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NY Bill Follows ‘Franken Amendment’

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Class action plaintiffs’ lawyers and their allies generally do not like arbitration, especially where the arbitration agreements effectuate a waiver of the ability of a worker or a consumer to bring a class action. Advocates for workers and consumers have attacked arbitration agreements through various avenues in the courts and in the court of public opinion.

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Recently, their efforts also have focused on passage of legislation.

On May 5, 2014, the New York State Assembly passed legislation – known as Bill A4791-2013 – prohibiting state entities from contracting with any business that requires an employee or independent contractor performing work under the contract to arbitrate claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising from discrimination, sexual assault, or harassment. Such torts may include assault, battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring. If this legislation is enacted, all employers who do business with any State government entity in New York would be required to allow their employees to adjudicate employment claims before the courts instead of using arbitration.

Exempt from the bill is any arbitration that is mandated by a collective bargaining agreement between the employer and/or independent contractor. The bill also provides for a waiver to be granted “to respond to an emergency arising from unforeseen causes,” but the waiver is to be no longer than necessary in duration and the state agency granting the waiver is obligated to list the reasons for granting it.

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The New York legislation follows in the footsteps of a similar federal provision known as the “Franken Amendment,” which was added as part of a defense spending bill and signed into law in 2009. The Franken Amendment, named after Sen. Al Franken of Minnesota, bars federal funds from going to defense contractors that continue to apply mandatory arbitration clauses to claims of sexual assault, assault and battery, intentional infliction of emotional distress, and negligent hiring, retention and supervision. The law requires that subcontractors on federal projects also certify to the same arbitration restriction.

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These pieces of legislation indicate the beginning of a trend towards limiting the arbitration options for employment claims.

The New York bill now moves to the Republican-controlled New York Senate for consideration. Stay tuned for future developments on this front in New York and in other states.

This column previously appeared on the Seyfarth Shaw blog site.

Texas Fires Back at EEOC Motion

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We normally pass, on blogging about briefs filed by a party before a court ruling, but Texas’ litigation against the EEOC and U.S. Attorney General Eric Holder is not shaping up to be just an everyday lawsuit.

This is a must read for employers. It goes to the heart of what the EEOC is doing these days, and how it is carrying out its duties.

Case Background

In April 2012, the EEOC issued guidance urging businesses to avoid a blanket rule against hiring individuals with criminal convictions, reasoning that such rules could violate Title VII if they create a disparate impact on particular races or national origins. Like various other states, Texas has enacted statutes prohibiting the hiring of felons in certain job categories. In November 2013, Texas sued the EEOC, seeking to enjoin the enforcement of this guidance, which Texas has nicknamed the “Felon Hiring Rule.” In March of this year, Texas amended its complaint to include more specific allegations of injury. For example, Texas alleged that the EEOC issued a right-to-sue letter to an applicant who had been rejected by the Texas Department of Public Safety after disclosing on his application that he had been convicted of a felony (unauthorized use of a motor vehicle). Texas claimed that the job involved “access to sensitive personal information for all 26 million Texans.”

Against this backdrop is a growing firestorm of litigation initiated by the EEOC over hiring checks based on criminal backgrounds. We have blogged about those cases and rulings previously (here, here, here, here, and here).

Earlier this month, the EEOC filed a motion to dismiss Texas’ lawsuit. In its motion, the EEOC offered three primary arguments. First, the EEOC contends that the U.S. District Court lacks jurisdiction to hear the case because the EEOC’s guidance is not legally binding and does not constitute a final agency action. Second, and in part because the EEOC claims its guidance has no binding authority, the EEOC argues that Texas lacks standing to pursue its claims. As the EEOC stated, “[t]he state may disagree with the EEOC’s interpretation of the law, but that does not imbue the interpretation with any legal consequences.” Third, the EEOC said the state’s claims should be dismissed because they are not ripe.

The State Of Texas Replies

In its brief, Texas started by pointing out other cases in which the EEOC pursued administrative investigations and lawsuits against employers and invoked its 2012 guidance. Making the point that the EEOC was attempting to have its cake and eat it too, the state characterized the EEOC as arguing that the guidance is “not worth the paper it’s printed on—even though it urges other courts to defer to it.”

Having set the theme, Texas turned to its legal arguments. The state argued that whether or not the 2012 guidance was a “final agency action” was not a jurisdictional issue, as the EEOC contended it was. Nevertheless, the state explained why the 2012 guidance in fact constituted a “final agency action” under the Administrative Procedure Act. Texas argued that the EEOC’s argument, that only those rules and regulations that were entitled to Chevron deference were reviewable, improperly narrowed the term “action” in a way that “no case from any court in the history of the Nation” had adopted. Texas also pointed out that the EEOC could not prevent review under the APA simply by re-characterizing its process in order to avoid judicial scrutiny under the Act.

Turning to the standing  issue, Texas identified three types of injury it has suffered, each of which independently established Article III standing, including (i) as an employer, the State of Texas is subject to the EEOC’s “Felon Hiring Rule,” and the EEOC issuance of a right-to-sue letter to an applicant denied a job after a criminal background check demonstrates that the state has been subjected to enforcement of the rule; (ii) Texas is seeking to enforce its right to participate in the notice-and-comment provisions of the APA, and the EEOC’s failure to comply with the APA had denied Texas its right to do that; and (iii) Texas has been injured by the EEOC’s purported preemption of the State’s laws. As evidence of this final injury, Texas pointed to the EEOC’s own website, which states that the Felon Hiring Rule “says that state and local laws or regulations are preempted by Title VII” if they cause a disparate impact.

On the ripeness question, Texas argued that, despite the EEOC’s attempts to recast its 2012 guidance as not requiring “individualized assessments” of all job applications, the case remained ripe for adjudication because it presents the “purely legal question” of whether “the State of Texas can continue to follow its facially neutral blanket no-felons policies …or whether the state must abandon those facially neutral policies.”

Implications for Employers

In defending against Texas’ case, the EEOC may have compromised future efforts to enforce its “guidance” against employers in Texas and other jurisdictions. To the extent the EEOC attempts to rely upon its 2012 statements as the basis for prosecuting disparate impact cases focused on criminal background check practices, particularly in cases where the EEOC alleges that an employer willfully violated Title VII, employers need only turn to the EEOC’s representations to the U.S. District Court for fodder in their own defense. Stay tuned for the upcoming ruling in this case.

This column previously appeared on the Seyfarth Shaw blog site.

Alabama Court Dismisses EEOC Dreadlocks Policy Challenge

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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.