Employers Face High Stakes

Any employer that has found itself before the EEOC understands the time, energy and cost that goes into defending against an individual employee's claims of unlawful discrimination or retaliation. In an individual disparate treatment case, an employer must be able to clearly and convincingly demonstrate the legitimate non-discriminatory reasons it relied upon to make the business decision that impacted that specific individual. Defending against a systemic discrimination charge, however, is significantly more involved and poses an exponentially greater potential for liability to a company. That is because systemic cases focus on a company-wide pattern or practice that has an adverse impact upon a protected class of individuals. For example, the EEOC has investigated (and resolved) pattern and practice cases involving discriminatory promotion and pay practices negatively impacting employees of Hispanic national origin, retirement programs that result in the selection of older workers, and implementation of layoffs that perpetuate an alleged “glass ceiling” adversely impacting women.

What Is the Current Political Landscape?

The EEOC's plan to identify and remedy systemic discrimination has been renewed with President Obama's commitment to eradicate discrimination from the workplace. In 2006, the EEOC introduced a Strategic Enforcement and Litigation Plan that focused on identifying, investigating and litigating systemic cases. In doing so the EEOC integrated employer EEO-1 reports with charge data to more readily identify potential systemic issues, provided specialized training on investigating and litigating systemic cases to field attorneys, and teamed investigators and attorneys together to identify systemic discrimination cases early on in the administrative process. By 2008, the EEOC's internal training efforts paid off in that the total number of systemic cases being investigated in that short two year window doubled.

Consistent with the EEOC's efforts, President Obama pledged during his campaign to provide additional funding to the understaffed Commission with one of the goals being to provide additional resources to remedy systemic discrimination. Almost immediately after taking office, the President made his first step toward fulfilling this promise when he appointed EEOC Commissioner Stuart Ishimaru as Acting Chairman of the EEOC. Not coincidentally, Ishimaru's focus while a Commissioner was largely on the investigation and prosecution of systemic cases. With Ishimaru as acting chairman of the EEOC, we are certain to see increased agency focus on the investigation and prosecution of systemic cases.

Couple this initiative with the current economic conditions, and there is no doubt that employers are facing heightened scrutiny with regard to the impact that employment practices and decisions have on classes of workers. With the number of layoffs increasing dramatically each month in the United States, it is no surprise that individual charges of discrimination are ballooning. What may be a surprise to employers, however, is that the EEOC needs only one complainant, or in some instances, a mere suspicion that a discriminatory pattern or practice is occurring to initiate a company-wide investigation.

By way of example, in one high-profile EEOC case, the Commission initiated an investigation into a company's retirement policies. Amazingly, the investigation was triggered by a confidential informant who had information about certain decisions made within the organization. When the EEOC commenced its investigation it sought a review of compensation records, documentation regarding employment decisions and retirement information. The end result after many months of litigation was a $27.5 million settlement.

Similarly, a recently filed matter before the EEOC demonstrates how a small group of complainants who are impacted by a reduction in force can represent an entire class of workers. For instance, in one case involving a financial corporation, a group of women who were terminated due to current economic conditions alleged in their EEOC charge that they were victims of “recessionary discrimination” in that women as a protected class were targeted during the reduction in force, whereas allegedly less qualified and under-performing male counterparts were retained. Specifically, they allege that this practice is one of many that points to an overall culture of gender discrimination throughout the organization. The group has filed claims on behalf of themselves and all other similarly situated women at the company who were impacted by layoffs. These types of cases are by no means isolated or unique and can also arise under state anti-discrimination laws, which may not require any administrative filings before the commencement of litigation.

In March, the EEOC reached a $4.3 million settlement for Hispanic employees of a retail store, arising out of allegations that this group of employees was discriminated against with regard to compensation, benefits and promotional opportunities. Like most companies, the burden, disruption and cost of the litigation was an impetus for the resolution.

One thing all of these cases have in common is how an individual or small group of complainants can quickly expand to cover an entire organization and the ease in which the EEOC can initiate an investigation into the employment practices of a company. Simply put, the EEOC needs only one disgruntled plaintiff and/or suspicion that an employer's policies have a disparate impact on a protected class in order to commence a sweeping investigation of general, company-wide employment policies, practices and decisions.

Employers in all industries should recognize the very real threat that systemic discrimination suits pose to any organization. First, a systemic discrimination suit exposes employers to extraordinary financial risks should a jury determine a basis for liability. Even a settlement, at the early stages of the administrative process will prove to be costly.

Moreover, the quantum of evidence necessary to demonstrate a prima facie case is not significant. In fact, in some instances, statistics alone may be sufficient. Once statistical evidence is combined with evidence of isolated instances of individual discrimination, the employer bears the burden of overcoming the presumption that systemic discrimination exists in the workplace. If the employer is unable to rebut this presumption then it can be inferred that systemic discrimination occurred on a class-wide basis.

Further, since the EEOC is not required to follow the Federal Rules of Civil Procedure, and as such, has much greater latitude to investigate an organization's overall practices, procedures, records and data, class actions suits are more easily brought by the EEOC. This broader “discovery” invariably increases the financial costs of defending against claims of systemic discrimination. Plus, the legal issue of whether punitive damages can be awarded to a class of complainants in a case initiated by the EEOC is open for interpretation by the courts. Thus, whether an employer decides to settle the issue or simply investigate the fact alleged in a systemic discrimination suit, the costs could cripple any organization's bottom line.

How Can Employers Protect Against Allegations of
Systemic Discrimination?

This new heightened focus on systemic discrimination presents far-reaching implications for employers. First and foremost, employers should be extremely careful in preparing position statements and submitting information in response to EEOC requests. Next, employers should be proactive in reviewing their policies, procedures and decision-making processes before they are forced to do so as a result of an EEOC investigation. If the results of this review reflect that there is any basis for a systemic allegation, an employer should alert their counsel before they respond or send any documents to the EEOC.

There are a certain red flags that an employer should look for when reviewing their policies. These include the following:

• Whether any hiring criteria or protocol disenfranchises a class of individuals;
• Whether disciplinary action is conducted on a consistent basis;
• Whether there are differences in compensation among job classifications negatively impacting members in a protected class;
• Whether a concentration of employees from a certain race or gender is found in one particular area of work. Or whether employees from a protected class are absent from higher level positions. Are there “glass ceilings” for certain positions within the organization?
• Whether there is an anti-harassment policy for which training is provided and a reporting mechanism for individuals to voice their concerns;
• Whether there are any job requirements or criteria used in hiring that has a disparate impact on members of a protected class; and
• Whether the company has received multiple charges or complaints of discrimination alleging similar forms of discrimination.

Once an EEOC charge is received, an employer should immediately and thoroughly investigate the allegations made in the charge. The responses and information that employers provide to the EEOC should be carefully vetted through legal channels to make sure they deal with the specific questions and/or individual allegations, and do not speak in generalities or improperly broaden the scope of the EEOC inquiry to classes or groups of employees.

Conclusion

Employers can take simple steps to avoid exposure to systemic discrimination investigations, claims and litigation by proactively analyzing internal procedures to assure nondiscriminatory treatment of individual employees and impact on groups of employees. A general checklist of topics to audit includes:

• hiring practices;
• wage payment practices;
• evaluation processes;
• promotion protocols;
• employment rules and policies;
• reduction in force protocols; and
• termination procedures.

In reviewing each area, employers should make certain that the rules are fairly and consistently applied to the entire workforce and do not adversely impact a protected class, such as minorities, persons over 40 or women. The minimization of potential liability far outweighs the time and cost to audit practices before the EEOC begins an investigation.

Brooke Iley and Christine Bonavita are partners in the Employment, Benefits and Labor practice at Blank Rome LLP. Iley is resident in the firm's in Washington, DC, office and Bonavita in the Philadelphia and Princeton, NJ, offices. Iley can be contacted at 202-772-5816 or [email protected]. Bonavita can be reached at 215-569-5358 or [email protected].

Any employer that has found itself before the EEOC understands the time, energy and cost that goes into defending against an individual employee's claims of unlawful discrimination or retaliation. In an individual disparate treatment case, an employer must be able to clearly and convincingly demonstrate the legitimate non-discriminatory reasons it relied upon to make the business decision that impacted that specific individual. Defending against a systemic discrimination charge, however, is significantly more involved and poses an exponentially greater potential for liability to a company. That is because systemic cases focus on a company-wide pattern or practice that has an adverse impact upon a protected class of individuals. For example, the EEOC has investigated (and resolved) pattern and practice cases involving discriminatory promotion and pay practices negatively impacting employees of Hispanic national origin, retirement programs that result in the selection of older workers, and implementation of layoffs that perpetuate an alleged “glass ceiling” adversely impacting women.

What Is the Current Political Landscape?

The EEOC's plan to identify and remedy systemic discrimination has been renewed with President Obama's commitment to eradicate discrimination from the workplace. In 2006, the EEOC introduced a Strategic Enforcement and Litigation Plan that focused on identifying, investigating and litigating systemic cases. In doing so the EEOC integrated employer EEO-1 reports with charge data to more readily identify potential systemic issues, provided specialized training on investigating and litigating systemic cases to field attorneys, and teamed investigators and attorneys together to identify systemic discrimination cases early on in the administrative process. By 2008, the EEOC's internal training efforts paid off in that the total number of systemic cases being investigated in that short two year window doubled.

Consistent with the EEOC's efforts, President Obama pledged during his campaign to provide additional funding to the understaffed Commission with one of the goals being to provide additional resources to remedy systemic discrimination. Almost immediately after taking office, the President made his first step toward fulfilling this promise when he appointed EEOC Commissioner Stuart Ishimaru as Acting Chairman of the EEOC. Not coincidentally, Ishimaru's focus while a Commissioner was largely on the investigation and prosecution of systemic cases. With Ishimaru as acting chairman of the EEOC, we are certain to see increased agency focus on the investigation and prosecution of systemic cases.

Couple this initiative with the current economic conditions, and there is no doubt that employers are facing heightened scrutiny with regard to the impact that employment practices and decisions have on classes of workers. With the number of layoffs increasing dramatically each month in the United States, it is no surprise that individual charges of discrimination are ballooning. What may be a surprise to employers, however, is that the EEOC needs only one complainant, or in some instances, a mere suspicion that a discriminatory pattern or practice is occurring to initiate a company-wide investigation.

By way of example, in one high-profile EEOC case, the Commission initiated an investigation into a company's retirement policies. Amazingly, the investigation was triggered by a confidential informant who had information about certain decisions made within the organization. When the EEOC commenced its investigation it sought a review of compensation records, documentation regarding employment decisions and retirement information. The end result after many months of litigation was a $27.5 million settlement.

Similarly, a recently filed matter before the EEOC demonstrates how a small group of complainants who are impacted by a reduction in force can represent an entire class of workers. For instance, in one case involving a financial corporation, a group of women who were terminated due to current economic conditions alleged in their EEOC charge that they were victims of “recessionary discrimination” in that women as a protected class were targeted during the reduction in force, whereas allegedly less qualified and under-performing male counterparts were retained. Specifically, they allege that this practice is one of many that points to an overall culture of gender discrimination throughout the organization. The group has filed claims on behalf of themselves and all other similarly situated women at the company who were impacted by layoffs. These types of cases are by no means isolated or unique and can also arise under state anti-discrimination laws, which may not require any administrative filings before the commencement of litigation.

In March, the EEOC reached a $4.3 million settlement for Hispanic employees of a retail store, arising out of allegations that this group of employees was discriminated against with regard to compensation, benefits and promotional opportunities. Like most companies, the burden, disruption and cost of the litigation was an impetus for the resolution.

One thing all of these cases have in common is how an individual or small group of complainants can quickly expand to cover an entire organization and the ease in which the EEOC can initiate an investigation into the employment practices of a company. Simply put, the EEOC needs only one disgruntled plaintiff and/or suspicion that an employer's policies have a disparate impact on a protected class in order to commence a sweeping investigation of general, company-wide employment policies, practices and decisions.

Employers in all industries should recognize the very real threat that systemic discrimination suits pose to any organization. First, a systemic discrimination suit exposes employers to extraordinary financial risks should a jury determine a basis for liability. Even a settlement, at the early stages of the administrative process will prove to be costly.

Moreover, the quantum of evidence necessary to demonstrate a prima facie case is not significant. In fact, in some instances, statistics alone may be sufficient. Once statistical evidence is combined with evidence of isolated instances of individual discrimination, the employer bears the burden of overcoming the presumption that systemic discrimination exists in the workplace. If the employer is unable to rebut this presumption then it can be inferred that systemic discrimination occurred on a class-wide basis.

Further, since the EEOC is not required to follow the Federal Rules of Civil Procedure, and as such, has much greater latitude to investigate an organization's overall practices, procedures, records and data, class actions suits are more easily brought by the EEOC. This broader “discovery” invariably increases the financial costs of defending against claims of systemic discrimination. Plus, the legal issue of whether punitive damages can be awarded to a class of complainants in a case initiated by the EEOC is open for interpretation by the courts. Thus, whether an employer decides to settle the issue or simply investigate the fact alleged in a systemic discrimination suit, the costs could cripple any organization's bottom line.

How Can Employers Protect Against Allegations of
Systemic Discrimination?

This new heightened focus on systemic discrimination presents far-reaching implications for employers. First and foremost, employers should be extremely careful in preparing position statements and submitting information in response to EEOC requests. Next, employers should be proactive in reviewing their policies, procedures and decision-making processes before they are forced to do so as a result of an EEOC investigation. If the results of this review reflect that there is any basis for a systemic allegation, an employer should alert their counsel before they respond or send any documents to the EEOC.

There are a certain red flags that an employer should look for when reviewing their policies. These include the following:

• Whether any hiring criteria or protocol disenfranchises a class of individuals;
• Whether disciplinary action is conducted on a consistent basis;
• Whether there are differences in compensation among job classifications negatively impacting members in a protected class;
• Whether a concentration of employees from a certain race or gender is found in one particular area of work. Or whether employees from a protected class are absent from higher level positions. Are there “glass ceilings” for certain positions within the organization?
• Whether there is an anti-harassment policy for which training is provided and a reporting mechanism for individuals to voice their concerns;
• Whether there are any job requirements or criteria used in hiring that has a disparate impact on members of a protected class; and
• Whether the company has received multiple charges or complaints of discrimination alleging similar forms of discrimination.

Once an EEOC charge is received, an employer should immediately and thoroughly investigate the allegations made in the charge. The responses and information that employers provide to the EEOC should be carefully vetted through legal channels to make sure they deal with the specific questions and/or individual allegations, and do not speak in generalities or improperly broaden the scope of the EEOC inquiry to classes or groups of employees.

Conclusion

Employers can take simple steps to avoid exposure to systemic discrimination investigations, claims and litigation by proactively analyzing internal procedures to assure nondiscriminatory treatment of individual employees and impact on groups of employees. A general checklist of topics to audit includes:

• hiring practices;
• wage payment practices;
• evaluation processes;
• promotion protocols;
• employment rules and policies;
• reduction in force protocols; and
• termination procedures.

In reviewing each area, employers should make certain that the rules are fairly and consistently applied to the entire workforce and do not adversely impact a protected class, such as minorities, persons over 40 or women. The minimization of potential liability far outweighs the time and cost to audit practices before the EEOC begins an investigation.

Brooke Iley and Christine Bonavita are partners in the Employment, Benefits and Labor practice at Blank Rome LLP. Iley is resident in the firm's in Washington, DC, office and Bonavita in the Philadelphia and Princeton, NJ, offices. Iley can be contacted at 202-772-5816 or [email protected]. Bonavita can be reached at 215-569-5358 or [email protected].