In this, our third and final post on the April 25, 2012 Enforcement Guidance (EG) issued by the EEOC regarding “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII”, we discuss Targeted Screens and Individualized Assessments.  Together, these represent one of the methods employers can use to rebut evidence of disparate impact discrimination that may arise out of the use of arrest and conviction records—and the most likely method employers will use. 

Targeted Screens
For its defense, an employer must prove that it had job-related reasons, consistent with business necessity, for its neutral policy or practice, even though the policy or practice may have caused a discriminatory disparate impact.  Under the EG, employers can meet this burden of proof with proper Targeted Screens. 

Targeted Screens are used to identify applicants or employees who legitimately should be screened out due to a criminal record.  Because a Targeted Screen needs to be narrowly tailored in order to link particular criminal records to particular jobs, employers will likely have to create multiple Targeted Screens.  Each Targeted Screen must be documented, including the data and rationale behind the decisions for the screen.

Individualized Assessment
This method of defense is not necessarily complete when a Targeted Screen excludes an individual from a specific job due to a criminal record.  The EEOC recommends another phase called Individualized Assessment.  Not to be confused with the individualized analysis conducted under the Americans with Disabilities Act to determine whether a person is disabled under the Act, the Individualized Assessment here is different.  It might be analogized to a “due process” requirement of notice and an opportunity to be heard.  In this, the Individualized Assessment is more like the Fair Credit Reporting Act’s requirement of pre-adverse action notice.

Per the EG, an Individualized Assessment requires giving notice to the individual that his criminal record caused him to be screened out (excluded) from employment.  While the EG is silent as to the content of the notice, employers would be wise to specifically identify the conviction and why it bars employment in the job at issue.  In addition, employers may consider providing the individual with a summary of the Targeted Screen’s factors.

Then, the individual is to be given an opportunity to explain the criminal record and demonstrate why the Targeted Screen’s exclusion should not be applied to him/her under the circumstances.  Such information, per the EG, may include evidence of an error in the criminal record, facts surrounding the conviction, age at the time of conviction and/or release from prison, evidence of a clean criminal and employment record since release, rehabilitation efforts, positive references, and evidence he/she is bondable.

Finally, under the EEOC’s scheme, the employer is to give the individual further consideration.  This may lead to an exception to the Targeted Screen, or the realization that the Targeted Screen needs to be modified or is not operating properly. 

The Green Factors
What criteria are employers to use to develop and apply Targeted Screens and Individualized Analyses?  At a minimum, the EEOC’s new EG would require employers to consider three factors articulated by our own Eighth Circuit Court of Appeals in Green v. Missouri Pacific Railroad, way back in 1975.  The Green factors include the following: 

1. The nature and gravity of the offense.
   For this factor, considerations include the harm caused by the crime (for example, property damage or personal injury), the legal elements required to prove the crime (for example, whether deception was part of the crime), and the classification of the crime (felony or misdemeanor, and the level of felony or misdemeanor).
2. The passage of time since the offense and/or the completion of the sentence.
   As the EEOC sees it, the longer the gap between the offense (or completion of the sentence) and the employment decision that is to be made, the less likely the conviction should serve as a bar to employment.  Permanent exclusions from employment rarely meet the business necessity test, unless a federal law requires an indefinite bar from a particular job or industry.  Here, the EEOC expects employers to obtain recidivism data in order to justify durational limits in Targeted Screens and Individualized Assessment.
3. The nature of the job sought or held.
   Concern over the conviction must be tied to a specific job for the Targeted Screen and Individualized Assessment to be properly applied.  Considerations include the job duties (not merely the title), the level of supervision to be provided, the working environment (e.g., private home, outdoors, warehouse), interaction with others (especially with vulnerable individuals), and the relationship of the criminal history to the job to be performed. 

What Employers Can Do with Arrest Information
Arrests are not proof of criminal conduct; indeed, in the United States an arrestee is to be presumed innocent until proven otherwise (convicted).  The EEOC’s position in the EG cites to research showing that African Americans and Hispanics are arrested two to three times their proportion in the general population.  Furthermore, arrest records can be inaccurate or incomplete.  Although more and more criminal records are readily available online, such databases may not be timely, completely, or accurately maintained.  Therefore, under Title VII, employers generally cannot take adverse employment action based merely on arrest information about an applicant or employee.  However, as noted in the EG:

“Although an arrest record standing alone may not be used to deny an employment opportunity, an employer may make an employment decision based on the conduct underlying the arrest if the conduct makes the individual unfit for the position in question.  The conduct, not the arrest, is relevant for employment purposes.”

Employers may engage in their own investigation and evaluation of the conduct underlying an applicant’s or employee’s arrest, but not the arrest itself, to take action.  (As an example of the distinction, Iowa employers may recall the next-day firing of an elementary school principal the day following his arrest for child pornography.)  In addition, if an arrest results in the loss of a license or registration that is required as an essential function of the job, the employer may take action based on that result. 

What Employers Can Do with Conviction Information
Employers may rely on convictions as evidence that the underlying criminal conduct occurred.  This is acceptable, even though the applicant or employee denies guilt and professes innocence when disclosing convictions or explaining them in the Individual Assessment phase. 

Yet even conviction records should be approached with caution by employers because they can be inaccurate, incomplete, or outdated.  There also may be other facts and circumstances to indicate that the conviction record is not reliable evidence that the applicant or employee actually engaged in the criminal conduct.  For example, an individual may have steadfastedly professed innocence, despite conviction, and be out of prison on bond awaiting a new trial because DNA testing (which wasn’t available at the time of conviction) indicates innocence.  This is why the EEOC requires employers to defend actions taken in response to criminal convictions by one or more of three methods—exclusion under federal law, validation under the Uniform Guide on Employee Selection Procedures, or Targeted Screens and Individualized Assessments (which we discussed in detail in this post).

For more information on the EEOC’s guidance regarding Targeted Screens and Individualized Analyses for handling arrests, convictions, and criminal background checks of applicants or employees, or to review your policies/practices on this topic, see our other posts on the EG, contact attorney Jill Jensen-Welch at 515-246-4536/jjensen@dickinsonlaw.com, or contact another member of the firm’s Iowa Employment Law and Labor Law Group at employmentlaw@dickinsonlaw.com

In an earlier post, we provided a to-do list based on the April 25, 2012 Enforcement Guidance (EG) issued by the EEOC on the “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII.”  In this post, we’ll analyze the EG so you understand why you need to turn your system for handling criminal records inside-out. 

Where the EEOC Comes In
To be clear, the EEOC is responsible for enforcing Title VII, which prohibits discrimination in employment based on the protected characteristics of race, national origin, color, sex (and pregnancy), and religion.  But Title VII does not include being arrested or being convicted of a crime as a protected characteristic—and neither does the Iowa Civil Rights Act.  We recently heard that at least one Iowa municipality is informally considering amending their local ordinance to protect those convicted of a crime from employment discrimination.  Iowa employers may want to watch the agendas of their local commissions and of the local city council.

Also, Title VII does not regulate criminal background checks or the acquisition of criminal history information in employment.  That is regulated under the Fair Credit Reporting Act, as enforced by the Federal Trade Commission, for employers using a “consumer reporting agency” to conduct criminal background checks. 

So where does the EEOC get the authority to issue guidance on discrimination in the use of arrests and convictions for employment decisions? 

Statistically, African Americans and Hispanics are arrested and convicted more than whites, and studies cited by the EEOC show that criminal records have a negative impact on employability on these minority groups.  Hence, the EEOC has a longstanding interest under Title VII in preventing both disparate treatment and disparate impact discrimination against African Americans and Hispanics that can occur when employment decisions are motivated by criminal records.

Disparate Treatment Discrimination
Stereotypes have developed such that the criminal history of a white person can be seen as less of a problem by some than the same criminal history of an African American or Hispanic.  When this affects an employment decision, disparate treatment discrimination under Title VII has occurred.  The EG devotes a little, but not much, space to disparate treatment discrimination.  It provides examples of where the EEOC will look for evidence of such stereotypes and unlawful motivations, including statements of decision makers, inconsistencies in the hiring process, similarly situated comparators, matched pair testing done by government agencies or advocacy groups, as well as applicant flow and workforce statistics.  Efforts to prevent claims of disparate treatment discrimination over the use of criminal background information should include obtaining criminal histories consistently across applicants/employees and within similar job categories, then evaluating that information in a fair and consistent manner that does not take race or national origin into account. 

Disparate Impact Discrimination
Disparate impact discrimination occurs when an employer’s neutral and evenly-applied policy or practice regarding applicants or employees – including a policy or practice with criminal records – falls more heavily on African Americans and Hispanics (or any other protected class or basis). This violates Title VII, too, and it is clearly the focus of the EG. 

The EG lays out the burden-shifting analysis the EEOC undertakes to analyze a disparate impact claim.  First, the applicant/employee carries the burden to identify a specific, neutral and evenly-applied policy or practice of the employer that is resulting in a discriminatory disparate impact.  In this context, such a policy or practice may include questions about convictions on the job application or in the interview, practices for obtaining criminal background checks, or the way the employer handles the criminal histories of applicants/employees.  Disparate impact is shown with statistical evidence.  The EEOC cautions that a racially balanced workforce will not necessarily disprove disparate impact.  The EEOC allows employers to submit evidence that arrest or conviction statistics in the local community differ from national statistics to rebut the applicant’s/employee’s disparate impact evidence. (Never mind that this seems to unfairly shift the burden of proof to the employer, which is not proper at the first stage.) 

For the next stage of the analysis, the employer carries the burden to rebut the evidence of disparate impact.  The EG provides three options here, which will be discussed in detail below. 

For the third and final stage, the burden shifts back to the applicant/employee to show that a less discriminatory alternative policy or practice exists to serve the employer’s legitimate goals as effectively as the challenged policy or practice, but the employer refused to adopt it.  The EG spends precious little time on this final analysis.  We suggest that the prepared and cautious employer will monitor its selection and retention policies and practices, vis-à-vis criminal records, to identify disparate impact and consider alternatives if any disparate impact is discovered.  

Rebutting Disparate Impact Evidence: What’s an Employer To Do?
Sometimes a disparate impact cannot be justified.  The EEOC lists three ways employers can rebut evidence of disparate impact due to use of criminal records. 

1. Other Federal Laws
   If a federal law prohibits hiring or employing someone with a particular criminal record in a particular job or industry, then the employer has a pretty good defense against unlawful discrimination.  As slam-dunk as this defense appears, there are a couple of interesting catches.  If the federal law only requires exclusion from employment for a period of time, rather than indefinitely, then the employer who extends that exclusionary time may be unlawfully discriminating.  Also, if the federal law provides an appeal or waiver process, the employer would be wise to use it (or advise the applicant/employee to use it).  Finally, complying with the state and local laws does not provide the employer with this same defense.  The EG advises that Title VII may pre-empt state or local laws that are less protective.A number of laws exclude persons convicted of certain crimes from working in federally insured financial institutions.  Some of them provide an indefinite bar of employment, others just a 10 year bar, and some of them have appeal or waiver procedures.  Banks, thrifts, credit unions, and other financial institutions should seek competent legal counsel to help navigate these complicated waters when developing policies or practices regarding employment decisions for persons with criminal records – including when developing Targeted Screens and Individualized Assessments.

   Other industries and occupations that the EG notes (in its non-exhaustive list) that may be subject to federal laws regarding criminal records and employment decisions include child care workers in federal agencies or facilities, port workers, the insurance industry, employee benefits workers, workers in Medicare or state funded health programs, federal defense contractors, federal government contractors, and court-imposed occupational restrictions.  

2. UGESP Validation
   The EEOC’s Uniform Guidance for Employee Selection Procedures (UGESP) contains a complex and detailed process for statistically validating any part of the selection process.  Although normally used to validate employment “tests”, the UGESP can be used for other selection requirements.  We doubt many employers will take this route to validate the use of criminal records information in the selection process given its complexity and cost.
3. Targeted Screen and Individualized Assessments
   The most likely path employers will take to comply with the EG is the Targeted Screen and Individualized Assessments.  Because of this, it bears special attention.  We’ll cover that in our third and final post in this series regarding the EEOC’s new enforcement guidance. 

For more information on the EEOC’s guidance on the use of arrests, convictions, and criminal background checks of applicants or employees, or to review your policies/practices on this topic, see our other posts on the EG, contact attorney Jill Jensen-Welch at 515.246.4536 / jjensen@dickinsonlaw.com, or contact another member of Dickinson’s Employment & Labor Law Group at employmentlaw@dickinsonlaw.com.

On April 25, 2012, the EEOC issued an updated Enforcement Guidance (EG) titled “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII.”  The new EG focuses on preventing employment discrimination based on race and national origin, and particularly, the disparate impact on African Americans and Hispanics from neutral policies and practices in employment regarding arrest and conviction records. As good as that sounds, in order to comply, employers have extra work ahead of them if they want to continue using criminal background information for employment decisions, which some believe is necessary to reduce the risk of theft, fraud, workplace violence, and negligent hiring claims.

Out with the Old, In with the New
Although the EEOC previously issued guidance on this topic in 1987 and 1990, and covered it in the Compliance Manual for its investigators, the new EG supercedes all of that.  In addition, the new EG reflects the EEOC’s hostility to the use of criminal records for screening and hiring applicants, and deciding whether to promote and retain employees. 

The new EG is available on the EEOC’s website.  The EEOC also has provided a shorter, but still helpful, Question and Answer page. If you want to get an employment defense attorney’s view of the new EG, watch this site for additional posts.

Politics and Process
For an insightful look at the process that resulted in the new EG, and the political winds that led to it, see a post from our friends at the Ohio Employer’s Law Blog. 

To-Do List
Because of the volume of information flowing from the new EG, we have decided to change our normal practice of explaining a new legal requirement or guidance, with employer tips and to-do’s at the end of the article.  Instead, this time, we are providing the to-do’s up front.  We’ll answer the “why’s” and “how’s” in two later posts on this topic. 

If you are an employer with 15 or more employees (therefore, covered by Title VII), you should add more items to the growing to-do list of your human resource professional.  Because the Iowa Civil Rights Act is patterned after Title VII, and Iowa generally follows the EECO’s lead, employers with four or more employees should pay attention, too.  (Hey, don’t shoot the messenger.)  Following is our list of recommendations for the to-do list.  Again, we’ll explain in more detail where this list came from, and what it means, in later posts.

• Job Applications – Remove any questions about criminal convictions from the job application form—both paper and electronic versions.  While this is not required by the EEOC, it comes with a strong recommendation (a “best practice”), with which we concur after slogging through the new EG.  Removing the questions will give you some additional arguments and defenses in the event of a discrimination claim over the use of criminal records, and we defense lawyers want all the arguments and defenses we can get.
• New Applicant Disclosure Form – Use a separate form to obtain criminal conviction information from applicants.  While this is not required by the EEOC we recommend it so you can still get the information that was stripped from your job applications, but be mindful of who sees it and how it is used.  As an aside, remember that the Fair Credit Reporting Act has specific requirements for yet other permission forms when a background check is conducted by a “consumer reporting agency”. 
• Policy/Practice
  • Eliminate any policy or practice that automatically excludes a person from all jobs due to any arrest or conviction.  This is a requirement, unless you want the EEOC to issue a probable cause determination with the first complaint it gets about your policy/practice.
  • Continue to perform criminal background checks on applicants and employees, but rethink when you get that information, what information you get, and what you do with it.  The EG requires developing a “Targeted Screen,” supported by data, which is narrowly tailored for a tight link between specific criminal records and specific jobs.  Generalized concerns will not cut the mustard for this; you will need cold, hard facts and statistical data.  Document your rationale for your policy/practice.  More details on this will be provided in future posts. Note, that if you are a rare employer who prefers and is familiar with validation studies under the EEOC’s Uniform Guidelines for Employee Selection, then you can substitute validation of your policy/practice for the Targeted Screen.  Either way, the new EG appears to require either a data-supported Targeted Screen or a Validation Study.
  • If you develop a Targeted Screen, add an “Individualized Assessment” process to go with it.  An Individualized Assessment gives the applicant/employee who would otherwise be excluded from employment based on the Targeted Screen a chance to provide additional information to try to change your mind about sending them packing due to an arrest or conviction.  More details on this will be provided in future posts.  This is not required, but it is strongly recommended and it was heavily discussed in the EG.
  • Note: The Targeted Screen and Individualized Assessment are not necessarily policies to be included in your employee handbook.  That’s because they are primarily applicable to applicants (who don’t get an employee handbook), and they primarily concern internal procedures for HR and supervisors.  It is sufficient to have these policies/practices documented for management/HR use only, and not published for general consumption by all employees. 
• Training – Train hiring officials and affected decision makers in your new policies/practices.  This is recommended by the EEOC as a best practice.
• Recordkeeping – Keep criminal record information of applicants and employees confidential.  In other words, treat it like medical information.  This is recommended by the EEOC as a best practice. 

For more information on the proper use of arrest and conviction records and criminal background checks of applicants or employees, or for help with the above to-do list, see our future posts on the new EG, contact attorney Jill Jensen-Welch at 515.246.4536 / jjensen@dickinsonlaw.com, or contact another member of Dickinson’s Employment & Labor Law Group at employmentlaw@dickinsonlaw.com.

The Occupational Safety and Health Act requires employers to “make, keep and preserve” records of workplace injuries and illnesses as the Secretary of Labor prescribes by regulation (29 U.S.C. § 658(c)).  The pertinent regulations provide that employers must prepare an incident report and a separate injury log “within seven (7) calendar days of receiving the information that a recordable injury or illness has occurred” (29 C.F.R § 1904.29(b)(3)) and must also prepare a year-end summary report of all recordable injuries during the calendar year (§ 1904.32(a)(2)).  The employer must save these documents for five years from the end of the calendar year the records cover (§1904.33(a)).  The Act also provides that “[n]o citation may be issued . . . after the expiration of 6 months following the occurrence of any violation” (29 U.S.C. § 658(c)). 

In a recently decided case, AKM LLC, d.b.a Volks Constructors v. Secretary of Labor, 2012 WL 1142273 (C.A.D.C.), the United States Court of Appeals for the District of Columbia Circuit sided with the employer on the issue of whether OSHA’s record keeping requirement and five year regulatory retention period allows OSHA to disregard the Act’s six month statute of limitations period.  Volks makes it clear that an employer’s obligation to create a record of workplace injuries and illnesses is distinct from the obligation to maintain the record. 

In November 2006, OSHA cited Volks for failing to properly record certain workplace injuries and for failing to properly prepare its reports, logs and summaries between January 2002 and April 2006.  Volks was not cited for violations of the requirement to “save” the documents for five years, but only for its failure to create the records. 

Volks moved to dismiss the citations as untimely, because the injuries giving rise to the recording failures took place more than six months prior to the issuance of the citations.  The Secretary of Labor argued that the violations continued every day the unmet record keeping obligation remained unsatisfied – and therefore the statute of limitations was the length of the record retention period plus the limitations period set by Congress – or five years beyond the six months stated in § 658(c). 

The Volks Court disagreed and held that if an employer fails to make records of workplace injuries, OSHA may only cite the employer for the violations within six months of the violation’s occurrence.  For example, if the workplace injury is reported on May 1, OSHA can cite an employer for failure to create a record beginning on May 8 and a citation is valid only if issued within six months thereafter.  On the other hand, once an employer has made such a record, it must also retain the record for the required time (five years) and OSHA may cite employers for loss or destruction of the record for six months after the fifth year of the retention period. 

The Iowa Occupational Safety and Health Act mirrors federal OSHA (for example, the language of the six month statute of limitations provision in Iowa Code 88.7 is identical to that found in 29 U.S.C. 658(c)).  Federal law interpreting and applying OSHA provisions is considered persuasive authority in interpreting and applying Iowa’s Act, consequently, the Volks decision is good news for Iowa employers, too.

If you have questions about OSHA record keeping requirements, please contact attorney Joan Fletcher at 515-246-4525 / jfletcher@dickinsonlaw.com, or another member of the firm’s Iowa Employment and Labor Law Group at employmentlaw@dickinsonlaw.com.

As an employment attorney on the defense side, I am often asked by my employer clients if they can recover their attorney fees when they win a case, because plaintiffs routinely recover theirs after a victory.  What’s good for one side should be good for the other, right?  I have to tell them, in theory, it is possible, but in reality, it is as rare as a blue-rare steak.  Simply put, there is a double standard built into the law regarding the recovery of attorney fees in employment litigation. 

Imagine my reaction when a federal judge in the Northern District of Iowa awarded fees and costs to the defendant-employer in EEOC v. CRST Van Expedited, Inc. on February 9, 2010, following a series of rulings which effectively dismissed sexual harassment claims brought by the EEOC on behalf of 270 women.  Judge Linda Reade’s award was also noteworthy because of its sheer size — $4,467,442.90 in attorneys’ fees and expenses, and another $92,842.21 for costs for CRST.  While I and my colleagues in the employment defense bar were pleasantly stunned by Judge Reade’s ruling, we realized, as the size of the award hints, this was not a typical case. 

What the district court giveth, the EEOC appealeth, and the Eighth Circuit taketh away. 

On February 22, 2012, this huge and unusual fee award for CRST was reversed by a unanimous court of appeals.  Under Title VII and Eighth Circuit precedent, only a “prevailing defendant may recover attorneys’ fees if the plaintiff’s case was frivolous, unreasonable or without foundation.”  The Eighth Circuit also noted that prevailing party status is granted to a Title VII defendant in only “very narrow circumstances.”  Indeed.

The Eighth Circuit determined that CRST was not a “prevailing party” because the claims of two of the 270 women were not dismissed and the EEOC was allowed to continue to trial on behalf of those two women.  This decision was the result of the Eighth Circuit re-analysis of the district court’s examination of all 270 claims — which must have been a Herculean task for both courts, not to mention CRST and the EEOC.  One of the surviving claims was that of the initiating complainant, Monika Starke.  The second was that of a woman whom the Eighth Circuit determined made contentions in her deposition which, if believed, could constitute an environment sufficiently severe and pervasive such that CRST could be liable for it.  Even though the EEOC’s success rate here was around 0.007%, two viable claims remained, meaning CRST was not a “prevailing defendant,” so it could not recover any of its costs to defend all 270 of the claims.

Circling back to the question often posed to me by my employer clients: “Can we recover our attorney fees, expenses and costs if we win?”  My answer remains the same:  “Fuhgeddaboudit.”

For the sake of completeness, it should be noted that the Eighth Circuit tackled several other issues in its 59-page ruling in EEOC v. CRST.  Included among them were what the EEOC must do before bringing a class action discrimination lawsuit, whether lead drivers who trained drivers were “supervisors” under harassment law, and how the doctrine of judicial estoppel applied to EEOC actions as compared with cases brought by individuals.  If you have questions about these additional issues, this case, attorney fee awards for employers, or sexual harassment, please contact attorney Russ Samson at 515-246-4548 / rsamson@dickinsonlaw.com, or another member of the firm’s Iowa Employment and Labor Law Group at employmentlaw@dickinsonlaw.com.

This article was co-authored by Dickinson attorney John E. Lande and was first published January 19, 2012, in the online journal of the Alternative Dispute Resolution Committee of the American Bar Association’s Litigation Section.

* * *

In June of 2011, the U.S. Supreme Court issued decisions in two cases applying Federal Rule of Civil Procedure 23 and its standards for class actions: Erica P. John Fund v.Halliburton, 131 S. Ct. 2179 (2011) and Wal-Mart Stores v. Dukes, 131 S. Ct. 2541 (2011). The decision in Halliburton, while important in its own right, has limited relevance to cases not sharing a similar factual background. Specifically, Halliburton dealt with class litigation in the context of investor suits against corporate executives who allegedly inflated stock prices. Dukes, described by the Court as “one of the most expansive class actions ever,” examined at length the Rule 23(a)(2) requirement that class actions “state questions of law or fact common to the class.”  Dukes is important to examine because it represents a comprehensive analysis of the “commonality” and “predominance” standards in Rule 23 and because arbitration rules, such as the Supplementary Rules for Class Arbitration of the American Arbitration Association (AAA) and the JAMS Class Action Procedures, incorporate both the “commonality” and “predominance” standards found in Rule 23.  

Class Action Requirements
Dukes dealt with whether a class could be certified under Rule 23. For a class action to proceed, litigants must first meet Rule 23(a)’s four required standards: numerosity, commonality, typicality, and adequacy of representation. (These standards are also prerequisites to class arbitration in the AAA and JAMS rules.)  Once a proposed class surmounts these obstacles, it must then slot itself into one of the three kinds of classes described in Rule 23(b). The plaintiffs in Dukes proceeded under Rule 23(b)(2), which requires that the party opposing the class has “acted or refused to act on grounds  that apply generally to the class.”  Dukes sheds light on what the Supreme Court will require from class litigants to surmount the initial “commonality” certification hurdle.

Dukes’ Background
The proposed class included some 1.5 million women who worked in about 3,400 Wal-Mart stores across the nation. The three named plaintiffs in Dukes, who were current or former employees at three different Wal-Mart stores, alleged that they, and all women employed at Wal-Mart, had been passed over for promotions, had not received the same pay raises, and were paid less than their male counterparts. To prove these claims, the plaintiffs relied on anecdotes from current and former employees, statistical evidence, and the testimony of a sociologist who conducted a “social framework analysis” of Wal-Mart. This evidence, they contended, demonstrated a pattern and practice of discrimination throughout Wal-Mart’s stores. Wal-Mart disputed the plaintiffs’ claims, pointing to both a devolved authority structure in which local managers retain nearly all employment authority and Wal-Mart’s strong policy against sex discrimination.

The district court certified the plaintiffs as a class. A divided en banc Ninth Circuit affirmed the district court’s ruling. The majority found that the plaintiffs’ evidence of commonality was sufficient to raise the common question of whether Wal-Mart’s female employees were subject to a single set of discriminatory employment practices. This was sufficient to meet the burden set out in Rule 23(a)(2).

Two issues made their way to the Supreme Court: whether the plaintiffs had established commonality as required by Rule 23(a) and whether a court could award damages in the form of back pay to a class certified under Rule 23(b)(2). The Court unanimously disposed of the second issue, holding that under Rule 23(b)(2), the plaintiffs could not seek an award for back pay. The issue that divided the Court, and ultimately sank any class certification chances for the plaintiffs, is what it takes for a class to meet the commonality requirement under Rule 23(a).

Dukes’ Search for Commonality
The majority opinion in Dukes, delivered by Justice Scalia, interprets commonality to mean that the claims of each individual plaintiff must rest upon a common contention, the truth or falsity of which will drive a class-wide resolution of claims. To determine whether or not there are class-wide contentions on which the litigation can be resolved, the Court will look closely at both the similarities and the dissimilarities in the plaintiffs’ claims. It is insufficient to show that all class members were affected by a violation of the same statute.  The inquiry must be whether they were affected by the same violation of that statute.  This emphasis on dissimilarities between plaintiffs will illustrate whether there are any class-wide commonalities at all.

The majority examined whether there was any “glue” holding together the various discriminatory acts alleged.  The Court acknowledged that a “rigorous analysis” of whether the Rule 23(a) requirements have been met may necessitate a court to “probe behind the pleadings before coming to rest on the certification question.”   The proof of commonality “overlaps” with at least some examination of the merits of the plaintiffs’ claims.  Finding insufficient evidence of a specific employment practice that tied all 1.5 million claims together, the Court held that Rule 23(a)’s commonality requirement was not met. 

The dissent, written by Justice Ginsburg, rejected this analysis.  Justice Ginsburg argued that the majority’s interpretation of “commonality” improperly blends the Rule 23(b)(3) requirement that class questions “predominate” over individual questions with the more basic 23(a)(2) requirement that there are questions of law or fact common to the class. Specifically, the dissent rejected the majority’s focus on dissimilarities between class members when determining whether common questions of law or fact are present to meet the initial certification tests.  Instead, Justice Ginsburg argued that even a single question of law or fact common to the class will satisfy the commonality requirement.

The dissent asserted that the majority’s approach borrows too heavily from Rule 23(b)(3). Courts necessarily engage in a dissimilarities analysis under Rule 23(b)(3) because they must weigh the commonalities and the dissimilarities to determine whether the commonalities “predominate.”  Weighing similarities, according to Ginsburg, is solely a 23(b)(3) inquiry. Considering dissimilarities in the 23(a) phase imports a more exacting standard into a stage of the litigation that does not require this analysis, and may potentially defeat certification for classes that will ultimately be certified under Rule 23(b)(1) or (2), which do not have to meet the Rule 23(b)(3)  predominance requirement.

The majority responded to Justice Ginsburg’s critique by noting that any competently drafted complaint could allege a common question. Instead, the majority would ask if the common contention is capable of class-wide resolution, meaning that a determination of that issue is key to resolving “the validity of each one of the claims in one stroke.”  Finding too many dissimilarities between the prospective class members suggests the answer to that critical question is “no.”

Conclusion
Both the AAA Supplementary Rules for Class Arbitration of the American Arbitration Association and the JAMS Class Action Procedures incorporate the standards found in Rule 23 of the Federal Rules of Civil Procedure.  The JAMS rules identify Rule 23(a) and (b) specifically, while the AAA rules use language identical to the Rule 23(a)(2) commonality requirement and the Rule 23(b) predominance standard.  Cases explaining the requirements of those rules are instructive for arbitrators attempting to apply the parallel arbitration rules.

The plaintiffs in Dukes were unable to establish that any unifying civil rights violation tied together the 1.5 million members of the proposed class.  The lack of a common contention that, once resolved, would determine a central issue for all claims meant that the threshold requirement for “commonality” found in Rule 23(a)(2) was not satisfied.  To identify that common contention, it is appropriate for the court to examine the nature of the claims even if this results in an overlap with the eventual determination of the merits of the case.

A federal district court judge in Washington, D.C., ruled today that the NLRB acted within the scope of its authority under the National Labor Relations Act in promulgating “Subpart A” of a Final Rule entitled “Notification of Employee Rights Under the National Labor Relations Act.”  As we explained in a blog post on September 1, 2011, the Subpart A requires virtually all employers subject to the National Labor Relations Act (NLRA) to post a notice in the workplace about workers’ rights under the NLRA.  Under the present NLRB expectations, the notices are to be posted no later than April 30, 2012.  But one can probably expect an appeal of this ruling to the United States Circuit Court of Appeals for the District of Columbia.

In the same ruling,  in a consolidated action, one brought initially by the National Association of Manufacturers (“NAM”) and others, and the second by the National Right to Work Legal Defense and Education Foundation and others, the federal district court judge concluded that certain provisions of “Subpart B” of the Final Rule are “invalid as a matter of law.”  Subpart B is entitled “Subpart B—General Enforcement and Complaint Procedures” and includes a rule that failure to post the Notice can be an unfair labor practice.  The district court judge concluded that this provision exceeded the NLRB’s authority to the extent that it purported to establish a per se rule applicable in all situations.  The court continued, however, that the NLRB could determine – on a case-by-case basis – that a failure to post the Notice constituted an unfair labor practice.  The court cautioned that the NLRB must make a specific finding based on the facts and circumstances in the individual case before it that the failure to post the Notice “interfered with the employee’s exercise of his or her rights.”  The court emphasized that it was “simply hold[ing] that the Board cannot make a blanket advance determination that a failure to post will always constitute an unfair labor practice.”

The district court also concluded that a provision in the Subpart B rules that would have tolled the 180-day statute of limitations for filing unfair labor practice actions against employers who have failed to post the Notice also exceeded the Board’s authority under the law, and thus was invalid.  While the court looked at the language of Subpart B, Section 104.214(a), it also looked at the language of the preamble to the rule.  The court was not impressed that the language of the rule itself used the word “may.”  Rather, the court looked to the preamble to the rule which, the court noted, demonstrated that the intent was to “establish[] tolling as the standard practice unless the employer can prove to the Board that it should not be applied.”  While conceding that the NLRB could determine that equitable tolling should be applied in a specific case where the plaintiff – the entity seeking its application – establishes that it should, the NLRB’s rule “turns the burden of proof on its head . . . demand[ing] that the employer prove that across the board, unlimited extension should not apply.”

Also on Friday, the same judge issued a separate decision overruling a motion by various plaintiffs to amend their initial complaint to, in effect, add a challenge to the “recess” appointment of three new Board members.  The judge noted that whatever “trial” there was going to be in the initial action (which had only challenged the “posting” rules) had already taken place prior to the time the amendment was sought.  Nothing in the judge’s ruling prevents an independent action challenging the recess appointments.

As of today, at least, unless a conscious decision has been made not to comply with the requirement, employers should be finalizing preparations to assure the NLRB-required notices are in fact posted – physically and electronically – on or before April 30, 2012.

If you have questions about the new NLRB notice-posting rule or the rulings mentioned above, please contact attorney Russ Samson at 515-246-4548 / rsamson@dickinsonlaw.com, or another member of the firm’s Iowa Employment and Labor Law Group at employmentlaw@dickinsonlaw.com.

As an attorney representing employers I am often asked, in conjunction with the discussion of a proposed termination of an individual’s employment, whether a “COBRA notice” needs to be provided.  29 USC § 1163(2) excludes from the definition of “qualifying event” under COBRA a termination of employment which is ”by reason of such employee’s gross misconduct.”  So what is “gross misconduct” that would justify not providing a soon-to-be-fired individual with the right to continue to participate at his or her own cost in the employer’s group health insurance plans?

There is no definition of or guidance on what constitutes ”gross misconduct” either in the COBRA statute itself or in the applicable regulations.  The federal judge in Middlebrooks v. Godwin Corporation, No. 1:10-cv-1306 (AJT/JFA) (E.D. Va. February 7, 2012), noted that federal courts have diverged very widely on the question:

Some courts have provided a standard by which conduct can be judged. See Zickafoose v. UBServs., Inc., 23 F. Supp. 2d 652, 655 (S.D.W. Va. 1998) (‘[C]onduct is gross misconduct if it is so outrageous that it shocks the conscience.’); Collins v. Aggreko, Inc., 884 F.Supp. 450,454 (D. Utah 1995) (‘Gross misconduct may be intentional, wanton, willful, deliberate, reckless or in deliberate indifference to an employer’s interest. It is misconduct beyond mere minor breaches of employee standards, but conduct that would be considered gross in nature.’); Paris v. F. Korbel & Bros., Inc., 751 F. Supp. 834, 838 (N.D. Cal. 1990) (defining gross misconduct as ‘conduct evincing such willful or wanton disregard of an employer’s interests as is found in deliberate violation or disregard of standards of behavior which the employer has the right to expect of his employee, or in carelessness or negligence of such a degree or recurrence as to manifest equal culpability, wrongful intent, or evil design, or to show an intentional and substantial disregard of the employer’s interests or the employee[']s duties and obligations to his employer.’).

Iowa employers will no doubt recognize the definition in Korbel: It is the definition of the term “misconduct” used by the Iowa Supreme Court and Iowa Workforce Development in determining whether an individual is disqualified from receiving unemployment compensation benefits.  871 IAC 24.32(1)(a).  Many employers are not, however, aware that Iowa’s unemployment compensation law also has a disqualification for “gross misconduct.” The agency has defined that term as “misconduct involving an indictable offense in connection with the claimant’s employment, provided that such claimant is duly convicted thereof or has signed a statement admitting that such claimant has committed such act.”

The federal judge in Middlebrooks specifically declined to formulate a “precise definition of gross misconduct.”  She did, however, conclude that “‘gross misconduct’ requires conduct substantially beyond mere negligence, carelessness, or obstinacy.”  This reinforces that an employer’s determination of “gross misconduct” is subject to de novo review by a court.

The Middlebrooks case provides an excellent teaching tool on how the question might arise.

Lillie Middlebrooks was offered employment by Godwin Corporation around July 29, 2008.  She began working on August 1, 2008.  Godwin Corporation had a contract with the District of Columbia to staff a program known as “Healthy Start.”  Middlebrooks, a registered nurse, was assigned to the program; her duties included supervision of two assistants.  After working for the company for 30 days, Middlebrooks was enrolled in Godwin’s employer-sponsored health plan.   Middlebrooks did not receive the “COBRA general notice” either when she started work or when she was put on the company’s health plan.

Middlebrooks had what the court called “a difficult working relationship with her team members.”  After at least two meetings where Middlebrooks was advised not to engage in certain conduct or the funding of the entire program in which she worked would be jeopardized, Middlebrooks “insisted on continuing” to do what she had been told not to do.  Middlebrooks’  employment was terminated on October 30, 2008.  Godwin sent Middlebrooks a notice labeled “Cobra Letter.”  According to the Court – which held a bench trial on Middlebrooks’ lawsuit – the “Cobra Letter” did not provide the following information:

• An explanation of the consequences of failing to elect or waiving continuation coverage. See 29 C.F.R. § 2590.606-4(b)(4)(vi).
• A description of the qualified beneficiaries’ grace periods for payment and the consequences of delayed payment and non-payment. See 29 C.F.R. § 2590.606-4(b)(4)(xii).
• An explanation of the importance of keeping the administrator informed of the current addresses of all participants or beneficiaries under the plan who are or may become qualified beneficiaries. See 29 C.F.R. § 2590.606-4(b)(4)(xiii).
• A notice that the employee has 60 days to make an election to enroll in COBRA. See 29 U.S.C. § 1165(a)(1).
• The correct date on which the 18-month maximum coverage period would expire. See 29 U.S.C. § 1162(2)(A)(i); 29 C.F.R. § 2590-606-4(b)(4)(viii).2
• The name of the plan under which continuation coverage is available. See 29 C.F.R. § 2590.606-4(b)(4)(i).

On November 18, 2010 – more than two years following the termination of her employment – Middlebrooks filed a lawsuit against Godwin.  She did not serve the lawsuit until March 15, 2011.  In the lawsuit, Middlebrooks sought the statutory penalty of $110 per day for each violation of the COBRA notice requirements, plus pre-judgment interest, costs, expenses, reasonable attorney fees, and whatever other relief the court deemed just and proper. (There was no claim of any injury from the failure to provide the notice, so no compensatory damages for the injury were sought.)

One of the first things that comes to mind is “no harm, no foul.” Where and how was Middlebrooks injured?  29 U.S.C. §1132(c)(1) by its terms provides that any plan administrator who “fails to meet the [notice] requirements” of 29 U.S.C. §§ 1166(a)(1) – (1) “at the time of commencement of coverage” or (4) after a “qualifying event” – “with respect to a participant or beneficiary … may in the court’s discretion be personally liable to such participant or beneficiary in the amount of $100 a dayfrom the date of such failure … .“  The amount of the penalty is in the court’s discretion, but the purpose is to “punish non-compliance with ERISA,” not compensate the participants for injuries.  In this case, the court determined a total penalty of $500.00 was appropriate.

As anyone who has ever experienced it knows, litigation is not cheap.  Middlebrooks represented herself pro se.  (Some plaintiffs’ lawyers somewhere must have exercised some judgment?)  The employer, Godwin, had the expense of an attorney up to and through trial before a federal judge.  And in suburban Washington, D.C., no doubt $500.00 did not come close to the total costs the employer incurred.

So Iowa employers take note:  If you decide you are not going to send a COBRA notice under the “gross misconduct” exception, you may find a court second-guessing your decision – and imposing a penalty even if the plaintiff suffered no actual injuries at all.

And as a corollary lesson from  Middlebrooks to Iowa employers – and indeed, employers everywhere – develop a protocol that ensures you can prove both of the required COBRA notices are sent, and sent in a timely manner. 

Finally, do not attempt to re-invent the wheel.  Use the DOL “model” general notice (in Spanish) and the DOL “model” election notice (in Spanish), and take care to complete each accurately and completely to cover the specific situation.

For more information, please contact attorney Russ Samson at 515-246-4548 / rsamson@dickinsonlaw.com or another member of the firm’s Iowa Employment and Labor Law Group at employmentlaw@dickinsonlaw.com.

On the day that comments were due on proposed regulations beefing up affirmative action requirements for disabled workers, the Office of Federal Contracts Compliance Programs of the U.S. Department of Labor announced a short extension of the deadline.  The comment period was set to end on February 7, 2012, but was extended to February 21, 2012, giving everyone fourteen more days.  Our December 9, 2011 post on this topic explained the proposed regulations. 

If you have questions about these proposed regulations, please contact attorney Jill Jensen-Welch at 515-246-4536/jjensen@dickinsonlaw.com, or another member of the firm’s Iowa Employment and Labor Law Group at employmentlaw@dickinsonlaw.com. 

The Eleventh Circuit Court of Appeals recently held that an employee’s pre-eligible request for post-eligible FMLA leave is protected activity under the FMLA.  Pereda v. Brookdale Senior Living Communities, Inc., No. 10-14723 (11th Cir. Jan. 10, 2012).

Plaintiff Pereda was hired on October 5, 2008.  In June 2009, she advised her employer that she was pregnant and would be taking FMLA leave following the birth of her child around November 30, 2009.  Pereda’s lawsuit alleges that following her FMLA request, her managers disciplined her for using accrued sick and personal leave to visit the doctor.  Pereda also alleges that she was disciplined for notifying management of an absence via e-mail rather than seeking verbal authorization.  In September 2009, Pereda’s doctor advised her to take a few days of bed rest.  Pereda’s lawsuit alleges that she notified the employer of her doctor’s order in a message left for the Executive Director prior to taking the time off.  Pereda claims she was not contacted by the employer during her bed rest and was terminated upon returning to work immediately thereafter.  Pereda alleges she used accrued sick and personal leave for the absences.      

The district court dismissed Pereda’s lawsuit.  It held that the employer could not have interfered with Pereda’s FMLA rights because she was not entitled to FMLA leave at the time she requested it.  The district court also held that because Pereda was not eligible for FMLA leave, she could not have engaged in protected activity, and therefore the employer could not have retaliated against her. 

The Court of Appeals reversed, because “allowing the district court’s ruling to stand would violate the purposes for which the FMLA was enacted.”  The Court reasoned that the FMLA’s requirement of notice in advance of leave means employees are protected from interference with their FMLA rights prior to the occurrence of the triggering event, such as the birth of a child.  “As the statute requires advance notice, logic mandates that [the] FMLA be read to allow a cause of action for employees who, like Pereda, in goodwill exceed the notice requirement.”  The Court also held that employees giving pre-eligible advanced notice of a need for FMLA leave are engaging in protected activity, and they are therefore protected from retaliation “because the FMLA aims to support both employees in the process of exercising their FMLA rights and employers in the planning for the absence of employees on FMLA leave.”  The Court emphasized that it was not creating a “new class of employees,” as argued by the employer.  “We are simply holding that a pre-eligible employee has a cause of action if an employer terminates her in order to avoid having to accommodate that employee with rightful FMLA leave rights once that employee becomes eligible.”

The Eleventh Circuit is not alone in its analysis of this issue.  The Pereda Court cited a similar decision by the Sixth Circuit Court of Appeals, as well as two decisions of federal district courts in the Northern District of Illinois and the Eastern District of Pennsylvania. 

Pereda is a clear message that going forward, employers subject to the FMLA need to carefully scrutinize all employment decisions, including discipline, for potential FMLA liability regardless of an individual employee’s eligibility for the same at the time of the employment decision.      

Iowa employers should also be aware of Iowa’s law prohibiting termination of employment “because of” an employee’s pregnancy.  Iowa law further requires that an employer grant to an employee disabled by pregnancy a leave of absence from work “if the leave of absence is for the period that the employee is disabled because of the employee’s pregnancy, childbirth, or related medical conditions, or for eight weeks, whichever is less.”  Iowa law also prohibits an employer from retaliating against an employee who exercises her right to maternity leave.  Similar to the FMLA, Iowa’s law provides that for this protection, the “employee must provide timely notice of the period of leave requested and the employer must approve any change in the period requested before the change is effective.”  An employee, perhaps one not yet pregnant, making inquiry about an employer’s policy on “notice” under this statute would probably be regarded as engaging in protected activity under this provision.

If you are an employer and have questions about your obligations under the FMLA, please contact attorney Sara Laughlin at 515-246-4549 / slaughlin@dickinsonlaw.com, or another member of the firm’s Iowa Employment and Labor Law Group at employmentlaw@dickinsonlaw.com.