About Gerald L. Maatman Jr. and Howard M. Wexler

Gerald L. Maatman Jr. is a partner of Seyfarth Shaw LLP, national employment and labor law firm. He is resident in the firm’s Chicago and New York offices. Howard M. Wexler is an associate in the Labor and Employment group in Seyfarth Shaw’s New York office.

EEOC Settles its First Transgender Suit Filed Under Title VII

As we previously reported, the EEOC has decided to pursue protections for transgender workers under Title VII’s prohibition against sex discrimination and harassment as part of its strategic mission, even though no federal statute, including Title VII, explicitly prohibits employment discrimination based on gender identity or expression.

To this end, the EEOC filed two lawsuits on Sept. 25, 2014 on behalf of transgender workers –EEOC v. Lakeland Eye Clinic, P.A. (Middle District of Florida, Tampa Division) and EEOC v. R.G. & G.R. Harris Funeral Homes Inc. (Eastern District of Michigan, Southern Division) — on behalf of transgender workers.

On April 9, Judge Mary S. Scriven of the U.S. District Court for the Middle District of Florida approved a consent decree entered into between the EEOC and Lakeland Eye Clinic, P.A. settling one of the two lawsuits. The terms of the Consent Decree, including the nature of the programmatic relief required by the EEOC make it crystal clear that this is an area that the EEOC will continue to pursue in 2015 and beyond.

Case Background

In EEOC v. Lakeland Eye Clinic P.A., the EEOC claimed that an organization of healthcare professionals fired an employee because she is transgender, because she was transitioning from male to female, and/or because she did not conform to the employer’s gender-based expectations, preferences, or stereotypes. The complaint alleged that even though the claimant had been performing her duties satisfactorily, she was terminated soon after she began presenting as a woman and informed her employer that she was transgender.

Terms of the Consent Decree

The EEOC and Lakeland Eye Clinic, P.A. reached a settlement during the course of discovery. In full and complete settlement of the claims raised by the EEOC, the parties entered into a Consent Decree which Judge Scriven approved on April 9. The following are highlights of the terms of the Consent Decree:

  • Total payment of $150,000 to the aggrieved employee as well as a neutral letter of reference
  • Revised employer discrimination and harassment policies stating that no employee will be terminated (or harassed) “based on an employee’s status as transgender, because of an employee’s transition from one gender to another, and/or because the employee does not conform to the Defendant’s sex or gender-based preferences, expectations or stereotypes”
  • Managerial and employee training including “an explanation of the prohibition against transgender/gender stereotype discrimination under Title VII” and “guidance on handling transgender/gender-stereotype complaints made by applicants, employees and customers.”
  • Monthly reports to the EEOC every six months certifying compliance with the terms of the Consent Decree
  • Two years of monitoring by the EEOC, including the right to conduct workplace inspections with 24 hours’ notice

Implications for Employers

The theories of liability articulated by the EEOC in this case closely follow the EEOC’s prior landmark administrative ruling titled Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 0120120821 (April 23, 2012) (previously discussed here) in which it held that transgender individuals may state a claim for sex discrimination under Title VII.

We expect that EEOC-initiated ligation on behalf of transgendered individuals will continue to increase given the Commission’s enforcement strategy and desire to “push the envelope” in this area. As we previously advised, employers must be mindful of issues related to gender identity and/or expression that might arise during interviewing, hiring, discipline, promotion and termination decisions. Employers should be particularly vigilant when an employee identifies as transgender, or announces a plan to undergo a gender transition. Stay tuned!

This blog was previously posted on the Seyfarth Shaw website here.

EEOC Issues $245 million Probable Cause Determination against NYC

On April 1, the EEOC’s New York District Office issued a Determination finding probable cause to believe that the City of New York’s Department of Citywide Administrative Services (DCAS) violated Title VII and the Equal Pay Act based on its “pattern of wage suppression and subjective promotion based on…sex, race, and national origin.” In the accompanying conciliation agreement proposal, the EEOC demanded numerous forms of programmatic relief from DCAS (e.g., EEOC monitoring and notice postings) as well as back pay, future pay, compensatory damages and legal fees and costs totaling more than $246 million. For any employer, the EEOC’s position is one that ought to be heeded for “lessons learned….”

The Charge

The Communications Workers of America, AFL-CIO Local 1180 filed a charge of discrimination with the EEOC against DCAS in 2014 on behalf of a class of African-American and Hispanic women who were (or still are) employed as administrative managers in various NYC agencies. The Union asserted that a discriminatory pattern of wage suppression on the basis of sex, race and national origin exists as well as facially neutral policies governing assignment, promotion and wages that have a disparate impact on female African-American and Hispanic administrative managers. To this end, the Union alleged that the minimum salary for administrative managers—which is disproportionately paid to Hispanic and African-American women—has been frozen for many years whereas the maximum salary for administrative managers (positions held primarily by Caucasian males) has increased significantly.

In addition to arguing that the Union did not have standing to file a charge with the EEOC, DCAS denied the allegations of discrimination and provided “a small sample of administrative managers along with their gender, race, agency, salary, and description of their job duties in an attempt to demonstrate that administrative managers do not perform equal work.”

EEOC’s Determination and Proposed Conciliation Agreement

The EEOC agreed with the Union, opening that DCAS’ evidence “was insufficient” and did “not withstand scrutiny.” The EEOC also alleged that DCAS declined to provide certain requested information and “the Commission determines that the silence is an admission of the allegations in the charge, and exercises its discretion to draw an adverse inference with respect to the allegations.”

In addition to its Determination, the EEOC provided a proposed Conciliation Agreement to resolve the charge against DCAS. The Conciliation Agreement, were DCAS to accept it, would require DCAS to, at a minimum, award raises via “an annual step process;” increase the minimum salary for all administrative managers; and agree to “proper oversight, opportunity and enforcement of equal employment,” which would include the appointment of an EEO monitor; amended job descriptions with a revised posting and bidding process; and provision of tuition assistance to union members to “level the playing field” for union members so that they can “effectively compete with their white male colleagues in the workplace.”

With respect to monetary damages the EEOC demanded $188,682,531.00 in back pay, a new starting salary for administrative managers of no less than $92,117.00, $56,922,000.00 in compensatory damages under Title VII, and no less than $1,000,000.00 in legal fees and costs.

The EEOC gave DCAS until April 17, 2015 to provide a written counter-proposal or advise if it did not wish to engage in conciliation. Absent what it deems a “reasonable written counter-proposal” from DCAS, the EEOC warned that it may deem conciliation futile and fail conciliation.

Implications or Employers

The headline grabbing dollar amount requested by the EEOC in this proposed conciliation agreement is certainly staggering and catapults this case into the “one to watch” column. Furthermore, this confirms what we predicted in our EEOC-Initiated Litigation Report – that the EEOC is going to focus this year on recovering large settlements and verdicts to try to make up for low recoveries in fiscal year 2014. As DCAS has already publically stated that it intends on participating in the conciliation process, we will be sure to monitor developments. Stay tuned!

This post can also be found on the EEOC Countdown blog here.


Second Circuit Overturns Rule 23 Class Certification as Individual Inquiries ‘Overwhelm’ Class Issues

On March 4, 2015, the U.S. Court of Appeals for the Second Circuit reversed a District Court’s decision to certify a class action against Nextel Communications, Inc. (“Nextel”) in Johnson, et al v. Nextel Communications, Inc., et. al., which we previously blogged about here. In Johnson, the District Court certified a class action – pursuant to Rule 23(c)(4) – relative to the claims of 587 employees of Nextel who allege that Nextel, and the former plaintiffs’ law firm representing the employees, engaged in various illegal acts against them by entering into a Dispute Resolution Settlement Agreement (“DSRA”) to resolve their employment discrimination claims. The ruling provides yet another interesting spin on Comcast Corp. v. Behrend, 131 S. Ct. 1426 (2013).

Background To The Case

Around 2000, a law firm representing 587 employees (current and former) entered into a DRSA with Nextel to resolve various discrimination claims. As a result of the DSRA, the law firm received $5.5 million in attorneys’ fees as well as an additional $2 million to act as consultants to Nextel on its employment practices. In total, the 587 employees received less than half of the amount that their law firm received as part of the DRSA. As a result, the employees filed two state court actions in Colorado, which resulted in a $1.2 million class-wide settlement against the law firm, with 39 employees opting out of the settlement.

Plaintiffs in Johnson – the 587 individuals whose claims against Nextel were resolved pursuant to the DRSA – sought to certify a proposed liability class against Nextel only as well as a sub-class made up of the 39 employees who-opted out of the Colorado settlements against their former law firm. The District Court granted this motion.

The Second Circuit’s Decision

The Second Circuit reversed the District Court and held that class certification was inappropriate because under Rule 23(b)(3), class-wide issues would not predominate, and individualized issues would “overwhelm” the case. The Second Circuit reasoned that Rule 23(b)(3)’s predominance requirement is more demanding than the Rule 23(a) commonality requirement, and that individual issues must be considered in deciding whether class issues outweigh issues involving individualized proof. The Second Circuit so ruled based on its reading on Comcast Corp.

Against this backdrop, the Second Circuit held that the District Court incorrectly held that New York law should apply in deciding whether the DRSA was enforceable. Rather, the Second Circuit held that the majority of the alleged wrongdoing took place outside of New York, where the individual employees resided, and “where he or she were promised representation.” As such, the Second Circuit held that “the state with the most significant relationship to plaintiffs’ claims is each individual state in which a class member resides and where he or she was promised representation.”

Once the Second Circuit established that the substantive law of each class member’s state applied, “the case for finding predominance of common issues and the superiority of trying this case as a class action diminishes to the vanishing point.” These individualized inquiries associated with looking at the substantive law of each class member’s state “…are not collateral issues that could be determined in individual hearings after common questions are resolved for the class – they go to the heart of defendants’ liability for each class members’ alleged injury” and therefore warranted the denial of class certification. The Second Circuited noted that “the specter of having to apply different substantive laws does not necessarily warrant refusing to certify a class…whereas here, the variations in state law present ‘insuperable obstacles’ to determining liability based on common proof, such variations defeat the predominance of common issues and the superiority of trying the case as a class action.”

Implications for Employers

Workplace class actions are being reshaped before our very eyes as courts across the country apply new Supreme Court precedent. The application of Comcast to class certification in a variety of contexts is still developing in the law. The decision in Johnson adds to the ever growing post-Comcast appellate court decisions on Rule 23 certification and is a must-read for employers caught in the crosshairs of high stakes, “bet the company” class action litigation, whether employment-related or otherwise.

This column previously appeared on the Seyfarth Shaw website, here.

Texas Loses Criminal Background Guidance Suite against EEOC

There continues to be growing firestorm of litigation initiated by the EEOC over hiring checks based on criminal backgrounds. In one of the most high profile cases addressing this issue (that we previously blogged about here and here,) Judge Sam R. Cummings of the U.S. District Court for the Northern District of Texas issued a decision in State of Texas v. EEOC, granting the EEOC’s motion to dismiss a lawsuit brought against it by the State of Texas. The lawsuit regarded Texas’ “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Under Title VII.”

Texas argued that the EEOC did not have the authority to issue the guidance and that the EEOC’s position that Title VII trumps conflicting state laws violates its state sovereignty. Judge Cummings rejected the State’s arguments in this first-of-its-kind attack on the EEOC’s authority.

Case Background

In April 2012, the EEOC issued guidance urging businesses to avoid a blanket rule against hiring individuals with criminal convictions, reasoning that such rules could violate Title VII if they create a disparate impact on particular races or national origins. Like various other states, Texas has enacted statutes prohibiting hiring of felons in certain job categories. In November 2013, Texas sued the EEOC, seeking to enjoin the enforcement of this guidance, which Texas nicknamed the “Felon Hiring Rule.” In March of this year, Texas amended its complaint to include more specific allegations of injury. For example, Texas alleged that the EEOC issued a right-to-sue letter to an applicant who had been rejected by the Texas Department of Public Safety, after disclosing on his application that he had been convicted of a felony (unauthorized use of a motor vehicle). Texas claims that the job involved “access to sensitive personal information for all 26 million Texans.”

The EEOC offered three primary arguments as to why Texas’ lawsuit should be dismissed:

• Lack of jurisdiction because the EEOC’s guidance is not legally binding and does not constitute a final agency action.

• Texas lacks standing to pursue its claims, given that the guidance has no binding authority.

• Texas’ claims are not ripe.

The Court’s Decision

Judge Cummings based his decision entirely on a lack of subject matter jurisdiction. Because “Texas does not allege that any enforcement action has been taken against it by the Department of Justice (as the EEOC cannot bring enforcement actions against states) in relation to the guidance,” Judge Cummings held that there is not a “substantial likelihood” that Texas “will face future Title VII enforcement proceedings from the Department of Justice arising from the Guidance.” As standing to bring suit “cannot be premised on mere speculation” Judge Cummings determined that Texas lacked the necessary standing to maintain its suit against the EEOC.

While acknowledging that the EEOC did in fact issue a right-to-sue letter to an applicant who was rejected by the Texas Department of Public Safety, who believed he was discriminated against based on a prior felony conviction, that was still not enough for the court, since “there are no allegations that any enforcement action has been taken by the EEOC or Department of Justice” based on Texas’ “felony conviction” rule. Accordingly, since the guidance is not a final agency action and because no enforcement proceeding is pending against Texas, Judge Cummings dismissed the case as “seeking a premature adjudication in the abstract without any actual facts and circumstances relating to the employment practices at issue.

Implications for Employers

While Judge Cummings’ decision is a blow to one of the most high profile challenges to the EEOC’s guidance, the dismissal is solely based on procedural grounds and is in no way an acceptance of the guidance and/or the litigation initiated by the EEOC over hiring checks based on criminal backgrounds.

Furthermore, while the EEOC may have won the battle in round one of this lawsuit, the war is likely far from over. To this end, employers obtained strong ammunition to use going forward, based on certain arguments advanced by the EEOC in pursuing the dismissal of Texas’ case. In furtherance of its lack of standing argument, the EEOC admitted that the guidance is neither “legally binding” nor does it carry with it any “legal consequences.” As such, to the extent the EEOC attempts to rely upon the guidance moving forward as the basis for prosecuting disparate impact cases focused on criminal background checks—particularly in cases where the EEOC alleges that an employer willfully violated Title VII—employers need only turn to the EEOC’s representations to the U.S. District Court for fodder in their own defense. It remains to be seen whether Texas will appeal this ruling. Stay Tuned!

This blog previously appeared on the Seyfarth Shaw website’s EEOC Countdown blog here.