October 2022 – Page 2 – Class Action Defense

By: Gerald L. Maatman, Jr., Jennifer A. Riley, and Rebecca S. Bjork

Duane Morris Takeaways: On October 1, 2022, in Texas v. EEOC, No. 21-CV-194 (N.D. Tex. Oct. 1, 2022), Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas ruled that the EEOC’s guidance on Bostock v. Clayton County, Georgia, 140 S.Ct. 1731 (2021), was invalid and unlawful. The EEOC’s guidance sought to delineate workplace protections for LGBTQ employees relative to general workplace policies, including obligations related to dress codes, use of bathrooms, and preferred pronouns. The Court agreed with the legal challenge mounted by the State of Texas over the Commission’s guidance. While the final chapter on these issues is far from written, employers should consider the ruling in Texas v. EEOC as part of a broader analysis of EEOC workplace regulations and the ever expanding array of issues involving appropriate workplace personnel policies.

The EEOC’s Guidance

On June 15, 2021, the Commission issued guidance on its interpretation of Bostock on the one-year anniversary of the U.S. Supreme Court’s ruling. Bostock, in a 6 to 3 decision, held that Title VII of the Civil Rights Act of 1964 prohibits discrimination against employees based on their sexual orientation or gender identity.

The EEOC’s guidance on Bostock – which can be accessed here – asserted that employers were obligated to accommodate LGBTQ employees regarding dress codes, use of identifying pronouns, and bathrooms and locker rooms. Critics of the Commission claimed that the guidance went far beyond the holding in Bostock and constituted impermissible rulemaking.

The Legal Challenge Of Texas

In what only can be deemed an extraordinary legal challenge, the Texas Attorney General sued the EEOC and sought declaratory and injunctive relief to invalidate the EEOC’s guidance and enjoin its enforcement and implementation. The lawsuit also challenged an analogous set of regulations issued by the U.S. Department of Health and Human Services (“HHS”). After rulings on procedural issues, Texas brought a motion for summary judgment on the grounds that: (i) the guidance of both agencies was inconsistent with the law; (ii) was arbitrary and capricious; and (iii) constituted improper rulemaking without following applicable notice-and-comment rulemaking procedures under the Administrative Procedure Act (“APA”).

The Court’s Decision

Judge Kacsmarky agreed with Texas, rejected the positions of the EEOC and the HHS, and granted summary judgment against the agencies.

The key aspect of the decision focused on the reach of Bostock. Judge Kacsmarky opined that the U.S. Supreme Court confined its ruling to a holding that Title VII banned workplace bias due to an employee’s “homosexual or transgender status.” Id. at 6. In analyzing Bostock, Judge Kacsmarky determined that the EEOC and the HHS misread the Supreme Court’s opinion. Id. at 7-14. He held that Bostock did not extend to “correlated conduct,” such as dress, bathrooms, use of pronouns, or healthcare practices. Id. at 4.

Based on this reasoning, Judge Kacsmarky ruled that the EEOC and HHS violated Title VII and the APA by issuing what he deemed the equivalent of substantive, legislative rules through improper procedures. As a remedy, he declared the guidance unlawful, set it aside, and awarded attorneys’ fees and costs to Texas.

Implications For Employers

The ruling in Texas v. EEOC reflects a judicial finding that the Commission acted inappropriately in attempting to push the legal envelope in terms of how Bostock should be read to obligate employers to accommodate LGBTQ employees in the workplace. That said, the ruling is unlikely to shut down the Commission’s efforts to push for expansive interpretations of the boundaries of Title VII. Employers can expect the Commission to pursue other test cases and litigate over the interpretation of Bostock for the foreseeable future. Furthermore, the Commission is apt to appeal the ruling in Texas v. EEOC to the U.S. Court of Appeal for the Fifth Circuit. Stay tuned!

By: Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik

Duane Morris Takeaways: In Lincoln v. Apex Human Services LLC, Case No. 22-CV-341, 2022 U.S. Dist. LEXIS 175714 (E.D. Pa. Sept. 28, 2022), Judge Harvey Bartle III of the U.S. District Court for the Eastern District of Pennsylvania denied Plaintiff’s motion for conditional certification a proposed collective action of over 100 registered nurses who alleged they were misclassified as independent contractors and owed unpaid overtime. Since conditional certification is typically granted at a rate of nearly 80% in wage & hour collective actions, the employer-friendly ruling in Lincoln is well-worth a read by corporate counsel. The decision can be used by businesses to defend against FLSA misclassification claims where the named plaintiff fails to establish that they are similarly-situated to other proposed collective members.

Case Background

Plaintiff sued Defendants under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., the Pennsylvania Minimum Wage Act, 43 P.S. § 333.104 et seq., and the Pennsylvania Wage Payment and Collection Law, 43 P.S. §260.1, et seq. She alleged that Defendants misclassified registered nurses (“RNs”), licensed practical nurses (“LPNs”), and other providers as independent contractors, thereby denying them required overtime pay and other employee benefits. Id. at *1. Plaintiff moved for conditional certification and judicial notice under Section 216(b) of the FLSA.

The Court’s Decision

The Court denied Plaintiff’s motion for conditional certification.

The Court explained that Third Circuit case law has developed a two-tiered test to determine whether employees are similarly-situated for purposes of allowing an FLSA representative action to proceed. Id. at *2 (citations omitted). Relevant here, the court first conducts a preliminary inquiry into whether employees are similarly-situated. Id. at *2-4.

Plaintiff argued that conditional certification was appropriate for three reasons, including: (1) all current workers were subject to Defendants’ uniform policy of failing to pay overtime; (2) all former workers were subject to Defendants’ uniform policy of failing to pay overtime; and (3) Plaintiff met the lenient standard of showing that workers were similarly, if not identically, situated. Id. at *4-5. To support her arguments, Plaintiff offered three types of evidence, such as her signed independent contractor agreement; texts messages between the plaintiff and one individual Defendant; and one pay stub from 2019 and four pay stubs from 2020 showing that taxes were not withheld from her pay. She claimed that this evidence was sufficient to meet the standard for conditional certification, which only requires a plaintiff to show “modest evidence, beyond pure speculation,” that the class members are similarly-situated. Id. at *5 (citation omitted).

The Court rejected Plaintiff’s position. It held that Plaintiff failed to present any evidence showing that she was similarly-situated to other proposed collective action members. Citing three other cases from the Eastern District of Pennsylvania, the Court noted that the plaintiffs in those cases presented some evidence, typically through affidavits or declarations, of how their individual situation was like that of other proposed collective members. Id. at *6. Here, Plaintiff merely alleged that there are over 100 Apex workers who were misclassified as independent contractors and denied overtime pay. The Court opined that the evidence Plaintiff provided was specific only to her situation, such as her own contract, text messages and pay stubs. As a result, the Court determined that Plaintiff failed to provide even minimal evidence that she and the proposed collective members were similarly-situated. Id. at *6.

For these reasons, the Court denied Plaintiff’s motion for conditional certification.

Key Takeaways For Employers

In FLSA misclassification cases, it is not uncommon for plaintiffs to seek the Court‘s approval to pursue these matters as collective actions. In situations where a named plaintiff fails to provide limited (or any) evidence regarding how they are similarly-situated to other proposed collective members, employers can use the decision in Lincoln to defend against motions for conditional certification. This strategy can result in a court prohibiting the named plaintiff from disseminating notice, or in other words, reduce a case from having potentially hundreds of plaintiffs down to a single plaintiff.