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Sixth Circuit Affirms EEOC Credit-Check Case Dismissal

Less than three weeks after oral argument, the Sixth Circuit affirmed a lower court order granting summary judgment in favor of Kaplan in one of the EEOC’s most high profile cases – EEOC v. Kaplan Higher Education Corp.

The EEOC brought suit against Kaplan for using credit-checks in its hiring process – “the same type of background check that the EEOC itself uses” the Sixth Circuit pointed out – claiming that the practice had a disparate impact on African Americans.

On Jan. 28, 2013, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment in favor of Kaplan, finding that the EEOC’s statistical evidence of disparate impact was not reliable and not representative of Kaplan’s applicant pool as a whole. (Read more about that ruling here.)

The Sixth Circuit found no abuse of discretion. The EEOC’s “homemade” methodology for determining race – by asking its “race raters” to label photographs – was, in the Sixth Circuit’s words, “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”

Background

The EEOC filed suit against Kaplan alleging that Kaplan’s use of credit-checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII.

In support of its allegations, the EEOC relied on statistical data compiled by Kevin Murphy.  Because Kaplan’s credit check process was race-blind, the EEOC subpoenaed records regarding Kaplan’s applicants from state departments of motor vehicles. Thirty-six states and the District of Columbia provided color copies of approximately 900 drivers’ license photos.

Murphy assembled a team of five “race raters” and directed them to review the photos and classify them as “African-American,” “Asian,” “Hispanic,” “White,” or “Other.” Murphy also provided the raters with applicant names.

Based on the results of this “race rating,” Murphy opined that, in a sample of 1,090 (out of 4,670 applicants), the percentage of black applicants who were flagged for review based upon their credit histories was higher than the percentage of white applicants who were flagged.

The district court excluded Murphy’s testimony as unreliable for two reasons. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court granted summary judgment in favor of Kaplan, and the EEOC appealed.

The Sixth Circuit’s Opinion

The Sixth Circuit affirmed. The Sixth Circuit noted that, as the proponent of expert testimony, the EEOC bears the burden of proving its admissibility. It determined that the district court did not abuse its discretion in finding that the EEOC failed to make such a showing.

The EEOC argued that the district court erred in finding that it had “wholly fail[ed]” to provide evidence that its technique had been tested or had any “known or potential rate of error.” The EEOC contended that it provided such support in the form of “anecdotal corroboration.” That is, as to 57 applicants, Murphy cross-checked his raters’ classifications with racial identifications provided by a DMV or Kaplan.

The Sixth Circuit noted that the EEOC’s cross-check yielded an 80% match – “an unimpressive correlation in case where a few percentage points (in credit-check fail rates for blacks and whites) might make the difference between significant liability and none.” In any event, as Murphy himself conceded, a mere 57 instances of anecdotal corroboration is “not enough” to establish the reliability of his photo rating methodology.

As the Sixth Circuit found, “[t]he EEOC’s case goes downhill from there.” The EEOC failed to present evidence that its technique was subjected to peer-review or publication, failed to show that Murphy employed standards to control “the technique’s operation,” and presented no evidence that Murphy’s race-rating methodology was “generally accepted in the scientific community.” The raters themselves “had no particular standard in classifying each applicant; instead, they just eyeballed the DMV photos.”

Finally, as an independent ground for excluding Murphy’s testimony, the district court found “no indication” that Murphy’s group of 1,090 applicants was representative of the applicant pool as a whole. The Sixth Circuit noted that, “[i]nstead there is a strong indication to the contrary: Murphy’s group had a fail rate of 23.8%, whereas the GIS applicant pool had a fail rate of only 13.3%.” It held that an unrepresentative sample “by definition” might skew the respective fail rates of black and white applicants in the larger pool – “and thus is not a reliable means to demonstrate disparate impact.”

Implications

In its opinion, the Sixth Circuit staunchly critiqued the EEOC’s “do as I say, not as I do” litigation tactics. It noted (in the first line of its opinion) that the EEOC “sued the defendants for using the same type of background check that the EEOC itself uses.” It also noted, as the district court observed, that “the EEOC itself discourages employers from visually identifying an individual by race and indicates that visual identification is appropriate ‘only if an employee refuses to self-identify.’”

This blog was previously published by Seyfarth Shaw LLP.

Five Questions with a Food Fraud Expert

Food Fraud

BALTIMORE—After his Food Safety Summit session on food fraud and economically motivated adulteration, I caught up with Doug Moyer, a pharmaceutical fraud expert and adjunct with Michigan State University’s Food Fraud Initiative. Here are a few of his insights into top challenges for the supply chain, and the biggest risks to be wary of as a consumer.

What are the riskiest foods for fraud?

The most fraudulent are the perennials: olive oil, honey, juices and species swapping in fish. Most people underestimate the amount of olive oil adulteration, but the amount of what is labeled “extra virgin olive oil” that Americans buy is more than Italy could ever produce. I buy certified California olive oil because I’ve sat down with that group and I know that their industry is really concerned about standards and have established a rigorous certification process. I am also really concerned about species swapping in the seafood industry. I love sushi, but I have a lot of concerns eating it, and they are not always about health. I don’t like feeling duped, and a lot of companies now have to contend with that reputation issue after so many studies have found that the odds can be incredibly low that you are eating the fish that you think you ordered—as little as 30% in some sushi restaurants in Los Angeles, for example.

Adulteration has been getting a lot more attention recently, from consumers and regulators. How old of a phenomenon is food fraud?

Food fraud actually dates back to the antiquities. In the industry, we refer to it as a 2,000-year-old problem. There are actually ancient jugs used for oil or wine that feature art that is misleading about the origin or quality of what came inside.

Why are we seeing more food fraud in the U.S. now?

In the United States, we have the real luxury of solid supply chains and active food safety protectors in the form of regulators and advocates. But, as the supply chain lengthens, strangers and anonymous players get introduced, and that’s where the system is most endangered.

What is the worst case of food fraud you’ve ever seen?

Melamine in Chinese infant formula is definitely one of the worst, and especially sinister. In the ‘80s, there was also a truly horrible case with olive oil in Spain. Many people hear about olive oil adulteration now and say, “What’s the harm, if it’s just another oil?” In that case, though, it was adulterated with industrial grade oil. Over 1,000 people died, and some are still infirm and in hospitals today.

What are the biggest culprits in pharmaceutical fraud?

Male enhancement, by far, is the top victim. Patients may be too embarrassed to see a doctor about their symptoms, so they log online and order from a rogue pharmacy—which may not even be a pharmacy at all. But if they were too embarrassed to get the medication to begin with, they will probably be too embarrassed to report the issues, too. Anti-malarials are also a big culprit abroad. In countries with a lot of demand for medications that fight malaria, many counterfeiters see the opportunity to fill that need before legitimate providers can. Poor populations gravitate toward these cheaper products, and access to doctors may be limited by a long, expensive trip—when you are already sick, or cannot afford the trip, it’s easier to go to a street vendor who rips off a sheet of what he says will help. It’s a particularly heinous crime because counterfeiters will trick customers with a little bit of aspirin in the pills that lower fevers and help with the body ache. That kind of deliberate attempt to keep people from getting better, to me, is more heinous than food fraud.

Alabama Court Dismisses EEOC Dreadlocks Policy Challenge

Employing reasoning adopted by a number of other courts, the U.S. District Court for the Southern District of Alabama recently dismissed the EEOC’s claim that an employer’s policy prohibiting employees from wearing dreadlocks violated Title VII – the case of EEOC v. Catastrophe Management Solutions. In its ruling, the Court confirmed that “employers’ grooming policies are outside the purview of Title VII,” and it further rejected the EEOC’s argument that the definition of race under Title VII should be read expansively to encompass more than immutable physical characteristics unique to a particular group.

Case Background

The case arose after Chastity Jones, an African-American applicant received an offer of employment from the defendant. At the time of the job offer, the employer had a grooming policy, which provided in part that “hairstyles should reflect a business/professional image” and prohibited “excessive hairstyles or unusual colors.” The employer interpreted the policy as prohibiting the wearing of dreadlocks, and thus conditioned its offer on Jones cutting off her dreadlocks. When Jones declined to do so, defendant withdrew the offer of employment. The EEOC filed suit, alleging that application of the policy to prohibit dreadlocks violated Title VII and that defendant intentionally discriminated on the basis of race. The employer moved to dismiss for failure to state a claim upon which relief can be granted.

EEOC’s Arguments

The EEOC argued that the employer had refused to hire Jones because she was black and that a policy that prohibits dreadlocks is racially discriminatory on its face because dreadlocks were determinant of racial identity. The EEOC also urged the Court to adopt an expansive definition of race under Title VII that would encompass “both physical and cultural characteristics, even when those cultural characteristics are not unique to a particular group.”

As an apparent fallback position, the EEOC argued that dismissal was inappropriate because it should be allowed to present expert testimony on three factual predicates:  1) “that Blacks are primary wearers of dreadlocks”; 2) that dreadlocks are “a reasonable and natural method of managing the physiological construct of Black hair”; and 3) that dreadlocks have a “socio-cultural racial significance” for blacks.

The Court’s Ruling

The Court rejected the EEOC’s arguments and dismissed the EEOC’s complaint. First, the Court identified a number of decisions addressing policies that restricted hairstyles and finding that such policies were non-discriminatory. Agreeing with these decisions, the Court held that a “hairstyle, even one more closely associated with a particular ethnic group, is a mutable characteristic.”  The Court also rejected the EEOC’s arguments regarding “socio-cultural racial significance,” noting that culture and race are different concepts and that “Title VII does not protect against discrimination based on traits, even a trait that has socio-cultural racial significance.”

Implications for Employers

This decision further reinforces an employer’s right to establish and enforce grooming policies and describes some parameters on the application of those policies. In addition, when facing EEOC charges which attempt to expand race discrimination under Title VII beyond immutable characteristics, the decision provides support for a defense that mutable characteristics, including traits that have purported “socio-cultural racial significance,” may not be protected as a matter of law.

This blog was previously published by Seyfarth Shaw LLP.

Five States Most Likely to See Employee Lawsuits

Businesses in California, Illinois, Alabama, Mississippi and the District of Columbia face a markedly higher risk of being sued by their employees compared to the national average, according to a study by Hiscox.

“Not only are employment lawsuits more likely in those states, but the likelihood of catastrophic verdicts is also significantly higher,” Mark Ogden, managing partner of Littler Mendelson, employment and labor law firm said in a statement. “Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000.00, most state employment statutes impose no damages ceilings.

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Consequently, employers in high-risk states must ensure that their workforces are adequately trained regarding workplace discrimination, harassment and retaliation and that policies forbidding such conduct are strictly enforced.”

The study found that a U.S.-based business with at least 10 employees has a 12.5% chance of having an employment liability charge filed against it. Businesses in several states, however, face a much higher level of exposure to litigation. California tops the list with establishments with at least 10 employees having a 42% higher chance above the national average of being sued by an employee. Other states and jurisdictions include the District of Columbia (32%), Illinois (26%), Alabama (25%), Mississippi (19%), Arizona (19%) and Georgia (18%). Lower-risk states for EPL charges include West Virginia, Massachusetts, Michigan, Kentucky and Washington.

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State laws can have a significant impact. For example, the employee-friendly nature of California law in the area of disability discrimination may contribute to the high charge frequency in the state.

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Discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA).

FEHA applies to a broader range of businesses, covering any company with five employees, versus a 15-employee minimum for cases brought under federal law as outlined in Title VII of the Civil Rights Act, according to Hiscox.