By Erin Dougherty Foley and Grace Nickels

Seyfarth Synopsis: New decision from the Supreme Court ruled that Title VII’s requirement that plaintiffs file with the EEOC or other state agencies is a non-jurisdictional claim-processing rule, which means it can be forfeited if a defendant waits too long to raise the objection.

On June 3, 2019, the U.S. Supreme Court resolved an important question for job-bias claims: is Title VII’s mandatory charge-filing a jurisdictional prescription or a claim-processing rule that can be forfeited?  Don’t worry, the ruling did not nullify the Title VII requirement that claimants file charges with EEOC or other state agencies before going to court.  However, this case clarifies that if an employer waits too long to say that the claimant did not overcome the charge-filing barrier, the employer can lose the defense. See Fort Bend County, Texas v. Davis, U.S., No. 18-525 (June 3, 2019).

Facts of Fort Bend County

Lois Davis worked in information technology for Fort Bend County. In 2010, she claimed that her department director sexually harassed her.  Davis also alleged that her supervisor retaliated against her for reporting sexual harassment by limiting her work responsibilities.  While her EEOC charge was pending, Davis was told to come to work on an upcoming Sunday.  Davis told her supervisor that she could not make it because of a church requirement, and she did not show.  Fort Bend terminated Davis for failure to come in.

In an attempt to add to her charge, Davis handwrote “religion” on her intake questionnaire and checked the “discharge” and “reasonable accommodation” boxes on the form.  However, she made no change in the formal charge document.  She filed suit alleging both religious discrimination and retaliation for having made a complaint of sexual harassment.  The case proceeded through litigation, including a trip up and back to the Fifth Circuit Court of Appeals.   The Fifth Circuit dismissed the retaliation claim, but remanded the religious discrimination claim.  Back in the district court, Fort Bend moved to dismiss the religious discrimination claim because — according to them — Davis had not exhausted her administrative remedies as to that claim.  The district court held that she had not satisfied her charge-filing requirement, which was “jurisdictional,” making it nonforfeitable.

The Fifth Circuit, however, reversed, holding that the charge-filing requirement is not jurisdictional, but rather is a prudential perquisite to suit, forfeited in Davis’ case because Fort Bend waited “years into the litigation,” and did not raise this concern until after “an entire round of appeals all the way to the Supreme Court.”  The Supreme Court affirmed.

Why Does This Matter?

The Supreme Court held that a charge-filing requirement speaks only to a party’s procedural obligations.  If the Court had ruled that it was jurisdictional requirement, the case would have been dismissed with no exceptions.  However, since it is a non-jurisdictional claim-processing rule, a defendant must promptly raise the objection.  Basically, if an employer waits too long to raise an issue about the adequacy of a charge, it forfeits the opportunity to rely on the issue later down the road.  Indeed, the Supreme Court noted: “Title VII’s charge-filing requirement is a processing rule, albeit a mandatory one, not a jurisdictional prescription  …..”

What Should Employers Look Out For?

Employers and their attorneys should review EEOC and other state equivalent charges carefully to make sure that any claims asserted in a federal court are identical to claims at the administrative level.  Ask these questions:

  • Did the accuser file a charge with the EEOC or the state equivalent?
  • If so, did the employee assert the same claims in the lawsuit?
  • If not, an employer should move to dismiss or object to the complaint because the employee failed to exhaust administrative remedies.

Do not wait long to do this.  The Court stressed that any objection can be waived if the employer waits too long to raise the point.  Employers still have a valid defense, they just can’t forget to assert it!

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Counseling & Solutions Team or the Workplace Policies and Handbooks Team.

By: Adam R. Young and Danielle R. Rabie

Seyfarth Synopsis: New Decision from Illinois Court of Appeals holds that employer can be liable for workplace violence under Illinois Gender Violence Act.

As we have discussed in many prior blogs, employers face numerous hazards of workplace violence, a complex term which can encompass a range of behaviors by employees, customers, and others at the worksite. Federal OSHA has expanded its aggressive use of the General Duty Clause to cite employers for workplace violence against women; its actions were upheld in recent OSHRC decisions like Integra Health Systems.

Federal OSHA has generally expressed that it will enforce workplace violence against employers, but sexual assault is pursued through other remedies. Negligent hiring of a dangerous employee, for example, is a tort claim in most states. Illinois also regulates gender-based violence under the Illinois Gender Violence Act, though liability seemed limited to “persons” who committed the gender violence. In Gasic v. Marquette Management Inc., 2019 IL App (3d) 17075 (Ill. Ct. App. 2019), the Illinois Court of Appeals has held that a corporation can be civilly liable for workplace violence committed against women.

Facts of the Gasic Case

In May 2017, the maintenance engineer for Cynthia Gasic’s apartment complex allegedly broke into her apartment and sexually assaulted her. Marquette Management Inc. owns and manages the apartment complex where Cynthia lives. Gasic then sued the abuser and his employer, Marquette Management Inc., for assault and battery under the Illinois Gender Violence Act (“the Act”). The language of the Act states that any act of violence or physical aggression that amounts to battery is gender-based violence so long as the battery is committed at least in part on the basis of the victim’s sex.

The Court of Appeals Expands Liability to Employers

The language of the Illinois Gender Violence Act also states that any “person” is liable for “perpetrating” gender-related violence. Under the Act, perpetrating includes “personally encouraging or assisting” the act of gender-based violence. Using this language, Marquette Management Inc. moved to dismiss on the basis that a corporation cannot physically perpetrate an assault or battery and is not a natural “person.” The trial court upheld this interpretation. On appeal, the Appellate Court makes it clear that they believe it is possible for a corporation to act “personally” under the Act. Unfortunately, the Court does not clarify which kinds of actions could potentially qualify as encouragement or assistance of gender-based violence. Now that Gasic’s claim has withstood a motion to dismiss, she will have to prove that Marquette Management’s actions amounted to encouragement or assistance of Canales’ assault.

Gasic’s theory of liability rests on the idea that Marquette Management knew or should have known that Canales was a risk to other employees and building tenants. She claims that Canales was the subject of multiple sexual harassment claims from employees and residents and that Marquette Management Inc. was aware of the complaints. Gasic asserts that the corporation “assisted” in perpetrating gender-related violence by negligently continuing to employ Canales withstanding these complaints. So while the Appellate Court has upheld that a corporation can act personally in perpetrating assault for the purposes of the Act, the question of whether the facts in this case are enough to find the corporation liable is still open.

Employer Takeaways

Employers already face numerous labilities for workplace violence. Gasic shows that Illinois Plaintiffs may survive a motion to dismiss on Illinois Gender Violence Act claims, a new source of liability for Illinois employers.

Corporations have a duty to prevent workplace violence – including gender violence – and courts are willing to expand liability to achieve that goal. Employers should continue to:

  • Be proactive. Make sure to investigate and document sexual harassment and assault complaints efficiently and effectively
  • Create and/or maintain policies that ensure effective oversight
  • Be aware of workplace dynamics

For more information on this or any related topic please contact the authors or your Seyfarth attorney.

By Rachel Bernasconi, Paul Cutrone, Ameena Y. Majid and Peter Talibart

Seyfarth Synopsis: This is the third in a series of blogs by our Global Modern Slavery Team dealing with how companies can get ahead of the curve of the changing legal landscape addressing the role of business and its connection to modern slavery.

In our experience, issues of modern slavery often become a business concern because the media has brought attention to a specific human rights issue for a particular industry. In turn, someone at a company in that industry reads about the issue and then raises it internally. More and more of our clients are starting to worry about how they can avoid the associated reputational risks of being connected with this global crime.

However, when the need (or aspiration) to assess the impacts of modern slavery and human rights arises, the next issue companies face is marshaling internal resources to be ready to assess the multi-faceted issue of how modern slavery may impact its operations and what impact any avoidance measures may have on how the company does business. As noted in our second blog in this series, the expectations on business are changing irrespective of laws. Companies facing compliance with one or more modern slavery laws that do not begin to internally organize themselves and look at how they interact with modern slavery and other human rights issues may find themselves in a position of catch up – or worse, defense mode – as reputations are impacted and societal and investor pressures increase.

Ownership of a human rights strategy within a company is not always clear. Often HR, the Board or a separate CSR or sustainability function struggle to combine their thinking into a coherent strategy. Effective strategies can only be driven by action at the board level and upper management. However, it is also important to build a cross-functional team that can develop a strategy that blends engagement, compliance behavior and reward, and procurement with an understanding of a company’s human rights impacts and vulnerabilities. In our experience, in compiling the right team, organizations should (depending on their size) consider including:

  • Members of upper management to understand and guide overall company strategy
  • Operational team leads
  • Compliance to guide risk tolerance and assessment
  • Procurement for understanding supplier engagement and contracting
  • Environmental, safety and sustainability experts
  • Human resources, which can guide policy development
  • Marketing (or corporate communications manager) to help inform how a company presents itself to its stakeholders and to have a disaster plan ready to implement
  • CSR to help inform and integrate with operations
  • Legal, both external and in-house (likely in-house employment/health and safety and/or corporate counsel or counsel that supports compliance, procurement and labor/employment although many companies have in-house counsel for human rights)

All team members should buy-in and express a commitment to understanding human rights in the context of the company’s values and international human rights principles. If it’s best for a company, a smaller group could be composed to assess strategy and then be expanded, as needed, to include, build on and integrate with the other functions. Note however that the global human rights legal framework has failed to contain the crime of modern slavery. It is illegal everywhere, but is growing everywhere. This is, in part, why the emerging style of legal architecture is placing responsibility on the private sector. This trend will continue as more jurisdictions pass similar laws.

Once a team is identified, conducting an internal capability assessment – identifying and assessing quality and capability of existing resources and any gaps – is an important next step. What a company does not know is as important to understand as what it does know for establishing the next phase of activity. Stay tuned for our next blog: Developing an International Human Rights Strategy.

By Renate M. Walker, Lynn Kappelman and Hillary J. Massey

Seyfarth Synopsis: Laws protecting individuals from discrimination and harassment in the workplace are expanding rapidly at the state and local levels, while the federal landscape remains unclear regarding LGBTQ rights. In light of the rapidly changing landscape, employers should review their policies, handbooks, and training materials for compliance at least annually.

Background

There was a time when human resources practitioners and employment attorneys could list the “protected classes”–groups of people protected from discrimination and harassment in the workplace–like counting to five: race, color, religion, sex, and national origin. Those were the five classes protected by Title VII of the Civil Rights Act of 1964. Federal protections were gradually expanded to include age, pregnancy, citizenship status, veteran status, and genetic information.

In recent years, the list of protected classes applicable to nationwide employers has grown substantially with the passage of more restrictive state and local laws. The requirements are ever-changing, particularly with regard to LGBTQ protections. This evolving landscape creates challenges for employers, particularly those operating in multiple states or nationwide, when updating policies, handbooks, and training materials.

Recent State Activity

Employers may tend to think of LGBTQ protections as limited to a minority of progressive states. However, more than 20 states and the District of Columbia have enacted legislation recognizing employment protections on the basis of sexual orientation, gender identity, sex stereotyping and gender expression, or some combination of these. Thus, employers operating nationwide who prefer to have one harassment policy applicable all employees nationwide, with policy addenda for states that require additional protections, should now consider whether to make a substantial change: eliminate the addenda and implement one nationwide policy that prohibits discrimination on the basis of any class that is protected in any state.

This is particularly important because even in the absence of statutes recognizing protected classes, state courts have interpreted anti-discrimination laws as providing broad protections. For example in the absence of a state statute banning sexual orientation discrimination, the Missouri Supreme Court recently recognized a gay male employee’s sex discrimination claim alleging a violation of the Missouri Human Rights Act (“MHRA”) where the employee argued that he was treated differently than similarly situated coworkers because he “did not exhibit the stereotypical attributes of how a male should appear and behave.” See Lampley v. Missouri Comm’n on Human Rights, 2019 WL 925557, at *24 (Mo. Feb. 26, 2019). That same day, the Missouri Supreme Court also recognized the public accommodation sex discrimination claim of a transgender female-to-male student who was denied access to the boys’ restrooms and locker rooms in a public middle school. See R.M.A. by Appleberry v. Blue Springs R-IV Sch. Dist., 568 S.W.3d 420, 428 (Mo. 2019) (finding plaintiff’s claim that he was denied access to facilities because of his sex sufficient to claim of sex discrimination under the MHRA, despite the fact that the MHRA does not explicitly cover claims based on gender identity).

In addition, some states and localities have recognized additional protected classes, such as political affiliation (D.C.) or familial status (D.C., CT, NY and others), and others have enacted more stringent requirements for public employers and government contractors.

Federal Circuit Split As To LGBTQ Protection

The EEOC interprets and enforces Title VII’s protection from discrimination on the basis of sex as including discrimination based on sexual orientation or gender identity. But not all federal courts agree. The Fifth and Eleventh Circuits recently denied Title VII protection based on LGBTQ status. In Wittmer v. Phillips 66 Co., 915 F.3d 328, 330 (5th Cir. 2019), the court ruled in favor of the employer in a transgender discrimination case based on 40-year-old precedent that Title VII does not prohibit discrimination on the basis of sexual orientation. Likewise, in Bostock v. Clayton Cty. Bd. of Comm’rs, 723 F. App’x 964, 965 (11th Cir. 2018), the court held that Title VII does not bar discrimination on the basis of sexual orientation.

In contrast, the Second, Sixth, and Seventh Circuits have recognized LGBTQ protections. In Zarda v. Altitude Express, Inc., 883 F.3d 100, 131-32 (2d. Cir. 2018), the court held that “sexual orientation discrimination is a form of sex discrimination.” In E.E.O.C. v. R.G. & G.R. Harris Funeral Homes. Inc., 884 F.3d 560, 574-75 (6th Cir. 2018), the court held that “discrimination on the basis of transgender and transitioning status violates Title VII.” In Hively v. Ivy Tech Cmty. Coll., 853 F.3d 339, 345 (7th Cir. 2017), the court articulated the test for sex discrimination: whether, if the plaintiff were of the opposite sex and everything else remained the same (i.e., if the plaintiff were a man married to a woman instead of a woman married to a woman), would the employment outcome have been the same? If the answer is no, according to the Seventh Circuit, then the plaintiff has stated a sex discrimination claim.

Supreme Court to Weigh In Soon

The United States Supreme Court is expected to resolve this discrepancy when it hears Bostock, Zarda, and Harris Funeral Homes during the next session. It granted certiorari in these cases in April 2019.

Federal Legislation

Meanwhile, federal legislation on the issue is pending. Just recently, in May 2019, the U.S. House of Representatives passed the Equality Act, a bill that, if enacted, would prohibit discrimination based on sex, sexual orientation, and gender identity in employment and other areas of federal law. Although the Senate is not expected to pass the bill, for now, its fate remains uncertain.

Conclusion

Given the current uncertainty of the law, employers may decide to err on the side of over-inclusion when defining protected classes in their equal opportunity and anti-harassment policies, and prohibit discrimination and harassment based on:

race, color, religion, sex, (including pregnancy, childbirth, and related conditions), sex stereotyping, gender, gender identity, gender expression, national origin, age, disability, ancestry, medical condition, marital status, familial status, military or veteran status, citizenship status, sexual orientation, genetic information, or any other status protected by law.

Employers should consider reviewing their policies on an annual basis, particularly if they operate nationwide.

 

By Rachel Bernasconi, Paul Cutrone, Ameena Y. Majid and Peter Talibart

Seyfarth Synopsis: This is the second in a series of blogs by our Global Modern Slavery Team dealing with how companies can get ahead of the curve of the changing legal landscape addressing business’ role and connection to modern slavery.

Many international companies now consider their modern slavery and human rights stance as more of a cultural marker than a legal compliance issue, notwithstanding the growing trend of more onerous legislative obligations in this area. This is for multiple reasons.

  1. Companies are increasingly being evaluated by employees, investors and consumers along ethical lines, in addition to the traditional metrics of prestige, stability and profitability.
  2. They are becoming more cognizant of the reputational impact that can arise from poor human rights practices in the supply chain.
  3. Any company statement on human rights practices – such as safety, employment or the identification and remediation of modern slavery is automatically degraded by association if there is an ethical event in the supply chain.

Employee engagement

With generational shifts in the workplace and the #metoo movement drawing worldwide attention to issues of basic human respect and dignity, younger generations are seeking a way to create impact through their work and those mid- to late-career are increasingly seeking a re-engagement with their work on a deeper, more meaningful level, in part, to “give back”.

Socially responsible investing

The idea of “ethical global citizenship” are also resonating with socially responsible investors, who are increasing in numbers as they find ways to align their money with their values. Right now, more than one in every four dollars are being invested using sustainable, responsible or impact investing strategies, according to The Forum for Sustainable and Responsible Investment. In addition, institutional shareholders are identifying ways to evaluate a company’s worth by measuring its actions through the lens of various environment, social and governance (ESG) factors. Granted, assessing a company’s social and governance impacts do not easily lend themselves to quantitative measures and there are fundamental questions to answer about this new “sustainability science”. But, there is an increasing understanding of the connection between a company’s values, the execution of those values in its business operations and its bottom line.

Consumer choice

Finally, consumers are driving accountability by directing their dollars to brands that create a connection with the trilogy of people, profit and planet. According to Edelman’s 2018 Earned Brand study, about 64% of consumers, globally, buy on trust. This was a 13% increase over 2017. Edelman named these consumers, “belief-driven buyers”, who they noted will “choose, switch, avoid or boycott a brand based on where it stands on the political or social issues they care about.” This statistic alone augers well beyond legal compliance as the only driver, to non-legal metrics such as reputation, transparency and accountability.

A new focus on “good” business

All of these trends, coupled with the changing legal landscape we touched on in our first blog in this series, are driving companies to re-evaluate the social impact of how they do business.

A company’s interaction with modern slavery typically starts with a consideration of its own operations, and then moves toward some kind of insulation from reputational damage caused by a supply chain event. This is, again, driven by the emerging disclosure and other compliance focused modern slavery laws as well as different industry standards that are developing on how to responsibly source materials and hire employees.

Global companies appear to be falling into two camps. Some commence the internal dialogue about modern slavery as an issue grounded in the company’s values, whilst others take a legal compliance approach.

For the former group, there are hard questions to address such as: What are the human rights we prioritize and what does that mean for our business? What is our supply chain? What gaps do we have between our policies and company values? What is the impact we want to create? What are we working towards? What are our auditing procedures and how do we adapt them to address human rights? Delta is an often cited example of a company who trains its workforce on these issues so that they are an active part of identifying and remediating modern slavery. There can be positive reputational benefits for those companies who see the issue as an extension of the corporate value proposition.

A determination of how any business should react to an estimated 46 million men, women and children working in unacceptable circumstances, mostly in the supply chain of legitimate industries around the world is not easy. Some companies feel they should take a stand about it and others feel they should not address it until legally compelled to do so. However, the laws in this area are only one aspect of the moral equation now facing the international business community.

A starting point for action can be with international labor and employment/health and safety or procurement specialists to identify how their industry is addressing its connection to modern slavery. Stay tuned for our next blog:  Modern Slavery:  The Dilemma of Internal Accountability and Resource Allocation.

 

 

By Benjamin D. Briggs, James L. Curtis, Adam R. Young, Ariel D. Fenster, and Craig B. Simonsen

Seyfarth Synopsis: Smoke produced during surgical procedures is carcinogenic and can carry pathogens. Employers who fail to abate surgical smoke hazards may face liability from employee injuries and OSHA citations.

Surgical smoke is created during numerous surgical and medical procedures. As NIOSH has explained, “during surgical procedures using a laser or electrosurgical unit, the thermal destruction of tissue creates a smoke byproduct. Research studies confirmed that this smoke plume can contain toxic gases and vapors such as benzene, hydrogen cyanide, and formaldehyde, bioaerosols, dead and live cellular material (including blood fragments), and viruses. At high concentrations the smoke causes ocular and upper respiratory tract irritation in health care personnel, and creates visual problems for the surgeon. The smoke has unpleasant odors and has been shown to have mutagenic potential.”

Sources report that surgical smoke has similar carcinogenic properties to cigarette smoke. The smoke vapors can also carry pathogens, such as infectious bacteria and viruses. Finally, dense surgical smoke can distract surgeons and staff, obscure a surgeon’s vision, and result in disruptive coughing while the surgeon is holding surgical instruments. Consequently, smoke can result in injuries and illnesses to the patient, physician, or operating room staff, including exposures to blood borne pathogens.

The hazards posed by surgical smoke can be abated through the use of a local exhaust ventilation (LEV) system — local suction or overhead exhaust — as well as through Personal Protective Equipment (PPE), in the form of antiviral surgical masks. However, there may be widespread underutilization of these abatements. NIOSH’s Health and Safety Practices Survey of Healthcare Workers, summarized in Secondhand Smoke in the Operating Room? Precautionary Practices Lacking for Surgical Smoke, Am. J. Ind. Med. (Nov. 2016), 59(11):1020-1031, reported that 4,533 survey respondents reported exposure to surgical smoke: “4,500 during electrosurgery; 1,392 during laser surgery procedures. Respondents were mainly nurses (56%) and anesthesiologists (21%). Only 14% of those exposed during electrosurgery reported local exhaust ventilation (LEV) was always used during these procedures, while 47% reported use during laser surgery. Those reporting LEV was always used were also more likely to report training and employer standard procedures addressing the hazards of surgical smoke. Few respondents reported use of respiratory protection.”

Numerous reports indicate that operating room personnel continue to demonstrate a lack of knowledge of these hazards and lack of compliance with recommendations for evacuating smoke during surgical procedures.

OSHA and Tort Liability

Under the OSH Act’s General Duty Clause, health care employers have a general duty to address recognized hazards with a feasible means of abatement. Federal OSHA announced an enforcement position on the issue of surgical smoke, explaining in a Standard Interpretation Letter that employers could be liable for unabated exposures to surgical smoke. Further, under OSHA state plans that require an Injury and Illness Prevention Plan (such as California and Washington State), employers are required to train employees on the hazards in their workplaces. States such as Rhode Island and Colorado have taken it a step further enacting “Surgical Smoke Evacuation Laws” which require facilities to adopt and implement policies that prevent human exposure to surgical smoke via the use of a surgical smoke evacuation systems. Accordingly, health care employers who fail to train perioperative personnel on abatements for surgical smoke face potential OSHA liabilities. Employees and patients who suffer from a cancer or infectious disease at the workplace could similarly bring worker’s compensation or, in limited circumstances, tort claims.

Accordingly, it is imperative that health care employers implement means and methods to control surgical smoke and provide appropriate training to employees on the issue. Failure to do so can result in significant legal liabilities.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Health Care Group, Workplace Safety and Health (OSHA/MSHA) Team, Workplace Counseling & Solutions Team, or the Workplace Policies and Handbooks Team.

By Barry J. Miller and Hillary J. Massey

Seyfarth Synopsis:  Employers cannot ignore the recent amendments to state and local pay equity laws and increased attention on equal pay issues. Pay equity claims raise unique challenges, including the prevalence of statistical evidence and multi-jurisdictional compliance. This article addresses the advantages of conducting a pay audit and how the analysis, particularly a regression analysis, may be helpful to employers in litigation. It also discusses how an employer may use a plaintiff’s expert analysis to undermine the plaintiff’s own claim, as the Fourth Circuit addressed in a recent opinion.

Threshold Question:  Should Employers Conduct A Pay Audit?

Conducting a proactive pay equity analysis is often the first and best step employers can take to ensure fair pay and diminish legal risk. Taking this step, however, should be approached with forethought and caution. Employers should make an informed decision about whether to conduct an audit.

A proactive pay equity audit is a valuable exercise when performed properly. It allows employers to identify and reduce risks, and can be used to substantiate an affirmative defense under some state-level pay equity laws. For example, the Massachusetts Equal Pay Act creates an affirmative defense to wage discrimination claims for an employer that has (1) completed a self-evaluation of its pay practices that is “reasonable in detail and scope in light of the size of the employer” within the three years prior to commencement of the action; and (2) made “reasonable progress” toward eliminating pay differentials uncovered by the evaluation. For federal contractors, evaluating pay practices on an annual basis is required, although the method for conducting the review is left up to the contractor. Moreover, conducting a pay analysis is aligned with organizational efforts to ensure equal pay in their workforces.

However, there are some key risks to be considered. If not adequately protected, an audit might be used against an employer in litigation under the federal Equal Pay Act or Title VII, which do not provide a similar affirmative defense. Thus, employers should work with counsel in order to protect the assessment process and results with the attorney-client privilege. Without these protections, a self-evaluation (and any wage differentials identified by it) may be discoverable in the event of a lawsuit. Employers should protect the audit at the outset and make an informed decision as to whether to waive the privilege in subsequent litigation. Counsel with experience and expertise in pay equity matters can also play a valuable role in shaping the scope and procedure for an audit to maximize its utility in identifying disparities that may become legal disputes and to ensure that the work product generated by the audit will make for effective evidence, if it is ever needed for use in court.

Do You Track the Data You Need For A Pay Audit?

Employers will, of course, need pay and demographic data to conduct an audit. This is typically readily available in HR information and payroll systems.

Other data points that could be used to explain differences in pay under the applicable federal and state equal pay laws are often not fully captured in employers’ information systems. This includes details about employees’ education, certifications and training, and prior relevant experience.

The federal Equal Pay Act – and many state equivalents – provide that employers may not pay unequal wages to employees in different protected classes who perform jobs that require equal (or, in the instance of some state laws, substantially similar or comparable) skill, effort and responsibility. Employers also sometimes lack the data needed to fully determine which jobs should be compared because of the “skill, effort and responsibility” involved. For example, “responsibility” may be measured by data not typically tracked in electronic information systems, such as amount of budget managed or the authority to execute legal documents.

While these are important limitations and employers would benefit from reviewing their data sources and discussing potential gaps in their data with employment counsel as part of a pay audit – and, indeed, we will delve more deeply into the issue of “data gaps” in future blog updates – do not let the perfect be the enemy of the good. There are often well-established proxies for some of the data points that could be missing. For example, for a proactive pay analysis, using age at date of hire as a rough “proxy” for prior experience is a common, and well-established practice.

While it is essential to consider these data gaps, a proactive pay equity analysis can still be extremely beneficial to identify employees whose pay can then be further evaluated. Even employers without perfect data – and our experience is this is almost all employers – can still benefit from a proactive pay assessment.

When Should Employers Use A Regression Analysis?

An employer’s selection of pay audit method depends on the scope and objectives of the review, including the number of positions and budget. It also depends on whether litigation is considered to be likely, and thus whether the method will be challenged in court.

Large employers that conduct a self-evaluation with the assistance of a professional labor economist typically perform a multivariate regression analysis. A regression analysis is a statistical technique used to model an organization’s compensation system based on data regarding factors expected to influence pay and determine to what extent gender or other protected characteristics may influence employees’ compensation. This is considered the “gold standard” in pay equity evaluations. If the pay difference between men and women measured for a group of employees has a high probability of occurring by chance alone, then the result is not considered “statistically significant.” However, when the size of the measured pay difference has a small probability to have occurred by chance, the result is considered “statistically significant.”

Social scientists, labor economists – and the Supreme Court – generally deem results as statistically significant at approximately two standard deviations (i.e., 1.96) or higher. A finding of 1.96 standard deviations (assuming a “normal distribution” manifested by the familiar bell curve graphic) indicates that a given pay difference would be expected to occur by chance 5% of the time if pay was set in a gender (or race)-neutral environment and if the grouping is appropriate and the regression model correctly incorporates all of the legitimate, business-related determinants of pay. Courts have approved this standard in employment discrimination cases. See e.g., Adams v. Ameritech Servs., Inc., 231 F.3d 414,424 (7th Cir. 2000) (noting that in employment discrimination cases, “[t]wo standard deviations is normally enough to show that it is extremely unlikely … that [a] disparity is due to chance.”); Cullen v. Indiana Univ. Bd. of Trustees, 338 F.3d 693, 702 (7th Cir. 2003) (explaining in Equal Pay case that “generally accepted principles of statistical modeling suggest that a figure less than two standard deviations is considered an acceptable deviation”).

A regression analysis is widely accepted by courts as reliable, is easily customized, and is an effective way to isolate the association of gender (or race) and compensation. However, it cannot be used to analyze job groups with few employees (typically fewer than 20-30) or heterogeneous groups that do not include at least a critical mass of employees of each gender (or race).

Other common methods are an average pay ratio (“APR”) (sometimes referred to as the “adjusted pay gap” or “adjusted pay difference”) and a cohort study. APR is a calculation of the average pay of women, compared to the average pay of men, conducted in groupings that may range from certain selected business units to an entire organization, after controlling for factors that are relevant to employee compensation.

Finally, a cohort study is a comparison of employees within a narrow group. It does not require statistical analysis and thus is less costly, but it typically includes some inherently subjective assessments and thus may be more difficult to defend in litigation. Also, it typically takes significantly more person-hours to evaluate pay using the cohort method.

Thus, employers often use a regression analysis for larger job groups, supplemented by a cohort analysis for smaller groups.

Regression Analysis As Evidence In Pay Equity Cases

Regression results can be helpful in defeating equal pay cases. Courts have dismissed claims under the Equal Pay Act when the evidence shows no systemic discrimination, i.e., no statistically significant differences in pay based on gender. See e.g., Spencer v. Virginia State Univ., No. 3:16CV989-HEH, 2018 WL627558, at *10 (E.D. Va. Jan. 30, 2018), aff’d, 919 F.3d 199 (4th Cir. 2019). In Spencer, a sociology professor claimed that she was paid less than male colleagues in other departments. The court entered summary judgment for the University, noting that “the regression analysis performed by … Plaintiff’s own expert, makes clear that VSU did not suffer from systemic, gender-related wage disparity,” and noting that the plaintiff had failed to point to any male comparator who earned more. The court explained that “[w]hile the lack of systemic discrimination, standing alone, may not be sufficient to disprove an EPA violation, … the absence of systemic discrimination … combined with … improper identification of a male comparator suggests a failure to establish a prima facie case.” Affirming, the Fourth Circuit explained that the plaintiff’s expert’s failure to uncover any statistically significant disparity within each school of the university undermined Plaintiff’s claim. 919 F. 3d at 206.

The Spencer case notes one limitation of a statistical model in defending individual pay discrimination claims:  the absence of a statistically significant group-level disparity does not preclude the possibility of individual employees claiming that their compensation was lower than that of a particular comparator of the opposite gender. However, a regression analysis that also includes an individual-level assessment by providing lists of employees who are “outliers” as to pay, allows employers to review and address the compensation of individual employees who may raise pay equity issues, even if they are in groups that show no disparity.

Finally, as to the law in Massachusetts and other laws in places like Oregon that provide an affirmative defense or a partial affirmative defense for employers who conduct reasonable audits, there is little guidance as to what is “reasonable.” Employers conducting audits should ensure the audits are as comprehensive in scope as the data allows, based on a methodology vetted by appropriate legal and economic experts. Employers should take special care at the outset of the audit in determining appropriate groups of employees for comparison purposes. And in light of the limitations of regression analyses, employers should also consider including an individual-level assessment of employee pay.

Conclusion

A regression analysis that finds no statistically significant difference in pay on a systemic basis and also includes an individual-level assessment is helpful for a defense to a pay equity claim. Employers considering whether to conduct an audit should do so only under the protection of the attorney-client privilege, so they can examine whether to waive the privilege and rely on the results in litigation.

For 20 years, Seyfarth’s Pay Equity Group has led the legal industry in fair pay analysis, thought leadership, and client advocacy.

As we reflect on the developments in equal pay laws and litigation in the past year, we continue to see a legal landscape that is rapidly evolving. To keep you up-to-date, we have created an Equal Pay-focused blog series to disseminate this information.

The series is edited by Matthew Gagnon, leader in the Complex Discrimination Litigation and Pay Equity Groups, and Christine Hendrickson and Annette Tyman, co-chairs of the Seyfarth Shaw Pay Equity Group.

We encourage you to subscribe to our mailing list to receive updates on these important issues.

By Rachel Bernasconi, Paul Cutrone, Ameena Majid, and Peter Talibart

Seyfarth Synopsis: This is the first in a series of blogs dealing with modern slavery where we explore how companies can get ahead of the curve of the quickly changing legal landscape by educating themselves on their connection to this issue. Seyfarth has been very active internationally in respect of the design of modern slavery transparency legislation since before the UK passed the groundbreaking Section 54 of the Modern Slavery Act. As an understanding of the nexus to basic employment, health and safety, corporate governance and host of other legal issues become clearer, stakeholders within companies will realize that, beyond compliance, they can create a competitive advantage that drives social impact, elevates their reputation, manages their reputational risk, and enhances engagement with employees and business partners.  

Modern slavery (which includes human trafficking within its broader ambit) is a concept marching steadily into the mainstream consciousness of global society. However, there are still many misconceptions over what modern slavery is, how it can happen, the sheer scale of the issue and how it can present not only a social risk but a risk to reputation and profit of honorable businesses. In this blog we set the stage by clarifying some of the myths and misunderstandings of modern slavery in the business context.

What is Modern Slavery?

Most people are not sure what “modern slavery” or “human trafficking” fully mean. These terms are often associated with prostitution rings and sex trafficking.  People then connect trafficking to stories similar to the movie Taken or to massage parlors that serve as a front for sex trafficking.  This actually represents only a minority of the persons affected by this global crime.

While sex trafficking is one form of modern slavery, the term encapsulates the breadth of the many forms in which human trafficking can occur.  Under international principles and laws, it covers, among other things, forced or compulsory labor, bonded labor, domestic servitude and child labor. We define it more simply as men, women and children who are either working against their will or working in circumstances that do not meet even minimum legal standards (if those standards exist). Our clients neither want to be associated with it nor want to inadvertently support it.

Modern slavery is a crime and a humanitarian issue that rivals the global arms and drug trades in breadth and profitability. It is illegal everywhere, but growing everywhere as is its detection. The commodity being sold is a human being who is preyed upon often because of vulnerability, which is not easy to identify. It is the fastest growing organized crime in the world and, after drugs, the second most profitable. The estimated illegal profits are upwards of USD $150 billion according to the International Labor Organization. Because this figure was based on a much lower estimate of affected people (21 million), nobody really knows how large the illegal profits actually are.

Of the International Labor Organization’s estimated 40.3 million trafficked human beings in the world, 81% of them are actually victims of labor trafficking, which is agnostic to gender or age, and the predominant aspect of modern slavery.  The US Department of Labor has identified 148 goods from 76 countries that have been produced by child labor or forced labor, which information is publicly available.

What Can it Look Like in Business? 

How, when and where modern slavery touches a business will vary.  For example, the hospitality industry (hotels, restaurants and casinos), agriculture and retail would appear to have a closer and more personal or obvious connection to it than a tech company. However, there are commonalities.  Every business sources materials, employs individuals and contracts with other businesses that do the same, creating some level of reputational human rights risk.

What many also do not realize is that modern slavery happens in the United States and other industrial nations.  It’s not just a third world issue.  Businesses get linked to it because of their supply chains and/or aspects of their own operations that may become complacent about the conditions that can facilitate labor trafficking.  Nor do most realize how legal systems are starting to become aligned against it, or how existing US laws may apply to them in relation to this issue.

Labor trafficking can take different forms. These forms include “bonded labor” where employees are essentially working off a debt (including to a recruitment agency) that may not be legitimate; child or underage labor; labor in unsafe working or living conditions; or where the employee is forced to turn over identity papers to the “employer” making it impossible to leave.  They all share the element of coercion.

What Should Companies Do or Start to Do?

Because modern slavery is a crime on many levels, responsibility for addressing it has traditionally been left to governments and law enforcement.  Non-governmental organizations—local, regional, national and international—have been very active in creating awareness campaigns and developing programs for victim rescue and recovery. Unfortunately, the global landscape and response to this crime has been, and continues to be, fragmented.

Over several years now, there has been a shift in focus on the role and responsibility of business and business leadership to identify, report and remediate modern slavery in their own operations and those of their suppliers (both downstream and upstream).  This focus is driven by the United Nations through its “Protect, Respect and Remedy” framework for governments and businesses in its Guiding Principles on Business and Human Rights that came out in 2011, followed by the UN Global Compact in 2011 (updated in 2014) and the UN’s Sustainable Development Goals in 2015.

National and regional governments are slowly starting to pass laws requiring the disclosure of modern slavery avoidance measures in a business’s operations and supply chain. To name a few, in 2012, California led the way with the California Transparency in Supply Chains Act, which the UK Parliament drew upon in passing Section 54 of the Modern Slavery Act in 2015.  In addition, both the Australian Commonwealth and the state of New South Wales adopted similar disclosure laws in 2018. France required certain large companies to publish a “vigilance plan” designed to identify and address risks relating to human rights in its Duty of Vigilance Law in 2017.  For some time now, the US government has imposed a strict human rights compliance regime for government contractors under the Federal Acquisition Regulations.  Federal procurement law has a storied history of influencing the development of the wider American legal system.

Senior management sign-off is typically required under these disclosure regimes, and the public disclosure model is likely to be replicated in other jurisdictions that are looking to pass laws in this area.  Even companies who are not subject to a law yet are voluntarily looking at ways to understand modern slavery because they may be asked to meet certain standards by their vendors or suppliers, or they are being rated for sustainability reasons and the ratings are premised, in part, on respect for global human rights.

Identifying and remediating human trafficking in business cannot be done by one department in an organization over a few-month implementation period. It also cannot be done by one company, no matter how big. It requires a different mindset. It requires a mindset that considers actions beyond compliance and a belief that when business can foster positive social impact through its operations and business relationships, profits will always be there.

In addition to a changing legal and conceptual landscape, consumers are demanding an elevated standard of ethics, conduct and transparency, while institutional and private investors are focusing on the impact of corporate ethics on the financial health and investor attractiveness of a company.  The link between business and modern slavery is fundamentally about a company’s reputation, how it conducts business, how and when it manages reputational risk, and engagement with its business partners, employees, consumers, investors and local communities.  Addressing this area is challenging, but it can also present opportunities for positive engagement with each of these parties. The first step for any business is awareness, education and understanding of its own and its industry’s connection to modern slavery.

There are many vanguard companies that have taken a deep look at developing their human rights position, assessing their human rights impacts and adopting systems for a human rights due diligence process.  These companies include the likes of Nestle, GE, Johnson & Johnson, Wal-Mart and many others who are leading the way with elevated standards of commitment.  They are demanding a level ethical playing field. Industry associations such as the Responsible Business Alliance, the Consumer Goods Forum, Better Cotton Initiative, and Ethical Trading Initiative, to name just a few, are also driving awareness, particularly of the fact that these issues cannot be effectively addressed in isolation, especially since. Addressing a topic like modern slavery requires coordinated industry and cross-industry responses and actions.

The forces of social media, investor and consumer ethical activism and the growing network of laws oriented to making supply chain transparency the price of market access will make it increasingly difficult for businesses to ignore the issue of modern slavery, whether or not they are subject to a law In their home jurisdiction.

Up Next

In our next blog post, we will cover how this issue is foremost about engagement and accountability.  Stay tuned for our next blog: The Company You Keep – Engagement and Reputational Risk.

By Jean Wilson

Seyfarth Synopsis: Massachusetts Attorney General steps up enforcement of Massachusetts “ban-the-box” law citing 19 businesses for asking impermissible questions about an applicant’s criminal history on an employment application. 

Last week, Attorney General Maura Healey announced that she had cited 19 businesses for  violation of the state’s ban-the-box law.  This law prohibits employers from asking job applicants about their criminal history on initial employment applications, subject to very limited exceptions.  The AG announced a similar round of enforcement action in May 2018 that included the investigation of over 70 Massachusetts employers and resulted in 21 citations.  Of that group, 4 employers were fined $5,000 and were required to enter into an agreement with the AG’s office.

The current round of enforcement action targeted a wide range of businesses including a national clothing retailer, several restaurants, a product design and manufacturing company, grocery store, hardware store, liquor store, and shipping service.  The AG entered into agreements with two of the larger companies.  As part of those agreements, the Companies were fined $5,000 and were required to alter their application process to comply with the law’s requirements.  The AG’s office sent letters to the other 17 employers warning them that their employment applications contained improper questions in violation of the law and requiring them to come into compliance immediately.  The improper questions contained in the applications included whether the applicant (1) had ever been convicted of violating the law, (2) had ever been convicted of a felony, and (3) had ever been convicted of a felony or misdemeanor other than a minor traffic violation.  Since issuing these letters, all 17 employers have confirmed compliance with the law.

In addition to prohibiting employers from including criminal history inquiries on an initial employment application, MA law prohibits employers from asking applicants (either verbally or in writing) about certain criminal history at any time during the application process or employment.  This prohibition includes questions about:  (1) an arrest, detention, or disposition in which no conviction resulted, (2) a first conviction for any of the following misdemeanors:  drunkenness, simple assault, speeding minor traffic violations, affray or disturbance of the peace, or (3) any misdemeanor conviction where the date of conviction or completion of a period of incarceration, occurred 5 or more years prior.  Changes to the CORI law in October 2018 imposed additional requirements on employers to include a detailed statement about expunged records on any form that seeks information about an applicant’s criminal history, in addition to a statement about sealed records that has long been required.

The AG’s announcement noted the goal of the 2010 CORI law was to address high unemployment and barriers to re-entry for people with criminal records by improving their access to employment opportunities.  AG Healey stated that “[t]oo many people who have paid their debt to society still face barriers to even landing an interview.  These actions are an effort to give all job applicants a fair chance.”  These enforcement actions are a continued effort by the AG’s office to educate residents and businesses about the law and to ensure that a person’s CORI is not used improperly to deny employment.

The AG’s enforcement action serves as a reminder for employers to review their employment applications, hiring-related documents, and hiring process to ensure compliance with the law.