Recently, the U.S. District Court for the Southern District of Alabama issued a decision reminding employers to take care when reviewing and responding to charges of discrimination. In Payne v. Navigator Credit Union, the defendant employer moved to dismiss the plaintiff employee’s claim for disability retaliation on the grounds that the plaintiff failed to exhaust her administrative remedies. Specifically, the employer argued that the plaintiff failed to allege in her EEOC Charge that she was retaliated against, and was precluded from pursuing a retaliation claim in court. When making its argument, the employer pointed out that the plaintiff had not “checked the box” for “retaliation” on her EEOC Charge nor did she use the word “retaliation” when describing how she had allegedly been harmed.  Nevertheless, the court ruled that the plaintiff’s allegation in the charging document that she was terminated shortly after informing her employer of her need to take medical leave for cancer treatment was sufficient to place the employer on notice of the a claim for  retaliation. This decision suggests that some courts will grant plaintiffs wide latitude to define their claims in litigation.  Employers facing an agency charge, or that have questions regarding responding to inquiries from administrative employment agencies, should consult with competent counsel.

On November 15, 2018, the United States Fourth Circuit Court of Appeals affirmed the decision of the Middle District of North Carolina in the case of Netter v. Barnes, et al, upholding dismissal of Netter’s case because her removal of other employees’ personnel files from the workplace is not “protected activity” and is a legitimate non-discriminatory reason for her termination.[1] A longtime employee of the Sheriff’s Department, Catherine Netter believed she was being discriminated against on account of her race and religion and removed several coworkers’ personnel files without permission, presumably “fishing” to determine whether said employees were being treated more favorably than her. Then, Netter copied the files and shared them with the Equal Employment Opportunity Commission (“EEOC”) when attempting to support her charge of discrimination. Eventually, Netter sued her employer for discrimination when she was passed over for a promotion. Netter (through her attorney) subsequently produced the files to the Sheriff in discovery. When deposed, Netter conceded that she had obtained the files as described above. In response, the Sheriff’s Department terminated her employment, citing, in addition to violations of internal policy, Netter’s violation of N.C. Gen. Stat. § 153A–98, which imposes criminal penalties for reviewing or disseminating information in county personnel files without authorization. Netter amended her lawsuit to include a retaliation claim under Title VII’s “participation clause,” which protects “participat[ion] in any manner in an investigation, proceeding, or hearing…” 42 USC § 20000e-3(a). Netter argued that her theft of personnel files fell under the participation clause, and even conceded that her actions violated the law. The Sheriff argued that any disclosure of information in violation of an employer confidentiality policy would fall outside of the scope of the participation clause, even if the employee had permission to access the information and disclosed it only to the EEOC in connection with a Title VII claim. The Court took a middle path, holding that the participation clause “does not protect a violation of a valid state law that poses no conflict with Title VII.” The Court did leave some breadcrumbs regarding the types of laws that could conceivably conflict with Title VII. Specifically, the Court noted in dicta the importance of personnel files to show evidence of disparate treatment. One can imagine that courts might take a closer look at a state law that, for instance, placed limits on the ability of the EEOC (or a corresponding state agency) to seek the information contained in personnel files. In any case, employers should ensure that access to personnel files and other confidential information is strictly monitored. [1] http://hr.cch.com/ELD/NetterBarnes111518.pdf

Recently, the U.S. District Court for the Eastern District of Pennsylvania determined a former employee did not violate the Defend Trade Secrets Act (“DTSA”) where she disclosed confidential information of her former employer to her husband and her attorney. In Christian v. Lannett Company, Inc.,[1] plaintiff Wendy Christian sued her former employer, Lannett, alleging violations of Title VII, the ADA, and the FMLA. In response, Lannett counterclaimed, alleging Christian violated the DTSA by misappropriating Lannett’s trade secrets.  The DTSA defines a misappropriation of trade secrets where one discloses or uses another’s trade secret without the consent of the trade-secret owner.  However, the DTSA also provides immunity for the disclosure of a trade secret “in confidence…to an attorney…solely for the purpose of reporting or investigating a suspected violation of law.”[2] Here, Lannett alleged that Christian violated the DTSA by disclosing Lannett’s trade secrets to (1) her husband and (2) her attorney. Christian moved to dismiss the DTSA claims. With regard to the alleged disclosure to her husband, Christian argued that any alleged disclosure predated the DTSA’s effective date and, thus, she did not violate the DTSA as a matter of law. The Court agreed, reasoning the DTSA does not provide for retroactive enforcement. Similarly, Christian’s disclosure to her own attorneys in discovery -- coincidentally carried out one day after the DTSA’s effective date – also did not amount to a misappropriation under the DTSA.  Indeed, the “disclosure” of Lannett’s trade secrets was made to her own attorneys pursuant to a discovery order of the Court, and, further, Lannett had not pleaded any facts showing that Christian’s attorneys intended “to use or disclose the purported trade secrets they acquired to anyone other than Defendant, to whom the trade secrets belong.” Though it is imperative for employers to protect their proprietary information and trade secrets, this case serves to remind employers to think carefully about their business objectives prior to raising DTSA claims.  Employers considering whether and how to best protect their trade secrets and proprietary information would do well to consult counsel. [1] No. 2:16-cv-00963-CDJ, E.D. Pa. [2] 18 U.S.C. §1833(b).

The Ninth Circuit Court of Appeals recently considered the United States Supreme Court’s landmark 2016 decision in Spokeo, Inc. v. Robins. Spokeo provided employers some hope in the area of litigation of background checks when it hinted that “harmless” technical violations of the Fair Credit Report Act’s (FCRA) procedures might not satisfy Article III of the Constitution’s requirement that a plaintiff suffers a “concrete” injury. Spokeo and its aftereffects, covered at length in a May 2016 blog post and a November update, remains in front of the Ninth Circuit on remand. The Ninth Circuit must now determine whether Thomas Robins suffered a “concrete” injury or a mere “bare procedural violation” when Spokeo disseminated incorrect information about him on the internet. Plaintiffs’ attorneys are no doubt hoping that the Ninth Circuit tipped its hand with a series of rulings in another FCRA case, Syed v. M-I, LLC. TheSyed decision, discussed here, appeared to hold that the defendant employer M-I engaged in a “willful” FCRA violation by including a release of liability in its pre-employment “disclosure and authorization” form. As to a “concrete injury,” Syed merely alleged that he was harmed when “he “discovered Defendant M-I’s violation(s)…[i.e. that] M-I had procured…a ‘consumer report’ regarding him for employment purposes based on the illegal disclosure and authorization form.” Weeks after the opinion was rendered, M-I filed a Petition for Rehearing, arguing that Syed “pled no real-world injury aside from a technical violation of the act,” and claiming that“[t]he panel repeated the mistake this Court made in Spokeo, dispensing with one of the irreducible requirements of Article III standing” (i.e., a “concrete injury”). In response, the Court denied the Petition for Rehearing and instead proffered an Order and Amended Opinion. The Court’s Order and Amended Opinion seemed to agree with Plaintiff’s Petition for Rehearing. Indeed, the most prominent addition to the Order and Amended Opinion was a new paragraph analyzing the “concrete injury.” Nonetheless, the Order and Amended Opinion reached the same conclusion as the original: Syed had Article III standing to move forward with his lawsuit based merely on being “deprived of the right to information and the right to privacy” when he signed the noncompliant form. If the tone of recent filings in Spokeo and Syedare any indication, the Supreme Court may soon be asked to clarify the analysis it delivered in Spokeo the first time around.

Recently, the Equal Employment Opportunity Commission (“EEOC”) has focused on filing lawsuits relating to an employer’s obligations under the Americans with Disabilities Act (“ADA”) when using pre-employment medical exams. During the month of September, the EEOC filed suit against Huntington Ingalls Industries in the U.S. District Court for the Eastern District of Virginia,* and against Consolidated Edison Company of New York, Inc. in the U.S. District Court for the Southern District of New York.** These cases concern different aspects of the ADA’s requirements: Huntington Ingalls focuses on providing an accommodation during the medical exam itself; Consolidated Edisonrelates to the use of a medical exam to deny employment. The EEOC’s growing interest in this area of law makes clear that employers would do well to revisit their obligations under the ADA. Employers often make use of pre-employment medical exams to determine an applicant’s suitability for employment. Employers should take caution, however, because their obligations under the ADA differ based on the stage of the employment process.*** First, an employer is prohibited from requiring an applicant to undergo a medical examination prior to an offer of employment, even if the examination is job-related. The employer may conduct a medical exam after the employer has extended the individual a contingent offer of employment – regardless of whether the exam or inquiry is related to the job in question – so long as the employer does so for all prospective employees in that particular job category.  Critically, an employer can only revoke an offer of employment based on the results of a medical examination if the reasons for the revocation are “job-related and consistent with business necessity.” Employers should exercise caution when seeking to revoke an offer of employment based on the results of a medical examination, as a misstep can create legal liability. When doing so, employers should be able to (1) provide evidence that all applicants in the job category in question are subject to examination; and (2) explain, with documentation, the specific ways in which revocation of the offer is job-related and consistent with business necessity (i.e. the individual is unable to perform the essential job functions or he or she poses a “direct threat” to himself, herself, or others). With the EEOC’s increased focus on such cases, employers would be wise to review their medical examination procedures to ensure they comply with the ADA.  Failure to do so could result in costly and protracted litigation. * U.S. Equal Opportunity Employment Commission v. Huntington Ingalls Industries, Civil Action No. 4:17-cv-00113 (E.D. Va. 2017). ** U.S. Equal Opportunity Employment Commission v. Consolidated Edison Co. of New York, Inc., Civil Action No. 17-cv-7390 (S.D.N.Y. 2017). *** See generally 29 CFR § 16430 et seq.

In 2011, the United States Supreme Court issued its landmark decision in Wal-Mart Stores, Inc., v. Betty Dukes, et al., decertifying a putative class of approximately 1.6 million current and former female Wal-Mart employees who claimed gender discrimination in wages and promotions in violation of Title VII. 564 U.S. 338 (2011). The Court reversed the Ninth Circuit’s affirmation of class certification and determined the plaintiffs failed to meet the class “commonality” standard set out in Federal Rule of Civil Procedure 23. Id. at 349-60. The Dukes decision set in motion a number of spinoff regional cases, one of which – barring another grant of certiorari to the high court – met its end somewhat anticlimactically, when the Eleventh Circuit issued its August 3, 2017 order in Love, et. al. v. Wal-Mart Stores, Inc. No. 15-15260. The Love plaintiffs included a sub-group of the Dukes plaintiffs who worked in the southeastern United States. These holdover Dukesplaintiffs were able to refile their claims because of the requirement that federal court discrimination plaintiffs first file with the Equal Employment Opportunity Commission. This rule effectively tolled the statute of limitations during the pendency of Dukes. But critically, under the Eleventh Circuit’s “no piggybacking rule”, tolling is limited to individual claims only, not class claims, which has also been adopted by the Fifth and Sixth Circuits. The Lovecourt previously left little room for argument when it noted in a 2013 order that “[t]he Eleventh Circuit categorically refuses to toll the limitations period for subsequent class actions by members of the original class once class certification is denied in the original suit.” Thus, on October 16, 2015 the individual named plaintiffs and Wal-Mart settled and jointly filed a “stipulation of voluntary dismissal.” On November 6, 2015, the Love appellants, made up of unnamed members of the would-be class, filed a motion to intervene solely to appeal the dismissal of class claims. This motion was denied 13 days later as moot, which, to make matters worse for the appellants, took them outside of their 30-day deadline to appeal the October 16 stipulated dismissal. The Eleventh Circuit thus found the appeal jurisdictionally barred, providing a rather sudden end to the winding multi-year litigation. In light of this tangled and technical history, employers and their counsel should be sure to understand the differences in treatment of class actions and individuals under the relevant rules, regulations, and statutes. Though it can be tempting to move immediately to the standard substantive arguments against numerosity, commonality, typicality, and adequacy of the proposed class, the Wal-Mart cases show that knowing your way around the procedural thicket is another useful skill in avoiding or minimizing the cost of class litigation.

It seems that employers were right to be concerned with the United States Supreme Court’s decision to “punt” in its May 2016 opinion in Spokeo Inc. v. Robins, after two United States District Courts reached opposite outcomes in opinions issued last month. Spokeore presents one of many recent putative class actions brought under the Fair Credit Reporting Act (“FCRA”), wherein plaintiffs allege “technical” or “procedural” violations of the FCRA’s oft-byzantine compliance requirements. Most employers are by now aware that the FCRA’s broad scope sets out strict compliance procedures for employers who wish to use criminal background checks for “employment purposes.”  In the Spokeo opinion, which was discussed in greater depth in a prior blog post, the Supreme Court remanded back to the Ninth Circuit with instructions to determine whether plaintiffs’ alleged harm was sufficiently “concrete” to confer Article III standing. Though the Court openly hinted at its disapproval of such procedural class actions (e.g. “It is difficult to imagine how the dissemination of an incorrect zip code…could work any concrete harm.”), it did not definitively hold that such claims could never satisfy Article III’s standing requirements. Taking cues from Spokeo, class action defendants in Nokchan v. Lyft, Inc.and Moody v. Ascenda USA, Inc. filed motions to dismiss on the grounds that plaintiffs had not alleged “concrete” injuries. In both cases, plaintiffs had previously advanced the now well-worn argument that defendants’ “disclosure and authorization” forms were not compliant with 15 U.S.C. §§ 1681b(b)(2)(A)(i)-(ii). In Lyft, the United States District Court for the Northern District of California agreed with defendant, granting its motion and dismissing the case without prejudice. The Lyft court noted that plaintiff “has not alleged that he suffered any real harm,” nor had he claimed to have been “harmed by the background check in any way.” In Ascenda, however, the United States District Court for the Southern District of Florida, denied defendant’s motion to dismiss, holding on strikingly similar facts that noncompliance with §§ 1681b(b)(2)(A)(i)-(ii) was not “akin to the dissemination of an incorrect zip code” and did in fact represent a sufficiently “concrete” injury. While the recent FCRA case law might be divergent, the message to employees remains clear: make sure your FCRA forms are compliant.

The United States Supreme Court may have finally offered employers some cover in their ongoing battle against Fair Credit Reporting Act (“FCRA”) class actions. On May 16, 2016, the Court handed down its decision in Spokeo, Inc. v. Robins, which vacated and reversed a Ninth Circuit ruling on the grounds that the lower court did not properly analyze both elements of the “injury-in-fact” required to confer Article III standing on a plaintiff. Spokeo operates a “people search engine” that aggregates information on individuals from a broad range of internet databases. Named Plaintiff Thomas Robins’ class action complaint alleged that Spokeo’s business model makes it a “consumer reporting agency” and thus subject to the FCRA’s detailed compliance procedures. The FCRA requires, among other things, that consumer reporting agencies “follow reasonable procedures to assure maximum possible accuracy of consumer reports” and also that “users” of consumer reports (e.g. employers who utilize background checks to determine eligibility for employment): (1) disclose that fact to individuals prior to obtaining such a report and (2) gain the individuals’ prior authorization to do so. Robins claimed that Spokeo willfully violated the FCRA when it disseminated inaccurate information regarding him – namely, that he held a graduate degree, was married with children, and was in his 50s. The Court’s opinion, authored by Justice Alito, noted that an injury-in-fact must be both “concrete” and “particularized,” and held that the Ninth Circuit’s decision properly considered the latter while neglecting to address whether plaintiffs adequately alleged “concreteness.” Though plaintiffs’ attorneys will rush to point out that the Court merely remanded back to the Ninth Circuit with instructions to analyze the concrete injury, employers can read the tea leaves and be heartened by the Court’s seeming disapproval of lawsuits based on “harmless” procedural violations: “Robins cannot satisfy the demands of Article III by alleging a bare procedural violation. A violation of one of the FCRA’s procedural requirements may result in no harm.” “In addition, not all inaccuracies cause harm or present any material risk of harm. An example that comes readily to mind is an incorrect zip code. It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” In the past few years, employers have seen a rise in situations where plaintiffs point out an alleged technical deficiency in an employer’s FCRA compliance procedure and claim a class populated by every individual who applied for employment in a given timeframe, regardless of whether even a single individual actually suffered an adverse employment action as a result. Although it is too early to tell whether Spokeowill have broad implications for cases of this type, it is a safe bet that both employers and plaintiffs’ attorneys will be closely watching the Ninth Circuit’s response in wake of the remand.

An internet news search containing the keywords “FCRA Settlement 2016” returns over 1,800 results in less than a second. Just a few weeks from Valentine’s Day, it’s clear that plaintiffs’ love letters to the 45-year-old federal law are still being answered at an alarming rate. The FCRA governs an employer’s use of so-called “consumer reports” (e.g., criminal background checks, credit reports, etc.) for employment purposes. Essentially, the FCRA sets out a list of steps that employers must follow if they wish to take an “adverse action” against an applicant or employee based on information contained in the consumer report. Yet a simple question remains: “Why?” Why do plaintiffs’ attorneys so regularly file monetarily successful claims – especially class action claims – against employers under the FCRA? Three features of the FCRA answer that question and can guide employers seeking to minimize the risk of an FCRA violation. 1. The FCRA is Confusing And not just to laypeople! – the United States Supreme Court has poetically criticized the FCRA as “less-than-pellucid.” Plaintiffs’ attorneys have exploited this uncertainty to great effect. 2. Classes are Frequently Certified The most common FCRA class action lawsuits allege some kind of technical deficiency in the employer’s “Disclosure and Authorization” form. Because many employers use boilerplate language in forms distributed to all applicants, Plaintiffs argue that a procedural violation is more likely to affect an entire group of employees or job applicants in a uniform way than in other employment contexts, which depend more on individualized facts and circumstances. An employer’s dutiful consistency can be a hindrance if an unlawful Disclosure and Authorization form is utilized. 3. Costs and Fees are a Breeze FCRA violations are broken down into two camps – “willful noncompliance” and “negligent noncompliance.” Though plaintiffs must meet the stricter “willful” standard if they want to pursue statutory and punitive damages, simple negligence will work for an award of actual damages, costs, and attorney’s fees. This relatively low bar gives plaintiffs’ attorneys a financial incentive to doggedly pursue even the most seemingly minor violations.       Though “certainty” and “the FCRA” can seem fundamentally incompatible, gaining an understanding of plaintiffs’ motivations can be the first step in preventing them from making an employer another costly statistic in a Google search.