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What Employers Can Expect from the SCOTUS Decision on Same-Sex Marriage

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On June 26, 2015, the U.S. Supreme Court issued its long-awaited decision in Obergefell, et al. v. Hodges, Director, Ohio Department Of Health; Tanco, et al. v. Haslam, Governor Of Tennesee, et al.; DeBoer, et al. v. Snyder, Governor of Michigan, et al.; and Bourke, et al. v. Bershear, Governor of Kentucky, and ruled five to four that the equal protection guarantee provided by the 14th Amendment to opposite-sex marriages extends to same-sex marriages. The SCOTUS opinion, authored by Justice Kennedy, holds that “same-sex couples may exercise the fundamental right to marry in all States [and] that there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character.”

With same-sex couples now having the same rights as opposite-sex couples, how will the decision affect employers and what can employers expect as an outcome?

More Lawsuits?

With the new decision, much of what employers provide and are mandated to provide to employees, such as those rights granted by the Family and Medical Leave Act (FMLA) and other employee benefits, may change to include same-sex couples. Although the U.S. Department of Labor modified its definition of “spouse” in the FMLA back in March 2015, employers must verify they are granting all eligible employees in same-sex marriages their FMLA rights. Speaking of the U.S. Department of Labor, we expect that there will be guidance from it soon.

Employers can also expect more lawsuits under Title VII of the Civil Rights Act of 1964. Although Obergefell, Tanco, DeBoer, and Bourke are not employment cases, the Supreme Court’s decision implicates employment laws. Claims of transgender, sexual orientation, and/or gender discrimination may increase as gender identity and expression continue to be a topic of discussion. Likewise, discrimination based on marital status may give rise to lawsuits in certain states under state anti-discrimination laws.

Health and Welfare Plans Update

One of the biggest impacts the U.S. Supreme Court decision will have on employment is on employee benefits. Medical insurance coverage and taxes will change, so employers should be prepared to accommodate such changes in its policies and contracts. We expect the Internal Revenue Service will provide guidance soon.

Employee Handbook and Company Policies Update

Employers are also well-served to update their employee handbooks to reflect and extend the rights given to the opposite-sex spouses to same-sex spouses to minimize litigation risks. Employers must also revised its enrollment processes, such as updating its consent and eligibility forms, to ensure that they comply with the new rule.

We will continue to update you on the impact of the decision on employee benefits in greater detail soon.

This article previously appeared on the Seyfarth Shaw website.

Amicus Supports Government’s Position in Mach Mining vs. EEOC

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On Nov. 3, six advocacy groups representing the interests of workers and plaintiffs’ class action lawyers filed an amicus brief with the U.S. Supreme Court in Mach Mining v. EEOC, No. 13-1019. A copy is here.

Authored by the Civil Rights Clinic of the Dickinson School of Law and The Impact Fund, the amicus brief represents the collective views of multiple public interest organizations, including the National Employment Lawyers Association, The Impact Fund, the American Association of Retired Person, the Asian Americans Advancing Justice-Asian Law Caucus, Disability Rights California and Public Counsel.

The amicus brief was filed in support of the U.S. Equal Employment Opportunity Commission, which filed its Reply Brief with the SCOTUS on Oct. 27, 2014. In supporting the government’s position, the amicus asserted that the brief represents the “perspective of the victims of workplace discrimination whom Title VII is intended to protect.”

Given the importance of this case and the issue presented, the new amicus brief is well worth a read by employers.

The Context and the Stakes

Mach Mining v. EEOC is a big case for employers and for government enforcement litigation. In a game-changing decision in December 2013, the U.S. Court of Appeals for the Seventh Circuit ruled that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit brought by the EEOC.

That decision had far-reaching, real world significance to the employment community, for it means the EEOC is virtually immune from review in terms of the settlement positions it takes prior to suing employers: “pay millions or we will sue and announce it in a media release.”

We have blogged on this case at various points before, as the litigation winded through the lower courts and culminated in the precedent-setting decision of the Seventh Circuit reported at 738 F.3d 171 (7th Cir. 2013). Readers can find the previous posts here and here and here.

In essence, the Seventh Circuit determined that the EEOC’s pre-lawsuit conduct in the context of conciliation activities cannot be judicially reviewed. Subsequently, in what many SCOTUS watchers found ironic, even though the EEOC prevailed in the Seventh Circuit, the Government also backed Mach Mining’s request for SCOTUS review to resolve the disagreement among the courts of appeals regarding the EEOC’s conciliation obligations. Given the stakes, the SCOTUS accepted Mach Mining’s petition for certiorari in short order to resolve this issue.

Amicus Briefs for the Defense

Employer groups have lined up behind Mach Mining to support reversal of the Seventh Circuit’s decision. Seyfarth Shaw LLP submitted an amicus brief to the U.S. Supreme Court on behalf of the American Insurance Association in Mach Mining. For blog readers interested in our amicus brief, a copy is here.

Amicus Brief Filed In Support of the EEOC

The amicus submission to the Supreme Court asserts that interpreting Title VII to allow judicial review of conciliation efforts by the EEOC would harm alleged victims of discrimination by violating the mandate of the statute that conciliation remain confidential. Judicial review, the amicus brief asserts, would chill full and frank settlement discussions; expose sensitive information about pre-lawsuit negotiations to the public, and hurt the cases of allegedly injured workers because federal judges might be potentially influenced by irrelevant settlement communications. The amicus brief also argues that if the SCOTUS interprets the statute to allow judicial review of pre-lawsuit conciliation efforts by the EEOC, dismissal is an overly harsh remedy where those efforts are determined to be inadequate (and instead the parties should be ordered to engage in further settlement negotiations).

The point of the amicus brief about compromising the impartiality of federal judges—by exposing the court to settlement discussions in conciliation—is somewhat surprising. Federal judges conduct mediations and settlement conferences as a matter of course, and are “exposed” to settlement discussions routinely.

Next Up on the Docket

Mach Mining’s answering brief is due on Nov. 26, 2014, and then the SCOTUS will set the case for oral argument for January 2015. We will keep our readers updated as developments occur in this litigation.

This post was previously published on the Seyfarth Shaw website here.

Court Dismisses EEOC Lawsuit for Lack of Jurisdiction

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On Sept. 22, 2014, in EEOC v. Vicksburg Healthcare LLC, et al., Judge Keith Starrett of the U.S. District Court for the Southern District of Mississippi granted defendant’s motion to dismiss an EEOC lawsuit for lack of personal jurisdiction and insufficient service of process. The EEOC had filed a disability discrimination claim on behalf of a nurse who worked at a hospital owned by a subsidiary of the defendant. The court held that the EEOC, which sued a subsidiary hospital in Mississippi and its Tennessee-based parent corporation, did not put forth prima facie evidence of the necessary factors to satisfy personal jurisdiction requirements for the parent corporation in Mississippi.

While this ruling is favorable for non-Mississippi parent corporations operating subsidiaries in Mississippi, it has larger significance for employers. It shows that nationwide jurisdiction is not a given when the EEOC sues. Additionally, the ruling provides the framework for how to prevent liability by avoiding personal jurisdiction.

Case Background

The EEOC filed an action on behalf of Beatrice Chambers alleging disability discrimination under Title I of the Americans with Disabilities Act of 1990. The complaint named Community Health Systems, Inc. (CHSI) and Vicksburg Healthcare, LLC (VHL) as Defendants, alleging that both CHSI and VHL have been continuously doing business as River Region Medical Center (River Region) in Vicksburg, Mississippi.

The EEOC alleged that the defendants terminated Chambers–who had worked as a nurse at River Region for about 36 years–because of her unspecified disability, and additionally failed to provide her with reasonable accommodations in violation of the ADA. VHL was a subsidiary of CHSI, which was incorporated in Delaware and had its principal place of business in Tennessee. While VHL admitted doing business as River Region and admitted employing Chambers, CHSI denied doing business as River Region and denied employing Chambers. Further, in its motion to dismiss, CHSI asserted the affirmative defenses of lack of personal jurisdiction, insufficient process, and insufficient service of process.            

The Court’s Decision

In granting CHSI’s motion to dismiss, the court held that the issue of personal jurisdiction was controlling. The EEOC has the burden of establishing a prima facie case for personal jurisdiction. The court noted that a non-resident defendant is amenable to being sued in Mississippi if: (1) Mississippi’s long-arm statute confers jurisdiction over the defendant; and (2) the exercise of personal jurisdiction comports with the requirements of federal due process. The Mississippi long arm statute consists of three prongs, including: the contract prong; the tort prong; and the doing-business prong. It was undisputed that the “doing-business” prong was case dispositive.

CHSI submitted an affidavit from its Senior Vice President and Chief Litigation Counsel to the effect that it did not conduct business in Mississippi and that it lacked sufficient minimum contacts to be hauled into court in Mississippi.

The affidavit confirmed that CHSI is a holding company with no employees; CHSI indirectly owned subsidiaries including VHL; CHSI neither operated nor controlled the day-to-day operations of River Region; CHSI and River Region maintained separate banking records and did not co-mingle funds; CHSI did not employ nor have control over any River Region staff; CHSI never made any employment decisions regarding Chambers; CHSI and River Region observed corporate formalities (including no overlap between the Board of Trustees of River Region and the board of directors of CHSI; the respective boards of River Region and CHSI each convened separate meetings, (the boards maintained separate minutes and records); and CHSI is not qualified to do business in Mississippi–owns no property there, has no offices there, does not market there, and does not pay taxes there.

Following well-established precedent, the court found this aggregation of factors to be dispositive. It held that the EEOC lacked personal jurisdiction to sue CHSI in Mississippi.

The court rejected the EEOC’s three arguments in opposition of dismissal. First, the EEOC argued that the 10-K form submitted by CHSI to the SEC demonstrated CHSI’s intent to do business in Mississippi as it often used language such as “we” when referring to the hospital.  The court rejected this argument, noting that the 10-K form also contained a provision saying the hospitals are expressly owned and operated by the subsidiaries. Next, the EEOC mistakenly speculated that the River Region employee handbook contained references to CHSI. The court cited an affidavit from CHSI’s litigation counsel clarifying that the entity referred to in the handbook was a different indirect subsidiary, and not the parent corporation. Finally, the EEOC erroneously relied on another case involving CHSI – Bass v. Community Health Systems, Inc., Case No. 2:00cv193 (N.D. Miss.). The court noted that no facts from that case illustrated that CHSI should be amenable to personal jurisdiction.

Implications for Employers

 When out-of-state parent corporations conduct business in Mississippi through subsidiaries, it is imperative that they observe corporate formalities to clearly maintain the parent-subsidiary relationship. Further, in documents such as 10-K forms and employee handbooks, employers must explicitly indicate that subsidiaries, and not the parent, own and operate local entities. If parent corporations follow the teachings of EEOC v. Vicksburg Healthcare, LLC, et al., they can avoid unwittingly submitting to personal jurisdiction in Mississippi courts while their subsidiaries do business there.

This blog was previously posted on the Seyfarth Shaw website.

Sixth Circuit Affirms EEOC Credit-Check Case Dismissal

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Less than three weeks after oral argument, the Sixth Circuit affirmed a lower court order granting summary judgment in favor of Kaplan in one of the EEOC’s most high profile cases – EEOC v. Kaplan Higher Education Corp.

The EEOC brought suit against Kaplan for using credit-checks in its hiring process – “the same type of background check that the EEOC itself uses” the Sixth Circuit pointed out – claiming that the practice had a disparate impact on African Americans.

On Jan. 28, 2013, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment in favor of Kaplan, finding that the EEOC’s statistical evidence of disparate impact was not reliable and not representative of Kaplan’s applicant pool as a whole. (Read more about that ruling here.)

The Sixth Circuit found no abuse of discretion. The EEOC’s “homemade” methodology for determining race – by asking its “race raters” to label photographs – was, in the Sixth Circuit’s words, “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”

Background

The EEOC filed suit against Kaplan alleging that Kaplan’s use of credit-checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII.

In support of its allegations, the EEOC relied on statistical data compiled by Kevin Murphy.  Because Kaplan’s credit check process was race-blind, the EEOC subpoenaed records regarding Kaplan’s applicants from state departments of motor vehicles. Thirty-six states and the District of Columbia provided color copies of approximately 900 drivers’ license photos.

Murphy assembled a team of five “race raters” and directed them to review the photos and classify them as “African-American,” “Asian,” “Hispanic,” “White,” or “Other.” Murphy also provided the raters with applicant names.

Based on the results of this “race rating,” Murphy opined that, in a sample of 1,090 (out of 4,670 applicants), the percentage of black applicants who were flagged for review based upon their credit histories was higher than the percentage of white applicants who were flagged.

The district court excluded Murphy’s testimony as unreliable for two reasons. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court granted summary judgment in favor of Kaplan, and the EEOC appealed.

The Sixth Circuit’s Opinion

The Sixth Circuit affirmed. The Sixth Circuit noted that, as the proponent of expert testimony, the EEOC bears the burden of proving its admissibility. It determined that the district court did not abuse its discretion in finding that the EEOC failed to make such a showing.

The EEOC argued that the district court erred in finding that it had “wholly fail[ed]” to provide evidence that its technique had been tested or had any “known or potential rate of error.” The EEOC contended that it provided such support in the form of “anecdotal corroboration.” That is, as to 57 applicants, Murphy cross-checked his raters’ classifications with racial identifications provided by a DMV or Kaplan.

The Sixth Circuit noted that the EEOC’s cross-check yielded an 80% match – “an unimpressive correlation in case where a few percentage points (in credit-check fail rates for blacks and whites) might make the difference between significant liability and none.” In any event, as Murphy himself conceded, a mere 57 instances of anecdotal corroboration is “not enough” to establish the reliability of his photo rating methodology.

As the Sixth Circuit found, “[t]he EEOC’s case goes downhill from there.” The EEOC failed to present evidence that its technique was subjected to peer-review or publication, failed to show that Murphy employed standards to control “the technique’s operation,” and presented no evidence that Murphy’s race-rating methodology was “generally accepted in the scientific community.” The raters themselves “had no particular standard in classifying each applicant; instead, they just eyeballed the DMV photos.”

Finally, as an independent ground for excluding Murphy’s testimony, the district court found “no indication” that Murphy’s group of 1,090 applicants was representative of the applicant pool as a whole. The Sixth Circuit noted that, “[i]nstead there is a strong indication to the contrary: Murphy’s group had a fail rate of 23.8%, whereas the GIS applicant pool had a fail rate of only 13.3%.” It held that an unrepresentative sample “by definition” might skew the respective fail rates of black and white applicants in the larger pool – “and thus is not a reliable means to demonstrate disparate impact.”

Implications

In its opinion, the Sixth Circuit staunchly critiqued the EEOC’s “do as I say, not as I do” litigation tactics. It noted (in the first line of its opinion) that the EEOC “sued the defendants for using the same type of background check that the EEOC itself uses.” It also noted, as the district court observed, that “the EEOC itself discourages employers from visually identifying an individual by race and indicates that visual identification is appropriate ‘only if an employee refuses to self-identify.’”

This blog was previously published by Seyfarth Shaw LLP.