United States: 4 Key Trends In Workplace Class Action Litigation For 2017: #3 Governmental Enforcement Litigation

Last Updated: January 22 2018
Article by Gerald L. Maatman Jr.

Seyfarth Synopsis: Despite the major ideological shift that occurred within American politics in 2017, government-initiated litigation continued to flourish if not increase even after with the election of the pro-business Trump Administration. A clear example of this can be seen in the courtroom, as the U.S. Equal Employment Opportunity Commission ("EEOC") filed more than the double the amount of merit lawsuits in 2017 than the Commission initiated in 2016. Today, readers are given an overview of a busy year at the EEOC and Department of Labor ("DOL"), as well as what employers should expect in the future in terms of government enforcement litigation. Check out this exclusive excerpt from the 2018 Workplace Class Action Report below!

On the governmental enforcement front, the change-over from the Obama Administration to the Trump Administration had little to no impact on reducing the pace of litigation filings and settlements in 2017. Both the EEOC and the DOL intensified the focus of their administrative enforcement activities and litigation filings in 2017. At the same time, the number of lawsuits filed and the resulting recoveries by settlement – measured by aggregate litigation filings and the top 10 settlements in government enforcement litigation – constituted a ten-fold increase as compared to what the EEOC and DOL achieved in 2016.

To the extent the Trump Administration aims to change those dynamics, its agency appointees either were not nominated in time to influence their respective agencies or were not put into place until mid to late 2017. The result was a delay in charges to agency policies and priorities. In this respect, fundamental changes to patterns in government enforcement litigation are more akin to changing the direction of a large sea-going cargo tanker than a small motor boat. Change is inevitable, but it takes time. Thus, the impact of change on governmental litigation enforcement trends is not likely to be felt until well into 2018.

As a result, the EEOC's lawsuit count increased geometrically in 2017. By continuing to follow through on the systemic enforcement and litigation strategy plan it announced in April of 2006 (that centers on the government bringing more systemic discrimination cases affecting large numbers of workers), the EEOC filed more cases as well as more systemic lawsuits. As 2017 demonstrated, the EEOC's prosecution of pattern or practice lawsuits remained an agency-wide priority backed up by the numbers. Many of the high-level investigations started in the last three years mushroomed into the institution of EEOC pattern or practice lawsuits in 2017.

By comparison to previous years, 2017 was a big one for the EEOC in terms of the number of lawsuits filed. Total merits filings were up more than 100% as compared to 2016. In fact, the EEOC filed more lawsuits in the month of September of 2017 than it did in all of the months of 2016 combined. This can be seen in the following graph:

This past year also marked the first year of the EEOC's new Strategic Enforcement Plan ("SEP"), which is intended to guide enforcement activity for 2017 to 2021. Although the new SEP outlines the same six enforcement priorities as in prior years, few people familiar with how the agency pursues its objectives expect that the EEOC will continue to enforce those priorities in the same way under the Trump Administration. The six enforcement priorities include: (1) the elimination of systemic barriers in recruitment and hiring; (2) protection of immigrant, migrant, and other vulnerable workers; (3) addressing emerging and developing issues; (4) enforcing equal pay laws; (5) preserving access to the legal system; and (6) preventing harassment through systemic enforcement and targeted outreach.

Each of these priorities can be interpreted in multiple ways. For example, the EEOC has consistently focused on the protection of lesbians, gay men, bisexuals, and transgender people as one of the most important emerging and developing issues in the workplace. A breakdown of court decisions by state regarding sexual orientation under Title VII can be seen in the following map:

The EEOC's efforts in this area have resulted in a body of case law in many jurisdictions over the past several years that now holds that discrimination against transgender individuals, or on the basis of sexual orientation, is a form of sex discrimination prohibited by Title VII. However, the Department of Justice under President Trump has recently disagreed with that interpretation. This may signal that this is one area that will shift in 2018 as high-level personnel changes are made within the EEOC.

The EEOC also focused in the past year on employers' utilization of social media and the use of algorithms and information available on the internet to screen job applicants. Recent comments by the EEOC's staff indicate that this may be one of the "barriers to recruitment and hiring" that the agency will focus on in 2018 and beyond. Along the same lines, the EEOC has shown an increased willingness to bring ADEA lawsuits against employers – especially in the hospitality industry – that it believes are discriminating against hiring applicants aged 40 and over.

The EEOC also recently issued new guidance impacting two of its enforcement priorities, including preserving access to the legal system (i.e., through increased enforcement of the anti-retaliation provisions of Title VII, the ADA, and the ADEA) and preventing harassment in the workplace. Among other things, the retaliation guidance expands the definition of "adverse action" to include one-off incidents and warnings, as well as anything that reasonably could be likely to deter protected activity. With respect to preventing harassment, the new guidance clarifies the EEOC's thinking about what constitutes a hostile work environment and the defenses available to employers when that hostile work environment is the result of supervisors' misconduct. Although important developments in their own right, the real impact of these new guidelines may not be clear until employers see how they are interpreted by the EEOC in active litigation situations. Like the priorities themselves, that will be impacted by whatever new policies and directives are put in place by the new Trump appointees.

It also appears that the EEOC is finally executing on its oft-stated intention to increase enforcement under the Equal Pay Act ("EPA"). The EEOC filed 11 EPA lawsuits in 2017. This is a significant increase over prior years (six EPA lawsuits were filed in 2016, five in 2015, and two in 2014). However, its enforcement efforts in this area may have suffered a setback when the changes the EEOC planned to make to the EEO-1 reporting requirements were put on hold in 2017. It was widely speculated that the new reporting requirements would have assisted the EEOC in bringing more claims under the EPA. Under the leadership of the new Administration, the Office of Management and Budget, pursuant to its authority under the Paperwork Reduction Act, stayed implementation of the EEOC's new EEO-1 regulations this past year.

The Commission's 2017 Performance Accountability Report announced that its systemic litigation program continues to be a focus for the EEOC. The EEOC labels a case "systemic" if it "has a broad impact on an industry, company, or geographic area." Systemic trends from the last five years of EEOC systemic cases can be seen in the following graph:

The EEOC's FY 2017 report outlined the EEOC's activity from October 2, 2016 to September 30, 2017. It showed the following:

  • The EEOC's field offices resolved 329 systemic investigations and collected $38.4 million in remedies (compared to 273 systemic investigations and $20.5 million in 2016). The figures for 2017 constitute significant increases over the previous year, and are near record amounts for monetary relief for systemic cases.
  • The EEOC also issued cause determinations finding discrimination in 167 systemic investigations (compared to 113 in 2016). Consequently, not only did the EEOC resolve more systemic investigations compared to 2016, but also it made considerably more cause determinations that it converted into beefed-up recoveries for claimants compared to last year.
  • The EEOC secured approximately $484 million in total relief in 2017 in litigation, mediations, and pre-litigation investigations. This tracks closely to last year's total relief figure of $482.1 million. It also includes $355.6 million obtained through mediation, conciliation, and settlement for victims of discrimination in private, state and local government, and federal workplaces. That number is marginally up from last year, which saw $347.9 million in such recoveries.
  • Litigation recoveries, on the other hand, have been steadily declining over the past few years, hitting only $42.4 million in 2017. This is markedly lower than 2016 and 2015, which saw the EEOC obtain $52.2 million and $65.3 million in litigation recoveries respectively.
  • The EEOC filed 184 merits lawsuits in 2017. This is more than double the 86 merits lawsuits that were filed in 2016. Of the lawsuits, 124 were on behalf of individuals, 30 were non-systemic suits with multiple victims, and the other 30 were systemic claims. The EEOC also filed 18 subpoena enforcement actions in 2017. Hence, the EEOC in the first year of the Trump Administration was far more active in filing lawsuits than in the final year of the Obama Administration.
  • In FY 2017, the EEOC resolved 99,109 charges, a marked increase over the past two years. As a result, the EEOC decreased its charge inventory by 16.2%, to 61,621 charges. This is the lowest level of charge inventory in 10 years and represents a significant reduction compared to FY 2016, when the EEOC only reduced its outstanding charges by 3.8%.

By comparison, the DOL's enforcement recoveries dwarfed those of the EEOC in 2017, as the DOL undertook aggressive enforcement activities over the past year and scored increases in settlements both in court actions and in the administrative investigation process. Without a full leadership team in place at the DOL's Wage & Hour Division ("WHD"), the enforcement program continued on the same track as it had been under the Obama Administration. In FY 2017, the WHD recovered more than $270 million in back pay wages for more than 240,000 workers, which represented a solid increase from the back wages recovered in the previous year. Given the Trump Administration's focus on policy changes, employers can expect that many of these enforcement strategies will get a closer look as the new DOL leadership team falls into place in 2018.

Over the past several years, the WHD fundamentally changed the way in which it pursues its investigations. Suffice to say, the investigations have been more searching and extensive, and often result in higher monetary penalties for employers. According to the DOL, since early 2009, the WHD has closed 200,000 cases nationwide, resulting in more than $2.2 billion in back wages for over 2.24 million workers. In FY 2017, the WHD collected more than $270 million in back wages. For much of the year, the DOL kept up its aggressive enforcement program, particularly in the hotel, restaurant, and retail industries. Much of the WHD's enforcement and other activities took place under the umbrella of "fissured industries" initiatives, which focus on industries with high usage of franchising, sub-contracting, and independent contractors. At the conclusion of those enforcement actions, the WHD continued to increase its use of civil money penalties, liquidated damages, and enhanced compliance agreements. As the Trump Administration reviews and considers the prior Administration's enforcement policies, we expect that 2018 is apt to bring a stark change in enforcement priorities and strategies.

The new year brought a new Administration and high expectations by employers for change at the WHD. Political reality and the Senate calendar, however, combined to limit the WHD's ability to implement that change. For most of 2017, only Secretary of Labor Alex Acosta and a single Assistant Secretary had been confirmed by the Senate. By year's end, the DOL Solicitor and several Assistant Secretaries had been confirmed; the critical position of the WHD Administrator remained vacant, as well as another dozen or so senior positions at the DOL. With the senior leadership team in place at the DOL by 2018, the agency is likely to make significant headway on the Trump Administration's policy objectives in the coming year.

Nevertheless, 2017 provided an opportunity for the new WHD to address some of its most pressing issues. The DOL was immediately tasked with defending the prior Administration's revisions to the Part 541 overtime exemption regulations, which had been enjoined in federal court in advance of their effective date in late 2016. Those revisions, which would have doubled the existing salary level required for the white-collar exemptions, substantially increased the minimum level required for the highly-compensated-employee exemption, and automatically increased the salary level on a periodic basis. These were the first changes to Part 541 in more than 10 years. However, those changes were ruled invalid on the basis that the salary level established in the regulation exceeded the Department's authority.

The Trump Administration managed to position itself well for future developments regarding the overtime regulations, defending the DOL's authority to set a salary level generally (which some believed had been called into question by the order declaring the Obama overtime rule invalid), while electing not to defend the specific salary level established in the 2016 regulation. It is likely that DOL will propose yet another change to the regulations in 2018.

The DOL also took the first steps in rolling back the prior Administration's view of what it means to be "employed" under the FLSA. In June of 2017, the DOL announced the withdrawal of the WHD Administrator's Interpretation 2015-1 ("AI"), which contained the WHD's analysis of the employee vs. independent contractor issue, and AI 2016-1, which contained the WHD's analysis of the joint employment issue. Both AIs were regarded as having an incredibly broad interpretation of what it means to have an employment relationship. Although no replacement guidance has yet been issued, the withdrawal of the AIs is seen as a signal that the current Administration does not take such an expansive view of what it means to be "employed" under the FLSA.

Around the same time as its withdrawal of the AIs, the DOL also announced the return to the use of opinion letters. After decades of use, these regulatory tools had been abandoned by the Obama Administration. The DOL's decision to restart its issuance of opinion letters allows employers and employees alike to seek formal guidance from the WHD on some of the most challenging wage & hour issues. No opinion letters have yet been issued, but it is clear that compliance assistance will once again be a valuable tool in the arsenal of the WHD, alongside its enforcement activities.

Not to be outdone, the National Labor Relations Board ("NLRB") also undertook an ambitious agenda in 2017. It reconsidered well-settled NLRB principles on joint employer rules and representative elections, entertained the possibility of extending the protections of the National Labor Relations Act ("NLRA") to college athletes, and litigated novel claims seeking to hold franchisors liable for the personnel decisions of franchisees. By the end of the year, however, the Trump Administration's appointees began to roll-back NLRB precedents and positions that had been espoused during the Obama Administration, such as a reversal of the expansive view of joint employer liability, allowing more deference to employer workplace rules, eliminating protections for obscene, vulgar, and highly inappropriate activity under the NLRA.

Implications For Employers

Regarding the 2018 Fiscal Year, employers can expect to see a significant decrease in government-initiated litigation and overall government enforcement in the workplace. Additionally, the lawsuits that are filed will likely include smaller groups of people and more isolated issues. This will particularly be seen at the EEOC, which is awaiting Senate confirmation on two Trump-appointed Commissioners sure to alter the entity's policy direction. Rather than expanding government's role in business and attempting to set innovative legal precedent, we predict the DOL and EEOC will stick to simple enforcement of current regulations. As always, we will stay on top of this important issue and keep our readers informed as new revelations come to light!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Gerald L. Maatman Jr.
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