact-finding and litigation functions: Seyfarth has consistently expressed concerns with the blurring of the line between the EEOC’s purportedly “neutral” fact-finding and litigation functions. We have stressed that a separation between these functions is necessary to ensure that EEOC’s investigations are fair and impartial, as opposed to surface attempts to check off “investigation” and “conciliation” boxes before filing suit, or worse, a way of obtaining “pre-discovery” before litigation. Our concerns are not addressed in the draft principles; we hope later drafts and the final Quality Control Plan will reinforce such a division.

Good-faith conciliation: Employers dealing with the EEOC are often vexed by its unwillingness (or inability) to explain the bases or merits of enormous pre-suit conciliation demands. The draft principles offer a glimmer of hope in this regard. As part of a quality conciliation, the EEOC appears to be more willing to share information with employers regarding how it calculates monetary relief and why it may be seeking certain programmatic relief. However, the quality criteria for conciliations omit any reference to or discussion about the merits of the charge or the EEOC’s reasonable cause determination. We suggest that the EEOC re-think and expand its conciliation parameters. From employers’ perspective, a meaningful negotiation regarding the appropriate value of the EEOC’s claims must include a discussion regarding the merits.

We recognize that the draft principles are a work in progress. We are cautiously optimistic that the EEOC has initiated a discussion regarding the manner in which it conducts investigations and conciliations. A meaningful discussion is necessary to reform the process, which, as we have previously noted, is balkanized and district-centric, often combative rather than cooperative. We hope the EEOC is committed to doing the hard work it will take to flesh out the draft principles into a robust Quality Control Plan that encourages uniformity and accountability - the touchstones of “quality.”

Eighth Circuit Raises Specter Of Constitutionality Issues In TCPA Class Actions

Seyfarth Shaw LLP — Wed, 22 May 2013 12:49:24 -0600

By Jennifer A. Riley and Jason P. Stiehl

In a much-anticipated decision involving the Telephone Consumer Protection Act (“TCPA”), the Eighth Circuit in Nack v. Walburg, Case No. 11-1460 (8th Cir. May 21, 2012), reversed a grant of summary judgment in favor of the defendant and remanded the proceeding, along the way questioning, but not ruling upon, the validity of the regulations by the Federal Communications Commission (“FCC”).

Although not a workplace class action, Nack demonstrates the importance of understanding regulations applicable to your business, evaluating their impact, and, if necessary, raising a timely challenge to those regulations. To the extent that TCPA class actions spike numerous Rule 23 rulings, it is also important for understanding and crafting class certification approaches.

Factual Background

Nack presents perhaps one of the most disconcerting fact patterns related to this already troubling statute. Nack, a lawyer and serial TCPA plaintiff, agreed to receive a facsimile communication from Douglas Walburg, the defendant. Id. at 3. After receiving the fax, Nack sued Walburg for failing to include appropriate opt-out language on the fax. The district court granted summary judgment in favor of Walburg, holding that once Nack consented to receive the specific fax, no opt-out notice was required. Id. at 5.

The Court’s Opinion

On appeal, Nack argued that the FCC regulation was unambiguous, and required an opt-out notice, regardless of whether the fax was solicited or unsolicited. Id. at 6. The FCC filed an amicus brief supporting that position, and during the first round of oral argument, the Eighth Circuit indicated its agreement with that interpretation, but questioned the authority of the FCC to make such a requirement where the statute appears to govern only unsolicited facsimiles. Id. Walburg refocused his arguments, arguing that even if the governing regulation required an opt-out notice: (1) the FCC exceeded its authority, as the statute only involves unsolicited facsimiles; (2) the FCC authority did not allow an opt-out violation to give rise to a private right of action; and (3) the regulation violates the First Amendment. Id. As to the first two arguments, the Eighth Circuit indicated that it would agree that if the FCC exceeded its authority, or received authority beyond the §227(b) (authorizing private right of actions), Walburg may have a valid argument. However, the Eighth Circuit declined to make such a ruling, as it was precluded from doing so by the Hobbs Act, which requires any challenge to a FCC regulation to be brought first before the agency. Id. at 8-11. Notably, the Eighth Circuit advised that “the district court may entertain any requests to stay proceedings for pursuit of administrative determination of the issues raised herein.” Id. at 12.

The Eighth Circuit also declined to reach Walburg’s constitutional argument, holding that he had failed to raise the issue below. Id. In closing, however, the Eighth Circuit stated that while it had previously ruled in Missouri ex rel. Nixon v. Am. Blast Fax, Inc., 323 F.3d 649, 660 (2003), that TCPA provisions related to unsolicited fax advertisements were not an unconstitutional restriction upon commercial speech, “the analysis and conclusions […] would not necessarily be the same if applied to the agency’s extension of authority over solicited advertisements.” Id.

Implications

Unfortunately, the Eighth Circuit left open several issues that will allow continued expansion of this niche area of class action litigation. However, through its commentary, the Eighth Circuit opened several doors for potential challenges to the statute. It should be noted that some of these challenges may ultimately be untimely, given the FCC ‘s small window of time allotted to challenge its regulations. We will keep a close eye on this case as it is sure to bring additional important changes to the class action landscape. In the meantime, this case provides a good reminder to businesses to keep abreast of evolving regulations that may apply to your business, including, in this case, marketing.

"Historic" Verdict In EEOC v. Hill Country Farms Reduced To $1.6 Million But Litigation Continues As EEOC Seeks Injunctive Relief Against Defunct Company

Seyfarth Shaw LLP — Thu, 16 May 2013 09:11:56 -0600

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

We previously reported that the United States Equal Employment Opportunity Commission (EEOC) secured a verdict of $240 million in its lawsuit against Hill Country Farms last week. Read our previous blog post here.

The EEOC trumpeted the verdict in a post-trial press release, but did not reveal the fact that the verdict would be reduced due to the caps in the applicable law at issue in the case. We noted that the verdict would be reduced due to statutory damages caps applicable to claims brought under the Americans With Disabilities Act (ADA). On May 14, 2013, the Court did just that and entered an order reducing the jury award for all thirty two claimants to $1.6 million. The Court’s May 14 Order, in addition to its previous award of back wages in the amount of $1.3 million, drastically reduces the total recovery in this case to $2.9 million. In the same order, the Court set the case for a further hearing on June 10, 2013 to address the EEOC’s request for injunctive relief.

The post-trial briefing in EEOC v. Hill Country Farms case is an example of the aggressive tactics and push-the-envelope arguments that employers facing EEOC-initiated litigation can encounter.

Background

We discussed the background of this case in previous posts (here and here).

On May 1, a jury awarded $240 million to thirty two intellectually disabled workers in connection with the EEOC’s claims that Hill Country Farms, their employer, discriminated against them and subjected them to a hostile work environment. Following the verdict, the Court invited briefing from defendant and the EEOC regarding the appropriate judgment award to be entered in the case.

Damages Caps Under The ADA

The ADA imposes a statutory cap -- a ceiling -- of $50,000 for each claimant in cases where an employer-defendant has more than 14 but fewer than 101 employees. The $50,000 limit is inclusive of compensatory and punitive damages.

Here, given the size of Hill Country Farms’ workforce at the time of the alleged violations, the “maximum allowable” recovery with respect to each claimant was $50,000, for a total recovery of $1.6 million for all claimants, plus “applicable prejudgment interest.” The Court will determine the proper amount of prejudgment interest at the June 10 hearing.

EEOC’s Request For Injunctive Relief

The EEOC is also seeking injunctive relief. To prove that it is entitled to an injunction, it must show that there is a “threat of irreparable harm” in connection with further violations by Hill Country Farms. However, Hill Country Farms reportedly went out of business in February 2009. So the EEOC will need to convince the Court that injunctive relief is necessary to stop a defunct business that has not employed anyone since 2009 from engaging in future violations of employment laws. The President of Hill Country Farms allegedly admitted at trial that although the company is no longer in business, it remains a “corporation in good standing in the State of Texas.” In other words, while the corporation is no longer operating a business and has no workforce, it remains a legal entity. Thus, the EEOC is maneuvering around the company’s current defunct status by arguing that Hill Country Farms or a successor company could “potential[ly] return to full operations or re-initiat[e]…the business.” If (and when) it resumes operations, the EEOC wants an injunction in place.

Because the potential “threat” that the defendant may resume or re-incorporate a business may occur “any time in the future,” EEOC is requesting ongoing and permanent future injunctive relief. For instance, the EEOC has requested injunctive relief provisions requiring that the defendant must notify the EEOC in writing if (1) the company or its principals or owners “engage in business at any time in the future” of any type or (2) the company or a successor company resumes business activities “similar to those conducted by Hill Country Farms.”

Further, if the company ever resumes business, the EEOC is seeking an order imposing a variety of obligations -- including training, reporting, and hiring a mental health professional as a consultant -- for five years.

Implications For Employers

It will be interesting to see if the Court accepts the EEOC’s novel argument in favor of injunctive relief in this case, and how it treats the defendant’s arguments opposing the propriety and scope of the relief. Stay tuned.

Second Circuit Pronounces New View Of The Importance Of Statistical Evidence In Firefighter Hiring Litigation In United States and The Vulcan Society, Inc., et al. v. City Of New York, et al.

Seyfarth Shaw LLP — Wed, 15 May 2013 17:58:53 -0600

By Rebecca Bjork and Gerald L. Maatman, Jr.

Employers who face Title VII discrimination lawsuits in the Second Circuit now have some pretty explicit guidance on how to rebut a plaintiff’s attempt to state a prima facie case of pattern or practice employment discrimination at the summary judgment stage. That blueprint was issued by the Second Circuit yesterday in United States and The Vulcan Society, Inc., et al v. City of New York, et al., No. 11-5113 (2d Cir. May 15, 2013). The de-emphasis on the probative power of statistical evidence in this Title VII pattern or practice case is the most newsworthy thing about it.

The Second Circuit’s ruling teaches that if plaintiffs say you have operated under a “standard operating procedure” of discrimination against an entire class of people, an employer may respond with whatever evidence you have to show that if you did, you did not intend to do so. Or, as the majority of this divided panel of the Second Circuit put it in one of the two opinions it issued, which you can read here, “[a]n employer facing that serious accusation [of intentional discrimination] must have a broad opportunity to present in rebuttal any relevant evidence that shows that it lacked such an intent.” United States and The Vulcan Society, Inc., et al v. City of New York, et al., slip op. at 28.

In vacating a summary judgment ruling against New York City, the Second Circuit ruled that the city was basically entitled to present any kind of proof it wanted in an effort to rebut the prima facie claim of the Vulcan Society, the group of minority firefighter intervenors in this long-running legal battle, that it intentionally sought to not hire black and Hispanic firefighters. The Justice Department’s complaint focused particularly on the disparate impact of written examinations that statistical analyses show favor Caucasian test-takers and did not state a claim for disparate treatment discrimination, which requires proof of intent. Our prior post of the litigation is here.

The district court had granted summary judgment for the intervenors on their disparate treatment claim. The majority of the Second Circuit faulted the district court for requiring that the City present either its own statistical evidence -- e.g.,to demonstrate that its hiring patterns should not raise an inference of unlawful discrimination -- or take on the plaintiffs’ statistics.

The Second Circuit clarified that this focus on statistics is not required. An employer can meet its burden under the shifting framework required by Int’l Brotherhood of Teamsters v. United States, 431 U.S. 324, 336 (1977), “by presenting a direct attack on the statistics relied upon to constitute a prima facie case. A defendant might endeavor to show that the plaintiff’s statistics are inaccurate, for example, infected with arithmetic errors, or lacking in statistical significance, for example, based on too small a sample.” Id. at 24-25. But -- and this is what the ruling makes clear, and which potentially eases the burden on employers at the summary judgment stage -- the employer can rebut the prima facie case “by accepting a plaintiff’s statistics and producing non-statistical evidence to show that it lacked such an intent [to discriminate against a class].” Id. at 25. Such evidence might take the form of affirmative action plans, diversity initiatives, attempts to produce an unbiased testing procedure, and the like. Id. at 26-27. There are other reasons to read these lengthy opinions -- including the dissenter’s view that the majority misread Teamsters and imposed a less rigorous burden on the defense to challenge the accuracy or significance of a plaintiff’s statistics at the burden-shifting stage of a pattern or practice case. But the bottom line is that the Second Circuit’s decisions give employers more grounds in which to fight disparate pattern or practice claims.

Court Dismisses Text-Messaging Class Action Against Lakers At The Pleading Stage

Seyfarth Shaw LLP — Mon, 06 May 2013 13:50:45 -0600

By Gerald L. Maatman, Jr. and Jennifer A. Riley

On April 18, 2013, Judge George H. Wu of the U.S. District Court for the Central District of California dismissed potentially costly class action claims against the Los Angeles Lakers in Emanuel v. Los Angeles Lakers, Case No. CV-12-9936-GW (C.D. Cal. Apr. 18, 2013), at the pleading stage.

In Emanuel, Judge Wu closely evaluated plaintiff’s class claims under the Telephone Consumer Protection Act (“TCPA”) at the outset of litigation and, applying a common sense approach, found them insufficient to warrant discovery.

We previously have reported other successful attempts to defeat class claims at the pleading stage (read more here). Although not a workplace class action, Emanuel demonstrates that pleading stage attacks are tactics that employers should keep in their arsenals for use in appropriate cases.

Factual Background

Plaintiff David Emanuel filed a putative class action against the Los Angeles Lakers claiming that the team violated the TCPA by sending him and others unsolicited text messages. Id. at 1.

During a Lakers game on October 13, 2012, the team displayed the following message at the Staples Center: “TEXT your message to 525377.” Id. After seeing the message, Plaintiff sent a text message: “I love you Facey. Happy Date Night” to the Lakers “for the sole purpose of having Defendant put a personal message on the scoreboard.” Id.

Shortly thereafter, Plaintiff allegedly received an “unsolicited text message” from the same number: “Thnx! Txt as many times as u like. Not all msgs go on screen. Txt ALERTS for Lakers News alerts Msg&Data Rates May Apply. Txt STOP to quit. Txt INFO for info.” Id.

Plaintiff claimed that the Lakers used an automatic telephone dialing system to generate the text and did so “to attempt to solicit business” from Plaintiff. Id. Defendant moved to dismiss and, in the alternative, for summary judgment.

The Court’s Opinion

The Court granted Defendant’s motion to dismiss with prejudice finding that the challenged message was not actionable under the TCPA.

To state a claim under the TCPA, plaintiff must allege that (1) defendant called a cellular telephone number, (2) using an automatic telephone dialing system, (3) without the recipient’s prior express consent. Id. at 2. Penalties for certain TCPA violations begin at $500 and can be tripled to $1,500 for each unsolicited text message.

Applying a “common sense” reading of the TCPA, the Court found that, by sending his original message, Plaintiff “expressly consented” to receiving a confirmatory text message from the Lakers. Id.

The Court noted that, indeed, when Plaintiff sought to display his love for “Facey” on the Staples Center jumbotron via text, “it is difficult to imagine how he could have been certain that the Lakers received his message without a confirmative response.” Id.

Further, while the impact of Defendant’s message is not crucial for a TCPA analysis, the Court noted that, by informing Plaintiff that “not all msgs go on screen,” Defendant’s message “provided Plaintiff with information relevant to his request.” Id. at 3.

Implications

Sending unsolicited text messages can be a costly violation of the TCPA, with fines ranging from $500 to $1,500 for each unsolicited message. Emanuel demonstrates that, in some cases, courts will apply common sense in the class action context. And defendants can use pleading-stage attacks to rid themselves of costly class litigation, under the TCPA or otherwise, at the earliest opportunity, before incurring the expense of class-wide discovery.

EEOC Obtains Record-Smashing $240 Million Verdict In ADA Case

Seyfarth Shaw LLP — Fri, 03 May 2013 08:54:13 -0600

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

On May 1, 2013, the United States Equal Employment Opportunity Commission (EEOC) secured a jury award of $240 million in an ADA case. The verdict is the largest ever obtained by the EEOC, a fact it is already touting on its website.

The verdict was handed down in EEOC v. Hill Country Farms, Inc., No. 3-11-CV-41 (S.D. Iowa) with a jury finding that an Iowa turkey-processing company discriminated against its intellectually disabled workers and subjected them to a hostile work environment on the basis of their disability.

While this case is a factual outlier, employers should take note of the EEOC’s expansive legal theories here as we expect them to resurface in pattern or practice cases.

Background

We discussed the background of this case in our previous post regarding the EEOC’s partial summary judgment win here. In September 2012, the EEOC secured summary judgment and damages of over $1.3 million on its claim that Hill Country Farms discriminated against intellectually disabled workers by paying them lower wages than non-disabled persons.

The EEOC tried its remaining claims to a jury. It alleged that claimants were subjected to a range of “severe and pervasive unwelcome conduct,” including being called names and being hit and kicked by defendant’s employees. (Complaint, ¶ 9(a).) It also alleged that claimants were subjected to harsh discipline and discriminatory job assignments due to their disability. (Id., ¶ 9(b).) Finally, it contended that claimants were discriminated against when they were assigned to substandard living, given inadequate medical attention, not allowed to move or communicate freely, restrained or confined to rooms, and denied bathroom breaks. (Id.)

After a week-long trial, the jury found against defendants in connection with both the discrimination and hostile work environment claims.

Jury Verdict

The jury awarded $5.5 million in compensatory damages and $2 million in punitive damages to each of the 32 claimants in the lawsuit for a total damages award of $240 million. The verdict is subject to reduction because the ADA caps damages but for now it is a symbolic victory for the EEOC.

To put the verdict in context -- between 1997 and 2012, the EEOC secured a total of $89 million in damages for all ADA claims. During the same time, the EEOC secured a total of $3.25 million in damages for all intellectual disability claims under the ADA. Thus, the verdict in this case is 77 times the total amount of damages the EEOC has obtained for all intellectual disability claims between 1997 and 2012.

EEOC’S Overreaching

The facts of this case are extreme. Leading up to the EEOC’s lawsuit, Hill Country Farms failed to change its pay practices or improve work conditions despite several government investigations that revealed violations. By apparently mistreating its disabled workers for two decades, the defendant practically invited the spectacularly bad outcome in this case.

However, putting aside the shocking facts of this case, from a legal perspective, certain of EEOC’s allegations in this lawsuit are problematic. The EEOC shoe-horned into an ADA claim allegations regarding unlawful and potentially criminal conduct including that defendant provided substandard or unsafe housing and restricted employees’ movement and communications. Without question, defendant’s conduct is reprehensible and should have been prosecuted. But the ADA is not the appropriate vehicle to do so. These types of violations are subject to other federal and state laws and statutes, each with its own enforcement mechanisms and remedial schemes. For example, in this case, the state stepped in and closed down the living quarters that the EEOC alleged to be unsafe and uninhabitable. Similarly, allegations that defendant restricted employees’ movement could have been addressed through state law claims such as the tort of false imprisonment.

Hill Country Farms did not challenge the EEOC’s legal theories concerning its discrimination and hostile work environment claims. It did not move to dismiss or strike certain of the allegations in the EEOC’s lawsuit to trim down the scope of the claims nor did it engage in any other dispositive motion practice. Instead, it chose to go to trial and lost.

Implications For Employers

Hard cases make bad law. Whether the record-breaking jury verdict in the EEOC v. Hill Country Farms case may prove the wisdom of that maxim remains to be seen.

This verdict may encourage the EEOC to continue to stretch civil rights laws beyond their plain statutory meaning. Because of headline-grabbing facts and defendant’s strategic choice not to challenge the EEOC’s claims as a matter of law, the EEOC’s expansive legal theories have been blessed by at least one federal jury. Employers may see this case cited as precedent to support the EEOC’s wide-ranging pattern or practice claims through which it impermissibly seeks to expand its jurisdiction into the realm of tort and criminal violations.

Expert Issues In Workplace Class Action Litigation

Seyfarth Shaw LLP — Thu, 02 May 2013 15:51:40 -0600

By Tim Haley

In Cason-Merenda, et al. v. Detroit Medical Center, Case No. 06-CV-15601, 2013 U.S. Dist. LEXIS 5707 (E.D. Mich. Apr. 22, 2013), Judge Rosen of the U.S. District Court for the Eastern District of Michigan held that the expert report provided by the plaintiff Registered Nurses (“RNs”) satisfied the Daubert admissibility requirements.

In so ruling in this workplace antirust class action, Judge Rosen applied a fairly lenient interpretation of the Supreme Court’s decision in Daubert v. Merrell Down Pharmaceuticals, Inc., 509 U.S. 579 (1993), describing its gatekeeping role as limited and noting that the rejection of expert testimony is the exception rather than the rule. Cason-Merenda, 2013 U.S. Dist. LEXIS 5707, at *19-20. But what will be interesting is how Judge Rosen will deal with this expert testimony in deciding the pending motion for class certification. In his decision Judge Rosen repeatedly refused to resolve issues involving a “battle of the experts,” holding that such determinations were for the trier-of-fact. Id., at *28-29, 38, 40-41, 46. Given recent Supreme Court precedent, it remains to be seen if the Court can take that position in deciding the motion for class certification.

The ruling is instructive for employers dealing with expert testimony in workplace class actions.

Background

In December 2006, plaintiffs, two registered nurses (“RNs”), filed a purported class action complaint alleging that a group of hospitals in the Detroit Metropolitan Area (“DMA”) violated §1 of the Sherman Act. In count I plaintiffs alleged that the hospitals conspired to suppress nurse wages and that this conduct violated §1 per se. In count II plaintiffs alleged that the hospitals agreed to exchange compensation information and that the effect of the exchange was to suppress nurse wages in the DMA in violation of §1 under the rule of reason. In March 2012, the Court granted the defendants’ motion for summary judgment on count I but denied it as to count II. (We previously blogged on this decision here.) Still pending is the plaintiffs’ motion for class certification. In reports provided by plaintiffs’ expert, Dr. Orley Aschenfelter opined that he could show with common proof that: (1) all or nearly all members of the class suffered harm (antitrust impact); and (2) the measure of each class member’s lost earnings. Id., at *11. In this motion defendants sought to exclude Dr. Aschenfelter’s testimony under Daubert.

The Decision

Dr. Aschenfelter proposed to show the wages the class members would have earned had there been no conspiracy (the “but-for” wages) by using a “benchmark” or “yardstick” methodology comparing the wages paid to RNs to what the hospitals paid for registered nurses supplied by temporary agencies. The defendants’ principal challenge to this method was that Dr. Aschenfelter failed to make the substantial adjustments necessary to ensure that the agency fee benchmark was “reasonably comparable” to the “but-for” wages that the hospitals would have paid to their RNs. Id., at *25. The Court noted that Dr. Aschenfelter did make adjustments to account for the differences and that challenges to the completeness or accuracy of those adjustments were matters affecting the weight to be given to the testimony and not its admissibility. Id., at *25-33.

Defendants also challenged Dr. Aschenfelter’s benchmark analysis on the grounds that it generated a single “but for” wage figure encompassing all nurses that worked at a given hospital in a given year and failed to distinguish between nurses with differing levels of experience, skill and training. In fact, Dr. Aschenfelter conceded that his method may result in understating the losses of experienced nurses as compared to the losses suffered by their less experienced counterparts. Id., at *33-37. However, the Court held that this was not a basis for excluding Dr. Aschenfelter’s testimony. So long as Dr. Aschenfelter was able to convince a jury that his benchmark methodology provides a truly conservative estimate of the RN losses, the Court reasoned that then his testimony was admissible on the issue of common antitrust impact. Moreover, the Court noted that the Sixth Circuit had upheld an aggregate measure of damages in an antitrust case that rested upon a uniform impact theory similar to that advanced by Dr. Aschenfelter. Id., at 34-37.

Implications For Employers

While Judge Rosen was able for now to avoid resolving the expert battles he noted in his decision, he may not be able to do so when he decides the motion for class certification. Recent cases have held that a court must resolve issues involving a battle of the experts if they are relevant to the question of whether class certification is appropriate. See, e.g.,Ellis v. Costco Wholesale Corporation, 657 F.3d 970, 982-84 (9th Cir. 2011). Further, Dr. Aschenfelter’s admission that his methodology may understate the losses of experienced nurses as compared to the losses suffered by their less experienced counterparts raises questions as to whether plaintiffs can adequately represent more experienced nurses. In addition, some courts have read the Supreme Court’s recent decision in Comcast Corp. v. Behrend, 2013 U.S. LEXIS 2544 (U.S. Mar. 27, 2013), to hold that to certify a class, plaintiffs must show a common method for proving the amount of damages suffered by each class member. The question is whether Dr. Aschenfelter’s method of estimating damages on a class-wide basis satisfies that standard.

ALJ Strikes Down Employer's Email And Social Media Policies As Violating The NLRA

Seyfarth Shaw LLP — Thu, 02 May 2013 15:44:21 -0600

By Reema Kapur and Jennifer A. Riley

On April 19, 2013, U.S. Administrative Law Judge David I. Goldman issued his decision and order in UPMC and SEIU Healthcare Pennsylvania, Case No. 06-CA-081896 (N.L.R.B. Apr. 19, 2013) and struck down an employer’s policies concerning employees’ use of non-work email and media as overly broad and ambiguous.

Although it is non-binding unless the National Labor Relations Board formally adopts it, the ruling reflects a disturbing trend. The NLRB views social media as the new “water cooler” – the quintessential outlet by which employees may engage in protected concerted activity. As a result, it continues to zealously protect employees’ social media activity, at the expense of well-intentioned employer restrictions.

Whether or not employers accept the ALJ’s reasoning (we discuss some lingering questions about the judge’s rationale below), UPMC demonstrates that employers must pay close attention as they attempt to manage risk in connection with workplace use of social media. Furthermore, the ruling has implications for defending any workplace class action, especially insofar as current employees - both in or not within a union - within a putative class use social media to comment upon and strategize over their workplace litigation issues.

Background

UPMC operates approximately 20 hospitals in Pennsylvania through subsidiaries. Id. at 3. Following an investigation into unfair labor relations charges filed by the health workers’ union, the government brought suit against UPMC. It alleged, among other things, that three of UPMC’s email and social media policies violated Sections 7 and 8(a)(1) of the National Labor Relations Act because they were impermissibly broad and ambiguous. Id. at 4.

Sections 7 and 8(a)(1) of the NLRA

Section 7 of the NLRA protects associational rights of “non-union” employees as well as “union” employees. In particular, it gives employees the right to engage in concerted activities for their “mutual aid and protection,” including, for example, to discuss wages and other working conditions. Id. at 8.

Covered employees are afforded rights under Section 7 “even though no union activity [is] involved and even though no collective bargaining [is] contemplated [by the employees involved].” See NLRB v. Phoenix Mut. Life Ins. Co., 167 F.2d 983 (7th Cir 1948), cert. denied, 335 US 845 (1948).

Section 8(a)(1) prohibits employers from engaging in labor practices that “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”

The ALJ’s Opinion

The judge upheld UPMC’s Solicitation Policy but struck down its Email and Acceptable Use Policies.

(1) Solicitation Policy

UPMC’s Solicitation Policy prohibited employees from using the UPMC email to engage in solicitation and requires employees to report unauthorized solicitation to a supervisor or manager. UPMC at 4-5.

The judge upheld the solicitation policy because it barred all non-work solicitation and did not contain any “viewpoint discrimination.” That is, the policy did not, for example, permit anti-union messages but ban pro-union messages, and it required employees to report all substantive violations without regard to content. Id. at 10-11.

(2) Email Policy

UPMC’s Email Policy generally allowed employees to use email for non-work purposes but carved out certain prohibited uses, including emails that “may be disruptive, offensive to others, or harmful to morale” or emails “soliciting employees to support any union or organization, unless sanctioned by UPMC executive management.” Id. at 5.

The judge found that the Email Policy ran afoul of Section 8(a)(1) in two ways. First, UPMC prohibited certain types of non-work email but did not precisely define the types of communications that it barred. Employees, therefore, could reasonably interpret the policy as prohibiting “expression of certain protected viewpoints.” Id. at 14.

Second, UPMC barred solicitation for certain groups or organizations while allowing solicitation for other groups or organizations approved by UPMC management. In the judge’s view, a “management approval process for certain viewpoints and certain organizations is antithetical to Section 7 activity and a reasonable employee will be chilled from even asking.” Id. at 15.

(3) Acceptable Use Policy

UPMC’s Acceptable Use Policy provided that UPMC’s computers, email, servers, and network could only be used to support UPMC’s work-related and authorized activities. It prohibited employees from a range of inconsistent uses, including “independently” establishing or participating in Facebook or other social media accounts without prior consent, and it prohibited employees from describing any affiliation with UPMC and using UPMC’s logos or other copyrighted or trademarked materials. The Policy contained a “significant carve-out” for “de minimis personal use” by employees that did not affect job performance. Id. at 5-6.

As with the Email Policy, the judge concluded that the Acceptable Use Policy set out “overly broad and vague restrictions” on the use of IT resources. As an example, UPMC broadly prohibited employees from “describing any affiliation with UPMC” which would bar employees from telling anyone where they work and interfere with employees’ Section 7 rights to complain about their working conditions. Id. at 18-21.

Questions Remain

The UPMC ruling demonstrates the difficulty that employers face when attempting to apply the Board’s broad pronouncements.

For example, the judge summarily rejected UPMC’s argument that “the hospital setting warrants unique restrictions on use of electronic communications.” Id. at 22 n.11. On one hand, UPMC is subject to onerous regulations concerning patients’ sensitive medical and private information. On the other hand, recent research indicates that a significant percentage of employees view access to social media during the workday as a necessity. (For example, an April 2013 Survey conducted by Intelligent Office found that a third of 1000 employees surveyed say they will not work for a company that has banned or blocked social media sites in the office.) The judge refused to grapple with these nuanced issues and advised that employers can simply avoid the problem by banning all non-work use of email. Id.

Perhaps more troubling, the judge likewise rejected UPMC’s effort to prohibit employees from using the company’s logos on social media sites. The judge acknowledged that employers have a right to prohibit trademark and copyright infringement but insisted that “[e]mployees have a Section 7 right to display a [company] logo as part of their Section 7 communications.” Id. at 20. Thus, the UPMC ruling leaves employees free to slap company logos on their private non-work (and unauthorized) posts – even though their views may be offensive, disruptive, or harmful to the company’s interests and even though the presence of logos may suggest that the company endorses the employees’ views.

Practical Tips for Employers

As UPMC demonstrates, employers do not have to permit any non-work employee use of email or social media. But, if they do, they must carefully fashion exceptions and restrictions so as not to interfere with employees’ Section 7 rights to engage in protected concerted activity. The judge highlighted some ways that UPMC could have drafted its policies to avoid these problems:

1. Narrowly Tailor Policies: Because UPMC’s exceptions and prohibitions were too broad and ambiguously worded, they were open to interpretation. The judge assumed the broadest possible interpretation and found the policies, as written, overbroad. Employers should carefully construct social media policies to avoid these pitfalls.

2. Carve-Outs: UPMC could have carved out protected concerted activity from its otherwise overbroad policies (but employers should note that such “savings clauses” are not silver bullets by any means).

3. Illustrations/Guidance: UPMC could have provided “illustrations or guidance” to assist employees in interpreting its policies.

The union has stated that it plans to appeal the portion of the ruling upholding UPMC’s Solicitation Policy to the Board; UPMC has not indicated whether it will appeal the remainder of the ruling. Stay tuned.

EEOC Redux: Federal Judge Holds California State Agency Exempt From Rule 23 Requirements

Seyfarth Shaw LLP — Fri, 26 Apr 2013 17:00:53 -0600

By Courtney Bohl and Laura J. Maechtlen

We previously blogged about DFEH v. Law School Admissions Council, Inc., No. 12-CV-1830, 2013 U.S. Dist. LEXIS 57431 (N.D. Cal. April 22, 2013), and the recent motion filed by the California Department of Fair Employment and Housing (“DFEH”), which asked the Court to allow the agency to proceed for “group relief” under the “pattern or practice” framework applicable to EEOC-initiated Title VII enforcement actions, rather than meeting the requirements of Rule 23 for class certification. On April 22, 2013, Judge Edward M. Chen of the U.S. District Court for the Northern District of California determined that the DFEH is not required meet the requirements of Rule 23; instead, because it is pursuing a government enforcement action, the agency is exempt from the requirements of Rule 23 when pursuing a case on behalf of a group of employees.

The ruling is novel, and vitally important for companies facing the prospects of governmental enforcement litigation with state agencies.

Factual And Procedural Background

The DFEH filed suit against the Law School Admission Council, Inc. (“LSAC”), seeking damages and injunctive relief over alleged failures of the LSAC to provide disability-related accommodations to test-takers of the Law School Admission Test (“LSAT”). The DFEH brought its action both on behalf of seventeen named individuals and as a “group or class” complaint on behalf of “all disabled individuals in the State of California who requested a reasonable accommodation for the LSAT from January 19, 2009 to the present.” Id. at 1. The DFEH alleged several forms of discrimination, including policies or procedures alleged to require test-takers to undergo psycho-educational and neuropsychological evaluations in order to be eligible for an accommodation, and a practice of placing notations on the test score if a test-taker was provided an accommodation, which is disclosed to all schools receiving the test score. Id. at 1-3.

The DFEH brought the current motion claiming that its suit, similar to government enforcement actions brought by the EEOC, is not a “class action” and thus is not subject to the requirements of Rule 23.

The Court’s Ruling

The Court held that the DFEH’s suit against LSAC was indeed a “government enforcement action” seeking relief on behalf of a group of aggrieved individuals and did not qualify as a class action within the meaning of Rule 23. Id. at 27.

In so ruling, the Court first analyzed the U.S. Supreme Court’s ruling in General Telephone Co., of the Nw., Inc. v. EEOC, 446 U.S. 318 (1980), which held that the EEOC could maintain a civil action for the enforcement of a statute under its jurisdiction and may seek relief for a group of individuals without first obtaining class certification under Rule 23. Id. at 10-11. The Court noted that the principle that emerged from General Telephone and post-General Telephone cases is that — where a government agency is authorized to act in the public’s interest to obtain broad relief, and the statute confers this power on the agency without referencing class certification — Rule 23 may not apply. Id. at 18.

Turning to the DFEH, the Court noted that it must examine the nature of the DFEH’s enforcement actions to decide whether or not they are subject to Rule 23’s requirements. Id. at 20. The Court closely followed the Supreme Court’s analysis in General Telephone, starting with the DFEH’s authority. The Court noted that California Fair Employment and Housing Act (“FEHA”) authorizes the DFEH to file administrative charges and to bring civil actions in court for group or class relief. Id. at 21. Additionally, the California Supreme Court has recognized the DFEH as a public prosecutor testing a public right. Id.

Next, the Court analyzed the relationship and potential conflict between Rule 23 and the FEHA. Id. at *24-30. The Court noted that applying Rule 23 to the FEHA would substantially limit the number and types of suits the DFEH could bring on behalf of a class. Id. at 24. For instance, Rule 23 would foreclose actions by the DFEH against employers with a small number of employees because the DFEH would be unable to meet Rule 23’s numerosity requirement. Id. at 28. Similarly, the DFEH’s actions would be limited to claims “typified by those of the original charging party,” even though the FEHA authorizes class claims that are “like or reasonably related to” the original charge. Id. at 28-29. Finally, under FEHA, the DFEH is authorized to proceed with an action even if some class members may appear to be disadvantaged, so long as the suit is advancing the public interest. Id. at 29. Applying Rule 23’s adequate representation requirement to the DFEH, however, would operate to foreclose an enforcement action where a conflict of interest between the DFEH and the members of the putative class existed. Id. at*29.

The Court also evaluated the policy behind distinguishing the DFEH’s action from a Rule 23 class action. Id. at 30-31. The Court reasoned that unlike a private class action, where typicality requirement ensures absent class members are not denied due process of law when they are bound without their explicit consent, in the DFEH case, absent victims are not bound by the outcome of a DFEH suit and may bring a suit against the employer on their own. Id.

The Court finally turned to and rejected the LSAC’s objections. LSAC argued the Court’s ruling would create an untenable conflict between FEHA and Rule 23. Id. at 31-32. The Court dismissed this argument, noting that its decision does not hold that California law trumps Rule 23. Id. at 32. Instead, its decision establishes that certain governmental enforcement actions are simply “not” class actions. Id.

LSAC also argued the Court’s rule would allow “a state statute to prescribe the procedure for pursuing purported class claims in federal court.” Id. at 37-38. The Court rejected this argument, finding that LSAC missed the import of General Telephone. The Court reiterated its ruling that when a government agency pursues class-wide relief through a civil enforcement action, it is not prosecuting a “class action” subject to Rule 23. Id. at 38.

Implications For Employers

This ruling has significant implications for employers, and especially those with operations in California.

While the ruling dictates the procedure by which these cases are litigated, and not the underlying substantive claims, the DFEH’s ability to file class-like litigation outside the procedural requirements of Rule 23 is a significant advantage for the agency. The agency need not prove numerosity, or other Rule 23 requirements. Instead, to prove a pattern-or-practice of discrimination, the agency will follow a burden-shifting framework encompassing two phases of litigation: a liability phase and a remedial phase. In the liability phase of a pattern or practice case, the agency has the initial burden of establishing a prima facie case that discrimination was the employer’s standard operating procedure — that is, the regular rather than the unusual practice. The burden then shifts to the employer to defeat the prima facie showing by demonstrating that the agency’s proof is either inaccurate or insignificant. If an employer fails to rebut the inference created by the prima facie case, the court may award prospective relief without any further evidence from the EEOC, including an injunction against continuing the discriminatory policy.

When a government agency seeks individual relief in addition to prospective relief, a court typically conducts a second “remedial” phase of the litigation to determine the scope of individual relief. Because the court has already found liability based on the existence of a pattern-or-practice of discrimination, it will infer that all decisions were made pursuant to the discriminatory policy at issue in the first phase. Therefore, the government need only show the persons subject to the offending policy, to show that they were potential victims of the proved discrimination. Once this showing is made, the burden shifts to the defendant to demonstrate that the individual claimant was denied an opportunity for lawful reasons. If a legitimate, non-discriminatory reason for the denial of opportunity is presented, the government then has an opportunity to demonstrate that the proffered reason is merely pretext for discrimination.

For these reasons, defense of pattern or practice claims is challenging. The cases tend to be statistically-intensive, and difficult to win on summary judgment. Moreover, in a remedial phase, individualized issues that may not be litigated in a Rule 23 class action are often addressed through a variety and varied array of trial plans determined by federal courts.

Clothed with authority to bring class-wide claims that are not subject to Rule 23’s requirements, the DFEH most likely will perform more expansive investigations into employer’s policies and practices, demand class-wide discovery before a lawsuit is filed, and style its class claims as pattern-or-practice claims on the heels of this important decision. Employers should be on the lookout for these strategies and expect the DFEH to bring more pattern-or-practice litigation in the near future.

Mixed Ruling In EEOC Religious Discrimination Case Confirms That Single Mass Termination Does Not Create A "Pattern Or Practice"

Seyfarth Shaw LLP — Thu, 25 Apr 2013 18:47:13 -0600

By Gerald L. Maatman and Jennifer A. Riley

On April 12, 2013, Judge Laurie Smith Camp of the U.S. District Court for the District of Nebraska issued her summary judgment opinion in EEOC v. JBS USA, LLC, No. 10-CV-318 (D. Neb. Apr. 12, 2013). In a mixed decision, Judge Camp gave the EEOC the benefit of the doubt on its investigation and conciliation efforts, but granted summary judgment on its claims for unlawful termination and retaliation, finding that a single mass termination of 80 employees did not constitute a “pattern or practice.”

We previously have blogged about the EEOC’s companion case pending before Judge Phillip Brimmer in the U.S. District Court for the District of Colorado and its thorny procedural and administrative issues (read more here, here and here). The series of rulings provide a window into the EEOC’s regular practices for prosecuting systemic claims and they are a valuable read for any employer facing large-scale EEOC litigation.

Factual Background

The EEOC filed two lawsuits alleging that JBS USA, LLC, which does business as meat packing company JBS Swift & Company, discriminated against a class of Somali Muslim employees at its facilities in Greeley, Colorado and Grand Island, Nebraska.

In the Nebraska suit, the EEOC alleged that JBS Swift engaged in a pattern or practice of religious discrimination when it failed to reasonably accommodate at least 153 Muslim employees by allowing them prayer breaks. The EEOC also alleged that the company retaliated against the employees and terminated their employment when they requested that the company move their evening breaks so that they could pray at sundown during the month of Ramadan.

JBS sought summary judgment on EEOC’s three pattern or practice claims, and the EEOC sought a ruling as a matter of law that JBS had engaged in a pattern or practice of denying reasonable accommodation. Id. at 3.

The Court’s Opinion On Investigation

JBS argued that the court should grant summary judgment because the EEOC failed to satisfy certain conditions precedent to filing suit, including investigation. Id. at 19.

JBS asserted that Section 707 authorizes only the EEOC to investigate charges of discrimination, and, therefore, the EEOC could not rely on the investigation performed by the Nebraska Equal Opportunity Commission (“NEOC”). The Court disagreed. The Court found that, because Section 707 incorporates the “procedures” set forth in Section 706, and Title VII supports worksharing between the EEOC and state and local agencies, it likewise permitted the EEOC to rely on investigation performed by NEOC. Id. at 21-24.

JBS also asserted that the EEOC failed to satisfy conditions precedent because the investigation was flawed and insufficient. Id. at 24. In rejecting JBS’s argument, the Court distinguished EEOC v. CRST Van Expedited, Inc. (read more here and here). Unlike EEOC v. CRST, JBS did not assert that the EEOC failed to identify or give it notice of the individual claims; rather, JBS asserted that the investigation was inadequate. The Court held that the EEOC enjoys “wide latitude” to investigate charges and, so long as an investigation occurred, the Court cannot review its sufficiency. Id. at 26.

The Court’s Opinion On Pattern Or Practice Claims

JBS also moved for summary judgment on the EEOC’s pattern or practice claims. JBS contended that the EEOC’s religious accommodation claims were inappropriate for pattern or practice treatment because, to show that unlawful discrimination occurred, each alleged victim must demonstrate a sincerely held religious belief. Id. at 30. The Court rejected JBS’s argument, but noted that to the extent individual workers’ beliefs varied, JBS could present this evidence during Phase I to show that accommodation would cause undue hardship. Id. at 31.

JBS also asserted that the EEOC could not make out a prima facie case because it could not show that discrimination was the company’s “standard operating procedure.” Id. at 32. The Court noted that the EEOC failed to produce statistical evidence showing disparities between protected and non-protected workers, but it nevertheless concluded that evidence of JBS’s purported company-wide policies regarding unscheduled prayer breaks created issues of fact for trial. Id. at 35.

Finally, JBS asserted that the EEOC could not establish a pattern or practice of unlawful termination or retaliation based on JBS’s isolated termination of 80 Somali Muslim employees. The Court agreed, noting that “multiple acts of discrimination are required to establish a pattern or practice.” Id. at 38. The EEOC did not allege that JBS adopted a discriminatory termination policy and, although it referred to 80 decisions, the mass termination was a single action in response to the events of a single day. Id. at 39.

Implications

Although a mixed bag, EEOC v. JBS contains some bright spots for employers. Most notably, Judge Camp rejected the EEOC’s theory that a mass termination is a “pattern or practice” simply because it involves multiple employees. Further, the Court found that, because the EEOC brought separate actions in separate forums, it could not introduce evidence from its Colorado action to bolster its inadequate claims. The opinions in both EEOC v. JBS cases thus provide valuable insight for employers facing large-scale EEOC pattern or practice claims.