Rebecca S. Bjork – Page 2 – Class Action Defense

April 19, 2023 by Gerald L. Maatman, Jr.

Federal District Court in Virginia Rejects Two-Step “Conditional Certification” FLSA Process

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

Duane Morris Takeaways: On April 14, 2023, U.S. District Court Judge T. S. Ellis, III joined in the fray over whether the long-used two-step process for issuing notice of a Fair Labor Standards Act (“FLSA”) collective action is consistent with the text of the statute. In Mathews v. USA Today Sports Media Group, LLC, et al., No. 1:22-CV-1307 (E.D. Va.), he held that it is not. Judge Ellis ordered the parties to engage in limited discovery to establish a factual record upon which he can decide whether members of the plaintiff’s proposed collective action are, in fact, “similarly situated.” If – and only if – he concludes they are, he would then issue a notice allowing such persons to opt-in to the collective action. This ruling is significant because it follows a similar decision by the U.S. Court of Appeals for the Fifth Circuit in 2021, and the Sixth Circuit is currently considering an appeal raising the same issue. Thus, momentum may be building for the U.S. Supreme Court to ultimately step in and settle the issue. The one-step or two-step process is far from academic, for it has everything to do with litigation costs and risks, and the leverage flowing from a win or a loss in the certification battle.

Case Background

Plaintiff filed a collective action lawsuit under the FLSA alleging that USA Today Sports Media Group, LLC (“USA Today”) and Gannett Co., Inc. unlawfully classified her and others like her as independent contractors, and thus denied them overtime pay. From January 2017 to August 2021, Plaintiff was the Site Editor for the Seahawks Wire website, USA Today’s website covering the NFL franchise Seattle Seahawks. In her role, Plaintiff alleges that she and other “similarly situated” Site Editors for other teams all signed the same “Editor Agreement” with USA Today, and that they all engaged in similar duties such as “writing, editing and publishing sports news articles regarding their respective teams; managing others; editing other people’s articles; and making social media posts regarding articles they had written.” (Slip Op. at 2.) She submitted three declarations signed by herself and two others working as site editors for other teams, along with a motion for “conditional certification” of her FLSA collective. (Id.)

USA Today responded by submitting declaration evidence to show that Site Editors have freedom to create their content including how long their articles are, the tone they take, how many are posted each day, et cetera. (Id. at 3.) It also noted that it did not provide any office space, tools, feedback, performance evaluations, or supervisors to Site Editors, and also allowed them to write for other websites. (Id.) In other words, USA Today submitted evidence to show that under the applicable test for deciding whether someone is an independent contractor, Site Editors meet that standard, so they are not misclassified.

As is typical, Plaintiff argued that her lawsuit should proceed immediately as a collective action by issuance of an order sending notice to all of the other Site Editors around the nation. She maintained that she had submitted sufficient evidence under a lenient first step standard in a two-step process that they are all “similarly situated.” (Id. at 1, 4.) Under a test established in 1987 by Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), Plaintiff contended that step one is an “initial ‘notice stage’ determination” that members of the proposed collective action are similar enough to receive a notice of the action and be given the opportunity to opt in. (Id. at 4 (citing Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095 1102 (10th Cir. 2001).) Under this view of the FLSA, a plaintiff need only show “substantial allegations” that they are “victims of a single decision, policy or plan” in order for a notice to be sent – in this case, to all Site Editors nationwide. (Slip Op. at 4.) Plaintiffs then usually receive the right to conduct complete discovery, after which defendants may file a motion to “decertify” the collective action, based on evidence developed during the discovery process.

USA Today responded that the Court should follow the Fifth Circuit’s recent decision in Swales v. KLLM Transp. Servs., LLC, 985 F.4th 430 (5th Cir. 2021), which rejected the longstanding approach developed in Lusardi. (Slip Op. at 4.) It argued that the two-step approach has no basis in the statutory language of the FLSA. Rather, it emphasized that the court must instead make a sound factual determination as to whether proposed opt-in plaintiffs are, in fact, similarly situated and that requires discovery targeted solely to that inquiry. (Id.)

The Court’s Decision

Judge Ellis agreed with USA Today. He ruled that the parties must engage in discovery directed to establishing whether or not Site Editors around the country are similarly situated with regards to their work, the supervision provided (or not) by USA Today, along with the other relevant factors to establish that they were misclassified as independent contractors. He began by noting that the Fourth Circuit had not adopted the Lusardi test, nor had it commented on the Fifth Circuit’s decision in Swales. Rather, the Fourth Circuit has simply stated that district courts have discretion to manage the notice process in FLSA collective actions. (Id. at 5.) Judge Ellis decided that “the correct approach then, as noted by the Fifth Circuit, is the one authorized by FLSA’s text. Courts must determine, at the outset, whether a proposed collective action is ‘similarly situated’ to the named plaintiffs. To make this determination, courts may require limited discovery, targeted only at the factual and legal considerations needed to make the ‘similarly situated’ determination.” (Id. at 6.) He then ordered discovery only of the following – from the plaintiffs the Schedule C or W-2 forms of the named plaintiff and two declarants relating to their work writing sports media blog posts; any employment contracts, offer letters or agreements relating to their work; and one three-hour deposition; and from the defendants the independent contractor agreements; policy documents relating to the independent contractor arrangement; an organizational chart; a three-hour long Rule 30(b)(6) deposition; and a three-hour long deposition of defendants’ declarant filed in opposition to plaintiff’s motion. (Id. at 6-7). The discovery must be completed by May 26, 2023. (Id. at 6.)

Implications For Employers

Our annual class action review analyzed FLSA conditional certification rates, and plaintiffs won 82% of first stage conditional certification motions, but only 50% of second stage motions. Our previous post on these statistics is here. Hence, the stakes are quite meaningful in terms of the approach outlined in the Matthews ruling.

As any employer who has been sued by a named plaintiff seeking to represent an FLSA collective action knows, the discovery burden imposed by application of the two-step Lusardi decision is far more onerous than what Judge Ellis established in this case. Full merits discovery lasting more than a year is common, as opposed to a narrowly-targeted investigation of the work performed by the plaintiffs along with facts relating to the relevant independent contractor factors. For that reason alone, employers with operations within the Fourth Circuit will be happy to know they can cite Judge Ellis’ ruling in the future. While no one can predict the future with any degree of certainty, it seems likely that this new legal trend regarding the collective action notice process may eventually need to be resolved by the U.S. Supreme Court.

April 6, 2023 by Gerald L. Maatman, Jr.

District Court Declines To Award Additional Attorneys’ Fees In $508 Million Sex Discrimination Class Action Settlement

By Gerald L. Maatman, Jr. and Rebecca S. Bjork

Duane Morris Takeaway: Even when class actions span decades prior to settling, the case seems unwinnable, the settlement contains a vast record, and the outcome was largely favorable to plaintiffs, courts nonetheless might be reluctant to add a “superior attorney performance” lodestar multiplier for an award of attorneys’ fees when the evidence provided by plaintiffs’ counsel is insufficient to do so. This issue was present in the U.S. District Court for the District of Columbia’s recent ruling in the extraordinary 45-year long case of Hartman, et al. v. Blinken, Case No. 77-CV-2019 (D.D.C. Mar. 31, 2023).

The ruling is a must read for any corporate counsel involved in class action litigation.

Case Background

Hartman was originally filed on Nov. 25, 1977 by over 1,000 female plaintiffs alleging that they were discriminated against by the United States Information Agency on the basis of their sex in violation of Title VII of the Civil Rights Act when they were allegedly passed over for hiring or promotions at the agency. The resulting litigation continued for decades, until the last several years, which involved negotiations between the plaintiffs’ counsel and the United States Department of State, the resulting defendant following the dissolution of the U.S. Information Agency. In 2000, the parties entered into a consent decree that provided for a $508 million settlement fund for the class and for “reasonable attorneys’ fees, expenses, and costs.” Id. at 2. The parties also settled more than 20 interim attorneys’ fee requests. Id.

The class action settlement constitutes the largest employment discrimination class action settlement ever.

In 2018, after all settlement funds were issued, plaintiffs filed a motion for a final determination of attorneys’ fees, seeking an additional award of $34 million as an enhancement to the lodestar amount.

Following an extensive evaluation and analysis of the previously awarded attorneys’ fees, the court denied plaintiffs’ request. It ruled that although the lodestar fee that had been awarded up to that point was “likely not an adequate measure of class counsel’s true market value,” plaintiffs had failed to properly identify information necessary for the court to approve a modification to the award. Id. at 3. Specifically, the court noted that plaintiffs had not submitted information regarding the “Laffey Matrix rates” used to calculate interim fees over the past several years, and failed to provide interest rate differences between the 1-year Treasury bill rate and the prime rate. Id. at 3-4.

The parties thereafter stipulated that defendants: (i) would pay plaintiffs $9,033,600 to resolve any issues concerning the use of the below-market Laffey Matrix rates and the Treasury bill interest rate; (ii) that the value of the base lodestar for the enhancement was $19 million; and (iii) that all other claims based on delay of fees, true market lodestar value, or interest paid on the interim fee awards were fully resolved. Id. at 4. The only remaining issue, identified by the parties as a potential dispute, was the possibility of a lodestar enhancement for “superior attorney performance” or “exceptional results.” Id.

Plaintiffs thereafter filed a motion for a lodestar enhancement based on “superior attorney performance.” The court denied the motion.

The Court’s Ruling

The court reviewed plaintiffs’ request under the D.C. Circuit’s “three-part analysis to assess appropriate fee awards under fee-shifting statutes in cases involving complex federal litigation.” Id. at 5. Under that framework, the third part of the analysis, or whether the use multiplies as warranted, was applicable here. Id.

Plaintiffs asserted that exceptional results and superior lawyering justified enhancement of the lodestar because it did not account for: (i) the results obtained; (ii) “the preclusion of other employment by committing both human and capital resources to the case;” (iii) “the duration of the case;” (4) “the ‘undesirability’ of the case;” and (iv) “awards in similar cases.” Id. at 10.

The court essentially found that none of the factors warranted a lodestar enhancement, as all factors were already accounted for in other areas of the lodestar determination. The court explained that any special results obtained should be already reflected in the reasonableness or the hourly rates. The court also noted that the complexity and voluminous nature of the record materials would be reflected in the overall number of hours billed. The court also stated that plaintiffs failed to show how any special commitment of human or capital resources was not already reflected in the lodestar.

As to plaintiffs’ argument that the case was “undesirable” and thus an enhancement was warranted, the court ruled that plaintiffs failed to identify specific evidence demonstrating that the case was undesirable, which was required under pertinent case law. Further, any societal implications from plaintiffs’ victory could not be measured in an objective way by the court in order to provide a lodestar enhancement.

The court concluded by emphasizing that the decision not to multiply the lodestar should not be taken to diminish the “resounding success plaintiffs’ counsel achieved.” Id. at 13-14. However, the court ruled that this case was not the “rare” or “exceptional” case in which “specific evidence” supports an “objective and reviewable basis” for enhancement of the lodestar. Id. at 14. The court thereby denied plaintiffs’ request for an enhancement of the lodestar amount.

Implications For Employers

Fee awards are discretionary, but the ruling in Hartman demonstrates the high standard of evidence required for an enhancement award. This decision is an excellent reference for defense efforts to fight attorneys’ fees awards in large-scale class actions.

January 30, 2023January 30, 2023 by Gerald L. Maatman, Jr.

Delaware Says Corporate Officers Are Now Subject To A Duty Of Oversight In The Workplace Harassment Context

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

Duane Morris Takeaways: In a new legal development of significant import, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies. In its ruling in In Re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Delaware Court of Chancery determined that like directors, officers are subject to oversight claims. This decision expands upon the rule established in the case of In Re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), which recognized the duty of oversight for directors. The decision will likely result in a flurry of litigation activity by the plaintiffs’ bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment.

Introduction

On January 25, 2023, the Court of Chancery for the State of Delaware issued a ruling that will have a substantial impact on shareholder derivative lawsuits, especially as they implicate allegations of workplace harassment. For the first time, corporate officers may be held liable for breach of the fiduciary “duty of oversight.” This ruling is likely to result in a multitude of court filings as the contours of this new legal rule are tested in litigation filed by plaintiffs’ attorneys. This represents yet another reason for companies to boost their efforts at corporate compliance and to ensure that robust complaint reporting and investigation systems are in place to protect employees who claim they are victims of discrimination, sexual harassment, and retaliation.

The Facts Underlying The Delaware Ruling

In In Re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Court found that Defendant David Fairhurst, who served as Executive Vice President and Global Chief People Officer of McDonald’s Corporation from 2015-2019, was liable to stockholders of McDonald’s for his failure to fulfill his fiduciary duty to fulfill his oversight role over human resource practices and policies. As the Court explained, Fairhurst “breached his fiduciary duties by allowing a corporate culture to develop that condoned sexual harassment and misconduct” and “breached his duty of oversight by consciously ignoring red flags.” (Slip Op. at 1.) The Court therefore denied Fairhurst’s motion to dismiss, clarifying that under the logic of Caremark, Delaware law does recognize a duty of oversight for corporate officers.

To prevail in their claims against Fairhurst, the plaintiffs had a legal challenge to surmount, in that no court had found that officers as opposed to directors had a duty of oversight in light of misconduct within a corporation. Even more, Delaware law presumes that directors and officers act in good faith when making decisions. Id. at 3. But the plaintiffs did have sufficient and specific facts on their side, which the Court discussed in detail.

McDonald’s has its principal place of business in Chicago, Illinois, and has a global workforce that exceeds 200,000 individuals. Id. at 5-6. The Complaint alleged that the Chicago headquarters of the Company had a “party atmosphere” that was encouraged by former CEO Stephen J. Easterbrook and Fairhurst, who were close personal friends. Id. at 7. Weekly happy hours featured an open bar, and “Easterbrook and Fairhurst developed reputations for flirting with female employees, including their executive assistants.” Id. Importantly, the plaintiffs alleged that the process for reporting human resource complaints (a company function directly under Fairhurst’s control) failed to address complaints sufficiently. Between 2016 and 2018, more than a dozen complaints were filed with the EEOC by employees who alleged sexual harassment and retaliation. Id. at 8. In December 2018, McDonald’s employees in ten cities went on strike in protest, attracting the attention of the U.S. Senate. Id. at 8-9, 12.

Plaintiffs also alleged that Fairhurst engaged in acts of sexual harassment in December 2016 and November 2018, and was warned about his use of alcohol at company events. Id. He was terminated in November 2019 after committing yet another act of sexual harassment. Id. And in October 2019, the Board of Directors learned that Easterbrook was engaging in a prohibited relationship with an employee, and he was terminated after an investigation by outside counsel. Id. at 15.

The crux of the reasoning behind the Court’s ruling is that an officer of a corporation has a fiduciary duty to oversee the corporation’s activities that fall within his or her role in the corporation. As the Global Chief People Officer at McDonald’s, the Court opined that “[Fairhurst] had an obligation to make a good faith effort to put in place reasonable information systems so that he obtained the information necessary to do his job and report to the CEO and the board, and he could not consciously ignore red flags indicating that the corporation was going to suffer harm.” Id. at 3. Simply put, his human resources role required that he act in good faith to maintain an awareness of potential liability resulting from improper workplace conduct, and the Court found that he did not do so. “Corporate fiduciaries can face liability if they knowingly fail to adopt an internal information and reporting system that is ‘reasonably designed to provide to senior management and to the board itself timely, accurate information sufficient to allow management and the board, each within its scope, to reach informed judgments concerning both the corporation’s compliance with law and its business performance.’” Id. at 24 (citation omitted). Because plaintiffs pled specific facts sufficient to allege that Fairhurst ignored red flags surrounding sexual harassment and the Company’s failed complaint system, the Court denied Fairhurst’s motion to dismiss.

Conclusion

While the Court’s decision is notable because it established a new fiduciary duty applicable to corporate officers, it is not a surprising outcome. The logic of Caremark leads inevitably to this decision, once it is established that corporate officers have real power and obligations within a corporation to manage risk. Because workplace harassment and retaliation claims pose very high risks to a corporation, it is to be expected that an officer responsible for the human resource function will come under strong scrutiny when EEOC charges and lawsuits are filed. The best defense to a high stakes workplace lawsuit is to prevent it from being filed in the first place. Ensuring that the proper systems for reporting and investigating workplace complaints are in place is by far preferable to litigating a case like this one.

January 18, 2023 by Rebecca S. Bjork

When Contract Interpretation Principles Matter: Court Provides A Roadmap For Avoiding Ambiguous And Contradictory Interpretations Of Arbitration Clauses

By Eden E. Anderson and Rebecca Bjork

Duane Morris Takeaway: It is a truism that arbitration is a matter of consent, and consent is embodied in contract law principles. In a recent ruling entitled Querette v. Chromalloy Gas Turbine, LLC, Judge Philp Halpern of the U.S. District Court for the Southern District of New York brought those abstract principles into the light of day while forging an interpretation of a collective bargaining agreement containing an arbitration clause and harmonizing seemingly contradictory clauses. In finding in favor of a defendant seeking to arbitrate a dispute with its employees, the Court provided a roadmap of sort that is well worth a read for corporate counsel.

Introduction

Requiring arbitration of workplace disputes unquestionably has become one of the most important legal tools for employers over the past several years. This is in large part due to developments in the law that encourage courts to enforce arbitration clauses that waive the right of employees to bring class actions. Because class action lawsuits are inevitably costly to defend and can out stretch over several years, employers – especially those with large headcounts – have come to rely on arbitration agreements containing class waivers to rein in litigation expenses.

For this reason, the careful drafting of arbitration agreements is very important. Agreements must be drafted in a way that avoids ambiguity and conflicting clauses. If an agreement is ambiguous, a court is more likely to construe it against the drafter, which often means denying motions to compel arbitration and allowing class claims to proceed in court. And if an agreement contains conflicting or contradictory clauses it is easier for a party to argue that it cannot be enforced. In such a case, the court must work to try and harmonize the conflicting clauses. Contract law assumes each clause was included for a reason, so courts attempt to avoid interpretations that would render a clause meaningless.

The Ruling In Querette v. Chromalloy Gas Turbine, LLC

These basic principles of contract interpretation played out in interesting ways in a recent case decided by District Court Judge Philip M. Halpern of the Southern District of New York. In Querette v. Chromalloy Gas Turbine, LLC, No. 22 Civ. 00356 (S.D.N.Y. Jan. 10, 2023), the Court was asked to compel arbitration of a class action filed under New York Labor Law §191(1)(a) that requires employers to pay their employees on a weekly basis. Relying on contract law principles, the Court sided with the defendant and ordered the plaintiff’s claim to be arbitrated.

The agreement at issue was the product of collective bargaining. Article 14 of the collective bargaining agreement (“CBA”) sets forth a multi-step grievance procedure that members of the union who have a dispute with the employer must follow. That process culminates in arbitration before the American Arbitration Association (“AAA”) to resolve the dispute. Id. at 2.

Section 14.F. of the CBA states that “Any and all grievances and all issues arising from and relating thereto, including the interpretation and application of this section shall be governed by, construed in accordance with and processed pursuant to AAA’s then existing rules governing labor disputes, which rules are fully incorporated herein.” Id. Section 14.G. of the CBA then provides that the grievance process is the sole mechanism for resolving disputes between employees and the employer, with two exceptions. That section states, in relevant part, “Except for resort to the agencies and/or courts charged with the enforcement of the laws enumerated in Article I herein, and except with further resort to the National Labor Relations Board, it is the intention of the parties that employees will look exclusively to this Agreement for the resolution of all disputes under this Agreement.” Id. at 2-3. Article I identifies several federal and state discrimination and family leave laws, but does not include state or federal wage and hour laws.

Section 14.I contains the second carve-out, ensuring a “Right of Representation and/or Counsel for Parties Only,” which preserves the right of union members to be “individually represented by private counsel as to any alleged right, only that any such alleged right must be pursued in a forum other than under this Article.” Id. at 3. In other words, Section 14.I appears on its face to carve out from the arbitration requirement any case brought by an employee who has retained private counsel. Reading the clause that way contradicts the mandate that all disputes between an employee and the employer must be subject to the grievance process spelled out in the CBA.

The plaintiffs contended that Section 14.I applied to their claim because they had retained private counsel to pursue their class action wage claim, so it could not be compelled to arbitration under the express and unequivocal language in that clause. The Court did not agree, and reached its conclusion by way of the very basic principles of contract interpretation explained above; reading a contract in a way that avoids ambiguity and conflicting clauses.

Basis Of The Court’s Opinion

First, the Court was required to determine whether it or an AAA arbitrator had the authority to determine if the dispute was arbitrable in the first place. The AAA rules provide that arbitrability is for an arbitrator to decide. However, the Court noted correctly that the U.S. Supreme Court has held that courts must not assume that the parties agreed to assign arbitrability to an arbitrator unless there is “clear and unmistakable evidence” of the parties’ intent to delegate that issue to an arbitrator. The court applied Second Circuit case law precedent holding that incorporation of the AAA rules alone does not per se show an intent to delegate arbitrability; rather “context matters.” Id. at 6. The context that mattered to Judge Halpern was the fact that the CBA was not so broad as to claim to cover each and every dispute between an employee and the defendant. He reasoned that the carve out for discrimination and family leave claims, along with the private counsel carve out itself, created ambiguity as to the parties’ intent to delegate arbitrability decisions to an arbitrator. And ambiguity means there is not clear and unmistakable evidence of the intent to delegate. Thus, the Court concluded it must decide arbitrability.

Second, the Court found that the private counsel carve-out did not exempt the plaintiff’s claims from the CBA’s arbitration requirement. Id. at 8. Applying the rule that contract interpretation must not render clauses contradictory to one another, the Court read the agreement in a way that gave meaning to both the requirement to arbitrate disputes and the private counsel carve out. The Judge opined that if the plaintiffs could hire private counsel as a way to evade the CBA’s arbitration requirement in every type of case, not just the discrimination and family leave act claims enumerated in Article I of the CBA, that would render the grievance procedure culminating in arbitration meaningless.

Because the CBA was the product of extensive and careful negotiation, the Court concluded that could not be the intent of the parties. Limiting the private counsel carve out to only discrimination and family leave cases allowed both clauses to have meaning. Id. at 8-9. In this way, the Court harmonized seemingly contradictory clauses in the CBA, and ordered the plaintiff’s wage law claim to arbitration.

Implications For Employers

It is not clear from the decision whether the arbitration itself can proceed on a class-wide basis, as there is no discussion of whether any class waiver exists in the CBA. Nonetheless, the Court’s order represents a master class in how to properly apply contract interpretation principles and enforce all clauses in arbitration agreements.

November 7, 2022 by Gerald L. Maatman, Jr.

What Employers Should Know About The EEOC’s Draft Strategic Plan For FY 2022-2026

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

Duane Morris Takeaways: On November 4, 2022, the U.S. Equal Employment Opportunity Commission released a preliminary draft of its 2022-2026 Strategic Plan. According to its preliminary draft, the EEOC plans to focus its internal operations over the next four years to make changes that it hopes will improve its performance securing targeted injunctive relief and conducting systemic investigations, along with its use of technology to process charges and conciliate them. The four-year plan – which is distinct from the EEOC’s strategic enforcement plan, still to be released in the coming months – was published in the Federal Register and is open for comment until December 4, 2022. Even if employers do not submit comments, they would be well-advised to review the draft and final Plan once it is announced because it provides a window into the EEOC Commissioners’ thinking for how the agency will use its resources to redress and deter workplace discrimination.

Introduction

Every four years, the EEOC prepares a Strategic Plan that drives how it will improve its internal operations to better enforce federal anti-discrimination laws. The Plan for 2022-2026 that has now been published in the Federal Register is important because once it is finalized after the review and comment period expires, it will set forth specific goals along with performance metrics to measure how well those goals are being met. The key elements of the draft Plan and why they are important are critical data points for employers.

Operational Improvements And Performance Metrics Sought By The EEOC

The 2022-2026 Strategic Plan draft signals that when investigating private sector employers, the EEOC will focus its internal operations on four key areas. First, the EEOC will ensure that by FY 2025, “90% of EEOC conciliations and litigation resolutions contain targeted, equitable relief and that level is maintained through FY 2026.” (Draft Strategic Plan at 15.) The draft Plan explains the EEOC’s view that such a goal likely would improve compliance with the statutes enforced by the agency nationwide.

Second, between FY 2022 and 2026, the EEOC aims to continue to “favorably resolve at least 90% of enforcement lawsuits.” (Id. at 16.) On this point, the EEOC explains that because its systemic litigation program is resource intensive, this goal is important to enable the agency to use its resources in a wise and efficient manner. Employers who have faced systemic lawsuits are well-aware of the amount of litigation resources they can consume, both for the companies involved and the EEOC.

Third, “In each year through FY 2026, the EEOC will provide training to all field staff on identifying and investigating systemic discrimination, and at least 90% of investigators and trial attorneys will participate in systemic training each year.” (Id.) The draft Plan explains that the purpose of this goal is “expanding the EEOC’s capacity to conduct systemic investigations, resulting in a coordinated, strategic, and effective approach to systemic enforcement.” (Id.) This likely signals that the draft Strategic Enforcement Plan will continue to emphasize and prioritize the EEOC’s use of pattern or practice lawsuits to enforce the statutes over which Congress gave it authority.

Fourth, “the EEOC will make significant progress toward enhanced monitoring of conciliation agreements, leading to a more robust compliance program.” (Id. at 17.) The Commission’s focus here is to implement “streamlined and standardized procedures, improved tracking and internal reporting mechanisms, and related training for EEOC field staff” to ensure that conciliation agreements are reached and enforced. (Id.).

Finally, the EEOC continues to be aware that its charge intake process needs work. The draft Plan pledges to leverage technological advancements to “enhance its intake services to potential charging parties, respondents, and representatives.” (Id. at 19.)

Implications For Employers

The EEOC’s FY 2022-2026 draft Strategic Plan is a document that provides insight into the direction the agency will take to improve how it functions.

With a nod the old E.F. Hutton TV commercial, “when the EEOC speaks, employers should listen…”

October 11, 2022October 17, 2022 by Class Action Defense

California Dreaming For Employers: U.S. Supreme Court Orders California State Court of Appeal To Reconsider Denial Of Arbitration In PAGA Case

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

Duane Morris Takeaways: On October 3, 2022, the Supreme Court of the United States granted certiorari, reversed, and remanded a case seeking review of a motion to compel arbitration in a California Private Attorney General Act (“PAGA”) labor law case entitled Dolgen California, LLC v. Galarsa, No. 21-1444 (U.S. Order List, Oct. 3, 2022). Granting Dollar General’s specific request, the Supreme Court ordered the California Court of Appeal to reconsider its decision affirming a trial court’s denial of the company’s motion to compel arbitration. That court held that the waiver of representative actions in the plaintiff’s arbitration agreement was unenforceable under California law. This is only one of several cases pending in California courts involving arbitration agreements that waive an employee’s right to bring a representative action under the PAGA that are being revisited in light of the U.S. Supreme Court’s ruling in Viking River Cruises, Inc. v Moriana (No. 20-1573, June 15, 2022). As a result, employers will soon have a better understanding of how PAGA representative action waivers will be interpreted in California within the now-controlling framework of the Federal Arbitration Act.

The Holding In Viking River Cruises, Inc. v. Moriana

Earlier this year, on June 15, 2022, the U.S. Supreme Court issued its long-awaited ruling in Viking River Cruises, Inc. v. Moriana. Companies with California-based workforces watched the case closely because it represented an opportunity to clarify the extent to which a court-made rule established by the California Supreme Court back in 2014 could co-exist with the Federal Arbitration Act (“FAA”). The FAA has long been found to favor the enforcement of arbitration agreements, including waivers of class and other representative claims. But the California Supreme Court’s decision made it impossible for class waivers to be enforceable under state law as a result of its decision in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 387-88 (2014) (holding that a “PAGA claim lies outside the [FAA]’s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship,” but is instead “a dispute between an employer and the state”).

In a complex and lengthy opinion, the Supreme Court held in Viking River that “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Slip Op. at 20.) “This prohibition on contractual division of PAGA actions into constituent claims unduly circumscribes the freedom of parties to determine ‘the issues subject to arbitration’ and ‘the rules by which they will arbitrate,’ and does so in a way that violates the fundamental principle that ‘arbitration is a matter of consent[.]’” (Id. at 18 (citations omitted).) In short, representative PAGA claims can now be subject to waiver in an arbitration agreement because “state law cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate.” (Id.)

Dollar General’s Petition For Certiorari

Dollar General filed a petition for certiorari while Viking River was pending, expressly asking the Supreme Court to hold the petition pending a decision in that case. It requested that once Viking River was decided, the Supreme Court should at that time grant Dollar General’s petition, vacate the California Court of Appeal decision below, and remand the case to that court for reconsideration in light of Viking River (known to Supreme Court practitioners as a “GVR” order). The facts in the Dollar General case are strikingly similar to those at issue in Viking River, and the company’s petition described the question presented as “Does the FAA require enforcement of a bilateral arbitration agreement providing that an employee cannot assert representative claims, including under PAGA?”

The U.S. Supreme Court’s GVR Order

On October 3, 2022, the Supreme Court did what Dollar General expressly asked it to do. (See Order List, Oct. 3, 2022.)

As is typical with GVR orders, there is no explanation of the reasoning behind the order, except that the California Court of Appeal is instructed to apply the reasoning of Viking River on remand. The California Court of Appeal now will soon reconsider its affirmation of the trial court’s denial of Dollar General’s motion to compel the plaintiff’s claim to an individual, non-representative arbitration proceeding.

Implications For Employers

Employers have long known that if they have operations in California, special attention must be paid to state law provisions that impose restrictions on employment practices unlike those in any other state. Now that the U.S. Supreme Court has ruled that the FAA preempts the court-made rule of Iskanian that precluded splitting representative PAGA claims from individual claims, it is likely that California courts will modify their enforcement of representative action waivers in arbitration agreements. But because this is California, wary employers would be wise to stay tuned for further developments in this rapidly changing area of the law.

October 10, 2022October 17, 2022 by Class Action Defense

Don’t Mess With Texas: Federal Judge Rules That The EEOC’s Guidance On LGBTQ Employees And Bostock Is Invalid

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!