By Laura J. Maechtlen and Robb D. McFadden

With the newfound ability to file civil actions seeking unlimited monetary relief, the California Department of Fair Employment and Housing (DFEH) is promising to flex its muscle by filing class actions challenging systemic discrimination under the California Fair Employment and Housing Act (FEHA). Quietly, the DFEH is also moving to capitalize on its expanded powers by altering the traditional burdens of proof in class action lawsuits. Taken together, the DFEH appears to be piggybacking on the EEOC’s strategic enforcement plan discussed here, and positioning itself as an agency uniquely qualified to investigate discriminatory practices and seek relief on a class-wide basis. 

New Authority and Leverage

A 2012 state budget trailer bill revolutionized the Fair Employment and Housing Act —California’s broader and more stringent version of Title VII — and radically changed the way FEHA is administered and enforced. Beginning in 2013, the DFEH now has the authority to file cases directly in court, to seek unlimited compensatory damages, and to recover reasonable attorney’s fees and costs as the prevailing party. 

DFEH Director Phyllis Cheng has been quoted in online articles, saying that these changes will “transform civil rights enforcement in California” and “raise[] the bar on the seriousness of cases [the DFEH] prosecute[s].” See “More Class Suits Ahead,” Law 360 (March 25, 2013).  Echoing the sentiments in the EEOC’s strategic enforcement plan, Cheng believes that class actions are “a good way to pool resources” and “be much more effective.” Id. She also indicated that they would catch employers’ attention and pressure them to comply with the law. 

Post Wal-Mart

Cheng believes that heightened class certification standards at the federal level in the wake of Wal-Mart Stores, Inc. v. Dukes, will make it “much hard for plaintiffs to bring class actions nationally,” forcing them to file regional class actions. Id. At the same time, recent state court decisions in Harris v. Santa Monica and Chavez v. City of Los Angeles will reduce plaintiffs’ overall recovery and make it harder to establish liability. Consequently, there “is going to be more activity at the department, and more complaints will stay within the department.” Id.   

As the largest state civil rights agency in the country, the DFEH sees itself as uniquely positioned to bring regionally-based class action lawsuits that would pass muster under Rule 23. Nonetheless, the DFEH realizes that it would be much easier if it was exempt from Rule 23 entirely.

 Circumventing Rule 23

Taking a page out of the EEOC’s playbook, the DFEH recently filed a motion in DFEH v. Law School Admissions Council, Inc., No. CV 12-1830-EMC (N.D. Cal.), to proceed for “group relief” under the “pattern or practice” framework applicable to EEOC-initiated Title VII enforcement actions, rather than as a class action under Rule 23.  Briefs can be accessed here, here and here. 

Unlike traditional class actions where a class must be certified before the case proceeds to trial, no class is certified in pattern or practice cases filed by the EEOC. Pattern or practice claims are tried in two phases: during the first phase, the government bears the burden of proving by a preponderance of evidence that a “pattern or practice” of discrimination existed (i.e., that there was a discriminatory policy in effect or that there was a pattern of discriminatory actions). If the government meets its burden, the trial proceeds to a remedial phase where all similarly situated individuals are presumed to have been discriminated against and it is the employer’s burden to disprove this presumption on a person-by-person basis. 

The DFEH’s motion to proceed under the pattern or practice framework will be heard by Judge Edward M. Chen on April 4, 2013. As an issue of first impression, Judge Chen’s ruling could have a major impact on the DFEH’s enforcement strategy.

Implications for Employers

The DFEH is under new management and it’s playing by new rules. Taking a page out of the EEOC’s recently-adopted strategic enforcement initiative and litigation procedures, the DFEH clearly intends to flex its muscle by pursuing impact litigation challenging systemic discrimination. Going forward, employers should expect more robust DFEH investigations focused on potentially unlawful policies or practices, a greater emphasis on administrative subpoenas seeking class-wide discovery before a lawsuit is even filed, and class action lawsuits styled as pattern or practice claims. Employers served with DFEH charges should take them seriously, ensure the company is conforming to all elements of applicable statutes and regulations, and immediately contact their employment counsel if a pattern or practice violation is alleged.