Category Archives: Trial Strategy

July 19, 2018

FAQs About Implementing Arbitration Agreements and Class Action Waivers

Bryan Benard

In late May, the U.S. Supreme Court ruled that arbitration agreements between an employer and an employee to resolve employment disputes through one-on-one arbitration do not violate the National Labor Relations Act (NLRA). In a huge win for businesses, the Epic Systems Corp. v. Lewis decision means that employers may use arbitration agreements to prohibit employees from filing and joining class or collective action lawsuits in employment-related matters.

In the weeks since SCOTUS’s decision, organizations have asked important and thoughtful questions on how to implement and use arbitration agreements and class action waivers with their employees. Although no guidance is “one-size-fits-all,” these FAQs may help answer common issues that come up.

Why Should We Use an Arbitration Agreement?

By requiring that employees resolve employment disputes through arbitration instead of filing a lawsuit in court, employers may benefit from numerous differences in both procedure and exposure. First, proceedings before a neutral arbitrator (or panel of arbitrators) are handled in private whereas lawsuits filed in a state or federal court are available to the public. In other words, unless documents are filed under seal, most court documents, hearings, and trials will be open to anyone, including reporters, competitors, other employees, etc. Consequently, requiring arbitration keeps publicity related to employment disputes at a minimum.

Second, procedures and evidentiary rules differ between arbitration and court proceedings. An employer may set forth in the arbitration agreement which arbitration rules will govern employment-related disputes. In addition, the employer and employee (and their attorneys) mutually select an arbitrator whereas the parties to a court action do not have input into the judge assigned to their lawsuit. In addition, an arbitrator has broad discretion over discovery and need not follow formal discovery and civil procedure rules that govern the courts (which may or may not be desirable in a given context). Finally, although there are some grounds for judicial review, arbitration awards generally cannot be appealed, meaning that disputes can get to a final resolution quicker.

What are the Benefits of a Class Action Waiver?

A class action waiver is typically one provision within an arbitration agreement stating that the employee agrees to resolve employment disputes on an individual basis and agrees to refrain from pursuing or joining any class or collective actions in conjunction with his or her fellow employees. By having employees waive class actions, businesses may avoid lengthy and expensive class action lawsuits that often involve hundreds, even thousands, of current and/or former employees nationwide. In addition, attorneys who represent employees are unlikely to receive the millions in attorneys’ fees that can be awarded as class counsel when forced to represent employees on an individual basis.

Are There Any Downsides to Using an Arbitration Agreement and/or Class Action Waiver?

Sure, it is possible that mandatory arbitration agreements and class action waivers may not be a good fit for every employer or for use with every employee. Although generally viewed as a benefit to employers, private arbitration can mean that resolution of an issue with one employee does not bind or even influence the resolution of that same issue with other employees. Accordingly, some employers may want to have a court rule on the lawfulness of a particular policy or practice so that it has more certainty for future enforcement. Also, smaller companies may not see the benefit in separately litigating each employee’s dispute in a separate proceeding if the company only has a handful of employees—meaning that in some situations, addressing multi-plaintiff cases could be less expensive if the pool of employees is relatively small.

In addition, arbitration is not always less expensive than court litigation since the employer is generally required to pay its own attorneys’ fees as well as most of the arbitration and arbitrator fees. There is also criticism and skepticism leveled at arbitration, on the theory that arbitrators will not grant motions to dismiss or summary judgment motions, or may attempt to “split the baby” rather than making tough decisions in favor of employers. Finally, a remote but possible scenario in a tight labor market is that key employees may refuse to agree to these mandatory agreements resulting in the loss of good talent or skilled, experienced workers.

May We Make New Employees Sign a Class Action Waiver as a Condition of Employment?

Generally, yes. You may make it a condition of employment that new hires sign a mandatory arbitration agreement with a class action waiver. Read more >>

May 21, 2018

Arbitration Agreements Waiving Class Actions Do Not Violate the NLRA, Rules Supreme Court

By Dora Lane and Emily Hobbs-Wright

Dora Lane

The U.S. Supreme Court ruled today that arbitration agreements requiring that an employer and an employee resolve any employment disputes through one-on-one arbitration do not violate the National Labor Relations Act (NLRA). In an opinion authored by Justice Neil Gorsuch, the Court ruled 5-to-4 that the Federal Arbitration Act (FAA) dictates that arbitration agreements be enforced, and nothing in the NLRA overrides that policy to permit employees to bring class or collective actions when employees have agreed otherwise. Epic Systems Corp. v. Lewis, 584 U.S. ___, (2018).

NLRA Does Not Protect Class and Collective Lawsuits

Emily Hobbs-Wright

In three cases consolidated before the Court, employees alleging wage claims sought to pursue collective lawsuits, joining with other allegedly harmed employees, under the Fair Labor Standards Act (FLSA) and applicable state wage laws. In each case, the employer sought to dismiss the collective lawsuits and instead resolve each employees’ allegations through individual arbitration as provided in arbitration agreements signed by the employees. The employees argued that the class-action waivers in the arbitration agreements were unlawful, violating their rights to engage in concerted activities for their mutual aid and protection under §7 of the NLRA. The employers asserted that the FAA demands that the individual arbitration agreements be enforced, as the NLRA does not override the FAA’s enforcement provision.

The Court ruled that the FAA requires courts to enforce arbitration agreements on the terms that the parties select, subject to courts’ refusal to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract” (e.g., fraud, duress, unconscionability – not arbitration-specific defenses). In the majority opinion, the Court stated that the NLRA does not override the FAA, and that §7 focuses on the right of employees to organize unions and bargain collectively, not on the right to pursue class or collective actions. The Court concluded that neither the NLRA nor the FAA’s savings clause protected the employees’ ability to resolve employment disputes through collective or class action when the employees have agreed to arbitrate their disputes with their employers on a one-on-one basis.

Dissent Focuses On Employee Rights

Justice Ruth Bader Ginsburg wrote a scathing dissent, that was joined by Justices Breyer, Sotomayor, and Kagan. The dissenting opinion notes that an individual employee’s claim against his or her employer for unpaid wages, or a similar employment law violation, may be relatively small and not worth the expense and effort of pursuing, when going it alone. But by seeking redress for commonly experienced wage losses on a collective basis, banding together to confront an employer, employees are placed on a more equal footing with employers and may better safeguard employee rights.

Justice Ginsburg writes that the majority’s decision “is egregiously wrong.” The dissent states that lawsuits to enforce workplace rights fit within the NLRA umbrella of “concerted activities for the purpose of . . . mutual aid or protection.” The dissent points to over 75 years of Board rulings that have held that the NLRA safeguards employees from employer interference when they pursue joint, collective, and class suits related to the terms and conditions of their employment. The dissent further states, “Forced to face their employers without company, employees ordinarily are no match for the enterprise that hires them. Employees gain strength, however, if they can deal with their employers in numbers.” The dissenting justices believe that NLRA §7 rights include the right to use class or collective litigation to resolve disputes over wages and hours, and would hold that class-action waivers in arbitration agreements are unlawful.

Big Win For Employers

In this not-unexpected result, the more conservative members of the Court have sanctioned the use of arbitration agreements by employers to help avoid class actions in the employment context. By using arbitration agreements with their employees, employers are able to resolve employment disputes in front of a neutral arbitrator rather than in the more public setting of a state or federal court. By requiring that disputes be arbitrated on an individual, rather than a class or collective basis, employers avoid lengthy and expensive class action lawsuits that often involve hundreds, if not thousands, of current and/or former employees who allege they have similar claims against the employer. The Supreme Court’s decision is a clear win for employers who now may use individual arbitration agreements to better control the cost, publicity, and liability exposure related to alleged violations of employment laws.

May 23, 2016

Limitations Period For Constructive-Discharge Claim Starts When Employee Gives Notice of Resignation

The Supreme Court made clear today that the filing period for a constructive-discharge claim begins to run when the employee gives notice of his or her resignation. In a 7-to-1 decision, the Court favored the five-circuit majority who recognized such timeline and rejected the Tenth Circuit’s reasoning that the clock begins to run on the date of the “last discriminatory act.” Green v. Brennan, 578 U.S. ___, (2016). Although the case involved a federal employee, the Court noted that the Equal Employment Opportunity Commission (EEOC) treats federal and private sector employee limitations periods the same so this ruling should affect constructive-discharge claims against private employers as well.

Discriminatory Act That Triggers Limitations Clock

In the case before the Court, Marvin Green, a postmaster in Colorado, claimed he was denied a promotion because of his race. A year after that matter was settled, Green filed an informal EEO charge with the Postal Service alleging that he was subjected to retaliation for his prior EEO activity due to his supervisor threatening, demeaning, and harassing him. After the Postal Service’s EEO Office completed its investigation of his allegations, he was informed he could file a formal charge, but he failed to do to.

A few months later, Green was investigated for multiple infractions, including improper handling of employee grievances, delaying the mail, and sexual harassment of a female employee. Green was placed on unpaid leave during the investigation. Federal agents quickly concluded that Green had not intentionally delayed mail, but neither Green nor his union representative was told. Instead, the Postal Service began negotiating with Green’s union representative to settle all the issues against Green, resulting in Green signing a settlement agreement in December 2009 that included giving up his postmaster position. On February 9, 2010, Green submitted his resignation which was to be effective March 31.

During that time, Green filed multiple charges with the Postal Service’s EEO Office. By regulation, federal employees must contact an equal employment opportunity officer in their agency within 45 days of “the date of the matter alleged to be discriminatory” before bringing suit under Title VII. Green’s allegations included that he had been constructively discharged by being forced to retire.

Green eventually sued the Postal Service in federal court in Denver. The district court dismissed Green’s constructive discharge claim, ruling that he had not contacted an EEO counselor about his constructive-discharge claim within 45 days of the date he signed the settlement agreement in December. On appeal to the Tenth Circuit Court of Appeals, Green argued that the 45-day limitations period did not begin to run until he announced his resignation, even though that was months after the last alleged discriminatory act against him. The Tenth Circuit disagreed with Green, ruling that the clock began to run on the date of the “last discriminatory act” giving rise to the constructive discharge, as two other circuits have held.

Limitations Period Begins When Employee Gives Notice of Resignation

On appeal to the Supreme Court, Green asserted that the statute of limitations began when he actually resigned due to constructive discharge, the act that gave rise to his cause of action, which was consistent with the rulings of numerous other Courts of Appeals. Interestingly, the Court agreed with the position taken by the Postal Service, which was different from the Tenth Circuit’s decision, ruling that the limitations period for a constructive-discharge claim begins to run when the employee gives notice of his resignation.

In an opinion written by Justice Sotomayor, the Court explained that “the ‘matter alleged to be discriminatory’ in a constructive-discharge claim necessarily includes the employee’s resignation.” The Court noted that to the “standard rule” governing statutes of limitations, the “limitations period commences when the plaintiff has a complete and present cause of action.” It means that period begins when the plaintiff “can file suit and obtain relief.” In effect, a constructive-discharge claim is like a wrongful-discharge claim which accrues only after the employee is fired. With nothing in Title VII or its regulations to the contrary, the Court therefore found that the limitations period should not begin to run until after the discharge itself.

So precisely when does an employee resign for purposes of triggering the limitations period for a constructive-discharge claim? The Court ruled that the limitations period begins on the day the employee tells his employer of his resignation, not the employee’s actual last day of work.

The Court did not decide the factual question of when Green actually gave notice of his resignation to the Postal Service, sending the matter back to the Tenth Circuit to determine that fact.

Significance of Decision for Employers

The practical effect of the Court’s ruling is to extend the period in which an employee may allege a constructive discharge beyond the limitations period for the underlying discriminatory acts that gave rise to the resignation. Hypothetically, employees who resign may be able to bootstrap any alleged discriminatory act during the course of their employment to their decision to abandon employment. In his dissent, Justice Thomas further opined that a discrimination victim may extend the limitations period indefinitely simply by waiting to resign. Yet the Court believed such concerns to be overblown, doubting that a victim of employment discrimination would continue to work under intolerable conditions only to extend the limitations period for a constructive-discharge claim. Nonetheless, even if the applicable Title VII limitation period (typically 180 or 300 days for private employers) for the underlying discrimination has passed, an employee may still have a timely claim for constructive discharge under the Court’s rule.

Time will tell if Justice Thomas’s concerns were more realistic that his colleagues believed.

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May 20, 2016

Employers Who Prevail In A Title VII Case May Seek Attorneys’ Fees Even Without A Ruling On The Merits

By Dora Lane

In a unanimous decision, the U.S. Supreme Court ruled that a Title VII defendant is not required to obtain a favorable judgment on the merits of the underlying discrimination case to be eligible to recover its attorneys’ fees. The decision means that employers who are able to dispose of Title VII claims for non-merits reasons, such as a dismissal on statute-of-limitations grounds, lack of subject matter jurisdiction, failure of the EEOC to conciliate, or something similar, may ask a court to award the attorneys’ fees incurred in contesting the claims (assuming, of course, it satisfies the remaining requirements for an attorneys’ fees award). Refusing to decide whether the EEOC must pay the $4 million attorney fee award at issue, the Court sent the case back to the Eighth Circuit Court of Appeals to consider an alternative theory proposed by the EEOC. CRST Van Expedited, Inc. v. EEOC, 578 U.S. ___ (2016).

Trucking Company Gets Sexual Harassment Claims Dismissed

In the case before the Court, a new female driver at a large trucking company, CRST Van Expedited, Inc., filed a discrimination charge with the EEOC alleging that she was sexually harassed by two male trainers during her 28-day over-the-road training trip. After a lengthy investigation and unsuccessful conciliation, the EEOC filed suit alleging sexual harassment on behalf of the driver and other allegedly similarly situated female employees. During discovery, the EEOC identified over 250 other women who had supposedly been harassed.

Years of legal battles ensued, during which the district court ultimately dismissed all of the EEOC’s claims for various reasons, including expiration of the statute of limitations, lack of severity or pervasiveness of the alleged harassment, employees’ failure to complain timely, CRST’s prompt and effective response to harassment complaints, and discovery sanctions for the EEOC refusing to produce certain women for depositions. Upon dismissing the lawsuit, the court ruled that CRST was a prevailing party and invited them to apply for attorneys’ fees. CRST did, and the court awarded CRST over $4 million in fees.

The EEOC appealed (twice) and the Eighth Circuit Court of Appeals, among other things, reversed the award of attorneys’ fees. Bound by previous decisions in its circuit, the Court of Appeals held that before a defendant could be deemed to have prevailed for purposes of recovering attorneys’ fees, the defendant had to obtain a favorable judicial determination on the merits of the case. The Eighth Circuit then determined that CRST had not prevailed on the claims brought on behalf of 67 women because their claims were dismissed due to the EEOC’s failure to investigate and conciliate, which was not a ruling on the merits. As a result, the Eighth Circuit ruled that CRST was not entitled to an award of attorneys’ fees on those claims. CRST appealed to the Unites States Supreme Court.

Defendant As “Prevailing Party”

Title VII provides that a court, in its discretion, may award reasonable attorneys’ fees to the prevailing party. Accordingly, before deciding whether to award attorneys’ fees in any given case, a court must determine whether the party seeking fees has, in fact, prevailed. That determination is relatively clear when a plaintiff proves his or her discrimination case and a favorable judgment or court order is entered in the plaintiff’s favor. But there has been no clear definition on how courts should determine whether a defendant has prevailed, especially when the complaint is dismissed for procedural deficiencies or on jurisdictional grounds.

In rejecting the Eighth Circuit’s requirement that “prevailing party” status depends on a ruling on the merits, the Court stated that “[c]ommon sense undermines the notion that a defendant cannot ‘prevail’ unless the relevant disposition is on the merits.” Instead, the Court held that a defendant fulfills its primary objective whenever it can rebuff the plaintiff’s case, irrespective of the precise reason for the court’s decision. Looking to the congressional intent for Title VII’s fee-shifting provision, the Court ruled that a defendant may “prevail” even when the court’s final judgment in not on the merits.

Fees Expended in Frivolous, Unreasonable, or Groundless Litigation

The Court noted that under Title VII’s fee-shifting provision, prevailing defendants may seek attorneys’ fees whenever the plaintiff’s claim was frivolous, unreasonable, or groundless. The Court recognized that defendants spend significant attorney time and expenses contesting frivolous and unreasonable claims that result in their favor, whether on the merits or not, and that a request for an award of fees in such cases is appropriate.

Good News For Employers

The Court’s decision is good news for employers defending Title VII claims because it makes clear that a defendant may ask for attorneys’ fees when it gets a favorable judicial result for reasons not on the merits, where the defendant can show that the plaintiff’s claim was frivolous, unreasonable, or groundless. That clarification may help deter the EEOC and individual plaintiffs from filing or continuing to litigate groundless claims.

That said, we may not have seen the final word on application of the Title VII fee-shifting provision as the Court sent the CRST case back to the Eighth Circuit to consider a new argument put forth by the EEOC, namely that a defendant must obtain a preclusive judgment in order to be the “prevailing party.” We’ll keep tabs on this case and let you know of any further developments.

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May 16, 2016

FCRA Lawsuit Sent Back To Ninth Circuit For Further Analysis on Standing to Sue

By Dora Lane

A bare procedural violation of the Fair Credit Reporting Act (FCRA) is not sufficient to permit an individual to sue for a willful FCRA violation, ruled the U.S. Supreme Court today. But, if the alleged procedural violation entails a risk of real harm, the plaintiff may have a concrete injury sufficient to have standing to sue. In a 6-to-2 decision, the Court sent the case back to the Ninth Circuit for further analysis of the injury-in-fact requirement of Article III standing. Spokeo, Inc. v. Robins, 578 U.S. ___ (2016).

People Search Engine Allegedly Produced False Information

Spokeo, Inc. operates a website that provides users with information about other people, including contact data, marital status, age, occupation, economic health, hobbies, shopping habits, musical preferences, and wealth level. It collects that information from various sources including phone books, real estate listings, and social networks.

According to Thomas Robins' allegations, he found that Spokeo’s website published false information about him. It stated that he was married, in his fifties, had children, held a job, was relatively affluent, and had a graduate degree – none of which was accurate. Robins sought to file a class action against Spokeo, asking to recover the $1,000 in damages allowed by the FCRA for each willful violation of the statute. The potential class could include millions of people.

Ninth Circuit Reversed on Whether Actual Harm Needed for Willful FCRA Violations

The trial court focused on Robins’ allegations of harm, which were “that he has been unsuccessful in seeking employment, and that he is concerned that the inaccuracies in his report will affect his ability to obtain credit, employment, insurance, and the like.” It dismissed his complaint without prejudice, ruling he lacked standing to sue Spokeo because he had not alleged “any actual or imminent harm.” Despite filing an amended complaint in which he more fully described the inaccuracies in the information on Spokeo’s website, the district court ruled that Robins had failed to plead an injury-in-fact and that any injuries pled were not traceable to Spokeo’s alleged violations.

The Ninth Circuit Court of Appeals reversed. Spokeo had argued that Robins could not sue under the FCRA without showing actual harm, but the Ninth Circuit found that the FCRA does not require a showing of actual harm when a plaintiff sues for willful violations. Therefore, the Ninth Circuit held that a plaintiff can suffer a violation of the statutory right without suffering actual damages.

Injury-In-Fact Requires Concrete and Particularized Harm

The Supreme Court vacated the Ninth Circuit’s decision, stating that the appellate court had failed to consider both aspects of the injury-in-fact requirement for standing to sue, namely that the plaintiff suffered an invasion of a legally protected interest that is both concrete and particularized, rather than hypothetical. Justice Alito, writing for the majority, stated that the Ninth Circuit focused on the “particularized” aspect of Robins’ injury – in other words, that he had been affected in a personal and individual way – but failed to consider whether his injury was “concrete.” The Court emphasized that Article III standing requires a concrete injury, even in the context of a statutory violation.

The Court pointed out, however, that a concrete injury does not have to be tangible. An intangible harm may constitute an injury-in-fact and Congress can identify and elevate intangible harms to give rise to a case or controversy sufficient for standing to sue. A risk of real harm may satisfy the concreteness requirement.

As it relates to Robins’ allegations of Spokeo’s willful FCRA violations, the Court wrote that although Congress clearly sought to prevent the dissemination of false information by adopting the safeguards in the FCRA, Robins could not satisfy the injury-in-fact requirement for standing simply by alleging a bare procedural violation of the FCRA. The Court noted that a violation of one of the FCRA’s procedural requirements, such as providing an incorrect zip code, may not result in harm. The Court, without taking a position on whether the Ninth Circuit’s ultimate conclusion was correct, sent the case back to the Ninth Circuit to further analyze whether Robins’ particular procedural violations, as alleged, involve a degree of risk sufficient to meet the concreteness requirement.

Effect of Ruling

By remanding this case back to the appellate court, the Supreme Court may have muddied the waters for defendants who face a statutory violation of the FCRA (or other federal statutes). Although it is good news that a bare statutory violation without concrete harm will not be sufficient to confer standing to sue, the analysis of the injury-in-fact requirement will likely mean that most cases will not be dismissed early in the proceeding, say on a motion to dismiss. That will raise the cost of defending such cases. Today’s opinion also leaves the door open for Robins’ class action case to proceed, should the Ninth Circuit find that the plaintiffs’ face the risk of real harm from false information in Spokeo’s people search database. We will continue to follow the case as the liability for statutory violations of the FCRA in a class action is huge.

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March 22, 2016

Class-Action Lawsuit Permitted To Rely On Sample Data To Determine Wages Owed

By John Husband

In the absence of actual time records, time spent by employees donning and doffing protective gear may be established by representative evidence in order to establish the employer’s liability for unpaid overtime pay in a class action lawsuit, ruled the U.S. Supreme Court today. The Court rejected the company’s argument that each employees’ wage claim varied too much to be resolved on a classwide basis. Instead, the Court upheld the class certification, sending the case back to the district court to determine how to distribute to class members the $2.9 million dollar jury award. Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. ___ (2016).

Pay For Donning and Doffing Protective Gear

Under the Fair Labor Standards Act (FLSA), it is well established that employers must pay employees for time spent performing preliminary or postliminary activities that are “integral and indispensable” to their regular work. In the Tyson Foods case, over 3,300 pork processing employees sued, alleging that the company failed to pay them for time spent putting on and taking off required protective gear at the start and end of their work shifts and at meal periods. The employees argued that such time was “integral and indispensable” to their work and that when added to their weekly work hours, pushed them beyond 40 hours per week resulting in unpaid overtime.

Because Tyson Foods did not keep any time records for donning and doffing time, the employees presented representative evidence of the time spend on those activities, including employee testimony, video recordings of the donning and doffing process at the plant, and a study by an industrial relations expert, Dr. Kenneth Mericle. Dr. Mericle analyzed 744 videotaped observations to determine how long various donning and doffing activities took, concluding that employees in the kill department took an estimated 21.25 minutes per day while workers in the cut and retrim departments took an estimated 18 minutes per day. Using that data, another expert added that time to each employees’ recorded work time to determine how many hours each employee worked per week.

Tyson Foods argued that because the workers did not all wear the same protective gear, each individual plaintiff spent different amounts of time donning and doffing the gear. Therefore, Tyson Foods maintained that whether and to what extent it owed overtime pay to each individual employee was a question that could not be resolved on a class-action basis. Importantly, Tyson Foods did not attack the credibility of the employees’ expert or attempt to discredit the statistical evidence through its own expert, but instead opposed class certification on the basis that the individual variances of the time spent by each employee made the lawsuit too speculative for classwide recovery.

Employee-Specific Pay Inquiries Do Not Destroy Class Action

The Court determined that the employees’ use of Dr. Mericle’s representative study was permissible to establish hours worked in order to fill the evidentiary gap created by the employer’s failure to keep time records of the donning and doffing activities. The Court refused to define a broad-reaching rule about when statistical evidence may be used to establish classwide liability, stating instead that it would depend on the purpose for which the evidence was being introduced and the elements of the underlying action. It ruled it appropriate to rely on sample evidence when each class member could have relied on that sample to establish liability if he or she had brought an individual lawsuit. In the wage and hour context, if the sample data could permit a reasonable jury to find the number of hours worked in each employees’ individual action, the “sample is a permissible means of establishing the employees’ hours worked in a class action.”

The Court, in its 6-to-2 decision, refused to rule on the issue of how the jury’s $2.9 million award would need to be dispersed among the class members and how to prevent uninjured class members (i.e., those whose donning and doffing time did not result in overtime) from recovering any part of the award. In fact, Chief Justice Roberts, writing a separate concurring opinion, expressed his concern that the district court would not be able to devise an allocation method that would award damages only to those class members who suffered an actual injury. But, because the majority found that the allocation methodology issue was not before the Court, the case gets sent back to the trial court for that determination.

Litigation Tactics To Oppose Class Certification

The Court noted numerous litigation strategies by Tyson Foods that may have proved fatal to its case. First, Tyson Foods failed to move for a hearing to challenge the admissibility of the employees’ expert study by Dr. Mericle. A so-called Daubert hearing would have offered Tyson the chance to keep the representative sample out of the trial which may have eliminated the employees’ evidence of time spent donning and doffing protective gear.

Second, the Court noted that Tyson Foods did not attempt to discredit Dr. Mericle’s sample evidence through an expert of its own. By focusing its trial strategy only on attacking the class certification issue, the jury was left without any rebuttal to the employees’ experts.

Finally, Tyson Foods rejected splitting the jury trial into two phases, a liability phase and a damages phase. Instead, it insisted on a single proceeding in which damages would be calculated in the aggregate and by the jury. The jury came back with a $2.9 million award, which was half of what the employees’ sought, but still a significant award against Tyson Foods.

Blow To Businesses Defending Class Actions

Although the Court refrained from approving the use of representative data in all class-action cases, the Court’s decision makes it more difficult for employers to object to sample data when defending a class or collective action. Noting that representative data is not an appropriate means to overcome the absence of a common employer policy that applies to all class members, per its 2011 Wal-Mart Stores, Inc. v. Dukes decision, the Court allowed representative data to fill the evidentiary gap regarding hours worked where each employee worked in the same facility, did similar work, and was paid under the same policy.

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January 20, 2016

Unaccepted Settlement Offer of Complete Relief Does Not Moot Plaintiff’s Case

By Sarah Wisor

In a 6-to-3 decision, the U.S. Supreme Court decided that a plaintiff who rejects a settlement offer or an offer of judgment of complete relief may continue litigating the case. Relying on principles of contract law, the Court ruled that once a settlement offer is rejected by the plaintiff, it has no continuing effect. Because the plaintiff remains empty-handed, he may continue to pursue all available remedies in court, on both an individual basis and on behalf of a class. Campbell-Ewald Co. v. Gomez, 577 U.S. ___ (2016).

Resolving Circuit Court Split on Whether Offer Moots Claim

The dilemma is this: if a defendant offers the plaintiff complete monetary and all other relief that he is entitled to recover on his claims, what is left to be decided or awarded? If there is no case or controversy, a federal court must dismiss the case as moot pursuant to Article III of the Constitution.

The Supreme Court agreed to hear this case because the Circuit Courts of Appeals did not agree on this issue. The First, Second, Fifth, Seventh, and Eleventh Circuit Courts of Appeals had previously ruled that an unaccepted offer does not render a plaintiff’s claim moot. However, the Third, Fourth, and Sixth Circuits had ruled oppositely, holding that an unaccepted offer of complete relief can moot a plaintiff’s claim.

Justice Ginsburg, writing for the majority, pointed to Justice Kagan’s words from her dissent in an earlier case: “When a plaintiff rejects such an offer – however good the terms – [the plaintiff’s] interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief.” Therefore, the Court reasoned, a case is not rendered moot by an unaccepted offer to satisfy the plaintiff’s individual claim.

Chief Justice Roberts Dissents

Chief Justice Roberts dissented, joined by Justices Scalia and Alito. (Justice Thomas concurred with the majority in its holding, but not its reasoning, writing a separate concurrence.) The dissenting justices stated that the “federal courts exist to resolve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.” The dissent would have rendered the case moot on the basis that there is no case or controversy after a defendant agrees to fully redress the injury alleged by a plaintiff.

Can Defendants Still “Pick Off” Named Plaintiffs?

Settling a named plaintiff’s individual claim prior to class certification is appealing to defendants who want to avoid the greater liability and cost of a class action. While this “picking off” strategy may have been undermined, in part, by the Supreme Court’s decision, the Court did not decide whether payment of complete relief would render the case moot.

This case arose when Jose Gomez sued a marketing firm, Campbell-Ewald, for sending him text messages without his permission. Gomez filed a nationwide class action, alleging violations of the Telephone Consumer Protection Act (“TCPA”), which permits consumers to recover treble damages of $1,500 per call/text message, plus litigation costs. Gomez sought the maximum statutory damages, costs, attorney’s fees, and an injunction against Campbell-Ewald barring further unsolicited messaging.

Before Gomez could file a motion for class certification, Campbell-Ewald offered to settle Gomez’s individual claim and filed an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure. Campbell-Ewald offered to pay Gomez $1,503 per unsolicited message and his court costs, but not attorney’s fees, which Campbell-Ewald argued were not available under the TCPA. Campbell-Ewald also offered to stipulate to an injunction that would bar it from sending text messages in violation of the TCPA. Gomez rejected the settlement offer and allowed the Rule 68 offer of judgment to lapse. Campbell-Ewald then sought dismissal of Gomez’s case, arguing that its offer of complete relief rendered his claim moot. The Supreme Court disagreed.

However, the Court did not decide whether the result would be different if a defendant actually deposits the full amount resolving the plaintiff’s individual claim in an account payable to the plaintiff, with the court then entering judgment in that amount. As Chief Justice Roberts stated in his dissent, the good news is that this case is limited to its facts, and that issue has been left for a future case.

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September 2, 2015

Utah Supreme Court: Misappropriation of Trade Secrets Presumes Irreparable Harm

By Bryan Benard

A Utah employer has dodged a $229,482 fee award and can continue its lawsuit against a former employee for misappropriation of company trade secrets and violation of a non-disclosure agreement. The Utah Supreme Court recently revived InnoSys, Inc.’s claims against a former engineer, Amanda Mercer, holding that the company established a prima facie case of trade secret misappropriation that gave rise to a rebuttable presumption of irreparable harm. The divided Court reversed the grant of Mercer’s summary judgment motion, allowing the company to take its claims to trial. InnoSys, Inc. v. Mercer, 2015 UT 80.

Employee Copied Sensitive Company Information to Thumb Drive and Personal Email Account

During her employment as an engineer for InnoSys, Mercer forwarded confidential company emails to her personal Gmail account. On the day that she was terminated for poor performance, Mercer copied the company’s confidential business plan onto a thumb drive.

Following her termination, Mercer filed a claim for unemployment benefits with the Utah Department of Workforce Services. After her claim was denied, she appealed, submitting a number of protected documents, including the confidential business plan and protected emails, into the administrative record. At that point, InnoSys began asking for details as to when and how she gained access to the confidential materials. Mercer then deleted all of the emails and InnoSys files. InnoSys filed a complaint in court, alleging that Mercer had breached her non-disclosure agreement (NDA), misappropriated company trade secrets in violation of the Uniform Trade Secrets Act (UTSA) and breached her fiduciary duty to the company.

Employee Changed Her Story But Still Won Judgment From Lower Court

Throughout discovery, Mercer changed her story regarding the use of her Gmail account and the timing of her acquisition of the company’s confidential business plan. Despite first claiming that she had IT’s permission to transfer company emails to her personal Gmail account, Mercer later admitted that she did not have anyone’s permission to do so. As to the business plan, Mercer initially testified in her deposition that she had copied the business plan onto a thumb drive because she had been asked to review the plan the day before her termination and was unable to access it via the company’s secure remote network. She later admitted that she copied it on the day of her termination and did not have it in her possession the day before she was fired.

Despite Mercer’s inconsistent statements regarding how she obtained the company’s confidential information, the district court ruled in Mercer’s favor on all of InnoSys’s claims. It did so after concluding that “there was no objectively reasonable basis to believe that Mercer had harmed InnoSys or was threatening to do so.” In addition to dismissing all of InnoSys’s claims against Mercer, the lower court also granted Mercer’s motion for sanctions against InnoSys and to collect attorneys’ fees as the prevailing party. The court ordered InnoSys to pay Mercer $229,481.58. InnoSys appealed.

Evidence of Harm

At the crux of the appeal was whether InnoSys needed to provide sufficient evidence of harm or threatened harm as a result of Mercer’s misappropriation and/or disclosure of company trade secrets to avoid summary judgment and proceed to trial. The lower court had found that InnoSys had not presented sufficient evidence that it had been harmed by Mercer’s admitted taking and disclosure of confidential company information and therefore, could not support its claims.

The Utah Supreme Court disagreed, holding that where a company establishes a prima facie case of misappropriation of trade secrets under the UTSA, it is entitled to a presumption of irreparable harm. The company was not required to produce evidence of financial damages as it also sought an injunction to prevent Mercer from further disclosing or using its confidential information.

The presumption of irreparable harm, as well as affirmative evidence of threatened harm, was also enough to keep alive the company’s claim for breach of the NDA. By reversing the grant of summary judgment in Mercer’s favor, the Court overturned the award of sanctions and attorneys’ fees against InnoSys.

Lessons Learned

First, put procedures in place to retain all signed employee agreements and documents. InnoSys initially could not find the NDA that Mercer had signed when her employment began. The lower court was hard on the company for that failure, and did not want to accept a copy of its standard NDA as evidence of what Mercer signed. The company eventually found the NDA signed by Mercer but the turmoil caused by its absence highlights the importance of strict record keeping for important employee agreements. Be certain to keep your signed agreements and acknowledgments in a secure location. You never know when you might need to enforce them.

Second, when employment ends for any reason, take steps to ensure that the departing employee returns all company information and property without retaining any copies. It is unclear from the opinion whether InnoSys asked Mercer for the return of any company materials when she was fired but it appears that it learned she had confidential company information after she submitted the company documents as part of her unemployment appeal. Don’t wait until after there has been a disclosure or further misappropriation but instead, proactively cut off access to company materials and seek the return of all company property. And remind departing employees of their continued obligations under confidentiality policies and NDAs.

Finally, enforce your NDAs to ensure continued protection of your company trade secrets and other proprietary information. Allowing a former employee to retain or disclose confidential information will undermine your future chances of arguing that such information is indeed a trade secret. You must continually guard that information or it will lose its protected status.

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July 13, 2015

EEOC’s Conciliation Efforts Must Be Real, Not “For Appearances Only,” After Mach Mining Decision

By Mark Wiletsky

An unsupported demand letter cannot constitute an actual attempt by the Equal Employment Opportunity Commission (EEOC) to engage in the required pre-lawsuit conciliation process, according to a federal judge in Ohio. EEOC v. OhioHealth Corp. (S.D.Ohio June 29, 2015). In one of the first cases to review the sufficiency of EEOC conciliation efforts after that review was authorized by the U.S. Supreme Court in its April Mach Mining decision, it is clear that courts are not willing to rubber stamp the EEOC’s purported conciliation efforts and will delay the lawsuit until actual conciliation takes place.

Insufficient Conciliation Efforts Often Frustrate Employers

If the EEOC finds reasonable cause to believe that employment discrimination occurred, it is required to try to eliminate the alleged discrimination through informal conference and conciliation with the employer. The goal is to get the employer to voluntarily comply with federal discrimination laws and resolve the alleged discrimination privately. In fact, the conciliation process is a necessary precondition to the EEOC filing a discrimination lawsuit against the employer. The EEOC is prohibited from suing the employer until after its conciliation efforts have failed.

At times, employers have been frustrated by a lack of real conciliation efforts, particularly in cases where the EEOC seems to prefer going to court rather than settling with the employer. The Mach Mining decision was a win for employers as it allows an employer to ask a judge to conduct a limited review of the EEOC’s conciliation efforts before a lawsuit goes forward.

EEOC’s Affidavit on Its Conciliation Efforts

The Supreme Court had explained in Mach Mining that a sworn affidavit from the EEOC describing its conciliation efforts would usually suffice to show that it had met its obligations. Many who analyzed that statement feared that an EEOC affidavit would effectively end the employer’s challenge to the sufficiency of the EEOC’s conciliation efforts, resulting in an empty judicial review. But Judge Frost’s decision out of the federal court in the Southern District of Ohio shows that is not the case.

In this case, the EEOC submitted an affidavit that stated that the EEOC had issued a reasonable cause determination letter that invited the parties to join “in reaching a just resolution of this matter” and stating that “conciliation of this matter has now begun.” The affidavit further states that over one month, the EEOC communicated with the employer, OhioHealth, including sending a conciliation proposal which was rejected. The EEOC then sent OhioHealth a final letter stating that conciliation efforts had not been successful.

OhioHealth countered the EEOC’s affidavit by providing its own declaration which stated that the EEOC had made a take-it-or-leave-it demand and failed to provide any information to back up its demand. Even though the EEOC’s determination letter had indicated that a commission representative would prepare a dollar amount that included lost wages and benefits, applicable interest and any appropriate attorney fees and costs, no such calculation was ever provided by the EEOC to OhioHealth. OhioHealth stated that it remained ready and willing to negotiate but that the EEOC instead declared that conciliation efforts had failed.

Judge Frost ruled that the EEOC’s “bookend” letters – first declaring the conciliation process open and then closed — did not constitute an actual attempt at conciliation. He wrote that without the EEOC providing the calculation of the charging party’s damages to OhioHealth, the parties could not shape their positions and the “conciliation process could have been nothing but a sham.” The judge ordered that the EEOC’s lawsuit against OhioHealth be stayed for 60 days while the EEOC engaged in good faith conciliation.

Judge Frost went on to offer a cautionary note to the EEOC. He was disturbed by the EEOC’s statements that it simply would not reach a private resolution of this matter via conciliation and that only a public resolution would be possible. He admonished the EEOC, stating that its position was “ridiculous” and defied the statutory scheme, binding case law, the court and common sense. He wrote that if the EEOC failed to engage in good faith efforts at conciliation as ordered, the court would impose all available consequences, including contempt and dismissal of the lawsuit. Pretty strong words indeed!

Lessons for Employers

Although this is only one court’s review of one conciliation process, employers should be pleased that the Mach Mining decision may have teeth, with courts taking a serious look at the actual conciliation efforts being made. If faced with a reasonable cause determination from the EEOC (and assuming you do not want to go to court), make certain to engage in conciliation by responding to the EEOC’s communications. If the EEOC makes a settlement demand, ask for the calculation of damages that supports the demand. Remain ready and willing to negotiate and document that willingness in writing. And if the EEOC files a lawsuit against you without first making real conciliation efforts, consider seeking a stay of the case by asserting that the EEOC failed to meet a condition precedent to filing the lawsuit.

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June 10, 2015

Employers Must Raise Defense of Unverified EEOC Charge or It Is Waived

By Steven M. Gutierrez

According to the Tenth Circuit Court of Appeals, verifying an EEOC charge is not a jurisdictional requirement, necessary to give the federal courts the authority to resolve the case; rather, the Court ruled that verifying an EEOC charge is a condition precedent to filing a Title VII lawsuit in federal court, which may be waived if the employer does not challenge it when first responding to the lawsuit. Gad v. Kansas State University, No. 14-3050 (10th Cir. May 27, 2015).

Verification of EEOC Charge

Title VII, the federal statute that prohibits employers from discriminating on the basis of race, color, national origin, sex or religion, requires that claimants submit a charge to the EEOC prior to filing suit in federal court. That submission must be “in writing under oath or affirmation.” EEOC regulations require that the written charge be signed and verified, which means sworn under penalty of perjury or affirmed before a notary public, an EEOC representative or another person authorized to administer oaths.

So what happens if the individual asserting discrimination does not verify his or her EEOC charge prior to filing suit? Does the employer-defendant have to raise the issue of the unverified charge, or does the lack of compliance with the verification requirement mean that the federal court lacks jurisdiction to hear the case at all?

Verification Not a Jurisdictional Prerequisite to Title VII Lawsuit

Not every defect in the administrative process defeats jurisdiction, rendering federal courts without authority to hear the case, pointed out the Court. After discussing previous U.S. Supreme Court cases that examined Title VII jurisdictional issues, the Tenth Circuit focused on four key points:

Whether a Title VII statutory requirement is jurisdictional or not depends on whether it is written within Title VII’s jurisdictional subsection – here, the verification requirement is contained in a separate provision that does not deal with jurisdiction of the district courts;
Because non-lawyers initiate Title VII processes, courts should not interpret procedural rules in a way that deprives individuals of their rights under the law – here, interpreting the verification requirement as jurisdictional might lead to inadvertent forfeiture of Title VII rights;
Verification is intended to protect employers from the burden of defending against frivolous claims or claims of which they had no notice – here, because verification remains a Title VII requirement, an employer may raise the plaintiff’s failure to satisfy the requirement as a defense, which serves to protect employers; and
Failure to verify a document as required by a federal rule should not render the document fatally defective – here, if a claimant’s failure to verify destroyed subject-matter jurisdiction, it would make the charge fatally defective by destroying a court’s ability to hear the case at all.

Based on its analysis of these four points, the Court concluded that the EEOC verification requirement is not jurisdictional.

Lack of Verification As Defense

Because verification of the EEOC charge remains a Title VII requirement, an employer defending a Title VII discrimination claim may raise a plaintiff’s failure to satisfy the requirement and seek dismissal of the case on that basis. The Court likened the verification requirement to other Title VII requirements that have been deemed non-jurisdictional, waivable defenses. For example, compliance with the statutory time limit for filing EEOC charges is prerequisite to bringing a Title VII suit in federal court that has been ruled to be subject to waiver and estoppel. Similarly, TitleVII’s application to employers with 15 or more employees has been determined to be a non-jurisdictional requirement that is waivable by an employer. Consequently, if an employer fails to raise a known verification defect during the EEOC proceeding, it likely waives the requirement and the case proceeds.

Waiver Left For Further Analysis

Because the district court in Gad had dismissed the plaintiff’s case for lack of subject-matter jurisdiction, it had not examined the issue of waiver of the defense. The Tenth Circuit noted that Gad had not argued that her employer, Kansas State University (KSU), had waived the verification requirement. (In its answer, KSU stated generally that Gad had failed to exhaust her administrative remedies but did not specifically mention her failure to verify her EEOC charge.) Instead, Gad argued only that the EEOC had waived the verification requirement, due to an EEOC investigator allegedly telling Gad that she did not need to return the signed EEOC form.

In reversing on the jurisdictional issue, the Tenth Circuit sent the case back to the district court to determine whether the verification requirement had been waived. The Court stated that despite the conclusion that an employer may waive the verification defect, it “does not necessarily follow that the EEOC can waive the requirement unilaterally.” But, the Court noted that there may be extreme circumstances where non-compliance with the verification requirement might be excused, such as negligent EEOC conduct that would mislead a reasonable layperson into thinking that he need not verify the charge. The Court refused to define the scope or parameters of a waiver rule, as that specific issue was not before the Court.

What This Case Means to You

When faced with a Title VII lawsuit, get a copy of the EEOC file at the earliest possible moment and check whether the claimant’s EEOC charge was verified. If not verified, you should seek dismissal of the proceeding on the basis that the claimant failed to verify his or her EEOC. If you choose to respond to the merits of the lawsuit ,without asserting lack of verification as a defense, you have likely waived that requirement.

It does not, however, appear that you should always raise the issue of lack of verification prior to your first response to the federal lawsuit. That is because an EEOC regulation permits “an otherwise timely filer to verify a charge after the time for filing has expired” and to cure technical defects or omissions, including failure to verify the charge. Consequently, if you point out the defect at any time prior to the claimant filing the lawsuit, the claimant will likely be able to amend their charge to correct the verification defect. But you should always raise the defense before responding to the merits of the charge of discrimination to ensure that you do not waive the defense.

Less clear, however, is the issue of an EEOC waiver of the verification requirement. Because the Court did not define the circumstances, if any, under which a claimant may argue that the EEOC did not ask for or require verification, we must wait for further guidance before knowing whether a claimant may proceed with a Title VII lawsuit even after you’ve raised the unverified charge defense.

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