Category Archives: Workplace

Crime Expert Reveals Biggest Gaps in Company Security

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WINNIPEG, MANITOBA, Canada – After decades of working undercover for the Royal Canadian Mounted Police, the U.S. Drug Enforcement Administration and U.S. Customs Service, crime and risk expert Chris Mathers knows where companies are vulnerable and what it takes to protect them.

“In a world where popular culture tells us that the ends justify the means, crime is all about perception,” he said in a keynote address at the 2014 RIMS Canada Conference. “Young people are bombarded with it all the time, but we are in business, too. So the question is, how vulnerable is your business?”

Mathers, who joined the forensic division of KPMG and was later named president of corporate intelligence, shared his insight into how companies can best guard against “the business of crime, and crime in business.”

During his 20 years dealing with drug traffickers, money launderers and members of organized crime syndicates, Mathers developed what he calls a “10/80/10” theory – 10% of the population is truly bad, 10% is truly good and would never lie (but you will probably never meet), and the other 80% is everywhere in between. Identifying and managing the risks of that 80% requires far more work than employers are currently doing, he said.

Background checks may be the single biggest thing companies can do better, Mathers said. While most businesses perform background checks when an employee is hired, such investigations are seldom conducted during the course of employment. As an example, he cited a case where a company had a director who was serving jail time on the weekends. Due to Canadian privacy laws, however, the case was never reported, so no one knew he had been convicted and imprisoned while on staff. In addition to possible reputation implications, the company could have been exposed to liability if any incidents had occurred at work.

While searching for criminal records of new hires is an excellent start, periodic checks should be implemented for all employees. High levels of drug use in the workplace in industries like manufacturing can be further compounded by the lack of drug testing in Canada, Mathers said. Further, 90% of corporate theft cases he have involved perpetrators who were gamblers.

He suggested that investigations should examine whether employees: have extreme views, use or are addicted to drugs, exhibit signs of alcoholism, are addicted to gambling or participate in illegal gambling, frequent prostitutes, or have relatives or a spouse associated with a criminal organization.

Associating with criminals can be a significant risk factor, regardless of the nature of the relationship. “Prostitutes are criminals and associate with criminals,” Mathers said. “They are around that activity and more likely to engage in it, which may mean they steal a client’s wallet or steal the sensitive intellectual property he’s carrying.” Similarly, an administrative assistant who is married to a member of the Hell’s Angels can introduce far more than just reputation risk if the spouse gets involved in illegal activities like drug smuggling.

Employees within a company can also rationalize criminal behavior. In the case of a man found to have stolen thousands of dollars through expense account fraud, for example, Mathers said the company faced a wrongful dismissal suit from the thief. He was never told that he could not steal, the man said, claiming the practice was an “unofficial bonus program.” Further, he claimed his boss had been doing it for years. “People see that behavior and come to think it is OK because they become accustomed to seeing it,” Mathers said. Maintaining regular internal investigations and ensuring compliance does not just bust wrong-doers, but prevents others from developing, especially as new technology continually emerges to make theft easier to commit and harder to track.

“There are no new crimes – they’re the same crimes, they’re just using new techniques to get them to you,” he said. Companies need to keep updating their monitoring strategies to match.

 

Measuring Employee Engagement

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Organizations that successfully engage their employees earn loyalty and can see measurable benefits from higher shareholder returns, according to BI Worldwide. Engaged employees translate to increased productivity, higher quality of work, lower accident and injury rates and higher employee retention.

BI Worldwide explains that companies can encourage employee engagement by creating a culture where loyalty is rewarded.

Also included are trainings to enhance employee performance, safety awareness and wellness programs.

Employers Anxiously Await Supreme Court’s Mach Mining Decision

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As we previously blogged, most recently here, the U.S. Supreme Court’s decision to grant certiorari in Mach Mining, LLC v. EEOC could be a game changer in EEOC-related litigation. In Mach Mining, the Seventh Circuit ruled that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit and that it will not scrutinize the EEOC’s pre-suit obligations, so long as the EEOC’s complaint pleads it has complied with all procedures required under Title VII, and the relevant documents are facially sufficient. By granting certiorari, the Supreme Court is set to weigh in during its next term relative to conflicting rulings amongst the circuit courts about judicial authority and standards for reviewing the EEOC’s pre-suit conduct.

In the meantime, however, the show must go on! To that end, a recent decision out of the U.

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S. District Court for the Western District of Missouri highlights why the Supreme Court’s eventual ruling in Mach Mining is important. In EEOC v. New Prime, Inc., Judge Douglas Harpool granted, in part, the EEOC’s motion for summary judgment, finding that it satisfied its pre-suit investigation and conciliation obligation despite noting that the court was “underwhelmed by the EEOC’s attempt at conciliation.”

Background

In EEOC v. New Prime, a trucking company maintained a company-wide “same-sex training policy” which required all applicants who did not meet Prime’s experience requirements to receive over-the-road training by an instructor and/or trainer who is the same gender as the applicant unless there is some pre-existing relationship between the female applicant and male instructor/trainer. The effect of this policy was that when a female applicant was ready to be assigned to a trainer or instructor in order to receive the necessary “over the road” training, a female driver had to be available.

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However, based on the number of female drivers available to train, Prime would place female applicants on a “female waiting list” when drivers were not available.

Prime implemented this policy after it was involved in a sexual harassment case brought by three female truck driver trainees.

A female job applicant brought a charge with the Missouri Commission on Human Rights (MCHR) and alleged that Prime told her that her application had been accepted, but she could not be hired because she was female and that no female trainers were available then or in the near future.

After the MCHR issued a Probable Cause finding, it transferred the case to the EEOC for further investigation. On April 1, 2010, the EEOC sent Prime a letter stating “the EEOC’s investigation of this charge is nation-wide in scope.” One year later the EEOC issued its Letter of Determination, which stated “[b]ased on the foregoing, there is reasonable cause to believe that Respondent has subjected Charging Party and a class of female trainees to unlawful discrimination by adopting a policy that denies female trainees training and employment opportunities that are not denied to similarly-situated male trainees.” On this same date, the EEOC sent its letter regarding conciliation that focused on relief not only for the party who brought the charge, but also “all identified and still-to-be identified victims.”

On June 7, 2011, Prime submitted its response to the conciliation proposal, which indicated that it was “not interested” in engaging in class-wide conciliation and would only negotiate concerning the individual who filed the EEOC charge. One week later the EEOC informed Prime that conciliation failed and subsequently brought suit in federal court.

The Decision

Both the EEOC and Prime argued that they were entitled to summary judgment on the merits as well as on several evidentiary (e.g. spoliation) and damage (punitive damages) issues. However, especially relevant with Mach Mining on the horizon is the fact that the EEOC decided to move for summary judgment on whether all conditions precedent to the filing of the lawsuit were met. Prime filed its own motion on this point, arguing that the EEOC failed to adequately investigate and conciliation the matter before filing suit.

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The court acknowledged that the EEOC is obligated to conciliate in good faith, and that in order to satisfy the statutory requirement of good faith conciliation, the EEOC must “(1) outline to the employer the reasonable cause for its belief that the law has been violated; (2) offer an opportunity for voluntary compliance; and (3) respond in a reasonable and flexible manner to the reasonable attitudes of the employer.” Furthermore, the court held that whether the EEOC adequately fulfilled its obligation to conciliate is dependent upon the “reasonableness and responsiveness of the [EEOC’s] conduct under all the circumstances.”

With respect to its investigatory function, the court held that the EEOC’s initial letters put Prime on notice that it was investigating on behalf of “similarly situated individuals with regard to the same-sex training policy.” Furthermore, Prime was put on notice through the initial charge and the subsequent investigation that any females who were subject to the policy, or more specifically put on the waiting list, were part of the EEOC’s investigation. Since it held that “the EEOC’s scope of the investigation in this matter was clear – it pertained to the same-sex training policy implemented by Prime, including the female waiting list for potential applicants, trainees and potential employees,” the court held that the EEOC adequately investigated the matter with respect to its class-wide claims prior to filing suit.

With respect to conciliation, the court found that the EEOC met the “low hurdle of attempting a reasonable and responsive conciliation process” despite shutting down conciliation one week after Prime submitted its initial response to the EEOC. The court was “not persuaded that this is enough to prevent the case from meeting the requirements for the filing of the instant lawsuit” given that Prime expressed no interest in considering compensation for any women affected by the policy – which is something the EEOC informed Prime it sought as a result of the company-wide alleged discriminatory policy. Accordingly, the court granted the EEOC’s motion for summary judgment, finding that it satisfied all conditions precedent to filing this lawsuit.

Implication for Employers

As this case demonstrates, the eventual ruling by the Supreme Court in Mach Mining has the potential to be a game changer for any employer dealing with the EEOC. If federal courts cannot review its pre-lawsuit conciliation efforts, the EEOC, in effect, will have free reign to pay mere lip service to its conciliation obligations and approach any negotiations in a “take-it-or-leave-it” manner. We will continue to follow developments as the parties and amicus groups file their briefs, and keep our readers informed.

This blog previously appeared on the Seyfarth Shaw website on the EEOC Countdown blog here.

Bifurcation in the Wake of Comcast

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Recently the U.S. District Court for the Southern District of New York certified a liability class in a Title VII suit brought against the United States Census Bureau. In Houser v. Pritzker, Magistrate Judge Frank Maas found that five of eight named plaintiffs had standing to bring suit, and further held that the proposed class met the commonality and typicality requirements of Rule 23(a).

The judge declined, however, to certify a damages class. Analyzing the Supreme Court’s decision in Comcast Corp. v. Behrend, which significantly raised the bar for predominance under Rule 23(b), Magistrate Judge Maas found that certification of a damages class was inappropriate given the highly individualized nature of each class member’s damages. Rather than reject certification entirely, the Court chose to exercise its discretion under Rule 23(c)(4) to bifurcate the liability and damages phase, and proceed to adjudication of the liability questions.

As such, the decision of Houser is of significant importance to all employers in the workplace class action context.

Background

The United States Census Bureau conducts a nationwide census every 10 years, known as the Decennial Census. The 2010 Decennial Census created 1.3 million temporary employment positions between October 2008 and September 2010, and the Census Bureau received about 3.8 million applications for these positions.

In screening job applicants, the Census Bureau required all applicants with a criminal record to provide “official court documentation” of their prior arrests and convictions within 30 days of receipt of a demand letter. Once the documentation was received, staff members would review and determine whether to treat the applicant as available for hire, or request further information.

In 2010, eight individuals filed a purported class action suit challenging these procedures as non-job related and discriminatory because they negatively impacted the hiring of African-Americans and Latinos for obtaining employment.

The Court’s Decision

Magistrate Judge Maas focused primarily on two issues – subject matter jurisdiction and class certification under Rule 23 – in his ruling.

Subject Matter Jurisdiction  

The Census Bureau moved to dismiss the suit for lack of subject matter jurisdiction pursuant to Rule 12(b)(1). The court examined whether the named plaintiffs had standing to bring suit and whether a favorable decision could redress their injuries.

First, the court concluded that five of the eight named plaintiffs individually possessed Article III standing to bring suit because they met the bare minimum qualifications for employment. Even though the Census Bureau established that the candidates would not have been hired due to a variety of factors ‒ geography, test scores and availability, among others ‒ the court rejected the notion that Title VII plaintiffs must show that they ultimately would have secured employment. Rather, “the question here is whether the Census Bureau’s allegedly discriminatory practices place any of the named plaintiffs on an unequal footing in terms of their ability to compete for employment.” In answer to this question, the court determined that the “five plaintiffs have established that they were eligible to be considered for employment but were denied the opportunity to compete with other applicants. That showing is sufficient to confer standing under Title VII.”

The court also held that the requested relief could redress the injuries of the same five plaintiffs. The court rejected the Census Bureau’s argument that each plaintiff was “precluded from selection for reasons entirely independent of the challenged policies and procedures” and therefore had no injuries that could be redressed by the relief sought. The court noted that these arguments were simply “repackaged” arguments relating to standing, and it denied the Census Bureau’s motion to dismiss.

Class Certification

Next, the court examined certification of the class. The court found without hesitation that the class met the standard for commonality under the Supreme Court’s decision in Wal-Mart Stores v. Dukes, 131 S. Ct., and commented that Dukes seemed to address the very situation at bar, where there was a “testing procedure to evaluate [all] applicants for employment” and “a class action on behalf of every applicant or employee who might have been prejudiced.” The court found that the parties had all but agreed that the “central questions in the case have a common, classwide answer; [and] the only point on which the parties disagree is the answers themselves.”

In examining typicality, the court noted that the only two Latino class representatives were not among the five plaintiffs with standing, and therefore the court declined to certify a class including Latino class members. This class definition seems unlikely to hold, however, as the court noted that Plaintiffs will have an opportunity to identify other Latino representatives, and the court may in its discretion amend the class definition at that time.

Finally, the court examined the predominance requirement of Rule 23(b) and found no bar to certification with respect to injunctive relief. The court’s analysis of damages sub-classes, however, was quite different. The court explained that “[t]he Supreme Court recently emphasized the stringency of the predominance requirement in Comcast Corp. v. Behrend” which requires that plaintiffs offer a damages model capable of calculating damages across the class. Given the “highly individualized nature” of analyzing damages as to any individual class member in this case, the court found that individual questions would predominate and the stringent requirements of Comcast were not met.

Nevertheless, the court found that Comcast did not mandate denial of class certification in its entirety. Rule 23(c)(4) allows a court in its discretion to maintain a class action only with respect to particular issues, and Magistrate Judge Mass opined that “nothing in the [Comcast] ruling appears to have taken that option off the table in future lawsuits.” The court noted that although Comcast did not bifurcate the issues under Rule 23(c)(4), the plaintiffs in that suit did not request that relief.

Implications for Employers

Courts have disagreed as to the effect of Comcast on class certification. Some have held that the decision requires a class-wide model for calculating damages in order to certify a class for any purpose, while other courts have bifurcated liability and damages phases and granted certification only with respect to the former. Indeed, district courts in the Second Circuit have reached different conclusions, and the Court of Appeals for the Second Circuit seems poised todecide the issue. Employers should be watching carefully.

This blog was previously published on the Seyfarth Shaw website.