Seyfarth Synopsis: Hey, look what our very impressive colleagues in the Wage & Hour Group have made available. Everything you ever wanted to know (and a bunch of stuff you should, but didn’t know) about the FLSA is now available in one book. Order yours today!

The Seyfarth Shaw Wage Hour Litigation Practice Group is pleased to provide you with the inaugural edition of our FLSA Handbook. The handbook not only summarizes the substance of the federal wage and hour laws but also provides guidance for employers’ responses to investigations as well as checklists for conducting self-audits. It is intended to provide a ready resource on frequently encountered issues arising in the rapidly evolving wage and hour compliance space.

Intended as a handy desk reference for corporate counsel and human resources professionals, we have focused our attention on the federal Fair Labor Standards Act. We have also, however, highlighted significant differences and developments at the state and local levels as a reminder to readers of the importance of complying with these additional – and often more cumbersome – levels of wage and hour regulation. We hope that you find the Handbook to be useful, and invite your feedback on topics of interest to you.

By Danielle R. Rabie and Erin Dougherty Foley

Seyfarth Synopsis: Despite inopportune remarks by a decision-maker, an employer was able to prevail in an age discrimination case where underlying reason for employee’s terminated was, in fact, insubordination, and not some pretext for discrimination.

Background

In January 2021, the Sixth Circuit Court of Appeals affirmed the Southern District of Ohio Court’s grant of summary judgment in favor of defendants in an unlawful termination suit. Former employee Melanie Pelcha claimed her employer, Watch Hill Bank fired her because of her age (47), in violation of the Age Discrimination in Employment Act (ADEA). Instead, Watch Hill pointed to Pelcha’s noncompliance with a 2016 policy change as the reason for the termination. The policy required employees to submit time off requests in writing one month in advance.

In early July 2016, Pelcha requested time off orally and initially refused to abide by the policy. Despite initially refusing, Pelcha did eventually submit the form one day before her requested day off. Due to her insubordination among other workplace issues (including failure to timely complete tasks and generally negative attitude), then-President and CEO of Watch Hill Greg Niesen terminated Pelcha’s employment.

Legal Standard

The ADEA prohibits employers from terminating employees “because of such individual’s age.” 29 U.S.C. § 623(a)(1). To survive a motion for summary judgment, Pelcha needed to prove that there was a genuine issue as to whether she was fired “because of” her age. In Gross v. FBL Fin. Servs., Inc., the Supreme Court held that the language “because of” requires employees to show that their age was the but-for cause of their termination. The Court also set forth two ways a plaintiff can establish they were terminated “because of” their age: (1) by direct evidence; or (2) using the burden-shifting analysis first introduced in McDonnell-Douglas Corp. v. Green. The Sixth Circuit in Pelcha v. MW Bancorp, Inc., et al. affirmed that Pelcha failed to meet her burden under both tests.

In applying (but ultimately rejecting) the “direct evidence” framework, the District Court considered three statements by CEO Niesen including: (1) comments that another employee in her eighties had a “limited shelf life” and had reached her “expiration date;” (2) that Niesen intended to reduce that same employee’s hours until she quit; and (3) Niesen’s statement that he would like to “hire younger tellers.” The District Court held that while these statements were properly considered as “direct evidence” of discrimination, they were not made proximate in time to the act of termination and were “merely vague, ambiguous or isolated remarks” that did not directly implicate age. Additionally, none of these statements were related to Pelcha’s termination and in fact, were not made in reference to any termination and were about an entirely different employee. Accordingly, the statements alone failed to meet the required burden of proof.

The District Court then considered the familiar McDonnell-Douglas framework, under which successful plaintiffs must first establish a prima facie case of age discrimination. While Pelcha succeeded in shifting the burden to Watch Hill, the District Court and the Sixth Circuit Court were satisfied with Watch Hill’s evidence that Pelcha was fired for insubordination. Ultimately, Pelcha could not establish that Watch Hill’s justification for her termination was a pretext for age discrimination.

Specifically, Pelcha laid out five arguments to support her claim that her termination was pretextual: (1) she was not actually insubordinate; (2) Niesen’s allegedly ageist comments show her termination was age-motivated; (3) the rationales for her firing shifted over time; (4) another employee engaged in the same conduct but was not terminated; and (5) that Watch Hill’s failure to adhere to its disciplinary policy showed pretext.

The Court dismissed all five arguments. It reasoned that while Pelcha eventually turned in the written time off request form, she was nonetheless insubordinate for failing to submit it in a timely manner. It further held that Niesen’s comments were insufficient as they were infrequent, directed towards another employee, and were not unambiguously ageist. Pelcha’s argument that “the rationales for firing her shifted over time” likewise failed as the District Court concluded that the rationale had not shifted, but rather that Watch Hill simply had more than one reason to terminate Pelcha.

Pelcha further alleged that her termination was pretextual because another employee under the age of forty similarly failed to submit the time off form and was not terminated. The District Court was unpersuaded, and found that unlike the other employee: (1) Pelcha’s insubordination was not simply her failure to complete the form but her refusal to do so once directed by management; (2) Pelcha was in a managerial position whereas the other employee was not and was therefore not subject to the same standards.

Finally, the District Court further concluded that Pelcha’s reliance on Watch Hill’s disciplinary policy was misplaced. While Watch Hill’s policy states that while progressive discipline is “typically” implemented, it also clearly states that “[s]ome performance concerns are serious enough not to follow a progressive schedule” and that immediate termination was warranted in Pelcha’s case. Based on the foregoing rationale, the Sixth Circuit affirmed Watch Hill’s motion for summary judgment and dismissed Pelcha’s case.

Employer Takeaways

While the plaintiff here was not successful in proving age discrimination, employers should take proactive steps to avoid age discrimination claims by:

  • Ensuring that policies are communicated and signed off on by all employees.
  • Consistently applying those policies (or documenting why a stronger position was taken toward a specific employee or incident).
  • Reminding managers to be careful in how they address employees and in what they actually say — even innocent statements could be misconstrued or used against them.

For more information on this or any related topics, please contact the authors, your Seyfarth attorney, or any member of Seyfarth Shaw’s Employment Law group.

By Noah A. Finkel

Seyfarth Synopsis:  The Seventh Circuit Court of Appeals last week affirmed a district court’s denial of class certification of a state overtime claim on numerosity grounds, reasoning that the touchstone for that element is whether joinder of putative class members is practicable, and a factor to consider is how easily the plaintiff could contact those class members for joinder. Because the FLSA’s collective action mechanism makes joinder easy, this ruling suggests that district courts should consider whether to reject class treatment when a collective action is available for members of a proposed class.

Outside of California, the FLSA’s collective action mechanism long has garnered the greatest amount of attention of most wage-hour practitioners because it applies nationally, contains the most developed case law, and allows for early conditional certification of a collective action based on a “lenient standard” under which a plaintiff need made only a “modest showing” to carry a “low burden.”  Indeed, as our colleagues showed us last month in Seyfarth’s annual Workplace Class Action Report, federal district courts granted 84% of conditional certification motions in 2020.

But collective actions have their limits. While conditional certification of a collective action results in a notice of the lawsuit being sent to all of those eligible to be in the collective, participation in a collective action requires one to affirmatively file a consent to join, or opt in. Anecdotally, we tend to see about 5 to 25 percent of those eligible actually join a collective action, thus limiting a defendant’s FLSA exposure.

Enter state overtime laws, however. Usually very similar to the FLSA substantively, state overtime laws differ from the FLSA in one huge way: they allow for an opt-out class action, rather than an opt-in collective action. An opt-out class action does not require a class member to do anything to participate. Once a state overtime law class is certified, a class member is a participant unless they opt out, and opt outs are very rare. A case that has, say, 15% participation under the FLSA often sees 100% participation under state overtime class action claim, thus inflating a defendant’s potential exposure. This is why the plaintiff’s wage-hour bar prefers to file hybrid collective/class actions rather than just one or the other.

Last week, however, the 7th Circuit may have made hybrid cases more difficult for the plaintiff’s bar in Anderson v. Weinert Enterprises, Inc., No. 20-1030 (7th Cir. Jan. 28, 2021), by putting some teeth into Rule 23(a)(1)’s numerosity requirement. It is rare to see class treatment denied on numerosity grounds. Indeed, courts often have assumed that a 40-member class meets numerosity. This approach, however, miscomprehends the numerosity requirement, reasoned the 7th Circuit.

A class plaintiff bears the burden of proving that a class is, in the language of Rule 23(a)(1), “so numerous that joinder of all members is impracticable.”  To do so, they must show that “it is extremely difficult or inconvenient to join all members of the class.”  Answering that question, the 7th Circuit reasoned, involves evaluating “the nature of the action, the size of the individual claims, and the location of the members of the class … .” In the Anderson case, the 7th Circuit held that the district court did not abuse its discretion in declining to certify a class action, given (i) the proposed class’s geographic dispersion (the class members all worked at the same facility), (ii) the overall size of the class (it numbered 37, but the 7th Circuit said that if it were larger, it probably wouldn’t have mattered), (iii) the dollar amounts involved with each individual claim (considering the availability of attorney fee shifting), and (iv) the plaintiff’s ability to easily contact the class members.

The last two factors discussed by the 7th Circuit warrant emphasis. Wage-hour claims typically involve a relatively small dollar amount for each individual claim, which might help a plaintiff show that joinder is impracticable. But the 7th Circuit noted that fee-shifting provisions, which are present in the FLSA and all state overtime laws, lower the barrier to joinder of these claims.

The plaintiff’s ability to easily contact the class members, which the 7th Circuit weighed against finding numerosity in this case, is present in just about every hybrid collective/class action. If conditional certification is granted, the defendant is compelled to provide the plaintiff with the name and address or other contact information for all collective action members, and there likely is substantial overlap between the collective action and class action members. The plaintiff is then authorized to send notice to each of them to invite them join the case. The collective action mechanism thus is a practicable method for joinder — and one that may preclude class certification.

To be sure, and as the 7th Circuit recognized, availability of a collective action does not mean that every class action in a hybrid matter fails to establish numerosity. But the 7th Circuit’s decision is a reminder that Rule 23 numerosity requires the plaintiff to show the impracticality of joinder, and that, the availability of the collective action device may mean the plaintiff cannot show that.

By James L. CurtisAdam R. Young, A. Scott HeckerPatrick D. Joyce, and Craig B. Simonsen

Seyfarth Synopsis: Last week, President Biden directed OSHA to release clear guidance for employers to help keep workers safe from COVID-19 exposure. On January 29, 2021, OSHA issued Protecting Workers: Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace.”

According to OSHA’s press release, the agency is putting forth “stronger worker safety guidance to help employers and workers implement a coronavirus protection program and better identify risks which could lead to exposure and contraction.” The updated guidance and recommendations highlight steps employers should take to ensure a safe and healthy workplace and outlines existing safety and health standards. Many employers have already implemented some, if not all, of these recommendations throughout the pandemic.

The newly-issued guidance focuses on a workplace COVID-19 prevention program, which OSHA opines “is the most effective way to mitigate the spread of COVID-19 at work.” OSHA lists 16 elements that effective plans should include:

  1. Assignment of a workplace coordinator;
  2. Identification of where and how workers might be exposed to COVID-19 at work;
  3. Identification of a combination of measure that will limit the spread of COVID-19 in the workplace, in line with the principles of the hierarchy of controls;
  4. Consideration of protections for workers at higher risk for severe illness through supportive policies and practices;
  5. Establishment of a system for communicating effectively with workers and in a language they understand;
  6. Educate and train workers on your COVID-19 policies and procedures using accessible formats and in a language they understand;
  7. Instruct workers who are infected or potentially infected to stay home and isolate or quarantine;
  8. Minimize the negative impact of quarantine and isolation on workers;
  9. Isolating workers who show symptoms at work;
  10. Performing enhanced cleaning and disinfection after people with suspected or confirmed COVID-19 have been in the facility;
  11. Providing guidance on screening and testing;
  12. Recording and reporting COVID-19 infections and deaths;
  13. Implementing protections from retaliation and setting up an anonymous process for workers to voice concerns about COVID-19-related hazards;
  14. Making a COVID-19 vaccine or vaccination series available at no cost to all eligible employees;
  15. Not distinguishing between workers who are vaccinated and those who are not; and
  16. Other applicable OSHA standards.

Though OSHA does not currently have COVID-19 regulations, the OSH Act’s General Duty Clause requires employers to provide a workplace free from any recognized hazard. OSHA’s guidance is an indication of the means of abatement the agency believes are “feasible” to address COVID hazards.

Further, we expect that if OSHA determines a COVID-19 emergency temporary standard (ETS) is necessary and issues it by President Biden’s March 15, 2021 deadline, a number of these provisions will be part of the regulations. Consequently, employers should evaluate their compliance with these guidelines now to prepare for any forthcoming ETS.

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

By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  In EEOC v. JBS USA, LLC, No. 10-CV-2103, 2021 U.S. Dist. LEXIS 13012 (D. Colo. Jan. 25, 2021), an EEOC-initiated lawsuit alleging a meatpacking engaged in a pattern or practice of discrimination on the basis of race, national origin, and religion, the U.S. District Court in Colorado denied the EEOC’s motion to reconsider the previous dismissal of the EEOC’s pattern or practice claims, thereby rejecting the Commission’s argument that a recent Tenth Circuit decision changed Title VII religious-accommodation law. 

This latest ruling in an 11-year legal battle brings the employer/defendant one step closer to defeating one of the largest pending EEOC pattern or practice of discrimination lawsuits. The latest ruling is instructive for corporate counsel dealing with EEOC litigation issues.

*  *  *

As we have previously blogged about (here, here, here, here, here, here, here, here, and here), the EEOC filed its lawsuit August 30, 2010, alleging a pattern or practice of discrimination on the basis of race, national origin, and religion, as well as raising claims of retaliation.  On August 8, 2011, the Court issued an order bifurcating the case.  Id. at *5.  Phase I of the trial was to address three issues, including: (1) whether defendant engaged in a pattern or practice of unlawfully denying Muslim employees reasonable religious accommodations to pray and break their Ramadan fast from December 2007 through July 2011; (2) whether defendant engaged in a pattern or practice of disciplining employees on the basis of their race, national origin, or religion during Ramadan 2008; and (3) whether defendant engaged in a pattern or practice of retaliating against a group of black, Muslim, Somali employees for engaging in protected activity in opposition to discrimination during Ramadan 2008. The Court presided over a 16-day trial for Phase I from August 7 to August 31, 2017.  Id. at *6.

On September 24, 2018, the Court issued its Phase I Findings.  Id.  It found that: (1) while defendant had denied Muslim employees a reasonable religious accommodation to pray during Ramadan (other than in 2009 and 2010), the EEOC had not made a requisite showing that any employees suffered a materially adverse employment action as a result of defendant’s policy denying unscheduled prayer breaks; (2) the EEOC had failed to prove that defendant’s disciplinary actions during Ramadan 2008 were motivated by a discriminatory animus; and (3) the EEOC had failed to demonstrate that defendant’s discipline of employees during Ramadan 2008 was for a retaliatory purpose rather for engaging in a work stoppage.  As a result, the Court dismissed the EEOC’s Phase I pattern or practice claims.  Id. at *7.  The EEOC moved the Court to reconsider.

The Court’s Decision

The Court denied the EEOC’s Second Motion for Partial Reconsideration of the Phase I Findings of Fact and Conclusions of Law.  The EEOC had asked the Court to reconsider its findings pursuant to the Tenth Circuit’s recent en banc decision in Exby-Stolley v. Bd. of Cnty. Comm’rs, 979 F.3d 784 (10th Cir. 2020), a disability-accommodation case brought under the ADA.  The EEOC argued that Exby-Stolley was an intervening change in Title VII religious-accommodation law.

First, the Court opined that Exby-Stolley was an ADA case where the jury was instructed that, in order for the plaintiff to make out an ADA accommodation claim, the plaintiff had to show that she had suffered an adverse employment action.  Id. at *8-9.  In holding that the ADA did not require that plaintiff prove that she suffered an adverse employment action, the Tenth Circuit compared the elements of an ADA accommodation claim with a religious accommodation claim brought under Title VII.  Exby-Stolley explained that, while ADA claims do not require that a plaintiff show an adverse employment action, in Title VII religious-accommodation cases, the prima facie case requires the employee to show among other things that “he or she was fired or not hired for failure to comply with the conflicting employment requirement.”  Id. at *9 (quoting Exby-Stolley 979 F.3d at 739).

Applying Exby-Stolley here, the Court explained that in its Phase I Findings, and as the Tenth Circuit stated in Exby-Stolley, the adverse employment action requirement for Title VII religious-accommodation claims, “is not new.”  Id. at *10.  The Court supported its position by quoting Exby-Stolley, and noted that, “In fact, the Tenth Circuit explained that the fact ‘[t]hat a disparate treatment claim — under Title VII or the ADA — would require an adverse employment action is wholly unremarkable.’” Id. at * (quoting Exby-Stolley, 9 F.3d at 793 n.3).

Accordingly, the Court held that the law concerning religious accommodation claims under Title VII remained the same as it was before the Exby-Stolley decision, and therefore denied the EEOC’s second motion for reconsideration.

Implications For Employers

This ruling represents the latest chapter in the seemingly never-ending EEOC v. JBS saga, where the employer once again received a favorable ruling from the Court.  In essence, the Court rejected the EEOC’s attempt to apply post-dismissal case law to change the Court’s mind about its previous ruling.

For employers who are mired in year-long litigation battles with the EEOC, this ruling illustrates that one of the Commission’s strategies will be to closely monitor dockets and seek to overturn prior adverse rulings when new case law precedent provides a window for that opportunity.  Employers would be prudent to similarly monitor court rulings – even after a court dismisses part of a case – to stay ahead of the EEOC’s anticipated tactics.

Readers can also find this post on our Workplace Class Action blog here.

By Romtin Parvaresh and Daniel C. Whang

Seyfarth Synopsis: The U.S. Court of Appeals for the Ninth Circuit recently became the seventh federal appellate court to hold that the standard for “willful” violations under the Family and Medical Leave Act is whether the employer knows or shows reckless disregard for whether its conduct violates the FMLA.

The Ninth Circuit’s decision in Olson v. United States, 980 F.3d 1334 (9th Cir. 2020) is the most recent case to hold that the standard for “willful” violations under the Family and Medical Leave Act is whether the employer knows or shows reckless disregard for whether its conduct violates the FMLA. Six of the other twelve federal circuit courts have reached the same conclusion, so Olson ushers a majority rule and signals a growing consensus.

Olson is noteworthy not only because it clarifies the FMLA’s contours but also because it provides an illustration of what actions weigh against a finding of willfulness.

Background for Olson

Andrea Olson provided consulting services to the Bonneville Power Administration via a third-party administrator. She suffered from anxiety and eventually went on leave under the FMLA. BPA did not provide Olson notice of her FMLA rights.

About a month into the leave, BPA considered terminating Olson’s services because there was no expected date for return, but it ultimately decided not to do so after consulting with its legal department. Also, during the leave, Olson billed BPA for several hours of work, which BPA paid.

After about three months of leave, BPA agreed to let Olson telework more and offered a trial work period, which she interpreted to include training her own replacement. Olson rejected the offer and never returned to work.

Olson sued BPA under the FMLA, arguing that BPA willfully interfered with her FMLA rights by failing to provide her notice of them. Relief is available for failure to notify only if the employee has been prejudiced. Following a bench trial, the trial court found in BPA’s favor – specifically, that BPA’s failure to notify was not willful.

Ninth Circuit: FLSA Standard for “Willfulness” Applies to FMLA Context

On appeal, Olson argued that the trial court failed to consider how BPA’s failure to notify prejudiced her.

The Ninth Circuit panel affirmed judgment for BPA, without addressing the issue of prejudice, on the basis that the trial court did not err in finding that BPA’s failure to notify was not willful. While noting that the FMLA does not define “willful,” the Court joined six other circuits (the First, Second, Sixth, Seventh, Eighth, and Tenth Circuits) in holding that the standard for willfulness under the Fair Labor Standards Act, articulated in McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988), also applies to FMLA claims. Under that standard, a violation is “willful” if the employer knows, or shows reckless disregard for whether, its conduct violates the FMLA.

Accordingly, the Ninth Circuit held that the trial court did not clearly err in finding that BPA’s violation was not willful. In reaching this conclusion, the Ninth Circuit indicated that three facts – BPA’s decision to consult with its legal department; BPA’s attempts to bring Olson back to work, and BPA’s payment of her billed hours during leave – weighed against a finding of willfulness. It also called into doubt whether BPA was even Olson’s primary (as opposed to secondary) employer under the FMLA, such that it may not have owed a duty to provide notice in the first place. The existence of that legitimate question was yet another factor that weighed against a finding of willfulness.

Key Takeaways

There are several takeaways from Olson:

  • West Coast employers now have clear guidance on what constitutes “willful” violations of the FMLA.
  • All seven federal appellate courts that have addressed the standard for “willfulness” under the FMLA have adopted the FLSA standard. This majority rule becomes even more persuasive in absence of any contrary authority.
  • Good faith and due diligence – such as consulting with legal counsel or engaging in the interactive process – appear to be factors that weigh against a finding of willfulness.

For more information on this or any related topics, please contact the authors, your Seyfarth attorney, or any member of Seyfarth Shaw’s Employment Law group.

By Kaveh Dabashi and Robert S. Whitman

Seyfarth Synopsis: A recent Second Circuit decision casts doubt on the usefulness of national statistics to support a claim of hiring disparities at the pleading stage of litigation. Unless the national population mirrors the pool of qualified job applicants, the Court held that national statistics cannot help a plaintiff plead that an employer’s hiring policy has a disparate impact on a protected class.

“Facts are stubborn things, but statistics are pliable.” With this Mark Twain quote, the Second Circuit opened its recent opinion affirming dismissal of a Title VII disparate impact claim. The opinion explores the extent to which national statistics regarding the arrest and incarceration rates of Black Americans versus Caucasian Americans can support a disparate impact claim.

The decision is a welcome ruling for employers and a helpful reiteration of the limited extent to which broad, national statistics can support a disparate impact claim at the pleading stage.

Background

NTT Data, a technology services provider, separately offered employment to two Black candidates for developer positions. The employment offers were contingent on the results of a routine background check. Upon conducting the background checks, NTT discovered that each candidate had been convicted of at least one felony. As a result, NTT withdrew the employment offers.

The candidates filed a putative class action, alleging that NTT’s alleged policy of not hiring individuals with “certain criminal convictions including felonies” violated Title VII of the Civil Rights Act of 1964. The Plaintiffs claimed that NTT’s policy had an unlawful disparate impact on Black candidates. A disparate impact claim typically alleges that a facially neutral employment policy adversely affects a protected class; the practice can be sustained if it is job-related and consistent with business necessity.

To support their disparate impact claim, the Plaintiffs pointed to national statistics showing that Black Americans “are arrested and incarcerated for crimes at higher rates than [w]hites, relative to their share of the population.” The District Court dismissed the complaint for failure to state a claim, holding that the national statistics on which Plaintiffs relied did not have an adequate relationship with the pool of NTT job applicants.

Second Circuit’s Decision

On appeal, the Second Circuit affirmed the dismissal while acknowledging that statistics can “nudge a disparate impact claim across the line from conceivable to plausible,” so long as the statistical data actually demonstrates a significant disparity that is caused by the challenged policy. To do this, the population analyzed in the statistical data must actually represent the population in the pool of job applicants. As an example, the Court remarked that “it would make little sense to judge a hospital’s physician-hiring policies by looking at the effect those policies would have on a population of high school graduates,” because high school graduates lack a medical degree and are thus ineligible for employment as physicians.

In other words, general population statistics are only helpful where they accurately reflect the pool of qualified job applicants. And this is where the Plaintiffs’ claim was defeated: the complaint did not plausibly allege that national arrest and incarceration statistics were in any way representative of the pool of qualified applicants for a position at NTT. On the contrary, the complaint took “great pains to highlight Plaintiff’s qualifications, plainly indicating that those qualifications are relevant to the jobs at the heart of this dispute.” Because the national population at large does not share these qualifications, national statistics could not support the Plaintiffs’ disparate impact claim.

Thus, the Court saw “no basis for using national statistics as a proxy for the qualified applicant pools for the developer positions[.]” The fact that Black Americans may be arrested or convicted at higher rates than Caucasian Americans could not, without more, make it plausible that Black web developers with the educational and professional qualifications to work at NTT are more likely to have been convicted of a crime than their Caucasian counterparts. Without additional information, the Plaintiffs’ disparate impact claim rested on mere conclusions.

Takeaways

The Second Circuit’s decision is welcome news to employers facing disparate impact claims. While the Court acknowledged the “informational disadvantage” that plaintiffs have at the pleading stage – that is, before plaintiffs have an opportunity to request information from the employer in discovery – the Court declined to allow a disparate impact claim to “force [its] way into discovery” merely on the basis of non-representative national statistics. This smooths the path for employers to seek dismissal of disparate impact claims before expensive and time-consuming discovery.

For more information on this or any related topics, please contact the authors, your Seyfarth attorney, or any member of Seyfarth Shaw’s Employment Law group.

By KarlaGrossenbacher, Jennifer A.Kraft, and Benjamin J.Conley

Seyfarth Synopsis: As COVID-19 vaccines become more readily available in coming months, employers are exploring ways to maximize vaccination rates within their workforce.  Some employers are  considering making vaccination mandatory.  Be sure to read our alert for more relating to legal considerations involved with a mandatory vaccination program.  Other employers are considering simply encouraging employees to get vaccinated, offering a voluntary vaccination program, or even offering an incentive to employees who receive the vaccine as part of a workplace wellness program.  Employers should be aware of the existing (and recently proposed) Americans with Disabilities Act (ADA) guidelines that may impact the design of any such program.

Background – ADA Restrictions on Wellness Programs

As described in greater detail here, the ADA applies to employer-sponsored wellness programs that include a medical exam or disability-related inquiry.  The ADA generally permits employers to make medical examinations or inquiries in connection with a wellness program, but only if such program is “voluntary.”  Under EEOC guidelines, that means:

  • The program is reasonably designed to promote health or prevent disease, is not overly burdensome, and is not a subterfuge for discrimination.
  • The program is not a “gateway plan”, requiring employees to submit to a medical exam or inquiry in order to access an enhanced benefits package.
  • The program offers a reasonable accommodation to persons for whom it is medically inadvisable to participate
  • Participants are provided with a notice informing them of why their information is being requested, how it will be used, and how it will be protected.
  • Incentives are limited.

The final requirement, relating to the level of permitted incentives, is in a state of flux.  Until 2016, there were no guidelines on how much of an incentive could be offered to encourage participation in a wellness program.  In 2016, however, the EEOC finalized regulations that would permit an incentive of up to 30% of the cost of self-only coverage under the employer’s health plan.  Those regulations were challenged by the AARP, however, and were ultimately struck down by the District Court who ordered the EEOC to reissue guidelines that engage in a more thorough process detailing how it determined that the incentive level met the ADA’s voluntary standard.

Last week, the EEOC issued a Notice of Proposed Rulemaking that would limit any incentives offered in a connection with a participation-only wellness program (i.e., one where participants are simply required to submit to a medical exam or inquiry but not required to achieve any particular outcome) to a “de minimis” threshold.  Examples of permissible incentives in the proposed regulations included a water bottle or a gift card of modest value.

Analysis of ADA’s Applicability to a Vaccination Program

The EEOC updated its Technical Assistance document on December 16, 2020, to provide that  the administration of a vaccine, in and of itself, does not constitute a medical examination.  That said, vaccine administration is almost always accompanied by medical questions to ascertain whether the person is susceptible to an allergic reaction, etc.  That type of inquiry could constitute a disability-related inquiry and therefore would be subject to restrictions under the ADA if the information is solicited by the employer or by an entity administering the vaccine to employees pursuant to a contract with the employer.

However, the ADA can be avoided altogether if the employee gets vaccinated by a third party provider who is not under a contract with the employer to administer the vaccine because the medical pre-screening questions are not attributed to the employer under this scenario.  Thus, an employer could structure its wellness program to provide a financial incentive to participants to receive a vaccine from a third-party vendor, not under contract with the employer (e.g., a local pharmacy chain), without running afoul of the ADA.  While the employer could require proof that the individual received a vaccination, that should not trigger ADA restrictions because, as noted above, vaccination status is not, in and of itself, a medical examination or inquiry under the ADA.

Duty to Accommodate

Current EEOC regulations on wellness programs require accommodation for disabilities absent undue hardship.  Although the proposed regulations on wellness programs do not address accommodations on the basis of religion, presumably the EEOC’s position on accommodation would be the same and the language from the current regulations regarding accommodation remains unchanged.  While current EEOC regulations do not specify what type of accommodation must be offered in a vaccination scenario, presumably the employer would have to come up with an accommodation that is an alternative requirement to getting the vaccine, such as wearing a mask, getting weekly COVID tests and social distancing, so the person with the disability-related or religious objection can earn the incentive.

Of course, the duty to accommodate would generally only be implicated in situations where an individual is actually unable to get the vaccine due to a disability (or potentially a bona fide religious objection) and reasonable accommodation need only be made absent undue hardship.  The viability of any such claim may be impacted by what the FDA says about any vaccine it approves in terms of any medical contraindication.

Level of Permitted Incentive

At present, it is unclear what level of incentive would be considered voluntary under ADA guidelines.  Prior regulations permitting incentives up to 30% of the cost of health coverage were invalidated by the courts.  The newly proposed regulations only permitting de minimis incentives are in proposed form, and the EEOC has stated that they are “simply proposals and they do not change the law or regulations.”  Further, there’s a possibility these regulations could be frozen by the incoming Biden Administration and/or revised before taking final form.  In any event, it’s unlikely the regulations would be finalized before more broad-based vaccine rollouts take place.

Even so, there is some risk that a plaintiff could seize upon this proposed regulations to argue that any incentive that exceeds a de minimis threshold is involuntary.  To be clear, the current regulations are only in proposed form and, as noted, the EEOC has made clear it is not “law.”  Further, courts can defer to, but often do not follow EEOC regulations.  But, employers should keep this proposal in mind as they implement an incentive-based COVID vaccination program.

By Christina Jaremus and Erin Dougherty Foley

Seyfarth Synopsis: In Frappied v. Affinity Gaming Black Hawk, LLC, 966 F.3d 1038 (10th Cir. 2020), the Tenth Circuit reversed dismissal and summary judgment in favor of Affinity Gaming Black Hawk, LLC (Affinity) on three of four discrimination claims brought by former Casino employees. The basis for the Court’s decision highlights several key takeaways for employers to consider in responding to discrimination claims after implementing layoffs.

The Frappied Plaintiffs were nine employees, eight women and one man, working at the Golden Mardi Gras Casino (Casino) in Blackhawk, Colorado. In 2012, Affinity purchased the Casino in 2012, and took over its operations in November. In January 2013, Affinity laid off many of the Casino’s employees, including the nine Plaintiffs. All of the Plaintiffs were over 40 years of age when Affinity terminated their employment. It was not a reduction in force. Affinity posted an advertisement listing 59 open positions and hired a large percentage of employees in their twenties. The female Plaintiffs brought “sex-plus-age” disparate impact and disparate treatment claims under Title VII of the Civil Rights Act of 1964 (Title VII), and all nine Plaintiffs brought disparate impact and disparate treatment claims under the Age Discrimination in Employment Act (ADEA) for age discrimination. The district court granted Affinity’s motion to dismiss the Title VII sex-plus-age claims and the ADEA disparate impact claim and granted summary judgment in favor of Affinity on the remaining disparate treatment ADEA claim.

The Tenth Circuit reversed all of the district court’s dismissals except the dismissal of the Title VII disparate treatment claim. Below are the key takeaways from the decision.

1. Sex-Plus-Age (or Another Factor) is a Cognizable Combination Claim Under Title VII Even if the “Plus” Factor Isn’t Protected by Title VII. It is no surprise that Title VII prohibits discrimination based on a combination of characteristics protected by Title VII, such as “sex-plus-race” discrimination, i.e., discrimination targeted only at employees of a particular race and sex. In Frappied, the “sex-plus” claim was based on sex discrimination combined with age discrimination. Age is not a protected characteristic under Title VII. Regardless, the Tenth Circuit noted that Title VII forbids “sex-plus” discrimination even when the “plus” characteristic is not protected under Title VII. The United States Supreme Court has recognized discrimination against women when the employer refused to hire women with preschool-age children, but not men with preschool-aged children. This was true even though Title VII does not prohibit discrimination against people with preschool-age children as a class.

As long as sex plays a role in the employment action, it is of no significance that a discriminatory factor other than sex might also be at work, even if that other factor plays a more important role than sex in the employer’s decision. Put in another way, as the U.S. Supreme Court explained in Bostock v. Clayton Cty., Ga., ––– U.S. ––––, 140 S. Ct. 1731, 1739, 1742 (2020), if a hypothetical employer has a policy under which it fires all Yankees fans, a termination based solely on that policy is because of status as a Yankee fan, not because of sex. But if its policy is to fire only female Yankees fans, it engages in prohibited discrimination because such terminations are based in part on sex.

In Frappied, the Tenth Circuit held that the sex-plus-age claims are cognizable under Title VII and reversed the district court’s dismissal of the Plaintiff’s Title VII disparate impact claims. It rejected Affinity’s argument that plaintiffs should not be able to bring Title VII sex-plus-age claims because of the availability of relief for age-based animus under the Age Discrimination in Employment Act, noting that each statute addresses different harms. The Court noted that recognizing “intersectional” claims best effectuates congressional intent to prohibit discrimination in its entirety.

However, it upheld the district court’s dismissal of plaintiffs’ Title VII disparate treatment claims because the lawsuit did not include any specific factual allegations that would suggest that Affinity discriminated against any individual plaintiff or the plaintiffs as a group because of sex. The lawsuit included statistical data, but it did not suffice to raise a plausible inference of sex discrimination because the Plaintiffs did not exclude younger workers in their statistical analysis. Instead, the statistics the Plaintiffs included in their lawsuit reflected at least three possibilities: discrimination based on: (1) sex alone, (2) a combination of sex and age, or (3) age alone. Because the plaintiffs did not compare older women to only older men, the statistics did not give rise to a plausible inference of discrimination because of sex necessary to allege a disparate treatment claim under Title VII.

2.  A “Sex-Plus” Plaintiff Need Not Show Discrimination Against an Entire Subclass. Citing Bostock, the Tenth Circuit also clarified that in order to prevail in a “sex-plus” claim, a female plaintiff does not need to prove that the subclass of women to which she belongs was unfavorably treated as compared to the corresponding subclass of men. Rather, if a sex-plus plaintiff shows that she (individually) would not have been terminated if she had been a man—in other words, if she would not have been terminated but for her sex—this showing is sufficient to establish liability under Title VII.

3.  Pay Attention to Lay-Off Demographics When Reorganizing Involves Rehiring. In Frappied, the district court dismissed the Plaintiffs’ disparate impact age discrimination claims because it concluded that the Plaintiffs did not offer statistics or data regarding the alleged disparate impact of age-neutral employment policies. The Tenth Circuit reversed. It found that the complaint alleged sufficient data to raise an inference of a disparate impact based on age. The Court found that the Plaintiffs provided data that showed Affinity laid off 67% of its workers forty or older and only 48-49% of its workers under 40. The statistical evidence also showed that there was less than a 5% chance that the correlation between age and termination was the product of random chance. The Court found that Plaintiffs’ claim was further buttressed by their allegations regarding the ages of the new hires who replaced Plaintiffs and the other terminated employees, 71% percent of whom were in their twenties. In short, when conducting layoffs where some employees may be rehired, pay attention to the relevant demographics of the employees who are laid off and rehired–a Plaintiff can plausibly allege an age-based disparate impact claim by alleging statistical evidence plus comparator (rehire) evidence.

4.  In the Absence of Individual Comparator Evidence, a Plaintiff in an Age Discrimination Disparate Treatment Claim Can Survive Dismissal By Showing That For Any Given Position, New Hires Were Materially Younger. The Tenth Circuit also reversed the district court’s decision to grant summary judgment to Affinity on Plaintiff’s disparate treatment age discrimination claims. Because many of the job positions were interchangeable and many of the terminated employees were fired on the same date, it was next to impossible for the Plaintiffs to ascertain who replaced whom. However, the Tenth Circuit found that because there was no clear one-to-one correlation between the terminated employees and the new hires, it would not require each plaintiff to show he or she was individually replaced by a significantly younger employee. Rather, the Plaintiffs needed only demonstrate that for any given position (even considering non-plaintiff data), the new hires were significantly younger than the terminated employees, which the Court found the Frappied Plaintiffs plausibly alleged.

5.  Be Consistent About the Basis for an Employee’s Termination. The Tenth Circuit also found that the Plaintiffs presented sufficient evidence to raise a genuine issue of material fact that Affinity’s proffered legitimate, nondiscriminatory reasons were pretextual because, in part, its reasons for terminating the Plaintiffs did not match the reasons given at the time of termination. (“The inconsistencies between Affinity’s contemporaneous stated reasons and its detailed post-hoc explanations for terminating Plaintiffs could support a jury’s finding that Affinity lacks credibility.”) In establishing a defense to any discrimination case, shifting explanations for the reasons an employee was terminated may be viewed suspiciously by a Court (and by a jury).

If you are navigating the legal implications of taking over a business previously owned by another company and making layoffs or other changes to the existing workforce, proceed with caution and (it’s strongly recommended) on the advice of counsel.

For more information on this or any related topics, please contact the authors, your Seyfarth attorney, or any member of Seyfarth Shaw’s Employment Law group.

By A. Scott Hecker

Seyfarth Synopsis: The EEOC recently issued guidance to employers considering mandating that their employees receive the COVID-19 vaccine. Employers are also left with other considerations, including how to address temporary workers at their worksites, whether FDA emergency use authorizations change the vaccine calculus, and how state laws may impact decision-making. We address some of the additional nuances to this fluid situation.

Seyfarth offered a comprehensive review of the EEOC’s December 16, 2020 guidance on whether employers can mandate that their employees receive the COVID-19 vaccine.  With this guidance in hand, and the prospect of widespread distribution of vaccines in 2021 on the horizon, employers are exploring their options for developing vaccination programs. Seyfarth has received a number of frequently asked questions from clients, both pre- and post-EEOC guidance, and the firm continues to monitor these developing issues.

The EEOC guidance made clear that employers can mandate employee vaccination, under certain conditions, and historically, federal OSHA has also indicated that employers can mandate vaccines. But employers will confront other issues with employer-mandated vaccination as the vaccine becomes more widely available, such as how to address contractors or other temporary workers at employer worksites.

Typically, employers have greater flexibility regarding vaccine requirements for contractors/temporary workers (or even visitors) – similar to testing and screening – because employers do not have a duty to accommodate these individuals (i.e., the ADA only applies to employees); however, some states have different legal requirements. For example, New York, allows “employees or applicants with disabilities . . . [to] request a reasonable accommodation, regardless of . . . employment status (permanent, contingent, temporary or provisional).”

Under section 296-d of New York’s Human Rights Law:

It shall be an unlawful discriminatory practice for an employer to permit unlawful discrimination against non-employees in its workplace. An employer may be held liable to a non-employee who is a contractor, subcontractor, vendor, consultant or other person providing services pursuant to a contract in the workplace or who is an employee of such contractor, subcontractor, vendor, consultant or other person providing services pursuant to a contract in the workplace, with respect to an unlawful discriminatory practice, when the employer, its agents or supervisors knew or should have known that such non-employee was subjected to an unlawful discriminatory practice in the employer’s workplace, and the employer failed to take immediate and appropriate corrective action. In reviewing such cases involving non-employees, the extent of the employer’s control and any other legal responsibility which the employer may have with respect to the conduct of the person who engaged in the unlawful discriminatory practice shall be considered.

“Unlawful discriminatory practice” includes “refus[al] to hire or employ or to bar or to discharge from employment such individual or to discriminate against such individual in compensation or in terms, conditions or privileges of employment” based on, e.g., creed or disability.

For uniformity’s sake, employers may want to align their employee and contractor vaccination requirements. Employers should also remain cognizant of potential joint employment issues when addressing non-employee concerns, including whether to ask for and how to maintain confirmation of vaccination from these individuals.

Something else for employers to consider is that COVID-19 vaccines are currently only available under FDA emergency use authorizations (“EUA”). When permitting emergency use of a vaccine, the FDA has an obligation to:

[E]nsure that recipients of the vaccine under an EUA are informed, to the extent practicable under the applicable circumstances, that FDA has authorized the emergency use of the vaccine, of the known and potential benefits and risks, the extent to which such benefits and risks are unknown, that they have the option to accept or refuse the vaccine, and of any available alternatives to the product.

This information is typically conveyed in a patient fact sheet that is provided at the time of vaccination. While the EEOC may not identify significant additional hurdles in considering vaccine mandates under an EUA, versus full FDA approval, we expect more robust development of the law in this space as employees (and perhaps others on worksites) test this approach in court.

In any event, arrival of the vaccine does not end the pandemic. Employers should maintain COVID-19 mitigation protocols during distribution of the vaccine. These policies may continue for a lengthy period as the vaccine is rolled out to different groups of workers and as employers work through accommodation requests. Employers who have operated with, e.g., social distancing, masks, etc., should be able to continue (and may be able to use these procedures as ongoing accommodations for those employees who do not receive a vaccine).

As with all things COVID-19, the states will have their say as well. Each state has developed a vaccine plan, and we generally expect states to follow federal guidance regarding the administration of COVID-19 vaccines. Our fingers are crossed that, in the interests of public health and broad vaccine deployment, California will adopt an interpretation of its Fair Employment and Housing Act consistent with the EEOC’s determination that the administration of the COVID-19 vaccination is not a medical examination and that employers’ requesting proof of vaccination is not a disability-related inquiry.

California’s COVID-19 vaccine page indicates that “there is no mandatory vaccination requirement from either the state or federal government. While vaccine doses will be limited in supply at first, we hope that by educating Californians about the safety and efficacy of a COVID-19 vaccine, we can encourage voluntary adoption of the vaccine.”

New York’s COVID-19 vaccine FAQs read “New York State is not mandating the COVID-19 vaccine.”

With dynamic circumstances and in the early stages of vaccine distribution, it is difficult to predict exactly how jurisdictions will proceed. States may continue to consider mandating vaccines (or prohibiting required vaccination). A number of state legislatures have pre-filed bills prohibiting or limiting vaccine mandates (e.g., Florida, Kentucky, Missouri, South Carolina, Tennessee, and Washington). New York and New Jersey are considering such proposals in current legislative sessions, while New York has also seen a contrasting proposal that would make the COVID-19 vaccination mandatory throughout the state. For a deeper dive into these state-level issues, take a look here,

For now, we have not seen any state-wide vaccination mandates, but indications are that employers can mandate vaccines, subject to relevant legal requirements.

Please reach out to your friendly, neighborhood Seyfarth attorney with additional questions.